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QSC announces preliminary results for 2007 and guidance for 2008

  • Revenues up by 28% in 2007 to € 335.2 million
  • EBITDA grows by 65% in 2007 to € 34.9 million
  • Revenues between € 385 and € 405 million planned for 2008
  • EBITDA between € 50 and € 60 million planned for 2008

Cologne, February 14, 2008. According to preliminary results, QSC grew its revenues to € 335.2 million during the past fiscal year, as opposed to € 262.5 million the year before. In the fourth quarter, alone, revenues rose by 15 percent from the previous quarter, reaching € 95.6 million. This quarter-to-quarter growth was mainly attributable to a strong increase in wholesale business, where there was a notable improvement in the provision of unbundled local loops.

In the full 2007 fiscal year, QSC posted its strongest revenue growth in the Wholesale/Reseller segment, where revenues rose by 87 percent to € 122.3 million. Revenues in the Large Account segment increased by 17 percent to € 76.6 million, while revenues with Business Customers were up by 12 percent to € 84.7 million. Overall, QSC increased the revenue share of its three strategic segments to 85 percent for the past fiscal year, as opposed to 79 percent the year before.

According to preliminary results, network expenses rose by 26 percent to € 227.2 million in 2007, as opposed to € 180.4 million the year before. This increase was mainly attributable to the operation of a significantly larger network with some 1,700 central offices at year-end 2007. Furthermore, network expenses also include one-offs for the integration of the network of Broadnet AG, which was merged with QSC on October 31, 2007. Nevertheless, QSC was able to improve its gross profit to € 108.0 million in 2007, as opposed to € 82.1 million the year before.

During the past fiscal year, other operating expenses, primarily consisting of marketing and selling as well as general and administration expenses, rose by 20 percent to € 73.1 million, as opposed to € 60.9 million the year before; the percentage of other operating expenses declined further from 23 percent to 22 percent of revenues.

Consequently, QSC again succeeded in disproportionately improving its EBITDA in 2007; according to preliminary results, EBITDA rose by 65 percent to € 34.9 million, as opposed to € 21.2 million in 2006. Depreciation expense amounted to € 45.5 million in 2007, as opposed to € 28.4 million the year before. Aside from the network expansion, this increase was attributable to the growing customer base, as QSC amortizes contract-related upfront expenses over a comparatively short period of 24 months. Furthermore, the fourth quarter of 2007 saw non-recurring, synergy-related write-downs on those components of the Broadnet network that overlap with QSC's and are therefore redundant. According to preliminary results, EBIT stood at € -10.6 million in 2007, as opposed to € -7.2 million the year before. The net loss amounted to € -10.1 million, as opposed to € -5.3 million in 2006, as QSC, due to the business development below expectations in 2007, had to abstain mostly from the planned capitalization of tax loss carryforwards for the past fiscal year.

The network expansion, which is driven by Plusnet, the joint-venture with TELE2, along with contract-related upfront expenses, led to a significant increase in capital expenditures to € 125.5 million in 2007, as opposed to € 40.1 million in 2006. Although the physical network roll-out will only be finished during the course of the current fiscal year, QSC had already largely completed the investment phase in 2007 due to the necessary lead times; the company now has access to the capacities that are required for the strong growth that is anticipated in 2008. During the current fiscal year, the company is planning on capital expenditures of between € 60 and € 80 million, with around 70 percent of this amount being attributable to contract-related upfront capital expenses.

After gradually overcoming the capacity constraints in the provision of unbundled local loops and accelerating order processing, the company plans to resume its strong and profitable growth in the current fiscal year: QSC anticipates revenues of € 385 to € 405 million and an EBITDA of between € 50 and € 60 million. Despite growing depreciation, the company aims for a breakeven result after taxes. With net liquidity of € 80.0 million as of December 31, 2007, QSC is adequately financed for this planned growth.

The strongest revenue growth is planned in Wholesale business. QSC will also develop new revenue opportunities with Large Accounts and Business Customers by upgrading its Managed Services business.

The full annual report will be available on March 31, 2008, at www.qsc.de/en/investor_relations/index.html.

Queries to:
QSC AG
Arne Thull
Investor Relations
Fon: +49(0)221-6698-724
Fax: +49(0)221-6698-009
E-mail: invest@qsc.de
Internet: www.qsc.de/en/

Notes:
This corporate news contains forward-looking statements. These forward-looking statements are based on current expectations and forecasts of future events by the management of QSC AG. Due to risks or mistaken assumptions, actual results may deviate substantially from those made in such forward-looking statements. The assumptions that may involve material deviations due to unforeseeable developments include, but are not limited to, the demand for our products and services, the competitive situation, the development, dissemination and technical performance of DSL technology and its prices, the development and dissemination of alternative broadband technologies and their respective prices, changes in respect of telecommunications regulation, legislation and adjudication, prices and timely availability of essential third-party services and products, the timely development of additional marketable value-added services, the ability to maintain and enlarge upon marketing and distribution agreements and to conclude new marketing and distribution agreements, the ability to obtain additional financing in the event that management's planning targets are not attained, the punctual and full payment of outstanding debts by sales partners and resellers of QSC AG, and the availability of sufficient skilled personnel.


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