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QSC: Strong growth with Large Accounts and Wholesale/Resellers

Cologne, November 29, 2005. QSC AG has published its quarterly report for the third quarter of 2005. There were no material changes to the preliminary results announced on November 10, 2005.
In the third quarter of 2005, QSC grew its revenues by 34 percent to € 51.1 million, as opposed to € 38.1 million for the same quarter the year before. Business with Large Accounts and Wholesale/Resellers has been particularly strong. In the third quarter of 2005, revenues with Large Accounts rose by 57 percent to € 12.7 million as opposed to € 8.1 million for the same quarter the year before. In the same period, revenues with Wholesale/Resellers even rose by 91 percent to € 8.6 million as opposed to € 4.5 million. Following the upgrade of the QSC network to a nationwide Next Generation Network (NGN) in the first half of 2005, resellers, primarily carriers without sufficient local access network infrastructure in Germany, are increasingly using the QSC network. Early successes on the part of wholsale partner debitel also contributed to revenue growth. "The targeted expansion of our infrastructure according to demand is paying off in our Wholesale and Resellers business as well as with business customers," explains QSC Chief Executive Officer Dr. Bernd Schlobohm.

In the third quarter of 2005, these higher revenues as well as the targeted expansion of QSC´s own infrastructure led to an increase of the cost of revenues by 29 percent to € 38.7 million, compared to € 30.1 million for the same quarter the year before. Nevertheless, the Company continued to rise its gross profit strongly by 57 percent to € 12.4 million, as opposed to € 7.9 million in the third quarter of 2004. EBITDA grew to € 1.1 million in the third quarter of 2005, compared to € 0.4 million for the same period the year before.

In the past months, QSC upgraded its network with ADSL2+ technology in the pilot region, Dusseldorf, and extended its DSL network to ten additional cities on a demand-driven basis. As a consequence, capital expenditure in the third quarter increased to € 4.8 million, compared to € 3.4 million in the third quarter of 2004. This targeted expansion of the Company´s infrastructure and the increased level of upfront expenditure for Large Account business put some pressure on the operating cash flow. Operating cash flow amounted to € 2.5 million in the third quarter of 2005 as opposed to € 3.7 million in the previous quarter. For the full fiscal year 2005, QSC expects an operating cash flow of at least € 7 million.

In the light of continuing strong growth, QSC has again significantly upgraded its revenue forecast for the full year when it announced its preliminary numbers for the third quarter 2005. The Company now anticipates revenues of over € 193 million for the full 2005 fiscal year, representing growth of over 32 percent. QSC continues to forecast a positive EBITDA of between € 4 to 8 million for 2005. QSC CEO Schlobohm says: "The further targeted expansion of our own infrastructure according to demand will make a significant contribution to QSC´s ability to grow revenue and profit strongly."

In millions of euros (€)Q3 2005Q3 2004Q1-Q3
2005
Q1-Q3
2004
Net revenues51.138.1141.3105.8
Network expenses38.730.1106.183.0
Gross profit12.47.935.222.8
Other operating expenses11.37.533.022.1
EBITDA+1.1+0.4+2.2+0.7
Net loss-4.1-5.5-13.8-16.5
Earnings per share (in €)-0.04-0.05-0.13-0.16
Capital investments4.83.411.27.3
Liquid assets as of
September 30
31.539.7  
Workforce as of
September 30
446358  

The complete 9-months report is available at
www.qsc.de/en/investor_relations/index.html

Queries to:

QSC AG
Arne Thull
Investor Relations
Fon: +49(0)221-6698-112
Fax: +49(0)221-6698-109
E-mail: invest@qsc.de

Notes:
This corporate news contains forward-looking statements pursuant to the US "Private Securities Litigation Act" of 1995. 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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