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QSC posts sharp EBITDA rise and announces first net income for Q4 2006

  • EBITDA up by 148% to € 5.2 million
  • First net income planned for the fourth quarter 2006
  • Strong growth in revenues with enterprise customers;
    slight decrease with residential customers
  • QSC now forecasts revenues of nearly € 265 million for the full fiscal year

Cologne, November 15, 2006. According to preliminary results, Cologne-based QSC AG grew its revenues in the strategic segments Large Accounts, Business Customers and Wholesale/Reseller year-on-year overall by 54 percent in the third quarter of 2006, thus again disproportionately improving its profitability.
The company posted its strongest growth in its Wholesale/Reseller segment; revenues increased by 113 percent to € 18.3 million year-on-year, to no small degree as a result of the successful start of the marketing of DSL lines by wholesale partners like HanseNet/Alice and freenet. Strong revenue growth also characterized both the Large Accounts segment - where revenues rose by 39 percent to € 17.7 million in the third quarter of 2006 - as well as the Business Customer segment, which saw revenues grow by 33 percent to € 20.0 million. As in the previous quarter, revenues in the company's non-strategic business with residential customers declined by 16 percent from the third quarter of 2005 to € 12.4 million, following ongoing fierce price competition in the residential market.


Overall, QSC grew its revenues by 34 percent in the third quarter of 2006 to € 68.4 million, as opposed to € 51.1 million for the comparable quarter the year before, and for the first time generated more than
80 percent of its total revenues in the company's three strategic segments.
This significant improvement in QSC's revenue mix produced a disproportionate improvement in profitability. According to preliminary results, gross profit increased by 82 percent in the third quarter of 2006 to € 22.4 million, as opposed to € 12.3 million for the same quarter the year before.


QSC's preliminary EBITDA rose by a strong 148 percent to € 5.2 million in the third quarter of 2006, as opposed to € 2.1 million for the comparable period the year before. The company's consolidated net loss improved to € -2.0 million in the third quarter of 2006 - according to preliminary results - as opposed to € -4.1 million for the same quarter the year before, thus further approaching the net income profitability threshold. Given the highly positive development of its profitability, QSC therefore not only anticipates crossing the net income profitability threshold during the course of the fourth quarter of 2006, but is also forecasting a first consolidated net income for the entire fourth quarter of 2006.
As a result of the improvement of its revenue mix towards higher revenues in the comparatively high-margin strategic segments, QSC is additionally raising its EBITDA forecast for the current fiscal year. The company now anticipates an annual EBITDA of between € 17 and 22 million, instead of € 15 to 20 million. At the same time, the shifting in the revenue mix at the expense of the comparatively low-margin residential customer segment leads to a revenue forecast of now nearly € 265 million instead of more than € 265 million.


QSC's interim consolidated statements will reflect full the consolidation of its majority interest in Broadnet, which was acquired on June 6, 2006, as well as time pro-rata consolidation of the Plusnet network operating company, which was formed as a joint venture, together with TELE2, from September 1, 2006 onwards. Following approval by the German Federal Cartel Office, Plusnet began operations on September 1, 2006, and is now swiftly expanding its nationwide DSL network from over 1,000 central offices today to nearly 2,000 central offices by year-end 2007.
Funding for these investments is assured by a € 50 million contribution in cash from TELE2 for its 32.5 percent interest in Plusnet. QSC's net liquid assets therefore totaled € 108.6 million as of September 30, 2006.

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

Notes:
The 9-months report of QSC AG is available starting the 27th of November 2006 at www.qsc.de. 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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