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QSC posts strong revenue and profitability growth in 2006

  • Revenues up by 35% in 2006 to € 262.5 million
  • EBITDA rises in 2006 from € 5.8 million to € 21.0 million
  • First net income in the fourth quarter of 2006
  • Revenue growth to more than € 350 million planned for 2007
  • EBITDA expected to rise to between € 50 and € 60 million in 2007
Cologne, February 28, 2007. According to preliminary results, QSC grew its revenues by 35 percent during the past fiscal year to € 262.5 million, as opposed to € 194.4 million the year before. The company posted its strongest growth in business with wholesale partners and resellers. Here, revenues grew by a strong 115 percent to € 65.4 million, boosted also by the successful marketing launch of DSL lines through wholesale partners like HanseNet and freenet. Strong growth also characterized the Large Account and Business Customer segments; in 2006, revenues with large accounts rose by 27 percent to € 65.5 million, revenues with business customers were up by 31 percent to € 75.5 million. During the past fiscal year, QSC was generating nearly 80 percent of its revenues in its three strategic segments of Large Accounts, Business Customers and Wholesale/Resellers.

This significantly higher revenue quality produced strong improvements in profitability, as shown by the preliminary results. QSC grew its EBITDA to € 21.0 million, as opposed to € 5.8 million in 2005. The company's net loss improved to € -6.7 million, as opposed to € -18.2 million in 2005. In consequence of the continuing profitability improvement, QSC generated its first quarterly net income of € 1.4 million in the fourth quarter of 2006; revenues for the same period totaled € 83.1 million, EBITDA € 9.3 million.
This strong and profitable growth is based upon QSC's existing nationwide Next Generation Network and upon its broadband infrastructure on the last mile. QSC further expanded its network in 2006, upgrading it with ADSL2+ technology. As a result of high upfront expenses for new large customers, resellers and wholesale partners as well as the start of the network expansion in cooperation with TELE2, capital expenditures totaled € 42.7 million, as opposed to € 20.1 million in 2005. Plusnet that was formed as a joint network operating company together with TELE2 in the summer of 2006 will be expanding the DSL network from more than 1,000 central offices to nearly 2,000 central offices by year-end. It will then be operating one of the largest DSL networks in Germany. This network expansion has been fully funded through the € 50-million capital contribution by Plusnet's co-shareholder TELE2. During the current fiscal year, QSC plans to invest a total of between € 60 and € 70 million in network expansion and for contract-related upfront expenses for enterprise customers.

This network expansion will open up further growth potential to QSC in its three strategic segments. The company is thus anticipating revenues of more than € 350 million in 2007, as well as further strong profitability improvements. For 2007, QSC expects its EBITDA to reach between € 50 and € 60 million, along with a net income of between € 15 and € 25 million.

Preliminary results in € million Q4 2006 Q4 2005 2006 2005
Net revenues 83,1 53,1 262,5 194,4
Network expenses* 59,3 37,8 180,4 143,7
Gross profit 23,8 15,3 82,1 50,7
EBITDA 9,3 0,8 21,0 5,8
Net income (loss) +1,4 -4,4 -6,7 -18,2
Capital expenditures 16,3 6,2 42,7 20,1
Net liquid assets on December 31 - 108,0 52,1
Workforce on December 31 - 675 450

*exclusive of depreciation and non-cash compensation

The full annual report will be available on March 29, 2007, at www.qsc.de/en/investor_relations/index.html.

Queries to:

Arne Thull
Investor Relations
Fon: +49(0)221-6698-724
Fax: +49(0)221-6698-009
E-mail: invest@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.