QSC AG

Investor Presentation • Dec 15, 2013

QSC AG

Analyst Roundtable Cologne, December 12, 2013

AGENDA

• 1. Operational UpdateBarbara Stolz – CFO
• 1. Strategic UpdateJuergen Hermann – CEO
• 1. Presentation of Selected Innovations
• QSC-WiFi
• QSC-tengo
• Q-loud platform
• Smart Utility & Energy Solutions
• 1. Impact of Innovations on QSC's Mid-Term StrategyJuergen Hermann – CEO

2013: QSC IS WELL ON TRACK TO MEETINGITS GUIDANCE

I i l l i € n m o n	Q Q 1- 3 2 0 1 2	Q Q 1- 3 2 0 1 3
R • e v e n u e s	3 5 3 2	3 4 0. 3	3 7 % -
( ) C 1 f t • o s o r e e n e s v u	2 3 6. 8	2 2 6. 9	4 2 % -
G f i t • r o s s p r o	1 1 6. 4 +	1 1 3. 4 +	2 6 % -
( 1 ) O h i t t • e r o p e r a n g e x p e n s e s	6 0. 4	5 6. 0	7. 3 % -
E B I T D A f i t • p r o	5 6. 0 +	5 7. 4 +	2 5 % +
D i i t • e p r e c a o n	3 9 6	3 9 0	1. 5 % -
E B I T f i t • p r o	1 6. 4 +	1 8. 4 +	1 2 2 % +
F i i l l t • n a n c a r e s u	2 9 -	2 9 -	-
I t • n c o m e a x e s	1. 0 -	0. 5 -	n m
N f i t t • e p r o	1 2 4 +	1 5. 0 +	2 1. 0 % +

3

(1) Excluding depreciation and non-cash share-based remuneration

TWO-FOLD DEVELOPMENT: DECREASE IN TC VS. GROWTH IN ICT

TC BUSINESS IS STRAINED BY TIGHTENED REGULATION …

• • Effective December 1, 2012, the German regulator loweredinterconnection fees. This involved three major changes:
• •Lower mobile fees: minus 45 – 47%
• •Lower fixed-line fees: minus 20 – 40%
• •A new structure of fixed-line interconnection fees for altnets
• • Effects on QSC in 2013:
• • Around € 7 – ⁸ million less revenues per quarter (~55% Resellers / ~45% Indirect Sales)
• •Around € 1 million less EBITDA per quarter

… AND A DECLINING MARKET: LEGACY VOICE

ICT BUSINESS IS BENEFITING FROM LARGE ORDERSWON IN 2012

• • Significant increasein day-to-day ordersfrom existing and new customers in 2013
• • Total order inflow in 2012 was probably higher than that of 2013
• • Large orders helpedQSC to outpace the market in 2013

ALL THREE SEGMENTS ARE CONTRIBUTINGTO THE PROFIT MARGIN

• • Lion's share of gross margin of € 113.4 million is provided by Direct and Indirect Sales
• • Resellers still bear a significant yet declining portion of QSC's costs
• • NGN allows QSC to highly efficiently provide services in very competitive markets such as legacy voice

IN 2013, PROFITABILITY WILL FOR THE LAST TIME BENEFIT FROMTHE DEFERRED COST EFFECT

• • Cost reduction of € 5.2 million per quarter since Q1 2011 due to the premature termination of the Plusnet contract (originally to run through Dec 31, 2013) in late 2010
• • QSC used deferred costs to return the payment from TELE2 over the remaining contract period
• • This positive effect will stop after Q4 2013, and will be compensated, to some extent, by a network deal(€ 2.5 – € 3.0 million per quarter)

SHORT-TERM PROFITABILITY DRAWBACK: PERSONNEL EXPENSES

• • Focusing on recruitment since 2012:
• •Outsourcing (+125)
• •Consulting (+59)
• •Development (+46)
• Additional ICT experts are thefoundation for growing revenuesin people-intensive Outsourcingand Consulting, and progress in R&D

SHORT-TERM PROFITABILITY DRAWBACK: DEVELOPMENT EXPENSES

• • Development budget has risen bymore than 200 percent in 2013
• • QSC now employs some50 developers
• • Budget for full year 2013 isaround €6 million

PROFITABILITY DRAWBACK:INVESTMENT IN CUSTOMERS

QSC IS EARNING AN ATTRACTIVE FREE CASH FLOW

QSC IS FINANCED VERY SOLIDLY FOR FURTHER GROWTH IN ICT AND EXPANDING R&D

AGENDA

• 1. Operational UpdateBarbara Stolz – CFO
• 1. Strategic UpdateJuergen Hermann – CEO
• 1. Presentation of Selected Innovations
• QSC-WiFi
• QSC-tengo
• Q-loud platform
• Smart Utility & Energy Solutions
• 1. Impact of Innovations on QSC's Mid-Term StrategyJuergen Hermann – CEO

OUR LONG-TERM STRATEGY: FROM TC TO ICT AND THE CLOUD

2013	2016
Leading ICT provider	The innovation driver
for business customers	in the German ICT market
Pioneer in the Cloud	Pioneer in the field of
and M2M-market	Cloud services

OUR LONG-TERM STRATEGY: GREAT PROGRESS SINCE 2009

2009		2011		2012		2013
Start of transfor- mation process from TC to ICT		Acquisition and IT Consul- ting specialist INFO AG	of IT Outsourcing	Development of QSC's central Cloud platform for different services and applications		Completion of merger with INFO AG and IP Partner
	2010 Acquisition of Housing and Hosting specialist IP Partner		2011 Winning first innovation awards and sponsorships for Cloud-based services		2013 Launch of first self-developed products (QSC-tengo)

WHERE QSC STANDS TODAY

OUR LONG-TERM GOALS

AN ATTRACTIVE EMPLOYER: QSC IS ABLE TO WIN TALENT IN A HIGHLY COMPETITIVE MARKET

SHAREHOLDERS ARE BENEFITING FROM THE TRANSFORMATION PROCESS

INNOVATION DRIVERS: WHERE QSC STANDS TODAY

• • cospace, QSC-tengo and QSC-Analyzer are first examplesof QSC's self-developed ICT innovations
• • Some 50 employees are focusing on developing new ICTand Cloud products for existing and new markets
• • QSC is contributing to several highly promising initiatives:
• •EEBUS – home automation (presentation at IFA 2013)
• • O(SC) ²ar – smart car (DHL is testing pilot cars)
• •Virtual power plant – working on the first pilot (FINESCE)

PRECONDITION FOR INNOVATIONS:A FLEXIBLE ORGANIZATION

• •Innovations need room for development and fast decisions
• • Innovations need to be driven by people who prefer to work insmaller organizations
• •Innovators need a commercial environment and supervision
• •Innovators need access to sales channels
• ⇒ New QSC organization (since Q3 2013) enables innovations to be driven in dedicated subsidiaries (owned and managed by QSC)
• ⇒A perfect environment for innovators with an entrepreneurial spirit

PRECONDITION FOR INNOVATIONS: CLOSE AND TRANSPARENT MANAGEMENT

• • In 2013, QSC has installed a new innovation management system with
• •Clear responsibilities
• •Defined, measurable goals
• •KPI's for internal controlling and steering
• •Roadmap for each project, including milestones and decision points
• ⇒New concept will come into effect at the beginning of 2014

HOW QSC WILL FOSTER INNOVATIONS

• •Developing in-house
• • Acquiring leading-edge technology companies
• • Winning leading-edge entrepreneurial talent

THE PLATFORM FOR INNOVATION ALREADY EXISTS

QSC ALSO HAS A STRONG SALES CHANNEL …

	TOP 200	Large Accounts		SME			SoHo			Retail
Sales		Direct Sales			Indirect Sales				Resellers
		Region Energy		Retail Finance		TC	ISP	IΤ		TC

... AND A HUGE PRODUCT PORTFOLIO

QSC IS WORKING NONSTOP TO FILL THE GAPS

AGENDA

• 1. Operational UpdateBarbara Stolz – CFO
• 1. Strategic UpdateJuergen Hermann – CEO
• 1. Presentation of Selected Innovations
• QSC-WiFi
• QSC-tengo
• Q-loud platform
• Smart Utility & Energy Solutions
• 1. Impact of Innovations for QSC's Mid-Term StrategyJuergen Hermann – CEO

AGENDA

• 1. Operational UpdateBarbara Stolz – CFO
• 1. Strategic UpdateJuergen Hermann – CEO
• 1. Presentation of Selected Innovations
• QSC-WiFi
• QSC-tengo
• Q-loud platform
• Smart Utility & Energy Solutions
• 1. Impact of Innovations for QSC's Mid-Term StrategyJuergen Hermann – CEO

QSC WILL BECOME AN INNOVATION DRIVER

THE ROADMAP TO BECOMING AN INNOVATION DRIVER

2014	2015	2016
QSC-tengo,	Home automation	Smart utility, Energy
QSC-WiFi, cospace,	and further	solutions further
QSC-Analyzer	innovations	other innovations

WHERE QSC WILL STAND TOMORROW

INNOVATIONS WILL ALLOW QSCTO BRING ITS VISION TO LIFE

QSC will become a company with

• •Revenues of € 0.8 – € 1.0 billion
• •An EBITDA margin of 25%
• • Free cash flow of € ¹²⁰ €150 million

Progress of innovations will decide whether QSC will be able to reach the vision already in 2016

Innovations are the key to higher margins and financial strength

INNOVATIONS WILL LEAD TO RISING REVENUES

Key developments:

• • Direct Sales will grow faster than the market
• • Indirect Sales will start to benefit from new ICTproducts in 2014
• • Resellers will start to benefit from new products for mass markets in 2015
• • Indirect sales and Resellers hampered by legacy business in 2014 and 2015

SALES ORGANIZATION WELL-POSITIONEDFOR ACHIEVING GROWTH

•Direct Sales

• •Close relationships with Outsourcing / Managed Services customers
• •Strong industry expertise (Energy, Finance, Retail … more to come)
• •Consulting serves as a perfect door opener

•Indirect Sales

• •Strong customer base (30,000 SMEs in Germany)
• •Network of some 450 ICT partners
• •2013/2014: Selection of suitable partners, training and certification

•Resellers

• •Long-term relationships with strong ICT brands
• •Strong experience in launching and marketing B2B2C products
• •Involvement in several development partnerships with leading industry players

M&A STRATEGY WILL HELP TO ACCELERATE GROWTH

• • All ICT players use acquisitions to broaden their innovation pipeline and to win additional talent
• • In the past, QSC has proven its ability to find suitable targetsand to integrate them smoothly
• • In 2014 and beyond, QSC will focus on small and mid-sized companies with outstanding innovations and/or industry expertise
• • Full take-overs are possible as is the acquisition of significant stakes and partnerships

TAILWIND FROM THE MARKET: THE ERA OFB2B CLOUD COMPUTING HAS JUST BEGUN

TAILWIND: RESIDENTIAL CUSTOMERS WILLADOPT CLOUD SERVICES AS WELL

DIGITAL DISRUPTION: MOST INDUSTRIESWILL EXPERIENCE FUNDAMENTAL CHANGE

• • One third of the companies in Germany expects a significant changein their business model by 2020 (KPMG 2013)
• • Massive changes in industries such as music and tourism are onlythe beginning
• • ICT and Cloud Services will be at the heart of most business models –Industry 4.0 will become a reality
• • Companies will need ICT and Cloud partners to
• •Operate their ICT (Outsourcing, Cloud)

• •Digitize their processes (Consulting, Cloud)

• • Fulfill their customers' expectations (Cloud) ("interaction wherever and whenever they want")

• ⇒QSC will become a preferred partner for the German Mittelstand

QSC IS ON A GOOD WAY TO REALIZING ITSLONG-TERM GOALS AND ITS VISION

• •QSC has a highly attractive innovation pipeline for fast-growing markets
• • Launch of innovations will open up the opportunity to earnfast-growing revenues
• • Higher share of self-developed products will boost profitability in additionto ongoing automation and standardization of existing business
• • In 2013, QSC has finished its transformation process and built anorganization "QSC 2.0"
• •In 2014, QSC will invest strongly in future growth and innovations
• • In 2015, "QSC 2.0" will start to reap the fruits of having becomethe innovation driver in the German ICT and Cloud market

CONTACT

QSC AGArne ThullHead of Investor RelationsMathias-Brüggen-Strasse 5550829 Cologne

Phone +49-221-6698-724Fax +49-221-6698-009E-mail invest@qsc.deWeb www.qsc.de

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SAFE HARBOR STATEMENT

This presentation includes forward-looking statements as such term is defined in the U.S. PrivateSecurities Litigation Act of 1995. These forward-looking statements are based on management'scurrent expectations and projections of future events and are subject to risks and uncertainties. Many factors could cause actual results to vary materially from future results expressed or impliedby such forward-looking statements, including, but not limited to, changes in the competitive environment, changes in the rate of development and expansion of the technical capabilities of DSL technology, changes in prices of DSL technology and market share of our competitors, changes in the rate of development and expansion of alternative broadband technologies andchanges in prices of such alternative broadband technologies, changes in government regulation, legal precedents or court decisions relating, among other things, to line sharing, rent for co location and unbundled local loops, the pricing and timely availability of leased lines, and other matters that might have an effect on our business, the timely development of value-added services, our ability to maintain and expand current marketing and distribution agreements and enter into new marketing and distribution agreements, our ability to receive additional financing if management planning targets are not met, the timely and complete payment of outstanding receivables from our distribution partners and resellers of QSC services and products, as well as the availability of sufficiently qualified employees. A complete list of the risks, uncertainties and other factors facing us can be found in our public reports and filings with the U.S. Securities and Exchange Commission.

DISCLAIMER

• • This document has been produced by QSC AG (the "Company") and is furnished to you solely for your information and may not be reproduced or redistributed, in whole or in part, to any other person
• • No representation or warranty (express or implied) is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information contained herein and, accordingly, none of the Company or any of its parent or subsidiary undertakings or any of such person's officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this document
• • The information contained in this document does not constitute or form a part of, and should not be construed as, an offer of securities for sale or invitation to subscribe for or purchase any securities and neither this document nor any information contained herein shall form the basis of, or be relied on in connection with, any offer of securities for sale or commitment whatsoever