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QSC AG

Investor Presentation • Nov 22, 2010

343_ip_2010-11-22_0eac1f74-1d81-4f39-b1a8-feb85add9bba.pdf

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QSC AGCompany PresentationResults Q3 2010

Cologne, November 8, 2010

OUR MISSION STATEMENT

QSC is the leading medium-sized provider in the telecommunications market who creates sustainable value for medium-sized companies, cooperation partners and employees through highest quality and customer focus.

AGENDA

    1. Highlights Q3 2010
    1. Financial Results Q3 2010
    1. Outlook 2010
    1. Questions & Answers

AND FINANCIAL STRENGTH

MAJOR ACHIEVEMENTS DURING Q3 2010

  • •Ongoing successful transformation of QSC
  • •Double-digit growth in IP-based products and services
  • •QSC launches first nationwide Open Access platform
  • • QSC is integrating the narrowband network of freenet cityline –marking the start of the Managed Outsourcing line of business
  • • QSC launches IPfonie centraflex 3.0 – an ICT software-as-a-service product

IP-BASED REVENUES GREW BY 13%

RISING REVENUES WITH IP-BASED SERVICES

Main developments

  • •Growing demand for "all IP" solutions
  • • Strong demand for VoIP services frommid-size customers and wholesalers

Our expectation

  • "IP revenues" will rise further because of
  • • A growing demand from mid-sizecustomers
  • • High interest in NGN-based serviceson the part of wholesalers and resellers
  • •Launch of further IP-based services
  • •Consistent white label strategy

OUTPERFORMING A FAST DECLINING MARKET

Market developments

  • • Clear trend toward using complete connections and VoIP for voice in Germany
  • Call-by-Call: -27% for voice minutes* Preselect: -42% for voice minutes*
  • •Fierce price competition

Our expectation

  • • QSC will continue to outperform the market thanks to its highly efficient cost structure
  • • QSC will benefit doubly from the trendtowards VoIP
  • •Rising revenues with IPfonie products
  • •Rising revenues in Voice Wholesale

* Source: DIALOG CONSULT / VATM, October 2010

ADSL2+ IS LOSING IMPORTANCE

QSC WILL PLAY A CENTRAL ROLE IN THE NGA MARKET

QSC has launched the first nationwide Open Access 'Integrator' platformin Germany

OPEN ACCESS IS OPENING UP NEW OPPORTUNITIES

  • • The new platform will enable regional carriers to market their NGAs, mostly based on fibre optic networks, beyond regional borders and to increase utilization
  • • QSC has already won two partners
  • •Leipzig-based HL komm is the first infrastructure provider
  • • 1&1 Internet AG is the first user of the Open Access platform and will add NGA connectionsof up to 100 Mbit/s to its product range in 2011
  • • QSC is entering an attractive market
  • •More than 50 further regional players are working on NGA infrastructures
  • • Already 650,000 householdsare connected to FTTX lines (2007: 110,000)

TREND TOWARD NGA VALIDATES OUR STRATEGY

  1. Highlights Q3 2010

    1. Financial Results Q3 2010
    1. Outlook 2010
    1. Questions & Answers

AT YEAR-END, QSC WILL BE GENERATING > 70% OF ITS REVENUES WITH IP-BASED PRODUCTS AND SERVICES

Q3 2010: CHARACTERIZED BY A SHARP RISE IN PROFITABILITY

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FOCUS ON PROFITABILITY IS PAYING OFF

PROFITABILITY IS POSITIVELY IMPACTED BY DECREASING DEPRECIATION

  • • In 2010, depreciation will decline to approx.€ 57 million
  • • Further decline expectedin 2011

NET PROFIT IN Q3 2010 IS HIGHER THAN INTHE ENTIRE 2009 FISCAL YEAR

Drivers

  • •High-margin IP-based growth
  • •Strict cost discipline
  • •Declining depreciation

Consequences

  • • Earnings per share grew to€ 0.10 per share in the first nine months of 2010
  • • Further rise in net profit expected
  • • QSC will start capitalizing its tax-loss carry forward

LOW CAPEX LEVEL, CONNECTED WITH CUSTOMER-DRIVEN INVESTMENTS

  • • QSC will invest approx. 7-8% of its revenues in 2010
  • • From 2011 onwards, CAPEX will be
  • less than 10% of revenues
  • at least 50% customerdriven

QSC IS GENERATING A RISING FREE CASH FLOW

QSC IS BUILDING UP A NET CASH POSITION

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NET CASH IS BACKING FUTURE GROWTH OPPORTUNITIES

QSC will be using its growing net cash to

  • • Pay an attractive dividendfor the 2011 fiscal year
  • •Potentially initiate a share buy-back program
  • • Invest inthe development of new services like Q-loud

  • • Optionally: acquire solution providers, especially in the field of ICT software-as-a-service business

  • Highlights Q3 2010

  • Financial Results Q3 2010

3.Outlook 2010

  1. Questions & Answers

OUTLOOK 2010QSC PLANS TO DOUBLE ITS FREE CASH FLOW

OUTLOOK 2010QSC PLANS TO TRIPLE ITS NET PROFIT

QSC expects a net profitof more than € 16 million

Further increase in

  • Revenues

OUTLOOK 2010SUCCESSFUL TRANSFORMATION PROCESS

  • • Ongoing transformation process enables QSC to
  • • Generate higher free cash flows andhigher profitability
  • •Focus on service business, using existing and new network capabilities
  • • Launch and market attractive IP-based services like Outsourcing Services for carriers
  • • Increase the share of ICT budgets of existing and new mid-size customers

  • • Ongoing transformation process will continue in 2011 and sharpen the profile of QSC as the leading medium-sized providerin the ICT market

  • Highlights Q3 2010

  • Financial Results Q3 2010

  • Outlook 2010

4.Questions & Answers

FINANCIAL CALENDAR

November 23, 2010 German Equity Forum Fall 2010 Deutsche Börse, Frankfurt

December 1-2, 2010 Berenberg Bank European Conference, London

"

CONTACT

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

Phone +49-221-6698-724 Fax +49-221-6698-009 E-mail [email protected] Web www.qsc.de

SAFE HARBOR STATEMENT

This presentation includes forward-looking statements as such term is defined in the U.S. Private Securities Litigation Act of 1995. These forward-looking statements are based on management's current 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 implied by 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 and changes 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 colocation 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

GROWING PROFITABILITY OF MANAGED SERVICES

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FOCUS ON HIGH-MARGIN PRODUCTS IS PAYING OFF

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VOICE WHOLESALE IS DRIVING WS/RS SEGMENT

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STABLE SHAREHOLDER STRUCTURE SINCE IPO

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