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QSC AG

Investor Presentation • Aug 9, 2010

343_ip_2010-08-09_27c27e7d-8a3e-482a-b674-ec298930d2bc.pdf

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QSC AGCompany PresentationResults Q2 2010

Cologne, August 9, 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!

QSC'S BUSINESS MODEL: FOCUS ON SERVICESBASED ON OUR NEXT GENERATION NETWORK

  • AGENDA 1. Highlights Q2 2010
    1. Financial Results Q2 2010
    1. Outlook 2010
    1. Questions & Answers

Q2 2010: FURTHER IMPROVEMENT IN PROFITABILITY AND FINANCIAL STRENGTH

MAJOR ACHIEVEMENTS DURING Q2 2010

  • •Ongoing successful transformation of QSC
  • •Double-digit growth with IP-based products and services
  • •Long-term network partnership with freenet
  • •First app for IPfonie centraflex: Interface for salesforce.com

IP-BASED REVENUES GREW BY 12%

ADSL2+ MARKET HAS REACHED SATURATION

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VOICE OVER IP IS SQUEEZING LEGACY VOICE

Main developments

  • •Fierce price competition
  • • Business customers are getting accustomedto VoIP

Our expectation

  • •Stabilization of these revenues on a low level
  • • QSC will benefit twofold from the trendtowards VoIP
  • •Rising revenues with IPfonie products
  • •Rising revenues in Voice Wholesale

RISING REVENUES WITH IP-BASED SERVICES

NEW GROWTH PATHOUTSOURCING SERVICES FOR CARRIERS

  • • On June 10, freenet and QSC signed a network partnership agreement, which will initially run for ten years
  • • QSC will fully integrate freenet's narrowband network into its NGN by December completely; customers will stay with freenet
  • •In the future, QSC will handle the complete voice traffic
  • • With this outsourcing service, QSC will be further broadening its leading position in handling VoIP-based voice minutesin Germany
  • ⇒ NGN is a perfect toolbox to cost-efficiently offering IP-based outsourcing services to other telco providers

  • ⇒ NGN allows QSC to play an active role in network consolidation without M&A activities

    1. Highlights Q2 2010
    1. Financial Results Q2 2010
    1. Outlook 2010
    1. Questions & Answers

QSC IS SHOWING FORWARD-LOOKING GROWTH

HIGHER IP-BASED REVENUES LEAD TO HIGHER GROSS MARGIN

Q2 2010 CHARACTERIZED BY RISING REVENUES AND HIGHER EARNINGS

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PROFITABILITY IS RISING FASTER THAN REVENUES

DECLINING DEPRECIATION IN 2010 AND BEYOND

Drivers

  • • High growth in ADSL2+ business in 2008 led to high depreciation (depreciation period: 2 years) in 2009
  • • Network rollout has been completed

Consequence

• Depreciation will be decliningin 2010 and beyond

QSC IS GENERATING RISING NET PROFIT

Drivers

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

Consequence

  • •Fast rising net profit
  • • Earnings per share grew to€ 0.03 per share in Q2 2010
  • • Growing net profit will allowQSC to pay an attractive dividend

LOW CAPEX LEVEL PROVES SUCCESSFUL TRANSFORMATION PROCESS

Drivers

  • • Customer-driven CAPEXdeclined, mainly due to less ADSL2+ installations
  • • No CAPEX for network extension =>investment period is over!
  • • Product development and future growth is included in CAPEX planning

Consequences

  • • 2010 and beyond:
  • CAPEX less than 10% of revenues
  • at least 50% customer-driven

QSC HAS BEEN GENERATING A RISING FREE CASH FLOW QUARTER BY QUARTER

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 Q2 2010

  • Financial Results Q2 2010

3.Outlook 2010

  1. Questions & Answers

OUTLOOK 2010QSC PLANS TO DOUBLE ITS FREE CASH FLOW

OUTLOOK 2010QSC PLANS TO TRIPLE ITS NET PROFIT

Results Q2 2010 –

QSC expects a net profitof more than € 16 million

Further increase in

OUTLOOK 2010SUCCESSFUL TRANSFORMATION PROCESS

  • • Successful transformation process allows to generate higher free cash flows and higher profitability, mainly for two reasons
  • •Higher margins with IP-based revenues
  • •Lower CAPEX/depreciation
  • • Successful transformation process allows QSC to focus on four attractive growth opportunities
  • •Providing Outsourcing Services for carriers
  • •Winning more mid-sized customers
  • •Increasing QSC's share of ICT budgets of existing and new customers
  • •Offering white label products and solutions through various sales channels

GROWTH OPPORTUNITYOUTSOURCING SERVICES FOR CARRIERS

  • • Advantages for carriers
  • •Access to a nationwide NGN
  • •Variabilization of formerly fixed infrastructure costs
  • •No further CAPEX
  • • Advantages for QSC
  • •Additional revenues in wholesale/reseller segment
  • •Higher network utilization
  • •Higher efficiency of the NGN

GROWTH OPPORTUNITYWINNING NEW MEDIUM-SIZED CUSTOMERS

GROWTH OPPORTUNITYLARGER SHARE OF WALLET

QSC HAS THE CHANCE TO DOUBLE ITS SHARE OFICT BUDGETS IN THE COMING YEARS

TRANSFORMATION OF QSC

In 2010 and beyond, QSC will be focusing on four attractive growth opportunities

  • •Providing Outsourcing Services for carriers
  • •Winning more mid-sized customers
  • •Increasing QSC's share of ICT budgets of existing and new customers
  • •Offering white label products and solutions through various sales channels

For QSC, the transformation KPIs are

  • •Double-digit growth of IP-based revenues
  • •Growing net profit

  • •Fast rising free cash flow

    1. Highlights Q2 2010
    1. Financial Results Q2 2010
    1. Outlook 2010
  • 4.Questions & Answers

FINANCIAL CALENDAR

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

Phone +49-221-6698-724Fax +49-221-6698-009E-mail [email protected] 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

ATTRACTIVE MARGINS WITH MANAGED SERVICES

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FOCUS ON HIGH-MARGIN PRODUCTS HAS PAID 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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