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QSC AG

Investor Presentation • Nov 21, 2008

343_ip_2008-11-21_f58adb22-4a2a-4471-8286-8479ebf79817.pdf

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QSC AG

1

Company PresentationResults Q3 2008

Cologne, November 19, 2008

19.11.2008

    1. Operational Update
    1. Financial Results / Outlook

HIGHLIGHTS Q3 2008: BACK TO PROFITABILITY

  • •QSC returns to profitability with € 2.1 million net income
  • • Ongoing strong and profitable revenue growth despite increasing economic challenges
  • • New business driven by
    • QSC's contribution to higher efficiency of customers
    • Increasing number of ULLs
  • •No material loss of existing business / customers
  • •No noticeable change in payment defaults
  • •Implementation of synergies following the Broadnet merger
  • •Increased focus on cost discipline
  • => QSC well positioned for economic downturn
  • 3

ENCOURAGING FINANCIAL DEVELOPMENT IN Q3 2008

  • •Revenues up by 25% to € 103.6 million
  • •EBITDA up by 147% to € 18.3 million
  • •EBITDA-margin doubles to 18%
  • •Net profit of € 2.1 million (Q3 2007: € -4.7 million)
  • • Significant reduction of CAPEX to € 21.1 million (Q3 2007: € 34.5 million)
  • • Well financed for anticipated growth
  • •€ 49.4 million liquidity as of September 30, 2008
  • •€ 36.7 million undrawn revolving credit facility available
  • 4Note: All results based on IFRS

PROFITABILITY THRESHOLD OF ~ 550,000 ULLsREACHED IN OCTOBER

5

ADSL2+ WHOLESALE MAIN REVENUE DRIVER IN 2008

Revenue drivers

  • Continuing growth in ADSL2+ wholesale leads to higher revenue
  • Decline of traditional, minute-based telephony revenues reflected in

SUSTAINED GROWTH OF WHOLESALE BUSINESS

Break-up of revenues

  • •50% of segment revenues from ADSL2+
  • •11% from legacy voice

German Market 2008

  • •3.2 million new DSL customers expected
  • •Growing demand for unbundled lines
  • • Substitution of T-DSL Resale by ULLs(2.9 million on September 30, 2008)

QSC 2008

  • •All major wholesale partners under contract
  • • Profitable business with resellers i.e. international carriers
  • BT
  • Colt Telecom
  • -Orange
  • Verizon

GERMANY REMAINS A DSL COUNTRYProspective market development in the coming years

Main drivers for ADSL2+

    • Still growth in demand for DSL
    • Retail ISPs need access to"complete" ULL vs. "bundled" T-DSL wholesale lines
  • Cable growth benefits from "catch up" effect following modernisation oflocal / regional networks

SLOW DOWN OF REVENUE DECLINECOUNTERED BY INCREASE OF VOIP/DIRECT ACCESS

Break-up of revenues

•45% legacy voice (H1 2008: 50%)

Market 2008

  • •Slow down of price competition
  • •Rapid gain of market share of VoIP

QSC 2008

  • • Growing demand for direct access to QSC's network and VoIP products
  • • Positive development of DSL and combined voice/data products for corporates and SOHOs
  • • New product S.HDSL bis: up to 20 Mbit/s symmetric

VOIP WILL BE A GROWTH DRIVER IN THE COMING YEARS

Main drivers

  • • Enterprises replace separate data and voice networks by integrated IP networks
  • • Customers combine VoIP with further IPbased services
  • • Efficiency gains through migration from legacy telephony to VoIP based applications

10

QSC SELLS EFFICIENCY AND PRODUCTIVITY GAINSTO ENTERPRISE CUSTOMERS

11

Market 2008

  • •Integration of VoIP in IP-VPN solutions
  • • Still growth opportunities in IP-VPN, especially in the SME-Segment
  • • High interest in new services like Communication-as-a-Service targeting call centers (Application Call Distribution)

QSC 2008

  • •NGN 'ready' for the new services
  • • Growing demand of Managed and Hosted Services like VirtuOS ACD
  • •QSC sells efficiency and productivity gains

QSC's BUSINESS MODEL:MOVING UP THE VALUE CHAIN

12

SWIFT INTEGRATION OF BROADNET ACQUISITION

  • • Network
  • Overlap is eliminated
  • QSC takes full advantage of Broadnet's WLL network
  • • Sales and marketing
  • All sales offices in Germany are merged
  • Consolidated product range
  • • Administration
  • Headquarter functions are consolidated in QSC's headquarter in Cologne

IMPROVED COST DISCIPLINE

QSC WELL POSITIONED FOR 2009 AND BEYOND

  • •QSC sells efficiency and productivity gains to enterprise customers
  • •QSC is well financed and under leveraged
  • •Growth in Wholesale / Reseller business
  • •Growing demand for new managed services in niche markets
  • •QSC – The NGN-Carrier => perfect starting position for the VoIP age

  • • Growth opportunities plus cost discipline will allow further profitability gains

    1. Operational Update
    1. Financial Results / Outlook

REVENUE GROWTH AND COST DISCIPLINE LEAD RETURN TO PROFITABILITY

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

STRONG PROFITABILITY GROWTH Q-o-Q

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

EBITDA MARGIN REACHES 18 PERCENT

CUSTOMER GROWTH DRIVES CAPEX IN Q3 2008

Results Q3 2008 –

20

90% OF CUSTOMER-DRIVEN CAPEX ISINVOICED TO CUSTOMERS

21

Customer related CAPEX asprepayment for future revenues

  • • In 2008, ~90% of customer-driven CAPEX is invoiced to customers
  • • Average term of cash payment: ~60 days
  • • Revenue recognition for upfront customer payment is spread over24 months / same period for depreciation of CAPEX

STRONG IMPROVEMENT OF CASH / REVENUES RATIO

22

SIGNIFICANT REDUCTION OF INTEREST-BEARING LIABILITIES / IMPROVED WORKING CAPITAL

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3.4 Debt financing – Club Deal (preliminary terms and conditions) SOLID FINANCING OF QSC: € 36.7 million undrawn revolving credit facility

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As of 30/09/2008: € 36.7 million undrawn revolving credit facility available QSC has drawn down € 0 in liquidity and € 13.3 million in guarantees

OUTLOOK 2008QSC expressly reiterates its guidance

25

  • •QSC expects revenues of more than € 405 million
  • •QSC expects EBITDA of more than € 60 million
  • •Net income ~ € 0 million

FINANCIAL CALENDER 2008

December 4, 2008 5th Annual MidCap ForumExane BNP Paribas, Paris

CONTACT

QSC AGArne ThullInvestor RelationsMathias-Brüggen-Strasse 55 50829 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

APPENDIX

STABLE SHAREHOLDER STRUCTURE SINCE IPO

31

NETWORK ROLL-OUT IS COMPLETED

  • • 1,900 central officesunder network coverage
  • • Next Generation Network (NGN) up and running
  • •More than 90% of the traffic is IP-traffic
  • •Significant cost-advantages
  • Nationwide voice network (474 POIs)
  • Separate Wireless Local Loop (WLL) network
  • •in 42 regions
  • •up to 400 Mbps
  • Network breakeven achieved
  • • QSC cross the threshold at some 550,000 ULLs(10/2008)

•

•

•

ALL SEGMENTS WITH ATTRACTIVE MARGINS

33

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