QSC AG

Earnings Release • May 15, 2008

News Details

Corporate | 15 May 2008 07:50

QSC posts strong revenue and EBITDA growth in first quarter of 2008

QSC AG / Quarter Results

Release of a Corporate News, transmitted by DGAP - a company of EquityStory
AG.
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QSC posts strong revenue and EBITDA growth in first quarter of 2008

• Strongest single-quarter growth in the customer base
• Revenues advance by 27 percent to € 97.5 million
• EBITDA grows by 28 percent to € 11.4 million
• QSC expects revenues and EBITDA to be at the upper end of the guidance
  for 2008

Cologne, May 15, 2008. QSC AG got off to a very good start in fiscal year
2008, posting the strongest growth in its customer base within a single
quarter in the company’s history. During the first quarter of 2008, the
company connected 124,700 unbundled local loops, nearly twice as many as in
the fourth quarter of 2007, which increased the total to more than 370,000.

The company grew its revenues by 27 percent in the first quarter of 2008 to
€ 97.5 million, as opposed to € 76.8 million for the same quarter the year
before. In this connection QSC generated its highest revenue growth in the
Wholesale/Reseller segment, where revenues were up 90 percent to € 49.3
million. While revenues in the Products segment declined by 12 percent to €
30.5 million as a result of the sustained price war in conventional
telephony, especially in connection with residential customers, revenues in
the Managed Services segment rose by 9 percent to € 17.6 million.

Beginning in the first quarter of 2008, QSC realigned its segment reporting
to these three segments. This means that the company’s accounting now
reflects the new organizational structure that has been in place since the
autumn of 2007 and that QSC has swiftly implemented IFRS 8 ahead of time.
The Wholesale/Reseller segment now includes all business relationships with
wholesalers and resellers, which include the strong wholesale partners, as
well as international carriers. The Products segment includes standardized
business with voice and data products for business and residential
customers, and the Managed Services segment includes the entire field of
custom-tailored solutions business for enterprise customers.

Both the strong rise in revenues as well as the achievement of synergies
following the merger of Broadnet and QSC led to a 28-percent rise in EBITDA
to € 11.4 million in the first quarter of 2008, as opposed to € 8.9 million
for the corresponding quarter the year before. QSC was thus already earning
an EBITDA margin of 12 percent in the first quarter of 2008.

There were two reasons why depreciation expense rose to € 15.0 million in
the first quarter of 2008, as opposed to € 8.5 million for the same quarter
the year before: First, the growing customer base is resulting in growing
customer-related capital expenditures for their connection, which QSC
depreciates within a relatively short period of 24 months. Second, QSC has
increased the number of central offices from around 1,000 to some 1,800
since the start of 2007 within the framework of the network expansion
project that has now been largely concluded. Operating this significantly
larger network, the net loss amounted to € -4.1 million, as opposed to net
income of € 1.1 million in the first quarter of 2007.

Capital expenditures totaled € 28.6 million in the first quarter of 2008,
as opposed to € 10.6 million for the same quarter the year before. Nearly
60 percent of this total was attributable to customer-related capital
expenditures, of which QSC swiftly invoices some 90 percent to the
respective customers. Now that the network expansion project has been
largely concluded, QSC anticipates that the rise in new business will bring
with it a corresponding increase in the percentage of customer-related
capital expenditures in the coming quarters, along with an inflow of
payments from customers for these preliminaries. With liquidity totaling €
68.8 million as of Mach 31, 2008, QSC therefore sees itself well financed
for the further growth it anticipates.

Given its very good start to the 2008 fiscal year, QSC anticipates that
both revenues and EBITDA for the full 2008 fiscal year will be at the upper
end of the guidance that it had announced in February 2008: At that time,
the company had planned revenues of between € 385 and € 405 million and an
EBITDA of between € 50 and € 60 million. In spite of the further rise in
depreciation expense, the company is additionally striving for a break-even
after-tax net result. QSC Chief Executive Officer Dr. Bernd Schlobohm
explains: 'Getting off to a good start in the current fiscal year gives me
every reason to be highly optimistic about achieving this planning. Because
with some 550,000 connected local loops, we will be surpassing the
break-even point for the significantly larger DSL network and then
achieving disproportionately high profitability growth.' With a total of
40,100 new local loops in April 2008, QSC has already succeeded in
increasing the total number of local loops to more than 410,000 as of the
end of April.

Queries to:
QSC AG
Arne Thull
Investor Relations
Fon: +49-221-6698-724
Fax: +49-221-6698-009
E-mail: invest@qsc.de

Notes:
This corporate news contains forward-looking statements. 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.
15.05.2008 Financial News transmitted by DGAP

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Language: English
Issuer: QSC AG
Mathias-Brüggen-Straße 55
50829 Köln
Deutschland
Phone: +49 (0)221 66 98-112
Fax: +49 (0)221 66 98-009
E-mail: invest@qsc.de
Internet: www.qsc.de
ISIN: DE0005137004
WKN: 513700
Indices: TecDAX
Listed: Regulierter Markt in Frankfurt (Prime Standard); Freiverkehr
in Berlin, Stuttgart, München, Düsseldorf

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