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QSC AG

Investor Presentation • Feb 3, 2011

343_ip_2011-02-03_001dd883-a5b9-46f5-b22a-dc6d6ce1eeea.pdf

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QSC AGCompany PresentationClose Brothers Seydler Bank AGSmall & Mid Cap Conference

Frankfurt, February 3, 2011

AGENDA

    1. Strategic overview
    1. Latest developments
    1. Financial results Q3 2010
    1. Outlook 2010
    1. Questions & Answers

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.

IN THE TELECOMMUNICATIONS MARKET ...

  • • Unique positioning: QSC is a telecommunications provider for enterprisecustomers with a focus on medium-sized customers
  • QSC IS THE LEADING MEDIUM-SIZED PROVIDER • Next generation pioneer: As the first telco company in Germany, QSC has built a Next Generation Network and therefore enjoys longyears of experience in connection with IP-based telephony solutions
  • • Attractive EBITDA margin: In 2009, QSC generated revenues of € 420.5 million and earned an EBITDA of € 76.9 million
  • • Solid financing: QSC is net-debt free and has an equity ratio of 58% as of September 30, 2010
  • • Committed workforce: 700 employees, roughly 500 are based in the Cologne headquarters

... FOR MEDIUM-SIZED COMPANIES

Larger Accounts SMEs ISPs/Carriers/Wholesaler
Approx. 8,300 enterprises with
revenues $\geq \epsilon$ 50 million		 Approx. 900,000 SMEs with
revenues < $\epsilon$ 50 million		 Resellers with a focus on:
- business customers
(112 ISPs, 35 national
and international carriers)
- residential customers
(6 wholesale partner)
- Tailor-made solutions for
the entire voice and data
communications
- Full service
- Individual service level
agreements		 - Modular portfolio of solutions
and products for voice and data
communications
- Customizable to suit every need
- Tremendous experience in
connection with IP-based
telephony solutions		 - Sophisticated portfolio
of pre-products
- Automated interfaces

QSC UNDERSTANDS THE NEEDS OFMEDIUM-SIZED COMPANIES

Needs Investment-
secure & sustainable		 Improve productivity
& adaptive to business		 "Peace of mind"
Transparent cost structure Solution driven consulting 24 x 7 customer service
Pay as you grow Tailormade solution Meaningful (customer driven) SLAs
Action Open source technology Infrastructure independent solution Dedication & focus on
enterprise needs
Open access infrastructure Precise planning & reliable roll out Reliable service
--------------------------------------- Financial flexibility:
customized financial solutions		 Easy usability Easy to do business with

A LONG TRADITION OF CUSTOMER FOCUSAND INNOVATIVE SERVICES

CUSTOMER-FOCUSED STRATEGY LED TO PROFITABLE GROWTH

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

NGN – THE PERFECT TOOLBOX FORNEXT GENERATION TELCO SERVICES

QSC IS TARGETING AN ATTRACTIVE MARKET TODAY …

… AND HAS THE CHANCE TO DOUBLE ITS MARKET SHARE IN THE COMING YEARS

AGENDA

    1. Strategic overview
    1. Latest developments
    1. Financial results Q3 2010
    1. Outlook 2010
    1. Questions & Answers

MAJOR ACHIEVEMENTS DURING H2 2010

  • •Ongoing successful transformation
  • •Double-digit growth in IP-based products and services
  • •Launch of the first nationwide Open Access platform
  • •New agreements with former Plusnet partner TELE2
  • • Acquisition of fast-growing Hosting and IT-Outsourcing provider IP Partner

DOUBLE-DIGIT GROWTH OF IP-BASED REVENUES

NGN ENABLES QSC TO INTEGRATE NEXT GENERATION ACCESSES (NGA) WITH A UNIQUE PLATFORM

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 toincrease 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)

NEW AGREEMENTS WITH TELE2

• Premature termination of the collaboration agreement: TELE2 is paying € 66.2 million for the premature termination of thecollaboration agreement, which would otherwise have run throughDecember 31, 2013

•QSC acquires 32.5% of Plusnet:

QSC is paying € 36.7 million to acquire the 32.5%-stake of TELE2 in Plusnet, equivalent to the current book value of the stake

•10-year Managed Outsourcing contract:

Following freenet, TELE2 is the second customer of QSC for its newManaged Outsourcing business

• 10-year DSL wholesale partnership: With TELE2, QSC is gaining another branded DSL wholesale partner(current partners include 1&1, Congstar, HanseNet)

ACQUISITION OF IP PARTNER WILL ACCELERATE TRANSFORMATION PROCESS

  • •On December 21, 2010, QSC acquired all shares of IP Partner, Nuremberg
  • •IP Partner is a fast-growing provider of hosting and IT outsourcing services
  • • The company operates two data centers with more than 10,000 servers for over 1,000 business customers
  • • The purchase price involves two components: € 15 million in cash and € 10 million by April 2012 latest, contingent upon various prerequisites
  • ⇒Acquisition strengthens IT competence of QSC
  • ⇒Acquisition accelerates transformation to an ICT service provider

WITH IP PARTNER, QSC NOW REALIZESICT OUTSOURCING SERVICES

AGENDA

    1. Strategic overview
    1. Latest developments
    1. Financial results Q3 2010
    1. Outlook 2010
    1. Questions & Answers

Q3 2010: FURTHER IMPROVEMENT IN PROFITABILITY AND FINANCIAL STRENGTH

REVENUES (in € million) $EBITDA$ (in $\epsilon$ million)
$+1.1$
$+1.2$ 19.2
104.4 105.6
Q3/09 Q3/10 Q3/09 Q

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 further solution providers, especially in the field of ICT software-as-a-service business

AGENDA

    1. Strategic overview
    1. Latest developments
    1. Financial results Q3 2010
    1. Outlook 2010
    1. Questions & Answers

OUTLOOK 2010QSC PLANS TO DOUBLE ITS FREE CASH FLOW

-

QSC PLANS TO TRIPLE ITS NET PROFIT

-

QSC expects a net profitof more than € 16 million

Further increase in

  • Revenues
  • EBITDA

AGENDA

    1. Strategic overview
    1. Latest developments
    1. Financial results Q3 2010
    1. Outlook 2010
    1. Questions & Answers

FINANCIAL CALENDAR

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CONTACT

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

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

twitter.com/QSCIRdetwitter.com/QSCIRenblog.qsc.dexing.com/companies/QSCAGslideshare.net/QSCAG

paulrobertloyd.com/2009/06/social_media_icons

-

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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QSC IMPLEMENTS THE FIRST OPEN ACCESS PLATFORM IN GERMANY

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