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QSC 2005 annual report: Network expansion and upgrade fuels growth dynamic

Cologne, March 30, 2006. Cologne-based QSC AG today published its consolidated 2005 annual financial statements, which were prepared for the first time in accordance with IFRS. There were no material changes to the preliminary results that had been announced on March 1, 2006 - QSC again sustained its strong and profitable growth in 2005. The company grew its revenues by 33 percent to € 194.4 million, as opposed to € 145.9 million in 2004. Once again, high-margin business in the Large Accounts segment contributed in particular to this strong growth, with segment revenues rising by 55 percent to € 51.4 million, as opposed to € 33.2 million the year before. With a view to the new customers that were won in 2005, such as Commerzbank, Gothaer Versicherungen and Total, QSC Chief Executive Officer Dr. Bernd Schlobohm notes: "Our early focus on high-growth business on the basis of enterprise network solutions continues to be paying off."

Schlobohm sees the company's own nationwide infrastructure as the foundation for its success. As a consequence, QSC therefore upgraded its network into a Voice over IP-capable Next Generation Network during 2005, expanded its DSL network by more than 200 additional central offices to over 1,000 central offices nationwide and began upgrading them with ADSL2+ technology. In spite of the expense increase related to this expansion, as well as higher up-front expenses in the Large Accounts segment, QSC grew its gross profit before depreciation, amortization and non-cash share-based payments by 55 percent to € 50.7 million in 2005, as opposed to € 32.8 million the year before. During the same period, the company's EBITDA increased by 81 percent to € 5.8 million, as opposed to € 3.2 million in 2004.
During the current year, QSC intends to accelerate the demand-driven expansion and upgrade of its network, and plans to invest a total of € 20 to 25 million. The company has already expanded its DSL network by 13 additional cities during the first three months of this year, and now enjoys a presence in more than 120 cities. QSC's CEO Schlobohm explains: "We are expanding and upgrading our network wherever existing or potential customer relationships render swift amortization and pay back of the required capital expenditures highly likely." QSC anticipates strong customer demand first and foremost in the Large Accounts segment and from wholesale partners like debitel and HanseNet, who are - on the basis of QSC's infrastructure - marketing ADSL2+ connections that offer transfer speeds of up to 25 megabits per second. Schlobohm continues: "Expanding our wholesale business, as well as the resulting build out of further cities, is strengthening our business with enterprise customers. The more enterprise customer locations we can reach with our own network, the more favorable becomes our cost structure and the more successful we will be in winning orders from large accounts."

QSC therefore again expects to experience especially strong growth in business with large accounts in 2006. Overall, the company is forecasting revenue growth to over € 240 million for the current fiscal year, along with an EBITDA of between € 15 and 20 million. Moreover, the company expects to cross the net profit breakeven threshold by year-end.

In millions of euros (€)20052004
Net revenues194.4145.9
Net loss-18.2-21.6
Earnings per share (in €)-0.17-0.21
Equity ratio (in %)56.260.5
Capital expenditure20.115.9
Liquid assets as of December 3152.140.3
Workforce as of December 31450367

The full annual report is available at

Queries to:
Arne Thull
Investor Relations
T: +49(0)221-6698-724
F: +49(0)221-6698-009

This corporate news contains forward-looking statements pursuant to the US "Private Securities Litigation Act" of 1995. 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 proliferation of alternative broadband technologies and their respective prices, changes in respect of telecommunications regulation, legislation and current rulings, 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 leverage and expand existing marketing and distribution agreements and to conclude new marketing and distribution agreements, the ability to obtain additional financing in the event that management´s planned targets are not attained, the punctual and full payment of outstanding debts by sales partners and resellers of QSC AG, and the availability of sufficiently skilled personnel.