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QSC posts gross profit for the first quarter of 2003

Cologne, May 27, 2003. Cologne-based QSC AG grew its revenues by 188 percent to EUR 27.6 million for the first quarter of 2003, in spite of the ongoing recession in Germany (Q1 2002: EUR 9.6 million). This nearly three-fold rise in revenues stemmed from undiminished growth in higher-margin business-customer and project business, as well as from the first time consolidation of voice carrier Ventelo, which was acquired at the end of 2002. Three years after going public, both of these factors played a major role in meeting QSC's stated objective to record its first gross profit of EUR 0.5 million in the first quarter of 2003, as opposed to a gross loss of EUR -7.5 million for the comparable period in 2002. "Right from the beginning, we had stressed that our business model is scaleable", explains CEO Dr. Bernd Schlobohm. "Thanks to its own infrastructure, rising revenues at QSC leads to leveraged improvements in profitability."

Improvements in the operating business also led to a sharp reduction in the company's EBITDA loss, which amounted to EUR -10.0 million for the first quarter of 2003 after EUR -16.3 million for the first three months of 2002. This nearly 40-percent improvement is attributable to focusing on high-margin market segments, especially project business customers. "Our key control parameter is the contribution margin that each and every product and each and every project generates", explains CEO Schlobohm. In addition, the swift integration of Ventelo helped to boost profitability. The consolidation of the two backbone networks into one integrated voice-data backbone network, as well as the consolidation of co-location rooms and regional branch offices, also produced significant cost savings.

Cash burn down for the eighth time in a row

QSC's net cash outflow for the first quarter was EUR -10.9 million, marking its eighth improvement in a row. As of March 31, 2003, cash and cash equivalents totaled EUR 76.7 million, while the company continued to remain virtually debt free. For 2003, QSC plans an average reduction of cash burn by about two million euros per quarter. QSC thus anticipates net liquidity of more than EUR 50 million as of December 31, 2003. On that basis, it is planned to reach the cash flow breakeven point during the course of 2004, without raising any further debt or equity capital.

Given the positive development of the business during the first quarter of 2003, QSC is reiterating its original full year forecast, dating from February 2003, of achieving revenues of EUR 105 to 115 million along with a negative EBITDA of between EUR -25 to -30 million. "Our central goal continues to be the EBITDA breakeven during the course of the fourth quarter", stresses CEO Schlobohm.

Queries to:
Claudia Zimmermann
Corporate Spokeswoman
Fon: +49(0)221/6698-235
Fax: +49(0)221/6698-289
Arne Thull
Investor Relations
Fon: +49(0)221/6698-112
Fax: +49(0)221/6698-009

Notes :
This ad hoc announcement 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 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.