QSC Expects to Reach the EBITDA Breakeven Point During Q4 2003

QSC Expects to Reach the EBITDA Breakeven Point During Q4 2003 


COLOGNE, Germany, Nov. 25  /PRNewswire-FirstCall/ -- Cologne-based QSC AG (Pink
Sheet: QSCGF) increased its revenues by 144 percent from EUR 12.1 million in the
third quarter of 2002 to EUR 29.5 million in the third quarter of 2003. During
the first nine months of the current fiscal year, revenues rose by 154 percent
to EUR 85.3 million, compared to EUR 33.6 million in the same period a year
before. In addition to the effect stemming from the consolidation of voice
carrier Ventelo, this rise in revenues is primarily attributable to the
sustained strong growth in project-related business. QSC won further prominent
names as customers, including TUV Rheinland Berlin Brandenburg and electronic
retail store chain MakroMarkt. Overall, the percentage of total revenues
accounted for by business customers rose to 58 percent in the third quarter of
2003, as opposed to 32 percent in 2002.

In the third quarter of 2003, the rise in revenues resulting from services for
business and project customers led to a disproportionate improvement in gross
profit to EUR 2.9 million (Q3 2002: EUR -2.3 million). QSC earned a gross profit
of EUR 5.0 million for the first nine months of the current fiscal year, as
opposed to a gross loss of EUR -12.1 million for the first nine months of 2002 -
an improvement by 141 percent. "This rise in gross profit impressively
underscores the scalability of our business model. Thanks to our own network
infrastructure, rising revenues lead to a leveraged improvement of QSC's
results," says Dr. Bernd Schlobohm, QSC's CEO.

At EUR 4.7 million, selling and marketing expenses were significantly lower
year-on-year (Q3 2002: EUR 8.9 million). The fact that QSC generated profits in
spite of reduced selling and marketing expenses also underscores the potential
of the company's business model. Advances in QSC's operative business combined
with a 144-percent year-on-year growth in third-quarter revenues lead to a
dramatic improvement in EBITDA: In the third quarter of 2003, the EBITDA loss
declined to EUR -5.5 million, as opposed to EUR -14.2 million for the third
quarter of 2002. During the first nine months of the current fiscal year, the
EBITDA loss declined by one half, from EUR -45.4 million to EUR -22.7 million.

Rapid Ventelo integration producing significantly improved results

The synergies stemming from the Ventelo acquisition, as well as the rise in
high-margin services for business and project customers play a major role in
QSC's significantly improved results. For the current fiscal year, QSC
anticipates positive synergistic effects from the Ventelo acquisition of up to
three million euros, and it anticipates positive effects of up to five million
euros for 2004. However, the fourth quarter of 2003 will incur non-recurring
integration expenses due to the relocation of Ventelo's administration and all
other operating functions to QSC's headquarters in Cologne. The non-recurring
expenses will involve costs for the move itself, refitting of existing premises,
the need to network all workplaces, as well as consolidation of the data and
network control centers. "With Ventelo's accelerated relocation to Cologne in
2003, we are concluding the integration process sooner than had originally been
planned," says Dr. Schlobohm.

For the tenth time in a row, QSC reduced its quarterly cash burn from quarter to
quarter, from EUR -8.6 million for the second quarter of 2003 to EUR -7.2
million for the third quarter of 2003 -- an improvement by 16 percent. Including
the EUR 0.7 million payment of the second tranche of the purchase price for the
Ventelo acquisition, this resulted in a total cash burn of EUR -7.9 million for
the third quarter of 2003. As of September 30, 2003, the company's cash and cash
equivalents totaled EUR 60.2 million.

Sustained EBITDA-profits for 2004

In spite of anticipated high non-recurring expenses for the integration of
Ventelo and the persistently weak economy in Germany, QSC is maintaining the
significantly higher forecast it announced in August. The company continues to
plan on breaking into positive EBITDA territory during the course of the fourth
quarter of this year and reaching the cash flow breakeven point during the
course of the first half of 2004. Also in August of this year, QSC raised its
full year guidance for revenues and EBITDA significantly from EUR 105 to 115
million planned revenues to more than EUR 115 million, and from EUR -25 to -30
million planned EBITDA loss to less than EUR -25 million. The management
continues to believe that these planned targets are both ambitious and
realistic. As a consequence, no overperformance relative to these increased
targets should be expected.

Given new contracts with large enterprise customers -- such as HypoVereinsbank
for whom QSC had been integrating 75 locations into a virtual private network
(VPN) over the last months -- Dr. Schlobohm, QSC's CEO, is expecting a further,
sustained improvement of the company's results: "We are confident to generate a
positive EBITDA for the entire fiscal year 2004."

   All amounts     01/07/-30/09/ 01/07/-30/09/ 01/01/-30/09/ 01/01/-30/09/
   in million EUR          2003          2002          2003          2002

   Revenues                29.5          12.1          85.3          33.6
   Gross profit/loss        2.9          -2.3           5.0         -12.1
   EBITDA                  -5.5         -14.2         -22.7         -45.4
   Net loss               -12.3         -27.3         -46.3         -74.9



The full 9-months-report of QSC AG is available starting the 25th of November
under http://www.qsc.de/de/investor_relations/index.html

Notes:

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
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. 

DATASOURCE: QSC AG



CONTACT: Claudia Zimmermann, Corporate Communications, [phone],

fax, [phone], , or Arne Thull, Investor Relations,

[phone], fax, [phone], , both of QSC AG



Web Site:  http://www.qsc.de/de/investor_relations/index.html 

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