Revenues in the second quarter of 2001 alone were EUR 7.1 million EUR, thus exceeding first-quarter revenues by 34 percent. We are very satisfied with this top line growth, commented CEO Bernd Schlobohm, adding that we were at the same time able to reduce our losses substantially, since our operating result for the first six months of the current business year proved to be better than originally planned. The EBITDA loss was EUR 45.7 million (H1/2000: EUR -25.1 million), with pre-tax losses amounting to EUR 54.7 million (H1/2000: EUR -30.1 million). Savings in operational expenses, the completion of the network build out coupled with a major increase in revenues, were the main factor behind this improvement.

The current slowdown in the German economy is starting to impact QSC’ revenue growth during the current third quarter. CEO Schlobohm notes that small and medium-sized companies our core target group are currently holding back on investments in IT and telecommunications services. Given this situation, the company expects to achieve revenues of EUR 26 – 34 million compared to the EUR 38 – 46 million originally expected. QSC continues to assume that 40,000 to 50,000 DSL lines will have been sold by the end of the year. Demand for our Q-DSL product for private customers is growing faster than we thought at its launch in May 2001, Schlobohm explained.

The Company’s current EBITDA forecast has improved relative to the forecast published in the spring of this year. QSC now expects an annual EBITDA loss of EUR 85 to 100 million compared to a previous forecast of EUR 90 to 120 million. In the second half of the year, our cost optimisation program will continue to produce substantial savings, Schlobohm emphasise,

With a virtually debt-free balance sheet, a high level of liquidity, a broadband network covering the 40 largest cities in Germany and our outstanding team of employees, Schlobohm views the current downturn in the economy as an opportunity

we will emerge from the crisis in a stronger position and establish ourselves as the undisputed number two on the German market.

As at June 30, 2001, QSC AG had cash and cash equivalents in excess of EUR 210 million, or approximately EUR 2 per share and was almost debt-free (financing debts as at June 30, 2001: EUR 0.3 million). CEO Schlobohm notes the crucial advantage this entails, stating that our sound financial position enables us to push forward with our business model. After completing a nation wide broadband network covering Germany’s 40 largest cities in 2000, and launching its own family of DSL products, Q-DSL, in the first half of 2001, the corporate focus is now on marketing. From the third quarter onward, a broad marketing campaign will lend strong support to the QSC sales effort. After a heavy phase o9f capital expenditure lies behind us, we have created all the conditions we need to continue increasing our sales, Schlobohm explains. As a consequence, the company expects to reduce its cash burn starting from the third quarter, as well as positive earnings on an EBITDA basis from 2003 onward.

QSC remains highly optimistic about the DSL market in Germany – Broadband is the future of the Internet, says Schlobohm. and we are very confident about the growth of this market in Germany, despite of the current business climate in this country. However, we are greatly concerned about Deutsche Telekom’s tactics to delay the emergence of real competition in the local access market. In the view of the QSC management team, the former state-owned enterprise is selling DSL services at prices that are below cost and hinders fair competition in the local access market.

In this context, the final decision by the Upper Court of Administration on August 23, 2001, according to which Deutsche Telekom must permit line sharing without further delay, is likely to have a very positive impact.

The decision by the regulation authority in March this year has now been made a reality, after a delay of five months comments Schlobohm, Now, it needs to be seen whether Deutsche Telekom finally presents a line sharing offer on a competitively fair and realistic basis

Line sharing means that QSC can use the greater part of the frequency spectrum on existing DT telephone lines to carry its own data, thus obviating the need to install a second line.

SOURCE: COMPANY PRESS RELEASE