07.28.1998Corporate

Iusacell Customer Base Doubles In Second Quarter 1998 Over Second Quarter 1997

Iusacell Customer Base Doubles In Second Quarter
1998 Over Second Quarter 1997

Company meets expectations, positioned ahead of competition

July 28, 1998






Media contact:  
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Grupo Iusacell

Ian C. Muir, Director of Investor Relations

011-525-109-5780

Lyssette Bravo, Manager of Investor Relations

011-525-109-5759

MEXICO CITY -- Grupo Iusacell (NYSE: CEL, CEL.D; BMV: USACELL)
today announced its second quarter subscriber base of 563,425, a 100 percent increase
over second quarter 1997, and a more than 125 percent subscriber growth since Bell
Atlantic assumed management control in February 1997.


Net customer additions for the current quarter grew 166 percent, to 82,684 compared
with 31,050 during the same period last year, helping Iusacell achieve six quarters of
successively higher net additions.


With reported quarterly revenues of 616 million pesos, a 25 percent increase over second
quarter 1997, Iusacell ended the second quarter with a 1.2 million peso operating profit,
the company's second consecutive quarter of operating profit.


Strong subscriber growth and continuing operating efficiency improvements produced a
second quarter Earnings Before Interest, Taxes, Depreciation and
Amortization (EBITDA) margin of 27 percent and year-over-year cash flow growth
of 102 percent. EBITDA totaled 163 million pesos in the second quarter of 1998.


Margins continued to increase during the current quarter, contributing to the turnaround
from a second quarter 1997 operating loss of 74 million pesos to a 1.2 million peso
operating profit for the period.


"Iusacell continues to meet our expectations, with especially strong results in customer
additions", said Tom Bartlett, CEO of Iusacell and President and CEO of Bell Atlantic
International Wireless. "Strong results were supported by growth in not only our prepaid
service, which continues to provide us profitable penetration into the Mexican cellular
market, but also by our more traditional contract plans. Being first with products,
technologies and services will continue to keep Iusacell ahead of the evolving competition,
allowing us to leverage unique bundles of services as the market's full-service provider.


"Our goal this year has us stretching to meet high financial and operational targets while
preparing to deploy new products and services ahead of new wireless players set to enter
the market over the next six to twelve months.


"For instance, we recently enhanced our national presence by winning two key wireless
licenses in northern Mexico and successfully launched digital services in our existing
Mexico City market. During the second quarter we also expanded distribution by nearly
900 new outlets and widened the customer care gap between Iusacell and its competitors
by opening two new Customer Call Centers and adding new procedures and support
systems that reduced average customer waiting time in our 22 largest stores from about 45
minutes to under 10 minutes. Customers are benefiting also from our deployment of the
RF fingerprinting system to increase our prevention of fraud."


Fulvio Del Valle, president and director general of Iusacell said, "We are particularly
pleased with the progress we have made in reducing churn by over 10%, cash operating
expenses per customer by 45% and almost doubling the productivity of our employees.
With the plans for a low-cost network leveraged across a near-nationwide footprint,
Iusacell will be positioned to meet short-term demand from an expanding consumer base
while managing long-term profitability."


"As for new interconnection rates, we are still optimistic that Mexican regulators will soon
resolve the issue equitably. Concluding a permanent interconnection agreement with the
market's monopoly provider will trigger a final phase for moving forward with agreements
for Calling Party Pays, which we believe the government plans to implement before the
end of this year".


Howard F. Zuckerman, CFO of Iusacell, noted, "Our second quarter financial
performance, and in particular EBITDA, was consistent with our targets. The company
spent US$104 million of its US$200 million CAPEX program in the first six months of
1998. In addition, the company is working on a plan, to be announced in the near future,
for further financing of its PCS operations in the northern regions."


Due to a foreign exchange loss of 184 million pesos, Iusacell reported a net loss for the
second quarter 1998 of 153 million pesos.


Grupo Iusacell is the leading independent wireless telecommunications company in
Mexico. It is the non-wireline cellular service provider in four of Mexico's nine regions in
the central portion of Mexico (including Mexico City) covering a total of 66 million POPs,
representing 70% of the country's total population. In May 1998, the company won
auctions from PCS concessions in two regions in Northern Mexico which cover an
additional 10 million POPs, or 11% of Mexico's total population. Since February 1997,
the company has been under the operating and management control of Bell Atlantic that,
through certain subsidiaries, owns 42% of the capital stock of Grupo Iusacell.


Un-audited Second Quarter Operating Highlights

At or for the three months ended June 30
                                          1998         1997      Change
Cellular Subscribers (EOP)              563,425      281,740      100%
Operating Profit                        Ps.1.2*     (Ps.74)*      N/A
EBITDA                                  Ps.163*       Ps.81*      102%
Net Subscriber Additions                 82,684       31,050      166%
Avg Monthly MOU / Sub                      87            107      (19%)
Avg Monthly Rev / Sub                    Ps.366       Ps.470      (22%)
Avg Monthly Contract Churn                2.49%        2.79%      (11%)
Paging Subscribers (EOP)                 20,006        9,808      104%
Number of Employees                       2,072        2,050        1%
Subscribers Per Employee                    258          131       97%
Cash Operating Expenses / Sub            Ps.977     Ps.1,778      (45%)

    * Figures in millions 

Note: This press release contains statements about expected future events and financial
results that are forward-looking and subject to risks and uncertainties. For those
statements, we claim the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995. Discussion of factor
that may affect future results is contained in our recent filings with the Securities and
Exchange Commission.


Note: All monetary figures are in Mexican Pesos and restated as of June 30, 1998, in
accordance with Mexican GAAP.


GRUPO IUSACELL, S.A. DE C.V.

Summary Operations Review for the Quarter ended June 30, 19982


The following summary operations review addresses the un-audited operating results of
Grupo Iusacell, S.A. de C.V. ("Iusacell"), for the quarter and six months ended June 30,
1998, along with its financial condition as of June 30, 1998. It should be read in
conjunction with the un-audited Consolidated Financial Statements accompanying this
discussion. All comparative analysis is on a constant June 30, 1998, purchasing power
basis unless otherwise stated.


Results of Operations

Second Quarter 1998 compared with Second Quarter 1997


Total revenues for the quarter ended June 30, 1998 were Ps.616, an increase of Ps.123, or
25% versus the second quarter of 1997. Revenue growth was primarily attributable to the
growth of Iusacell's subscriber base during the last twelve months.


Service revenues for the second quarter were Ps.513, an increase of 23% compared with
the second quarter of 1997, and represented 83% of total revenues.


Within service revenues, airtime consumption represented 33% of total revenues during
the second quarter of 1998, versus 28% during the second quarter of 1997. Monthly fees
represented 39% of total revenues during the second quarter of 1998 versus 33% during
the second quarter of 1997 and value-added services represented 5% of total revenues in
the second quarter of 1998, versus 6% in the second quarter of 1997. Long distance
represents the company's remaining revenues for both second quarter of 1998 and second
quarter of 1997. Equipment sales and other revenues (including out-roaming) were
Ps.103, an increase of 37% from the second quarter of 1997, and represented 17% of total
revenues. The increase in handset sales accompanied continuing strong growth in the
prepay segment of the company's subscriber base.


The company's subscriber base was 563,425 at June 30, 1998, compared with
281,740 at June 30, 1997, representing an annual increase of 100%. During the second
quarter of 1998, the contract subscriber churn monthly average was 2.49%, compared
with 2.79% during the second quarter of 1997, an improvement of 11%.


Average monthly MOU per subscriber in the second quarter of 1998 declined to 87 from
107 during the second quarter of 1997.


This decline is attributable to the higher relative growth in the prepay subscriber base and
the normal industry trend of lower MOU per subscriber as the cellular subscriber base
expands.


Average monthly revenue per subscriber declined to Ps.366 in the second quarter of 1998
from Ps.470 in the second quarter of 1997, on a nominal basis, for the same reasons and
because of a shift in usage mix toward discounted incoming calls. Further, second quarter
1998 ARPU was adversely affected by a lower level of price increases compared with the
same period in the prior year.


Cost of services decreased marginally to Ps.164 in the second quarter of
1998 compared with Ps.169 in the second quarter of 1997. Sales, general and
administrative expenses were Ps.244 in the second quarter of 1998, compared with Ps.199
in the second quarter of 1997, an increase of 23%. As a percent of revenues, sales,
general and administrative expenses represented 40% in the second quarters of 1997 and
1998.


Net operating income for the second quarter of 1998 was Ps.1.2 million, compared with a
net operating loss of Ps.74 million in the second quarter of last year.


Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) increased
102% to Ps.163 million in the second quarter of 1998, compared with Ps.81 million in the
second quarter of last year.


Integral financing costs were Ps.148 million in the second quarter of 1998 versus a gain of
Ps.10 million in the second quarter of 1997. The main difference was a higher exchange
loss of Ps.184 million (Ps.9 million in 1997), partially offset by a higher monetary
correction gain of Ps.87 million (Ps.75 million in 1997) and lower interest expense of
Ps.52 million (Ps.57 million in 1997).


Iusacell reported a net loss of Ps.153 million for the second quarter of 1998, compared
with a net loss of Ps.77 million for the second quarter of 1997, attributable primarily to the
increased foreign exchange loss from the weakening of the peso.


First Half 1998 compared with First Half 1997


Total revenues for the six months ended June 30, 1998, were Ps.1,195 million, compared
with Ps.931 million during the first half of 1997. Service revenues for the first half were
Ps.1,010 million, an increase of 27% compared with the first half of last year. Within
service revenues, airtime consumption represented 33% of total revenues during the first
half of 1998, versus 29% during the first half of 1997. Monthly fees represented 39% of
total revenues during the first half of 1998 versus 33% during the first half of 1997; and
value-added services represented 7% of total revenues in the first half of 1998, versus 6%
in the first half of 1997. Equipment sales and other revenues (including out-roaming) in
the first six months of this year were Ps.185 million, an increase of 36% compared with
the same period last year, and represented 15% of total revenues. The increase in handset
sales accompanied continuing strong growth in the prepay segment of the company's
subscriber base.


The company's net adds were 163,302 during the first half of 1998, compared with 48,834
during the first six months of 1997, representing an annual increase of 234%. In the first
half of 1998, the contract subscriber churn monthly average was 2.67%, compared with
2.98% during the first half of 1997, an improvement of 10%.


Average monthly MOU per subscriber in the first half of 1998 declined to 90 from 107
during the first half of 1997. This decline is attributable to the higher relative growth in
the prepay subscriber base and the normal industry trend of lower MOU per subscriber as
the cellular subscriber base expands. Average monthly revenue per subscriber declined to
Ps.382 in the first half of 1998 from Ps.470 in the first half of 1997, on a nominal basis, for
the same reasons and because of a shift in usage mix toward discounted incoming calls.


In addition, ARPU in the first half of 1998 was also adversely affected by price increases
being lower than the rate of inflation.


Cost of services increased 8% from Ps.292 million in the first half of 1997 to Ps.316
million in the same period of this year. Sales, general and administrative expenses were
Ps.468 million in the first half of 1998, compared with Ps.398 million in the first half of
1997, an increase of 18%. However, as percent of revenues, sales, general and
administrative expenses have been reduced from 43% in 1997 to 39% in 1998.


Net operating income for the first half of 1998 was Ps.1.6 million, compared with a net
operating loss of Ps.148 million in the first half of 1997.


EBITDA was Ps.312 million in the first half of 1998, compared with Ps.165 million in the
first half of 1997, an increase of 89%.


Integral financing costs were Ps.252 million in the first half of 1998, versus a gain of Ps.57
million in the first half of 1997. The main difference was a higher exchange loss of Ps.358
million (Ps.29 million in 1997), partially offset by lower interest expense of Ps.100 million
(Ps.122 million in 1997).


Iusacell reported a net loss of Ps.253 million for the first half of 1998, compared with a
net loss of Ps.115 million in the first six months of 1997, attributable primarily to the
increased exchange loss of Ps.358 million (Ps.29 million in 1997).


Financial Condition


Liquidity. The company's liquidity in the second quarter and first half of 1998 was
provided by cash from operations, short and long term borrowings and vendor financing.


Assets. Grupo Iusacell's total assets as of June 30,1998 were Ps.8,045 million
(US$892 million), which represents an increase over June 30, 1997 of Ps.683 million
(US$76 million).


Capital Expenditures. In the second quarter and first semester of 1998, the company
invested US$62 million and US$104 million, respectively, in its capital expenditure
program, primarily in the construction of its digital network.


Other capital expenditures during the quarter included investments in the development of
the company's new billing and customer care system, the deployment of its RF
fingerprinting system, designed to prevent fraudulent traffic from being processed on the
analog network, the opening of 22 additional retail points of sale and network
performance improvement systems.


Debt. Total interest-bearing debt as of June 30, 1998 was Ps.3,685 million (US$408
million). All of this debt is dollar denominated, and in spite of a 12 month decline in the
US dollar to peso exchange rate of 13%, the overall financing cost has proven to be less
than having peso denominated debt or entering into hedging agreements. At June 30,
1998, the company's average cost of outstanding debt was 8.9%, with a remaining
average maturity of approximately 4.1 years. At June 30, 1998, the company's debt to
total capital ratio was 52.2%, versus 46.5% at March 31, 1998. This increase is mainly a
result of additional debt incurred to cover capital expenditure investments.


Investments in the company's digital network conversion, other cellular investments and
the future PCS business operations will be funded through various sources, including
additional borrowings under the company's existing debt facilities and EXIMBANK
financing.


Note: All monetary figures are in Mexican Pesos and restated as of June 30, 1998, in
accordance with Mexican GAAP.