Grupo Iusacell Announces First Half Results
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FOR IMMEDIATE RELEASE
July 26, 1996
Net Income Gain Over Comparable Period
for 42 Percent Owned Bell Atlantic Venture
Mexico City, Mexico -- Grupo Iusacell, S.A. de C.V.
(NYSE: CEL and
CEL.D), reported a net profit of $35.6 million pesos1 for the first
half of 1996, versus a loss for the first half of 1995 of $225.8
million pesos. The results were reported on a June 30, 1996, constant
purchasing power basis.2
The improved results for the first half of 1996 are attributable to
price increases implemented in November 1995 and February 1996, cost
reductions, and the relative appreciation of the Mexican Peso net of
inflation. The Company's core cellular business, which was affected
in April and May by competition, rebounded in June with the
introduction of new prepayment and contract programs that resulted in
sharply improved customer acquisition and retention rates.
For the second quarter ended June 30, 1996, the company reported a net
loss of $55 million pesos, compared to a net profit of $91 million
pesos for the first quarter of 1996. The loss in the second quarter
was due principally to higher integral financing and higher customer
churn, reflecting a continued difficult economic climate and the
impact of a more competitive market.
"The first six month of 1996 have been a period of consolidation and
renewed focus by Iusacell as we position our company for anticipated
improvement in the Mexican economy," said Guillermo Amore,
and CEO of Grupo Iusacell. "Our priorities are clearly reflected in
first half results with improved pricing, cost containment, and
revitalized marketing programs in our cellular division. Nothing is
more vital to our ongoing success than establishing momentum in our
"We are disappointed by our inability to conclude negotiations with
SCT for the approval of our technical and economic plans for the
commercial provision of fixed wireless local radiotelephony service.
Although we believe that we are legally entitled to such approval, we
are exploring with the SCT alternative approaches to accelerate the
initiation of the commercial provision of such service. As of the end
of June, we had 8,800 customers in trial service.
"We continue to build on new opportunities for Iusacell in related
businesses and we are enthusiastic about the possibilities available to
us through our concession in long distance, which we plan to launch as
a service on August 11.
"The keys to our success going forward are sustained growth in our
cellular division, and commitment by our management team to build on
our primary strengths, and to take advantage of new business
Operationally, cost of service declined during the first half of 1996
to 36 percent of revenues from 39 percent in the first half of 1995,
as a result of the company's ongoing cost control programs. Selling
and general and administrative expenses declined by 16 percent, period
Cash generated from operations (EBITDA) was $172.5 million pesos for
the first half of 1996, a 10.8 percent increase over year-ago levels,
reflecting the effects of the cost control programs and price
increases implemented in November 1995 and February 1996. The EBITDA
margin for the first half of 1996 was 23 percent compared to 18
percent for the comparable 1995 period.
Edward Kingman, chief financial officer of Grupo Iusacell added, "I
pleased with our continuing cost containment measures and believe that
this discipline will enhance margins as we return to healthy growth
levels. While margins and growth in our core cellular business have
been significantly below the levels where we want them to be, we're
addressing the key issues that will drive the turnaround. In our
cellular division, the prepayment program and its enhancements are
delivering the results we'd expected, ahead of schedule."
The subscriber base grew by 0.6 percent compared to the end of the
first half of 1995, from 202,157 to 203,324. The June 30, 1996,
subscriber count does not reflect the cumulative positive impact of the
company's Control Plus pre-payment plan, launched on June 3, 1996.
By July 23 total subscribers had increased to 210,311.
"We have seen fundamental changes in the cellular market including
introduction of pre-payment plans by both Iusacell and its
competition, attracting and retaining cellular customers in light of
difficult economic conditions," said Alberto Gomez Obregon, director
of the cellular division. "Iusacell's recent introduction of its
Control Plus pre-payment plan attracts a new segment of customers, and
we've experienced a significant resurgence in demand since then.
"Our fundamental challenge in the marketplace is to work with
our customers to make cellular service accessible and affordable
during this period, and to transition these customers to full service
plans as the economy improves. We plan to build on the momentum
generated by Control Plus as the turnaround in the Mexican economy
gets under way."
Grupo Iusacell is a leading independent 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). The company covers a total of 64 million POPs,
representing 70 percent of the country's total population. In addition
to its cellular operations, Grupo Iusacell is continuing with its
commercial trial of fixed wireless service, and in August 1996 will
begin to provide long distance and paging services. Grupo Iusacell is
listed on the Bolsa Mexican de Valores and the New York Stock Exchange.
1H96 1H95 % Change
**** **** ********
Subscribers (EOP) 203,324 202,157 0.6
Net Subscriber Additions (1H) 1,167 7,434 (84.3)
Avg. Monthly MOU/Sub 125 147 (15.0)
Avg. Monthly Rev/Sub./Month $519 $526 (1.3)
Avg Monthly Churn 3.93 3.10 26.8
Number of Employees 2,154 2,076 (3.6)
The comparisons above are on an "as reported" basis.
Bell Atlantic Corporation (NYSE: BEL) is at the forefront of the new
communications, entertainment and information industry. In the
mid-Atlantic region, the company is the premier provider of local
telecommunications and advanced services. Globally, it is one of the
largest investors in the high-growth wireless communication
marketplace. Bell Atlantic also owns a substantial interest in
Telecom Corporation of New Zealand and is actively developing
high-growth national and international business opportunities in all
phases of the industry.
- Exchange rate calculation:
- First half 1996 = 7.49 pesos to 1 US dollar
First half 1995 = 6.125 pesos to 1 US dollar
First quarter 1996 = 7.5 pesos to 1 US dollar
Second quarter 1996 = 7.48 pesos to 1 US dollar
- The company is reporting results in conformance with Mexican
GAAP which requires restatement of prior period financials to
reflect constant peso reporting. Given the high rate of
inflation since the beginning of 1995, care must be exercised in
making inter-period comparisons.
- Steve Fleischer, 215-963-6822
Brian Wood, 215-963-6204
Grupo Iusacell First Half Results 1996