Grupo Iusacell Announces First Half Results

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, president 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 cellular business.

"We are disappointed by our inability to conclude negotiations with the 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 opportunities."

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 over 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 am 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 the 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.


  1. 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
  2. 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.

Media contacts:

Grupo Iusacell First Half Results 1996

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