Grupo Iusacell Announces Restructuring and Recapitalization Plan

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Grupo Iusacell Announces Restructuring and Recapitalization Plan

Simplified Share Structure in New Holding Company Will Enhance Share Liquidity and Create Additional Financing Flexibility; Bell Atlantic to Maintain Control

August 6, 1998


Howard F. Zuckerman, Chief Financial Officer, 011-525-109-5761, or Ian C. Muir, Director of Investor Relations, 011-525-109-5755, both of Grupo Iusacell

MEXICO CITY -- Grupo Iusacell (BMV: IUSACELL, NYSE: CEL and CEL.D) announced today that its principal shareholders have agreed to a four-step restructuring and recapitalization plan, to be initiated immediately and anticipated to be fully implemented by year end, that will increase the liquidity of the Company's public shares, provide proceeds primarily to fund the acquisition of licenses for the Company's Personal Communications Service (PCS) operations in Mexico's northern regions and create additional flexibility for the Company to obtain debt financing for its capital expenditure program.

The Company will effect a 1-for-1 share exchange offer to consolidate its four existing voting and limited voting share classes into two voting share classes of a new holding company. Prior to the exchange offer, the Company will borrow US$71.5 million from Bell Atlantic under its US$150 million convertible debenture facility and Bell Atlantic will immediately convert the loan into equity. The Company, however, will extend the economic benefit of the convertible debenture to the public shareholders by means of an approximate US$8.5 million rights offer of shares in the new holding company at the same US$0.70 per share (US$7.00 per ADS) conversion price. Net proceeds to Iusacell from these two transactions will total approximately US$80 million and result in a 10.5% increase in total shares outstanding. Finally, the principal shareholders will sell a portion of their shares in the new holding company to the public in order to increase the public float.

Upon the completion of these transactions, Bell Atlantic and the Peralta Group will each own approximately 42% of the new holding company, and Bell Atlantic will retain management control. The public float will be concentrated in one class of stock and will constitute approximately 15% of the outstanding capital stock -- rather than the current 10% of outstanding capital stock divided among two classes. The trust administering the Company's executive employee stock purchase plan will hold the remaining shares. It is expected that both classes of shares in the new holding company will be listed on the Mexican Bolsa and that the new public class of shares will also be listed as ADSs on the New York Stock Exchange.

Fulvio Del Valle, President and Director General of Iusacell commented: "The restructuring and recapitalization plan creates the foundation for further value creation for our shareholders and positions Iusacell for the next phase of its development and business growth. Further, this plan represents a significant advance in the process of Iusacell becoming a broadly owned, public company".

Howard F. Zuckerman, Vice President and Chief Financial Officer of Iusacell, added that "the restructuring and recapitalization plan should resolve the concerns raised by our existing public shareholders and potential investors over the past year regarding the liquidity of the Company's public shares and should create the flexibility that will enable Iusacell to continue financing its 1998-1999 capital expenditure program."

The exchange offer, rights offer and shareholders secondary offering will be subject to the receipt of necessary United States and Mexican government approvals, certain shareholder and third party consents and approvals, and market conditions. The consummation of the rights offer and shareholders secondary offering will also be subject to the successful completion of the exchange offer.

The exchange offer, rights offer and shareholders secondary offering will be registered under the Securities Act of 1933 and will be made in the United States only by means of a prospectus.

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 which, through certain subsidiaries, owns 42% of the capital stock of Grupo Iusacell.

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