Grupo Iusacell Announces Results for First Three Quarters; Rebound in Subscriber Growth
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Grupo Iusacell Announces Results for First Three
Quarters; Rebound in Subscriber Growth
October 24, 1996
Cynthia M. Pelini
MEXICO CITY -- Grupo Iusacell, S.A. de C.V. (NYSE: CEL
reported a net loss of $53.9 million pesos for the first nine months
of 1996, versus a loss for the first nine months of 1995 of $351.6
million pesos, with results stated on a September 30, 1996, constant
purchasing power basis (A). The improved results for the first three
quarters of 1996 are attributable to price increases implemented in
November 1995 and February 1996, the success of the company's Control
Plus cellular prepayment program introduced in June 1996, and the
relative appreciation of the Mexican Peso net of inflation. Financial
results were affected by the economic situation in Mexico, as consumer
spending continues to lag behind the recovery beginning to be
experienced in the export and construction sectors. For the third
quarter ended September 30, 1996, the company reported a net loss of
$90.9 million pesos, compared to a net loss of $57.3 million pesos for
the second quarter of 1996.
Cellular subscribers as of September 30, 1996, were 225,107, a 10.7%
increase over the June 30, 1996, customer base of 203,324, and
representing an annualized growth rate of over 40%.
Guillermo Amore, President and CEO of Grupo Iusacell, noted: "We
pleased with the renewed growth in our cellular division, and believe
that we have successfully turned the corner toward continued growth in
our key wireless markets. The launching of our long distance and
paging businesses back in August will enhance margins over the long
term, as we make the best possible use of our existing infrastructure.
We continue to expect recovery in consumer confidence in Mexico in
1997, and we are positioning our businesses to participate in that
recovery. We anticipate improvements in pricing later this year."
"In our other businesses we are very pleased with the initial market
response to our long distance launch. We continue to await the
approval by the SCT of our technical and economic plans for the
commercial provision of local fixed wireless telephony. As of the end
of September, we had 11,750 customers in trial service; customer
acceptance of our fixed wireless service is very favorable"
The Company's core cellular business experienced strong customer
growth as a result of the introduction of its prepayment program,
known as "Control Plus" in June, as well as the rollout of new
contract programs designed for maximum flexibility, also resulting in
sharply improved customer retention rates.
Alberto Gomez Obregon, Director of the Cellular Division, noted,
competitive response of Grupo Iusacell's Control Plus plan is a hit in
the marketplace. We are back on track with strong growth in customer
count, and I am highly confident that the marketing innovations which
we will be introducing in the coming months brighten the picture even
further. Our new Flex 75 and 150 programs reflect our commitment to
innovation on the contract side as well, as well as our focus on the
importance of this segment when consumer confidence returns to
Edward Kingman, Chief Financial Officer of Grupo Iusacell, added,
"While our nine month numbers compare favorably to the year ago
period, our third quarter results reflect costs associated with the
launching of paging and long distance services to our existing
customer base, lower incremental cash flows associated with prepayment
customers, and the higher costs of much stronger growth. Longer term,
however, we are building the foundation for stronger revenue and
margin growth in our core cellular and fixed wireless businesses."
On a constant peso basis, revenues for the first nine months of 1996
were $1,147.2 million pesos, versus $1,293.9 million in the first nine
months of 1995, a decline of 11.3%. The lower revenues are a result
of the difference between current domestic inflation and the Company's
ability to put through price increases and, to a lesser extent, to
lower minutes of use associated with the cellular prepayment program.
Operationally, costs of sales were held flat during the first nine
months of 1996, as a result of the company's ongoing cost control
programs, to 39% of revenues from 40% of revenues in the first nine
months of 1995. Operating expenses declined by 15% period over
Cash generated from operations (EBITDA) was $228.9 million pesos for
the first nine months of 1996, a 10.5% increase over year-ago levels,
reflecting the effects of the cost control programs as well as the
price increases implemented in November 1995 and February 1996. The
EBITDA margin for the first nine months of 1996 was 20% compared to
16% for the comparable 1995 period. EBITDA margins in the third
quarter were 13%, due in part to paging and long distance start-up
"The entry of Grupo Iusacell into the long distance competitive
is another sign of our integration," said Daniel Rios, Director of
Long Distance Division. "We have strong customer recognition and
our existing cellular and fixed wireless customers, we have
approximately 2% of the existing telephony customer base in Mexico as
we sell our long distance services to non-proprietary customers
beginning January 1, these numbers will also grow."
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) covering a total of 64 million POPs -- representing 70%
of the country's total population. In addition to its cellular
operations, Grupo Iusacell is continuing with its commercial trial of
radiotelephony service, and in August 1996 will begin to provide long
distance service to its existing cellular and radiotelephony
customers, and began to market its paging services under the brand
name of "Iusabeep." Grupo Iusacell is listed on the Bolsa
Valores and the New York Stock Exchange.
First 9 Months 96 First 9 Months 95 % Change
Subscribers (EOP) 225,107 207,087 8.7
Net Subscriber Additions 14,908 12,364 20.6
Avg Monthly MOU/Sub 117 141 (17.0)
Avg Monthly Rev/Sub/Month $508 $459 10.7
Avg Monthly Churn 3.68% 3.40% 8.2
Number of Employees 2,167 2,121 2.2
The comparisons above are on an "as reported" basis.
GRUPO IUSACELL, S.A DE C.V.
Management's Discussion & Analysis of Financial Condition and
Results of Operations for the Period Ending September 30, 1996
(in Mexican GAAP with Pesos of Constant
September 1996 Purchasing Power)
The following report addresses Grupo Iusacell, S.A. de C.V.'s
("Iusacell" or the "Company") financial performance
for the nine
months ended September 30, 1996, and for the corresponding 1995 time
period, along with its financial condition as of September 30, 1996.
It should be read in conjunction with the Consolidated Financial
Statements accompanying this discussion. All comparative analysis is
on a constant September 30, 1996, purchasing power basis unless
otherwise stated. Due to the significant devaluation of the peso that
has occurred since December 1994, and the impact of an approximately
30% domestic inflation rate during the twelve months ended September
30, 1996, upon constant peso Mexican GAAP reporting, comparisons
between the two periods must be made with care.
Results of Operations(A):
Total revenues for the nine months ended September 30, 1996, were
$1,147.2 million pesos, a decrease of $146.6 million pesos, or 11.3%
versus the corresponding 1995 period on a constant peso basis.
Service revenues decreased by 11.2% and represented 86% of total
revenues while equipment sales and other revenues (including
out-roaming) decreased by 12% and represented 14% of total revenues.
Airtime consumption represented approximately 24% of revenues during
the first nine months of 1996 versus approximately 27% of revenues
during the first nine months of 1995. Monthly fees represented 34% of
total revenues during the first nine months of 1996, versus 31% during
the corresponding 1995 period. Value-added services were
approximately 8% in the first nine months of 1996, unchanged from the
corresponding 1995 period.
To offset the effects of increased inflation on the Company's costs,
Iusacell registered, with the Secretaria de Comunicaciones y
Transportes ("SCT") a 15% average rate increase in November
1995 and a
30% average rate increase in February 1996. Revenues did not increase
proportionally with the rate increases, as a result of lower average
monthly minutes of use and the impact of approximately 20% inflation
since the Company's last price increase in February 1996. On an as
reported basis, revenues did increase significantly between the second
and third quarters.
The Company's subscriber base was 225,107 on September 30, 1996,
compared to 207,087 at September 30, 1995, representing a year over
year increase of 8.7%. Growth for the third quarter of 1996 compared
to the second quarter of 1996 was 10.7% for an annualized rate of
approximately 40%. During the first nine months of 1996, subscriber
churn increased to an average monthly level of 3.68%, compared to 3.4%
during the corresponding period last year.
Average monthly minutes of use (MOUs) per subscriber for the first
nine months of 1996 declined to 117 from 141 during the corresponding
period of 1995. The decline is attributable to the continuing
economic problems experienced inMexico during 1995 and 1996 and to the
growing presence of prepayment customers in the subscriber base.
Average monthly revenue per subscriber increased by 10.7% to $508
pesos for the first nine months of 1996, from $459 pesos for the
comparable 1995 period, on an as reported basis, due principally to
previously mentioned price increases.