FOR IMMEDIATE RELEASE
February 27, 1996
FOR FULL YEAR 1995
Company Secures US $65M Bridge Facility
Mexico City, Mexico - Grupo Iusacell S.A. de C.V. (NYSE: CEL and CEL.D) reported a loss of 569 million pesos for the full year 1995, compared to a loss of 519 million pesos for the comparable 1994 period, with results stated on a December 31, 1995 constant purchasing power basis. The loss in 1995 was due primarily to foreign exchange losses arising from a continued decline in the value of the peso, as well as a decline in operating margins resulting from the impact of high domestic inflation on operating expenses. (1) During the fourth quarter operating cash flow increased 69%, to 71 million pesos, up from 42 million pesos in the third quarter. Also, fourth quarter revenues increased 23%, from 335 million pesos in the third quarter, to 411 million pesos.
"We successfully met the difficult challenges of 1995," concluded Guillermo Amore, Chief Executive Officer of Grupo Iusacell. "We maintained our base of customers and experienced moderate growth in a very difficult business environment. In part due to our success in instituting stringent cost controls, we were able to keep our core operations cash positive during a major economic crisis. In fact, our operating cash flow margin increased significantly from the third to fourth quarter. This success will position the Company for improved performance in 1996, as the economy recovers and markets open."
He added, "We have recently secured a 65 million dollar bridge facility, which is anticipated to be replaced with an intermediate-bond offering. These proceeds will enable Grupo Iusacell to fund aggressive business expansion in our core business, and pending final approval, will provide the necessary financing for the Company's radiotelephony project." Amore also announced that Grupo Iusacell has recently signed a joint venture agreement through which the Company will soon offer national paging services to augment its cellular product line. He added, "As the economy resumes positive growth in 1996, we believe that we are well positioned to benefit from renewed strength in the marketplace. Longer term, Grupo Iusacell has a unique opportunity to become a full-service provider in the telecommunications marketplace."
The Company continued to experience growth in its cellular business, with subscribers increasing 8% for the year, from 194,723 on December 31, 1994, to 210,201 on December 31, 1995. Revenues increased 27% in nominal terms, but usage was lower, with MOU per month ending the year at 141. Revenues on a Mexican GAAP basis declined by 16%, reflecting the inflation-accounting impact of a 52% domestic inflation rate during 1995.
Difficult economic conditions have resulted in EBITDA margins for the cellular business ending the fourth quarter at 21%, with overall EBITDA margins, including start-up costs associated with the Company's business development activities, at 17% during the fourth quarter. Edward Kingman, Chief Financial Officer of Grupo Iusacell said, "The lower EBITDA margins for 1995 are primarily attributable to the impact of inflation on our cost of doing business and insufficient price increases to fully recover these expenses." He added, "However, we are encouraged by fourth quarter financial results. Fourth quarter revenue increased 23% over the third quarter figure, and the fourth quarter EBITDA margin for the entire business increased to 17%, compared to 12% in the third quarter."
Moving into 1996, management believes there are opportunities to increase both profitability and growth in its core cellular business. First, a 30% price increase effective February 1, 1996, coupled with a 15% price increase in April, 1995, is a significant market initiative to reestablish compensatory margins in this business. In addition, the Company recently secured a bridge loan to fund expansion of its core cellular business. Finally, the Company has announced two key management changes in the cellular business. Alberto Gomez Obregon has been appointed Vice President of cellular operations. He is a former McKinsey engagement manager who then worked as General Manager for Pepsico in Puerto Rico. More recently, he was managing director in charge of International Vice President of marketing for Grupo Dina, here in Mexico. William L. Bishop has been appointed Director of Region 9 cellular operations. He formerly for GTE Information Services as a general manager, and more recently as President of Mobilnet CANTV, a cellular company in Caracas, Venezuela.
The Company continues to wait for approval from the SCT of its technical and economic plans to begin widespread deployment of this service. Test market results with approximately 3,500 subscribers continue to be encouraging, with a low level of churn and high system reliability. Capitalized expenditures for the development of radiotelephony during the fourth quarter amounted to 17 million pesos, and the Company is pursuing longer-term financing to support the expansion of the business, pending SCT approvals. Commitment of Company resources to the project will be carefully matched to actual deployment of this network and to experienced rates of customer acquisition.
During 1995, the Company was awarded a concession to provide long distance services upon the opening of the market in January 1997. The Company will focus on leveraging its significant market presence in the cellular and radiotelephony businesses in committing corporate resources to the development of this business opportunity. Broader participation in the long distance market is contingent upon the economics of interconnection agreements which are currently being negotiated, promulgation of final rules for the long distance industry, and potential opportunities to partner with other long distance carriers.
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 65 million POPs - representing 70% of the country's total. In addition to its cellular operations, Grupo Iusacell is continuing with its commercial trial of radiotelephony services, and has recently received a long distance license. Grupo Iusacell is listed on the Bolsa Mexicana de Valores and the New York Stock Exchange. Shareowners include the Peralta family of Mexico, and Bell Atlantic, a major U.S. regional bell operating company.
Some key operational figures are as follows:
1995 1994 %Change Subscribers (EOP) 210,201 194,723 7.9 Net Subscriber Additions 15,478 67,362 (77.0) Avg Monthly MOU/Sub 141 179 (21.2) Avg Monthly Rev/Sub/Month (Ps) 466 595 (21.7) Avg Monthly Churn (%) 3.6 2.7 35.6 Number of Employees 1,996 2,267 (12.0)(1) The company is reporting results in conformance with Mexican GAAP which requires restatement of prior period financials to reflect constant NPs reporting. Given the 52% inflation experienced during 1995, care must be exercised in making inter-period comparisons.
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for more information, contact:
- Juan Pablo Salinas
011-525-104-4120 (from the U.S.)
905-104-4120 (from within Mexico City)