Mexico Iusacell Hopes Innovation Narrows Gap With Telcel
biz.yahoo.com
Thursday February 21, 6:16 pm Eastern Time
MEXICO CITY (Dow Jones) Innovation is what Mexico 's #2 wireless operator needs to set itself
apart, Grupo Iusacell (NYSE: CEL - news) SA's (CEL) chief executive said on the heels of the
company's less-than-thrilling 2001 results.
Iusacell was expected to report losses for
the fourth quarter, but low growth and high
customer turnover is becoming increasingly
difficult for market watchers to swallow.
Late Wednesday, Iusacell reported a $74 million net loss for the last three months
of 2001 and a $500 million loss for the full year. The company added 173, 947 net
users last year, compared with 6.5 million at dominant operator Telcel, a unit of
America Movil SA (AMX).
Peter Burrowes, Iusacell's chief executive, blames house cleaning for the
company's lagging performance. Burrowes was installed at Iusacell in May, along
with several other top-level managers, as part of an overhaul initiated by
shareholders Verizon Communications (NYSE: VZ - news) Inc. (VZ) and
Vodafone Group PLC (VOD).
"The price of transformation was growth," Burrowes said at a press conference
Thursday.
Apparently Iusacell's stock is also paying the price.
Iusacell American Depositary Receipts, which trade in New York , fell 2.1% Thursday to $3.23 while the company's L shares lost 4.3% to end at 2.92 pesos ($ 1=MXN9.085) in Mexico . The shares have lost more than 20% of their value since America Movil reported its explosive Telcel growth at the end of January.
As of Dec. 31 , Telcel served 17 million of the country's nearly 22 million users. Iusacell was a distant second with 1.86 million clients. Telcel is working with a $900 million capital-expenditure budget for 2002, while Iusacell has set aside $250 million.
In a country where one player has so much market share, the only way a company like Iusacell can "differentiate itself is through innovation," said Burrowes.
In December, Iusacell launched an off-peak pricing plan that offers discounts for calls placed on nights and weekends. Iusacell says its competitors soon followed with similar plans.
Iusacell launched two more new product initiatives Thursday. One is a promotion that features Burundis cartoon characters on pre-paid phone cards. Iusacell is hoping the cards become collectors' items.
The other product is a new pre-paid service package that includes a digital Motorola Inc. (MOT) phone, 30 free minutes each month and a 25% discount on pre- paid phone cards. The package, called Iusacell IDEAL, sells for MXN165 per month.
Pre-paid wireless service enables customers to buy ready-to-go cell phone packages without contracts or monthly bills. Such services are immensely popular in Mexico , where 90% of the country's wireless users purchase their air time in advance.
"We're going to have some very positive surprises in the coming year," Burrowes said.
But the clock is ticking for those wanting to expand in Mexico 's wireless market.
Telefonica Moviles SA (TEM) of Spain arrived in early 2001 with the purchase of four carriers in northern Mexico from Motorola. Since then the company has been scouting the country for more acquisitions. Should Telefonica purchase Pegaso PCS SA (E.PEG), as long-anticipated, then it would become Mexico 's second-biggest operator with just over two million clients.
-By Amy Guthrie, Dow Jones Newswires; (5255) 5080-3453; amy.guthrie@ dowjones.com
(This story was originally published by Dow Jones Newswires)
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