CEL reports Q3 results (18 October 1999)
Monday October 18, 6:40 pm Eastern Time
Company Press Release
SOURCE: Nuevo Grupo Iusacell, S.A. de C.V.
Nuevo Grupo Iusacell Reports Record Third Quarter Results(1)
- Record EBITDA margin of 36%; EBITDA up 50% over third
quarter 1998 - Record 181,000 net adds 163,000 digital
contract subscribers - More than 1.1 million cellular
subscribers, 80% over third quarter 1998 - Digital CDMA
network and Single Billing Cellular System fully operational
MEXICO CITY, Oct. 18 /PRNewswire/ -- Nuevo Grupo Iusacell,
S.A. de C.V. (NYSE: CEL; BMV: IUSACELL), today announced
record operating cash flow for the third quarter of 1999.
Earnings before interest, taxes, depreciation and
amortization (EBITDA) were $374 million, versus $249 million
in the third quarter last year.
The Company's record performance came as a result of strong
operating results, including revenues of $1.052 billion,
driven by growth in digital contract subscribers and average
revenue per user (ARPU). Iusacell ended the quarter with more
than 1.1 million cellular customers and recorded its fourth
consecutive quarter of positive net income.
As a result of continued revenue growth, productivity
improvements and cost containment, EBITDA grew 50% over third
quarter 1998. EBITDA margin increased to a record 36% in
third quarter 1999, versus 30% in third quarter 1998.
Iusacell has implemented its digital network on all its cell
sites, which resulted in a 53% increase in depreciation costs
when compared with third quarter 1998. The Company posted an
operating profit of $3 million, despite the higher
depreciation charge this quarter.
``We've already begun translating recent successes like our
single cellular billing platform and our digital coverage
over 100% of our cell sites into significant competitive
advantages. Iusacell's new single rate plan is a great
example of how we used that advantage to quickly and
responsively meet the needs of a specific Mexican market
segment,' said Tom Bartlett, CEO of Iusacell and President
and CEO of Bell Atlantic International Wireless.
Operating Performance
In the third quarter of 1999, compared to the same quarter
last year, total revenues were up 25% and the cellular
subscriber base grew 80%. Service revenues increased 28% for
the same period.
``Iusacell will continue to focus on high quality, high value
products, services and customer care. Our digital network and
state-of-the-art systems are now well positioned to support
the continued rapid growth of our digital subscriber base,'
stated Fulvio Del Valle, President and Director General of
Iusacell.
The Company has a base of 163,000 digital contract customers,
an increase of 58% in the past three months. This digital
growth includes the accelerated migration of analog contract
subscribers in the third quarter. To enhance its Nuevo
Milenio(TM) digital packages and further penetrate the
contract market, the Company launched its ``one single rate'
plan for local, national long distance and international long
distance to the United States and Canada and roaming calls on
September 26th. The new product should generate added long
distance and roaming traffic. Based on the positive consumer
response, the one single rate plan has been extended to the
Company's prepaid customer base. Iusacell expects the balance
of the year to show strong contract subscriber growth in all
of its operating regions.
The Company's decision to extend the life of its VIVA(TM)
prepay card by 185 days has resulted in the retention, in the
last two quarters, of approximately 130,000 subscribers as
``incoming calls only' customers who otherwise would have
been deactivated. This strategy has resulted in additional
revenue for the quarter. The Company will retain these
``incoming calls only' customers as long as they continue to
contribute to profitability.
The six-month trial pricing for Calling Party Pays (CPP) will
end in October 1999. In the first five months since CPP was
launched, Iusacell has experienced at least 8% increase in
traffic due to CPP, with a considerable increase in the
percentage of incoming calls and cellular to cellular calls.
The Company expects to see continued growth of incoming and
cellular to cellular traffic volumes.
The Company continues to improve accessibility to all our
products while especially facilitating replenishment of our
prepaid products, expand its distribution network in the last
12 months by 111% to more than 5,800 points of sale (POS).
There are now 1,112 full service outlets (96 directly owned)
and an additional 4,739 points of sale for prepay cards. This
expanded distribution, together with the features of the
VIVA(TM) prepay platform, has helped drive the strong growth
in prepay subscribers since third quarter 1998.
Third quarter 1999 contract minutes of use (MOUs) and
contract ARPUs increased 6% and 15%, respectively, compared
with third quarter 1998. This improvement was primarily
driven by growth in digital subscribers, value-added services
and the impact of calling party pays. Excluding the incoming-
only customers, further penetration of the prepaid market
resulted in a 9% decrease in blended MOUs but a 1% increase
in ARPUs, when comparing third quarter 1999 over the same
period in the previous year.
Cash operating expenses per subscriber decreased to $737 in
the third quarter, a 32% reduction from the $1,085 recorded
in third quarter last year. Contract subscriber acquisition
cost increased from US$354 in the third quarter 1998 to
US$386 in the third quarter 1999 as the Company's strategy
for accelerating digital customer base growth increased the
need for higher-cost digital handsets.
Third quarter 1999 net income was $103 million, mainly
reflecting integral financing gains. This compares with a net
loss of $1.5 billion in third quarter 1998.
Financial Condition
Capital Expenditures
Iusacell's capital expenditures were US$25 million during
third quarter 1999, primarily used to accelerate the
deployment of digital infrastructure and the continued
expansion of Iusacell's long distance fiber optic network.
All cell sites in Regions 5, 6, 7 and 9 now provide digital
coverage.
Liquidity
During the third quarter, the Company funded its operations,
capital expenditures, handset purchases and interest payments
through internally generated cash flow, proceeds totaling
US$34 million from the primary equity and rights offerings
and vendor handset financing.
Debt
Debt, including Interest-bearing trade notes payable, as of
September 30, 1999 totaled US$472 million, representing a
US$33 million increase from third quarter 1998. This
additional debt was used primarily to finance deployment of
the Company's 100% digital network. All of the debt is U.S.
dollar-denominated, with maturities averaging 3.0 years.
Iusacell's debt-to-capital ratio was 45.6% at the end of the
quarter, versus 60.4% at September 30, 1998.
Other Business Developments
Restructuring and Recapitalization Plan
In the third quarter, Iusacell completed its share exchange
and rights offers. 99.9% and 95.5% of outstanding Series ``D'
and ``L' shares, respectively, were exchanged. The rights
offer received an 82.1% subscription rate, which resulted in
gross proceeds to New Iusacell of US$12.9 million. At the
expiration of the exchange and rights offers, New Iusacell
successfully completed a primary and secondary share offering
for a combined 125 million shares (12.5 million American
Depositary Shares). As a result of these offers, Iusacell's
public float increased by 14.7 million ADRs or 128%.
Year 2000 Compliance
All required modifications or replacements of mission
critical systems and internal network elements had been
implemented by the end of the third quarter of 1999. All
required modifications or replacements are scheduled to be
completed by the end of October 1999. US$17 million have
already been spent or committed to complete the Year 2000
compliance program.
The Company's Year 2000 compliance program is, in large part,
dependent on third party vendors and interconnecting
carriers. The Company can not assure that all significant
third parties will implement timely corrective measures
necessary on their part to prevent disruption of service or
to ensure correct billing and payments. In that event, the
Company will, in most cases, be able to implement contingency
plans to minimize or eliminate potential billing and service
disruption.
Unaudited Operating Highlights
Third Quarter Nine Months
1999 1998% Change 1999 1998 % Change
Revenues
(millions) $1,052 $840 25% $2,909 $2,277 28%
Gross Margin
(millions) $741 $573 29% $1,967 $1,511 30%
Operating Income
(Loss) (millions) $3 ($979) -- $36 ($977) --
EBITDA (millions) $374 $249 50% $1,003 $625 60%
Net Income (Loss) $103 ($1,465) -- $619 ($1,769) --
Cellular Subscriber
Base 1,132,205 627,856 80%1,132,205 627,856 80%
Net Cellular
Additions 181,318 77,289 135% 376,311 227,735 65%
Paging Subscribers27,447 23,252 18% 27,447 23,252 18%
Avg. Number of
Employees 1,825 2,116 (14%) 1,839 2,016 (9%)
Avg. Subscribers
per Employee 571 278 105% 495 254 95%
Avg. Monthly
Contract Churn 2.53% 2.39% -- 2.44% 2.58% --
Third Quarter Nine Months
1999 1998% Change 1999 1998 % Change
Avg. Monthly MOU
per Subscriber* 79 87 (9%) 77 89 (13%)
Contract 166 157 6% 160 148 8%
Prepay 33 36 (8%) 32 43 (26%)
Monthly ARPU* 349 347 1% 339 371 (9%)
Contract 794 692 15% 784 687 14%
Prepay* 111 101 10% 97 119 (18%)
Incoming Only Subscribers
MOU 5
ARPU 10
* Without Incoming Calls Only subscribers
Integral Financing Gain (Loss)
Third Quarter Nine Months
1999 1998 1999 1998
Net Interest Expense ($75) ($78) ($163) ($198)
Exchange Gain (Loss) $78 ($581) $325 ($1,011)
Monetary Correction Gain $128 $185 $520 $432
Total Integral
Financing Gain (Loss) $131 ($474) $682 ($777)
Revenue Breakdown
Revenues by type of service and the period-to-period comparisons are as follows:
Third Quarter Nine Months
1999 % of 1998 % of 1999 % of 1998 %of
Total Total Total Total
Monthly Fee 354 33.6 279 33.2 1,040 35.8 841 36.9
Airtime
Consumption 360 34.3 226 26.9 927 31.9 696 30.6
Long Distance 112 10.6 95 11.3 349 12.0 199 8.7
Value-added
Services 66 6.3 61 7.3 198 6.8 161 7.1
Other 53 5.0 79 9.4 112 3.8 57 2.5
Total Service
Revenues 945 89.8 740 88.1 2,626 90.3 1,954 85.8
Equipment Sales
& Other 107 10.2 100 11.9 282 9.7 323 14.2
Total Revenues $1,052 100.0 $840 100.0 $2,908 100.0 $2,277 100.0
Nuevo Grupo Iusacell, S.A. de C.V. (New Iusacell) was
organized as a limited liability stock company under the laws
of Mexico on August 6, 1998. As a result of the exchange
offer completed in August 1999, New Iusacell holds
substantially all of the capital stock of Grupo Iusacell,
S.A. de C.V. (Old Iusacell).
Grupo Iusacell, S.A. de C.V. (NYSE: CEL.Y; BMV: IUSACEL) (Old
Iusacell) is a leading independent telecommunications company
in Mexico. It provides wireless cellular service in
four of Mexico's nine regions in the central portion of
Mexico (including Mexico City) covering a total of 67 million
POPs, representing approximately 69% of the country's total
population.
New Iusacell and Old Iusacell have been under the management
and operating control of subsidiaries of Bell Atlantic
Corporation (NYSE: BEL - news).
Note: This press release contains statements about expected
future events and financial results that are forward-looking
and subject to risks and uncertainties. For those statements,
we claim the protection of the safe harbor for forward-
looking statements contained in the Private Securities
Litigation Reform Act of 1995. Discussion of factors that may
affect future results is contained in our filings with the
Securities and Exchange Commission.
For any additional information please check the web page at:
iusacell.com.mx
List of the following financial statements attached:
Consolidated Income Statements
Three months ended September 30, 1999 and 1998
Three months ended September 30, 1999 and June 30, 1999
Nine months ended September 30, 1999 and 1998
New Iusacell Consolidated Balance Sheets
September 30, 1999
Old Iusacell Consolidated Balance Sheets
September 30, 1999 and 1998
September 30, 1999 and June 30, 1999
(1) unless otherwise noted, all monetary figures are in
Mexican Pesos and are restated as of September 30, 1999
in accordance with Mexican GAAP, except for ARPU
(which is in nominal pesos).
SOURCE: Nuevo Grupo Iusacell, S.A. de C.V. |
