INTERVIEW-Mexico Iusacell plans network investments
Monday December 20, 8:01 am Eastern Time
By Fiona Ortiz
MEXICO CITY, Dec 20 (Reuters) - Mexico's No. 2 cellphone
company, Iusacell (NYSE:CEL - news), will invest $375 million
in infrastructure over the next three years and has plans to
triple its digital network capacity in 2000, top officers said.
``In terms of cell sites, we will grow 15 percent next year
(from about 400 now). We will triple the capacity because we
are investing in the digital network,' Fulvio del Valle,
managing director of Iusacell, told Reuters in an interview Friday.
Iusacell -- which markets itself as a higher-quality
alternative to its huge competitor Telcel, part of Telefonos
de Mexico (Telmex) (NYSE:TMX) -- forecasts its subscribers
will double over the next 18 months, to about 2.6 million.
The company, 40.2 percent owned by U.S. phone company Bell
Atlantic (NYSE:BEL), also sees its market share in Mexico
growing from around 25 percent to about 35 percent over the
next two years.
The company projects that overall cellphone penetration will
rise from 4 percent to 16-17 percent in this country of some
100 million people over the next few years.
Iusacell, which has been running EBITDA (earnings before
interest, tax, depreciation and amortization) margins in the
35-36 percent range, also hopes to get that rate upward of 40
percent, bringing the company in line with Bell Atlantic's
U.S. margins.
Del Valle said the $375 million projected investment does not
include its plans for two northern Mexico regions, where it
has licenses for PCS (Personal Communications Service), a
higher-capacity digital wireless technology. He did not
specify what will be done in that region.
Del Valle said Iusacell's percentage of prepaid cellular
customers, who buy packages of phone time and then use them
up, would remain at current levels compared with contract
users, who are billed monthly for minutes used.
In a recent report, Dresdner Kleinwort Benson analyst Patrick
Jurczak saw Iusacell ending 1999 with about 67 percent
prepaid subscribers, rising to about 73 percent next year.
Iusacell more than doubled its total number of subscribers
this year.
Tom Bartlett, chief executive officer of Iusacell and also of
Bell Atlantic's international wireless division, told Reuters
Iusacell may hold further talks with four small northern
Mexico cellular companies -- with about 800,000 users between
them.
In November, talks with those companies, all owned by
Motorola (NYSE:MOT), failed to result in a merger that would
have given Iusacell coverage where it does not have frequencies.
``It's important to us to have a nationwide footprint (but)
I'm not going to do it at a price point or on terms not
beneficial to Iusacell and for that reason have not come to
terms,' Bartlett said.
He said controlling a nationwide network would bring down
costs for Iusacell, but he said in the meantime, from a
customer point of view, Iusacell phones work all over Mexico
on agreements the company has in regions outside its license areas.
Meanwhile, Iusacell is continuing negotiations to possibly
purchase southern Mexico cellular operator Portatel, which
has about 900,000 subscribers.
Del Valle said Iusacell's two overlaid networks, one analog
and one digital, gave it sufficient capacity to deal with a
flood of new cellular customers this year, after authorities
implemented a ``calling party pays' system, meaning
cellphone users no longer pay for calls they received.
He said the company was in line with the government's quality
control standards limiting the number of dropped calls and
system busy signals.
Telcel, the competition, has admitted the quality of its
service suffered when its network was deluged with heavy new
traffic in September and October.
Bartlett and Del Valle said Iusacell's growth would be driven
by demand in the near future for Internet access on handsets.
``Our plans for the next 12-18 months include Internet and
messaging,' said Bartlett. ``Wireless access protocol (WAP)
is going to be in the market sooner than you think,' Del
Valle said. With WAP, users can send and receive messages on
their phones. |
