[CEL Reports: Part 1]
Monday February 26, 6:44 pm Eastern Time
Press Release
Iusacell Reports Solid Subscriber Growth and Increased
Digital Customer Usage for the Fourth Quarter 20001
MEXICO CITY--(BUSINESS WIRE)--Feb. 26, 2001--Grupo Iusacell
150,000 net cellular additions in the fourth quarter
of 2000
Total cellular subscribers grew 27% in 2000 vs. 1999,
to 1.7 million
520,000 total digital subscribers at year-end 2000,
including 138,000 prepaid digital customers
Revenues and EBITDA for 2000 increased 20% and 23%
over 1999, to $5.5 billion and $1.9 billion, respectively
Note: Unless otherwise noted, all monetary figures are in
Mexican Pesos and restated as of December 31, 2000 in
accordance with Mexican GAAP, except for ARPU (which is in
nominal pesos).
Grupo Iusacell, S.A. de C.V. (Iusacell or the Company) (BMV:
CEL, NYSE: CEL) today announced solid net cellular subscriber
growth with nearly 150,000 net additions for the fourth
quarter of 2000. Revenues for the fourth quarter of 2000
increased 8% over the fourth quarter of 1999, to $1,436
million. The Company posted earnings before interest, taxes,
depreciation and amortization (EBITDA) of $457 million for
the fourth quarter of 2000, an 8% improvement over the same
period last year. As a percentage of revenues, EBITDA margin
remained unchanged at 32% in the fourth quarter of 2000
compared to the same period of 1999.
The Company recorded net adjustments of $47 million during
the quarter which negatively affected the recording of
revenue, cost of sales due to inventory write-downs, as well
as commissions, bad debt and general and administrative
expenses (see Litigation). Had the Company not effected these
one-time adjustments, EBITDA margin for the fourth quarter of
2000 would have been 35%. In spite of the adjustments, EBITDA
in dollar terms for the year 2000 was US$198 million, which
is in line with management's expectations.
Operating Performance
In the fourth quarter of 2000, Iusacell experienced solid
gross contract additions of 67,000, 28% higher than in fourth
quarter of 1999, increasing the total contract subscriber
base at year end 2000 to 443,000. During 2000, Iusacell's
contract subscriber base grew by 26%. Contract churn for the
fourth quarter of 2000 remained at the 3.4% level per month.
The company expects churn to decrease significantly by mid-2001.
Iusacell's ID Pack, which combines a monthly contract plan
with prepaid replenishment options, has successfully gained
acceptance among students and young adults with 41,000 ID
Pack net additions during the year 2000. The Company is
developing similar products to migrate high-end prepaid
customers to contract plans.
Iusacell experienced record gross prepaid additions in the
fourth quarter of 2000, 45% higher than the gross prepaid
additions in the fourth quarter of 1999. As of December 31,
2000, the Company's prepaid subscriber base was approximately
1,239,000, including approximately 275,000 Incoming Calls
Only customers. Excluding Incoming Calls Only customers, the
prepaid subscriber base grew 26% in 2000 to 964,000 subscribers.
During the second half of the year 2000, the Company
introduced marketing plans to encourage the migration of
high-end analog prepaid subscribers to digital service in
order to leverage the capabilities and efficiencies of its
CDMA network. These plans include a partial subsidy for the
digital handset, the cost of which the Company will recover
through increased traffic. Iusacell had 138,000 digital
prepaid subscribers as of December 31, 2000, representing 11%
of the total prepaid customer base.
Following the subscriber reporting policies recently adopted
to align the company with Verizon reporting policies,
Iusacell continued to turn over those prepaid customers who
have not replenished their card within six months after the
initial usage period has expired. Despite these actions, net
prepaid subscribers increased by 119,000 in the fourth
quarter of 2000 and by 268,000 for the twelve-month period
ended December 31, 2000.
The total subscriber base, including Incoming Calls Only
prepaid subscribers, increased by 27% to 1.7 million compared
to year end 1999. Had the Company followed the same
subscriber reporting practices as its competitors in the
Mexican market, Iusacell's subscriber base would have been
approximately 2.2 million subscribers as of December 31, 2000.
Mr. Fulvio V. Del Valle, President and Director General of
Iusacell stated: ``These past twelve months have been a
transition period for Iusacell. The Company is extremely
pleased to report resumed subscriber growth in the fourth
quarter and we look forward to even better results in the
coming quarters''.
As a result of the continued expansion of its distribution
network, the Company's products and services were available
at more than 20,000 points of sale as of December 31, 2000,
compared with 6,500 points of sale as of December 31, 1999.
Fourth quarter 2000 average monthly postpaid minutes of use
(MOUs) increased slightly by 6% while prepaid MOUs increased
44%, compared to the fourth quarter of 1999. The increase in
prepaid MOUs was driven by traffic growth related to CPP and
by the migration of 11% of the prepaid base to digital
service during the year. These factors also resulted in a 27%
increase in prepaid ARPUs compared with the fourth quarter of
1999. Contract ARPUs decreased 9% in the fourth quarter of
2000, primarily driven by the wide acceptance of the lower
revenue-generating ID Pack contract plan. Excluding Incoming
Calls Only prepay customers, blended (contract plus prepay
subscriber) fourth quarter 2000 MOUs increased 13% over the
same period last year, while blended ARPUs declined by 3%.
Cash operating expenses per subscriber for the quarter
decreased to US$ 63, representing a 13% decline from the US$
72 recorded in the fourth quarter of 1999. Contract
subscriber acquisition costs for the period decreased to US$
344 from US$ 377 in the same period last year, primarily as a
result of a decline in digital handset costs.
General and administrative expenses as a percentage of
revenues continued to improve from 14% in the fourth quarter
of 1999 to 9% in the fourth quarter of 2000 due to aggressive
expense controls. Sales and advertising expenses for the
fourth quarter of 2000 rose by 14% compared to the year
earlier period, driven by higher advertising and commission
expenses associated with higher sales volume and by higher
television advertising rates, which became effective in the
third quarter of 2000.
Depreciation and amortization expenses increased by 39% in
the fourth quarter 2000, resulting in an operating loss for
the quarter of $197 million, compared with an operating loss
of $50 million for the same period last year. Depreciation
increased due to the US$67 million in capital expenditures
invested in the fourth quarter of 2000 and the US$217 million
invested in capital expenditures in 2000 to improve network
capacity, coverage and quality. The increase in amortization
was due to higher handset subsidies associated with higher
gross additions.
The fourth quarter 2000 integral financing cost increased to
$196 million compared to $185 million in the fourth quarter
of 1999. Substantially higher net interest expense resulting
from the Company's issuance in December 1999 of US$350
million of 14.25% Senior Notes was partially offset by a
significantly lower exchange loss and a slightly higher
monetary correction gains.
As a result of higher operating losses and higher integral
financing cost, Iusacell recorded a net loss for the quarter
of $468 million, compared with a net loss of $328 million in
the same period last year.
William S. Roberts, Chief Financial Officer of Iusacell,
said: ``The Company continues to post solid financial results
even considering recognition of one-time events, which are
part of the continued effort by Iusacell and its controlling
shareholder, Verizon, to provide a transparent and accurate
information base for its shareholders and the financial
community. Iusacell continues to improve its business
processes and operating efficiencies, which will permit us to
grow profitably in 2001.''
Financial Condition
Capital Expenditures.
During the fourth quarter of 2000, Iusacell invested US$67
million in capital expenditures to increase capacity, improve
quality and expand coverage. The total capital expenditures
for the year 2000 were US$217 million, including US$13
million invested in the first phase of its PCS network
deployment in Regions 1 and 4 in northern Mexico. Iusacell is
currently finalizing plans to more aggressively expand PCS
services in late 2001.
Debt.
As of December 31, 2000, total debt, including trade notes
payable, was US$798 million. During the fourth quarter,
Iusacell repaid US$22 million in principal amount of
indebtedness, however it also drew down entirely on a US$12
million handset financing facility with Banco Santander
Mexicano. All of the Company's debt is U.S. dollar-
denominated, with an average maturity of 3.8 years. On
December 31, 2000, Iusacell's debt-to-capital ratio was
54.8%, versus 60.1% on December 31, 1999.
Liquidity.
During the fourth quarter of 2000, the Company funded its
operations, capital expenditures, handset purchases, and debt
principal and interest payments with internally generated
cash flow and a portion of the proceeds from its second
quarter equity offering. On December 31, 2000, the Company's
operating cash balance was US$69 million. Additionally,
Iusacell had US$93 million in escrow to cover the interest
payments through December 2002 on its 14.25% Senior Notes due
2006.
Hedging.
On December 31, 2000, the Company maintained a foreign
exchange hedging program utilizing US$48 million in forward-
rate contracts. These hedges provide coverage for
approximately 50% of the principal amortization and interest
payments coming due over the period January 2001 to January
2002.
Planned Refinancing.
During the first quarter of 2001, Iusacell expects to
refinance the US$266 million remaining principal balance of
its Chase Bank Syndicate and Eximbank loans. This refinancing
will postpone principal repayments to 2004, thereby
permitting the Company to expand its capital expenditures
program for the next three years. As a first step toward this
refinancing, Iusacell received a US$22 million bridge loan in
January 2001 to repay principal due on the Chase Bank
Syndicate and Eximbank loans.
Other Developments
Expected Change in Shareholder Structure: On January 5, 2001,
Vodafone Group Plc announced that it had reached an agreement
with the Peralta Group to acquire its entire 34.5% equity
stake in Iusacell for US$973.4 million. The transaction is
subject to, among other things, regulatory approvals by the
Comision Federal de Competencia (the Mexican Federal
Competition Commission), which has been received, and the
signing of a shareholders agreement between Vodafone and
Verizon, that is still been negotiated. This transaction is
expected to close in March 2001.
Upon consummation of the transaction, Iusacell's shareholder
structure will be as follows:
Grupo Iusacell Corporate Ownership
Verizon Communications Inc. 37.2%
Vodafone Group Plc 34.5%
Public Float(a) 28.3%
(a) Includes employee stock plan
Regulatory Affairs: In January 2001, Telmex, Alestra and
Avantel reached an agreement-in-principle to reduce the
interconnection rate for long distance carriers to US$0.0125
per minute and to have the nine existing long distance
carriers, including Iusacell, reimburse Telmex approximately
US$821 million for the special projects it undertook to
prepare its network for long distance competition. This
special projects payment is to be made in two parts; 15% will
be divided equally among the nine carriers and the remaining
85% will be paid over four years based on usage, as a
US$0.0053 per minute surcharge to the interconnection rate.
Iusacell is in negotiations with Telmex to obtain similiar
terms not only for its long distance business, but also for
the local cellular interconnection rate, which would
represent a rate reduction from US$0.0330 to US$0.0125 per
minute. The Company expects to reach an agreement with Telmex
in the first quarter of 2001.
Tower Sales: In order to minimize additional external cash
requirements to finance new capital investments, on February
23, 2001, the Company closed the sale of approximately 170
non-strategic towers to the Mexican subsidiary of American
Tower Corporation, and receive in excess of US$18 million in
net proceeds. The Company expects to sell up to an additional
150 towers to American Tower Corporation by the end of 2001.
Litigation. In December 2000, the Company's motion for
summary judgment was granted and all counts of a complaint
filed by Mitsubishi Electronics America, Inc. against the
Company were dismissed. In January 2001, the Company reached
a settlement with Mitsubishi. As a result, in the fourth
quarter of 2000, the Company reversed Ps. 23 million in
related reserves.
Year 2000 Results Compared with Year 1999 Results
Full year 2000 highlights were as follows:
Net additions for the year were 358,000, a 27%
increase versus year-end 1999 subscriber base. Had the
Company followed current market practices, net additions for
the year-end 2000 would have been 868,000, a 53% increase.
Revenues increased to $5.5 billion in 2000 from $4.6
billion in 1999, an increase of 20% and 29% in dollar terms;
EBITDA improved to $1.9 billion in 2000 from $1.5
billion in 1999, a 23% increase and 33% in dollar terms;
EBITDA margin for the year increased from 34% in 1999
to 35% in year-end 2000;
Average monthly MOU per contract subscriber increased
to 246 in 2000 from 209 in 1999;
Blended average monthly MOU per subscriber increased
to 94 in 2000 from 91 in 1999;
ARPU per contract subscriber increased to $818 in 2000
from $779 in 1999;
Blended ARPU per month decreased to $322 in 2000 from
$335 in 1999, as a result of the higher growth rate for
prepay customers;
Average monthly churn for contract subscribers
increased to 3.51% in 2000 from 2.96% in 1999;
Integral financing result decreased from a gain of
$577 million in 1999 to a cost of $525 million in 2000,
mainly due to higher net interest expense of $941 million
compared to $318 million in 1999, a foreign exchange loss in
2000 of $16 million compared to a foreign exchange gain of
$173 million in 1999 and a lower monetary position gain of
$432 million compared to $722 million in 1999. |
