Fitch Affirms Iusacell's 'D' Ratings.

Business Editors

CHICAGO--(BUSINESS WIRE)--May 14, 2004

Fitch Ratings affirmed its foreign and local currency debt ratings of 'D' for holding company Grupo Iusacell, S.A. de C.V. and operating company Grupo Iusacell Celular, S.A. de C.V. (collectively referred as Iusacell). The ratings apply to $500 million in outstanding securities, including $350 million senior notes due 2006 and $150 million senior notes due 2004.

The ratings reflect the payment default that took place during June 2003 and indicate that potential recovery for bondholders is estimated at less than 50% of principal. Prior to this event, Iusacell's profitability had been pressured by a weak economy. In addition, Iusacell's business model was primarily focused on the post-paid subscriber market, which was limited in size due to low per capita income levels. In an effort to improve its financial performance, the company had implemented cost-reduction measures and significantly lowered capital expenditures to boost cash flow availability, but these measures constrained Iusacell's ability to maintain subscriber growth levels amid heightened competition.

After the default, shareholder control of Iusacell changed hands when majority shareholders Verizon Communications and Vodafone PLC sold their equity stake to Movil Access, S.A. de C.V., a subsidiary of Biper, S.A. de C.V., which is in turn is controlled by the Salinas group. Iusacell's new shareholder structure has not materially changed its financial profile because Iusacell has not received capital contributions and continues to operate with internally generated cash flow. Nevertheless, Iusacell has the potential to eventually derive some operational synergies with Unefon, the third largest Mexican wireless operator that is also part of the Salinas group.

Iusacell continues to face the challenges of restructuring its debt profile, which currently totals slightly more than $800 million and includes $350 million in senior notes due 2006, $150 million in senior notes due 2004 and a $266 million secured syndicated loan. Iusacell also faces the challenges of turning around its operations, a difficult task due to the lack of funding available to complete needed capital expenditures.

Even after completing a debt restructuring, Iusacell would continue to face significant competitive pressures due the scale of Telcel's network and the expanded presence of Telefonica Moviles. Currently, Iusacell is the fourth-largest wireless operator in Mexico with 1.3 million subscribers and a market share of less than 5%. Over the past year, the company's subscriber base has declined from a peak of more than 2.0 million, which is partially due to the company's strategy of cleaning up its subscriber base by writing off underperforming accounts. As a result, both revenues and EBITDA continued to decline during 2003.

Grupo Iusacell, S.A. de C.V. is a holding company that controls wireless provider Grupo Iusacell Celular, S.A. de C.V. The company is the fourth-largest wireless operator in Mexico, with 1.3 million subscribers at Dec. 31, 2003. The company is 76.4% indirectly owned by Ricardo Salinas. The remaining 25.4% is held by the public.