Second Quarter 2003 Results; Iusacell Reports Improved EBITDA and Postpaid Churn in 2Q 2003; New Service Plans Gain Solid Foothold.Business Editors MEXICO Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. CITY--(BUSINESS WIRE)--July 25, 2003 Grupo Iusacell Iusacell Grupo Iusacell is Mexico's #3 mobile operator. The company provides cellular services reaching about 90% of Mexico's population, including Mexico City and received more licenses to cover the remaining regions in early 2005. It has more than 4. , S.A. de C.V. (Iusacell or the Company) (BMV BMV Bolsa Mexicana de Valores BMV Bureau of Motor Vehicles BMV Bundesministerium für Verkehr (German: Federal Ministry of Transport) BMV Below Market Value BMV Brome Mosaic Virus BMV Bedside Medication Verification :CEL CEL Cellular CEL Celestial CEL Check Engine Light CEL Degrees Celsius (temperature) CEL Comisión Ejecutiva Hidroeléctrica del Río Lempa (El Salvador) CEL Center for Entrepreneurial Leadership )(NYSE NYSE See: New York Stock Exchange :CEL) today announced results for the second quarter ended June June: see month. 30, 2003(1). Highlights -- Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become (2) improved to 29% in this quarter from 19% a year ago -- Postpaid post·paid adj. With the postage having been paid in advance. postpaid Adverb, adj with the postage prepaid Adj. 1. churn churn: see butter. decreased to 2.9% from 3.3% in the second quarter of 2002 -- Gross additions in the postpaid segment increased sequentially -- Postpaid MOUs and ARPUs grew 16% and 2%, respectively, on an annual basis -- Launch of new postpaid service plans continued in the quarter - multiple options to meet the needs of high-value customers -- Verizon Communications
Verizon Communications, Inc. and Vodafone Vodafone Group Plc is a mobile network operator headquartered in Newbury, Berkshire, England, UK. It is the largest mobile telecommunications network company in the world by turnover and has a market value of about £84.7 billion (July 2007). Americas A·mer·i·cas , the See America. BV agreed to tender their 73.9% of outstanding shares to Movil Access, S.A. de C.V., a Grupo Salinas Grupo Salinas is a group of dynamic, fast growing, and technologically advanced companies, focused on creating shareholder value. Created by Mexican entrepreneur Ricardo B. company "In the second quarter, customers responded very positively to our newly launched postpaid service plans, demonstrating that our commitment to the customer's experience is generating tangible results. A decrease in postpaid churn, combined with an increase in network traffic and average revenue per user, helped to improve adjusted EBITDA to 29% in the period," said Carlos Carlos, prince of the Asturias Carlos, 1545–68, prince of the Asturias, son of Philip II of Spain and Maria of Portugal. Don Carlos, who seems to have been mentally unbalanced and subject to fits of homicidal mania, was imprisoned by his father in Espinal G., Chief Executive Officer of Iusacell. (1)Unless otherwise noted, all monetary figures are in Mexican Mexican named after or originating in Mexico. Mexican axolotl see ambystomamexicanum. Mexican beaded lizard (Heloderma horridum pesos and restated as of June 30, 2003 in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Mexican GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). , except for ARPU (Average Revenue Per User) A calculation often used to determine the overall value of an application. It is also used to rate particular customers, especially in the wireless space, by comparing someone's account to the overall average. (which is in nominal pesos). The symbols "$" and "US$" refer to Mexican pesos and U.S. dollars, respectively. (2)Adjusted EBITDA margin, which expenses rather than capitalizes postpaid handset The part of the telephone that contains the speaker and the microphone. On a desktop phone, the part you hold in your hand is the handset. On a cellphone, the entire phone is the handset. See multihandset cordless and headset. subsidies and excludes non-operational transactions. Operational Results Subscribers as of June 30, 2003 totaled 1.95 million, an 11% decline from the prior year figure. This was primarily driven by a reduction in the prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. base which declined from 1.8 million in the
second quarter of 2002 to 1.6 million in the current quarter. Gross
additions in the second quarter of 2003 totaled 148,000, compared to
390,000 in the prior year period, and 164,000 in the first quarter of
2003; the current gross adds figure reflects the Company's
continued focus on high-value subscribers.Sequentially, the Company's postpaid customer base decreased nominally, ending at 341,000. Compared to the year ago period, postpaid customers decreased 11%, primarily due to fewer gross additions; however, the current postpaid mix is more heavily weighted towards high-end high-end adj. Informal 1. Appealing to sophisticated and discerning customers: a high-end department store; high-end video equipment. 2. subscribers. Prepaid customers decreased 5% sequentially and 11% year over year, totaling 1.6 million as of June 30, 2003, reflecting the Company's prior efforts to grow that segment in the first half of 2002. The sequential decline in the prepaid subscriber base is the anticipated result of the Company's efforts to replace low-usage Incoming Calls Only customers and low revenue generating prepaid customers with higher value subscribers. Postpaid churn improved to 2.9% in the second quarter of 2003 from 3.2% in the second quarter of 2002 and first quarter of 2003, respectively. The improvement reflects the success of the Company's new plan offerings and continued focus on customer service initiatives for high-value postpaid subscribers. Blended churn, however, was 3.8% compared to 3.0% in the year ago period and 3.4% in the first quarter of 2003. This can be attributed to continued turnover among low-usage prepaid customers acquired in the previous strategic focus on low-end low-end adj. 1. Cheapest in a line of merchandise: low-end subcompact cars. 2. Informal Of, relating to, or intended for low-income consumers; downscale: prepaid market effective in the first half of 2002. Minutes of use (MOU (Minutes Of Usage) A metric used to compute billing and/or statistics for telephone calls or other network use. ) among postpaid customers increased 16% on a year over year basis, while prepaid MOUs remained unchanged. The new postpaid service plans have a larger number of minutes included in the packages, including some with free nights and weekends, which helped drive a 5% blended MOU increase year over year. Average revenue per user (ARPU) in the postpaid segment of $687 increased 2% compared to the second quarter 2002, while prepaid ARPUs of $76 increased 1%. Sequentially, postpaid ARPU increased 1% due to a postpaid subscriber mix more weighted towards higher value service plans and higher MOUs. Blended ARPU, however, declined from $186 in the second quarter of 2002 to $180 in the second quarter of 2003.
Operating Highlights
Second Quarter Six Months
2Q 2003 2Q 2002 2003/ 2003 2002 2003/
2002 2002
Subscriber
base 1,954,139 2,200,391 -11% 1,954,139 2,200,391 -11%
Gross
cellular
additions 148,284 390,168 -62% 312,121 684,472 -54%
Net cellular
additions (81,592) 205,134 -140% (127,061) 345,225 -137%
Blended
churn 3.8% 3.0% - 3.6% 2.9% -
Avg. monthly
MOU per
subscriber 65 62 5% 63 65 -3%
Postpaid 250 215 16% 238 217 10%
Prepaid 28 28 - 27 29 -7%
Monthly
ARPU(a) 180 186 -3% 179 203 -12%
Postpaid 687 676 2% 684 703 -3%
Prepaid 76 75 1% 76 82 -7%
(a)ARPUs in pesos of each period
Commercial Initiatives New service plans: In the first half of 2003, Iusacell launched new prepaid and postpaid value propositions aimed to position the Company as the premier service provider in the targeted high-value market segment. These plans were designed to fit the needs of high-value consumer segments and are supported by advertising and marketing campaigns that anchor the effort. The postpaid value propositions are comprised of the following plans: a NAFTA NAFTA in full North American Free Trade Agreement Trade pact signed by Canada, the U.S., and Mexico in 1992, which took effect in 1994. Inspired by the success of the European Community in reducing trade barriers among its members, NAFTA created the world's plan, in which local calls, as well as calls within Mexico, the U.S. and Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of , are priced at the same per minute rate; an unlimited nights and weekends plan designed to increase mobile traffic and leverage non-peak network hours; a basic plan with affordable rates designed to compete directly with competitors' plans by incorporating higher baseline The horizontal line to which the bottoms of lowercase characters (without descenders) are aligned. See typeface. baseline - released version minutes; and multi-line plans to fit the communication needs of small groups of users such as families and small and medium sized enterprises. In addition, the Company offers regional plans, such as, in the northern regions, where subscribers can purchase a special cross-border plan with lower priced calls across Mexico, U.S. and Canada; and in Regions 1, 4 and 8, local plans are available with competitive per minute pricing. All these plans feature unlimited Iusacell-to-Iusacell calls to other subscribers on the network for a fixed monthly fee. Corporate customers can now contract a flexible combination of the new service packages at a volume rate, or purchase a large pool of minutes at a competitive per minute price that can be shared among all users. Financial Results Revenue in the quarter decreased slightly from the previous quarter to $1,140 million. However, revenues decreased 16% from the year ago period as a result of the lower subscriber base and lower ARPUs resulting from the change in the subscriber base mix. The Company believes the newly launched set of service plans including corporate proposals, as well as, high-value customer retention programs, will drive high-value sales and revenues in the third quarter 2003. Cost of sales in the second quarter of 2003 decreased 30% from the year ago period, from $481 million to $335 million. Ongoing headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. initiatives and cost controls enabled the Company to realize better cost savings despite higher lease costs associated with the non-strategic towers sold to (and leased-back from) the Mexican subsidiary of American Tower Corporation Formed in 1995, American Tower Corporation is a publicly held company (NYSE: AMT) that is a leading owner and operator of wireless and broadcast communications sites in North America. Today American Tower owns and operates over 30,000 sites in the United States, Mexico and Brazil. . Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. : sales and advertising expenses in the quarter declined 22% year over year due primarily to fewer gross subscriber additions and the net effect of the 2002 IEPS IEPS International Education Programs Service (US) IEPS Institute for Education Policy Studies IEPS Institute for Environmental Policy and Stewardship (Canada) tax provision cancellation (see Regulatory and Legal Affairs). As a percentage of revenues, sales and advertising expenses decreased from 25% to 23%. Lower headcount and expense containment containment Strategic U.S. foreign policy of the late 1940s and early 1950s intended to check the expansionist designs of the Soviet Union through economic, military, diplomatic, and political means. It was conceived by George Kennan soon after World War II. helped reduce general and administrative expenses to $115 million, an 11% decline from the previous year's quarter. As a percentage of revenues, general and administrative expenses remained stable at 10% in the second quarter of 2002 and 2003.
Revenue Breakdown
(In millions of constant pesos as of June 30, 2003)
Second Quarter Six Months
2Q % of 2Q % of 2003 % of 2002 % of
2003 Total 2002 Total Total Total
Monthly fee 336 30 391 29 675 29 810 29
Airtime consumption 585 51 636 47 1,187 51 1,310 47
Long distance 94 8 122 9 186 8 263 9
Value-added
services + roaming 61 5 90 7 135 6 183 7
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Total service
revenues 1,076 94 1,239 92 2,183 94 2,566 92
Equipment sales &
other 64 6 113 8 133 6 230 8
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Total revenues 1,140 100 1,352 100 2,316 100 2,796 100
EBITDA(3) margin in the second quarter of 2003 was 37%, higher than the 34% recorded in the first quarter of this year and the 32% recorded in the second quarter of 2002, evidencing the early results of the turn around efforts. On an absolute basis, second quarter 2003 EBITDA of $425 million increased 6% sequentially, but decreased only 3% from $437 million recorded in the second quarter of 2002. 2002 EBITDA included a $35 million gain from non-strategic tower sales; without this extraordinary item EBITDA would have improved 6% on a year-over-year basis. Adjusted EBITDA margin was 29% in the second quarter of 2003, substantially higher than the 19% margin recorded in the second quarter of last year. Depreciation and amortization expenses of $615 million in the second quarter of 2003 increased 5% from the second quarter of 2002, due to higher depreciation expense derived from the capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. of recently completed projects. Postpaid subscriber acquisition costs in the quarter improved from US$245 last year to US$186 in the most recent quarter, due to restructured commission plans aimed to support the new value proposition packages, more efficient handset purchases and targeted subsidies. Operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. in the quarter increased from the $152 million recorded last year to $191 million in the current quarter driven by lower revenues and higher depreciation and amortization expenses partially offset by continued cost controls and headcount initiatives. Other income of $46 million was recorded in the second quarter of 2003 as a result of the cancellation of certain tax provisions derived from a tax provision analysis from prior years as part of the continuous operations of the Company. Integral financing result in the quarter ended with a gain of $19 million, compared to a cost of $538 million in the same quarter of last year. The improvement was mainly driven by a $232 million foreign exchange gain resulting from the 3% appreciation of the peso against the U.S. dollar, compared to a 5% peso depreciation last year. Interest expense increased $12 million in the second quarter of 2003, compared to the same period of 2002 as a result of the peso depreciation in the twelve-month period. Net loss in the quarter of $124 million was the result of lower integral financing costs. This compares to a net loss of $714 million in the year ago period. Liquidity: During the second quarter of 2003, the Company funded its operations, capital expenditures, handset purchases, and principal and interest payments with internally generated cash flow. As of June 30, 2003, the Company's operating cash balance was US$12 million.
Integral Financing (Cost) Gain
(In millions of constant pesos as of June 30, 2003)
Second Quarter Six Months
2Q 2003 2Q 2002 2003/ 2003 2002 2003/
2002 2002
Net interest expense (237) (222) 7% (466) (443) -205%
Exchange (loss) / gain 232 (380) -161% (49) (413) -112%
Monetary correction gain 24 64 -138% 105 158 -166%
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Total integral
financing gain (loss) 19 (538) -104% (410) (698) -41%
(3)This press release contains a reference to EBITDA and provides the components of EBITDA on the face of the Consolidated Income Statement consolidated income statement An income statement that combines the income statements of two or more organizations. As with other consolidated statements, a consolidated income statement eliminates any funds owed to or due from firms within the same group. . EBITDA is used by management for comparisons to other companies within our industry as an alternative to GAAP measures and is used by investors and analysts in evaluating performance. EBITDA, which is earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
EBITDA should be considered in addition to, but not as a substitute for other measures of financial performance reported in accordance with accounting principles generally accepted in Mexico. EBITDA, as defined above, may not be comparable to similarly titled measures reported by other companies. Capital expenditures: Iusacell invested approximately US$4 million in its regions during the second quarter of 2003 to expand coverage. This capex reflects Iusacell's strategic focus on maximizing existing capacity and prioritizing investments that directly benefits the high-value customer base. Debt: As of June 30, 2003, including trade notes payable and notes payable to related parties, debt totaled US$811 million, compared to US$841 million registered in the second quarter of 2002 and US$815 in the first quarter of 2003. All of the Company's debt is U.S. dollar-denominated, with an average maturity of 2.4 years. As of quarter-end, Iusacell's debt-to-capitalization ratio was 64.8%, versus 56.7% on June 30, 2002. As a consequence of the events of default (as defined under the different indentures governing gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. the debt) incurred in the quarter (see Event of default on 14.25% bonds due 2006 and Technical default on 10% bonds due 2004), Iusacell reclassified all the Company's financial debt as current in the Balance Sheet presented herein, in accordance with Mexican GAAP. Recent Developments ADS ratio change: As previously reported, the Company obtained approval to implement a 1 for 10 ADS ratio change at the Ordinary Shareholders Meeting held on April 21, 2003. The change became effective on May 12. 2003. Each of Iusacell's American Depositary Shares American Depositary Share (ADS) Foreign stock issued in the US and registered in the ADR system. now represents one hundred of its ordinary shares, and the new CUSIP number CUSIP Number An identification number assigned to all stocks and registered bonds. The Committee on Uniform Securities Identification Procedures (CUSIP) oversees the entire CUSIP system. Notes: This system is used in the U.S. and Canada. is 40050B 20 9. Before the ratio change, the Company's ADS-to-ordinary shares ratio was one-to-ten, and the CUSIP number was 40050B 10 0. This ratio change did not impacted holders of the Company's ordinary shares and was effected without charge to investors. The main purpose of the ratio change was to comply with the NYSE rules requiring a minimum 30-day average trading price Trading price The price at which a security is currently selling. of US$1.00 per ADS. With the ratio change, the Company has cured the deficiency and on July July: see month. 17, 2003, received written confirmation from the NYSE that Iusacell is no longer considered below the continued listing criterion. Strategic shareholders tender shares: On June 13, 2003 the Company's two largest shareholders, Verizon Communications and Vodafone Americas BV, announced an agreement to tender all of their shares, representing 73.9% of the Company's outstanding shares, in a public tender offer commenced in Mexico and the United States Relations between the United States and Mexico are among the most important and complex that each nation maintains. They are shaped by a mixture of mutual interests, shared problems, and growing interdependence. by Movil Access, S.A. de C.V., (Movil Access) a Mexican telecommunications service provider A Telecommunications Service Provider or TSP is a type of Communications Service Provider that has traditionally provided telephone and similar services. This category includes ILECs, CLECs, and mobile wireless companies. , a subsidiary of Biper, S.A. de C.V., which is part of Grupo Salinas. After obtaining regulatory approvals, Movil Access launched the tender offer on June 30, 2003, and withdrawal rights will expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. on July 29, 2003. In the Offering Memorandum Offering Memorandum A legal document stating the objectives, risks, and terms of investment involved with a private placement. Notes: The private placement of hedge funds necessitates the issue of memorandums. , filed with the Mexican Securities and Banking Commission and the U.S. Securities and Exchange Commission (SEC), Movil Access is offering to purchase all of the outstanding Series V and Series A shares, including all of the ADSs representing Series V Shares of Iusacell at a peso price of $0.057 per share (in the U.S. offer, the equivalent of $5.71 pesos per ADS) in each case in cash, less any withholding taxes The amount legally deducted from an employee's wages or salary by the employer, who uses it to prepay the charges imposed by the government on the employee's yearly earnings. . For more information, please refer to the Offering Memorandum, filed by Movil Access, on the Mexican Stock Exchange Mexican Stock Exchange The only stock exchange in Mexico. The Indice de Precios y Cotizaciones, or IPC index, consists of the 35 most representative stocks chosen every two months. web site (http://www.bmv.com.mx) and the U.S. Offering Memorandum, on the SEC web site (http://www.sec.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. ). Unanimous written consent of the Board of Directors of Iusacell: In a filing with the Mexican Stock Exchange dated July 14, 2003, the Board of Directors of Iusacell said there are too many possible outcomes, both negative and positive for the stock, to be able to recommend acceptance or rejection of the offer to buy 100% of the company's shares (see Strategic shareholders tender shares). The Board urged shareholders "to take their own decision based on the information available," while noting that all shareholders are offered equal treatment under the buyout bid Noun 1. buyout bid - a bid to buy all of a person's holdings bid, tender - a formal proposal to buy at a specified price launched June 30. The Board members said the offer is substantially below market price prior to the execution of the tender. The Board said it was not in a position to "reasonably and responsibly assign a value" to the three options open to other shareholders: accept the offer, reject the offer and sell the shares in the market, or reject the offer and remain as a shareholder. For additional information please consult the form 14D-9 filed by the Company with the SEC on http://www.sec.gov and the filing with the Mexican Stock Exchange on http://www.bmv.com.mx. Event of default on 14.25% bonds due 2006: Pending an agreement with the Company's creditors on a restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). plan, Iusacell did not make the US$25 million coupon payment due on June 1, 2003 on its 14.25% bonds due 2006. The 30-day period within which to make the coupon payment expired ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. on June 30 without payment. As a result, an event of default occurred under the Indenture An agreement declaring the benefits and obligations of two or more parties, often applicable in the context of Bankruptcy and bond trading. The term indenture primarily describes secured contracts and has several applications in U.S. law. governing the bonds, and the bondholders have the right to declare the principal of and the accrued interest Accrued Interest The interest that has accumulated on a bond since the last interest payment up to but not including the settlement date. There are two methods for calculating accrued interest: 1) 360-day year method, used for corporate and municipal bonds. under the bonds due and payable or take other legal actions specified in the Indenture, as they deem appropriate. To date, the bondholders have not taken any action against the Company, nor have they waived any right to do so. Request for a waiver The voluntary surrender of a known right; conduct supporting an inference that a particular right has been relinquished. The term waiver is used in many legal contexts. extension under the Credit Agreement: During the first half of 2003, Grupo Iusacell Celular, S.A. de C.V. ("Iusacell Celular") exceeded the permitted leverage ratio of 2.50 times specified under the US$266 million Amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. and Restated Credit Agreement, dated as of March 29, 2001 (the "Credit Agreement"). On April 28, 2003 Iusacell Celular and the lenders entered into a temporary Amendment and Waiver ("the Amendment") to the Credit Agreement to increase the permitted leverage ratio from 2.50 to 2.70 times. On May 22, 2003, the Amendment was extended until June 13, 2003 and on June 12, 2003, the Amendment was further extended until June 26, 2003. On June 27, 2003, Iusacell Celular formally requested an additional extension of the Amendment. On July 10, 2003, the Amendment was extended until August 14, 2003. The Amendment contains covenants which expire on August 14, 2003 which restrict Iusacell Celular from making any loans, advances, dividends, or other payments to the Company and require a proportionate pro·por·tion·ate adj. Being in due proportion; proportional. tr.v. pro·por·tion·at·ed, pro·por·tion·at·ing, pro·por·tion·ates To make proportionate. prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. of the loan under the Credit Agreement if it makes any principal or interest payments on any of its indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. for borrowed money, excluding capital and operating leases Operating Lease A lease contract that allows the use of an asset, but does not convey rights similar to ownership of the asset. Notes: An operating lease is not capitalized it is accounted for as a rental expense. . If the Amendment is not further extended, upon its expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created , Iusacell Celular would be in default of a financial ratio covenant under the Credit Agreement, which would constitute an Event of Default (as defined in the Credit Agreement) as if the Amendment had never become effective. Technical default on 10.00% bonds due 2004: Pending an agreement with the Company's creditors on a restructuring plan and as restricted by the waiver extension under the Credit Agreement, Iusacell Celular did not make the US$7.5 million coupon payment due on July 15, 2003 on its 10.00% bonds due 2004. Iusacell Celular has a 30-day period within which to make the coupon payment. If Iusacell Celular does not make the payment within the grace period, an event of default would occur under the Indenture governing the bonds, and the bondholders would have the right to declare the principal of and the accrued interest under the bonds due and payable or take other legal actions specified in the Indenture, as they deem appropriate. Regulatory and Legal Affairs Injunction injunction, in law, order of a court directing a party to perform a certain act or to refrain from an act or acts. The injunction, which developed as the main remedy in equity, is used especially where money damages would not satisfy a plaintiff's claim, or to against telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. tax upheld: In March 2002, the Company filed an injunctive
The city is part of the "Water-Circuit", a cluster of towns which are very famous for natural fountains and waterwells. ") to challenge the Mexican government's implementation of a new excise tax Excise Tax 1. An indirect tax charged on the sale of a particular good. 2. A penalty tax applied to ineligible transactions in retirement accounts. This penalty is assessed by and paid to the IRS. Notes: 1. on certain wireless telecommunications services In telecommunication, the term telecommunications service has the following meanings: 1. Any service provided by a telecommunication provider. 2. approved by the Mexican Congress. On June 6, 2003, Iusacell was officially notified that Mexico's Supreme Court affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. the October 21, 2002 ruling by a federal district court of Mexico City Mexico City Spanish Ciudad de México City (pop., 2000: city, 8,605,239; 2003 metro. area est., 18,660,000), capital of Mexico. Located at an elevation of 7,350 ft (2,240 m), it is officially coterminous with the Federal District, which occupies 571 sq mi in favor of upon the side of; favorable to; for the advantage of. See also: favor Iusacell's cellular service concessionaires in their amparo filed against the special telecommunications tax enacted by the Mexican Congress on January 1, 2002. Shareholders Meeting and Resolution On July 25, 2003, the Company held a general ordinary shareholder's meeting by which its shareholders elected a new Board of Directors, which will become effective upon the closing of the public tender offer of Iusacell's shares lead by Movil Access (see Strategic shareholders tender shares). The transaction is expected to close on July 29, 2003. In addition, the Board of Directors reiterated its intention to name Mr. Gustavo Guzman as Chief Executive Officer of Iusacell, Mr. Jose Ignacio Morales Elcoro, Director General of Administration and Mr. Jose Luis Riera K., Director General of Finance, all names effective on July 29, 2003. The following table presents the members of the new Board of Directors:
Ricardo B. Salinas Pliego Chairman of the Board and
Series A Director
Pedro Padilla Longoria Vice Chairman and Series
A Director
Gustavo Guzman Sepulveda Series A Director
Jose Ignacio Morales Elcoro Series A Director
Luis Jorge Echarte Fernandez Series A Director
Federico Bellot Castro Series A Director
Mariluz Calafell Salgado Series A Director
Jorge Narvaez Massini Series V Director
Eduardo Kuri Romo Series V Director
Hector Rojas Villanueva Series V Director
Marcelino Gomez Velasco Series V Director
Gonzalo Brockman Garcia Series V Director
About Iusacell Grupo Iusacell, S.A. de C.V. (Iusacell, NYSE: CEL; BMV: CEL) is a wireless cellular and PCS (1) (Personal Communications Services) Refers to wireless services that emerged after the U.S. government auctioned commercial licenses in 1994 and 1995. This radio spectrum in the 1. service provider in seven of Mexico's nine regions, including Mexico City, Guadalajara, Monterrey, Tijuana, Acapulco, Puebla, Leon and Merida. The Company's service regions encompass a total of approximately 92 million POPs, representing approximately 90% of the country's total population. For additional corporate information please visit the Company's web site at http://www.iusacell.com. 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, the Company claims the protection of the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. for forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. contained in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Discussion of factors that may affect future results is contained in our filings with the Securities and Exchange Commission. Macroeconomic mac·ro·ec·o·nom·ics n. (used with a sing. verb) The study of the overall aspects and workings of a national economy, such as income, output, and the interrelationship among diverse economic sectors. information used in the preparation of this report considered a 4.4% inflation rate for the twelve months ended June 30, 2003 and peso-dollar exchange rates of $10.47 and $9.61 at the close of business of June 30, 2003 and 2002, respectively. Attached are the Consolidated Income Statements of each of Grupo Iusacell, S.A. de C.V. and Grupo Iusacell Celular, S.A. de C.V. for the three-month periods ended June 30, 2003 and 2002, and the Consolidated Balance Sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. of Grupo Iusacell, S.A. de C.V. and Grupo Iusacell Celular, S.A. de C.V. at June 30, 2003 and 2002. The financial statements of Grupo Iusacell Celular, S.A. de C.V. exclude the impact on results and financial position of the US$350 million in 14.25% Senior Notes due 2006, certain microwave equipment and related purchase money indebtedness and the PCS business.
GRUPO IUSACELL CONSOLIDATED BALANCE SHEET
COMPARISON OF SECOND QUARTER 2003 WITH SECOND QUARTER 2002
(Figures in thousands of constant June 30, 2003 pesos)
2Q03 2Q02 Change
2Q03/
2Q02
ASSETS
Current Assets
Cash and marketable
securities 123,272 0.9% 464,060 0.3% -73.4%
Accounts receivable, net 488,908 3.5% 698,893 3.9% -30.0%
Related parties - 0.0% 931 0.0% -
Recoverable taxes and
other 639,579 4.5% 329,131 4.3% 94.3%
Inventories 51,693 0.4% 188,149 0.2% -72.5%
TOTAL CURRENT ASSETS 1,303,452 9.2% 1,681,164 8.8% -22.5%
Property and equipment,
net 8,655,709 61.4% 9,711,326 61.9% -10.9%
Excess of cost of
investments in
subsidiaries over
book value, net 1,989,917 14.1% 2,209,784 14.1% -9.9%
Other assets 2,149,801 15.2% 2,803,008 15.1% -23.3%
TOTAL ASSETS 14,098,879 100.0% 16,405,282 100.0% -14.1%
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities
Accrued liabilities 695,378 4.9% 805,618 5.4% -13.7%
Related parties 209,070 1.5% 196,453 1.3% 6.4%
Accounts payable 196,218 1.4% 434,494 1.1% -54.8%
Short-term debt 8,130,500 57.7% 392,128 0.8% 1973.4%
TOTAL CURRENT
LIABILITIES 9,231,166 11.0% 1,828,693 9.0% 404.8%
Non-current liabilities 254,125 1.8% 8,031,767 58.8% -96.8%
TOTAL LIABILITIES 9,485,291 57.0% 9,860,460 67.0% -3.8%
Minority interest 3,025 0.0% 71,467 0.0% -95.8%
Shareholders' Equity
Capital stock 7,237,823 51.3% 7,237,823 49.8% -
Legal reserve 20,341 0.1% 20,341 0.1% -
Capital contributions 1,424,266 10.1% 1,424,266 9.8% -
Net loss -818,229 -5.8% -1,068,026 -4.8% -23.4%
Accumulated earnings
from prior years -3,464,634 -24.6% -1,352,045 -23.8% -156.3%
Excess from restatement
of shareholders' equity 210,996 1.5% 210,996 1.5% -
TOTAL SHAREHOLDERS'
EQUITY 4,610,563 43.0% 6,473,355 32.0% -28.8%
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 14,098,879 100.0% 16,405,282 100.0% -14.1%
GRUPO IUSACELL CONSOLIDATED INCOME STATEMENT
COMPARISON OF SECOND QUARTER 2003 WITH SECOND QUARTER 2002
(Figures in thousands of constant June 30, 2003 pesos)
2Q03 2Q02 Change
2Q03/
2Q02
REVENUE
Service 1,075,605 94.4% 1,239,219 91.6% -13.2%
Equipment sales and other 64,244 5.6% 113,063 8.4% -43.2%
TOTAL REVENUE 1,139,849 100.0% 1,352,282 100.0% -15.7%
Cost of services 310,970 27.3% 375,045 27.7% -17.1%
Other costs 23,541 2.1% 105,920 7.8% -77.8%
TOTAL COSTS 334,511 29.3% 480,965 35.6% -30.5%
GROSS MARGIN 805,338 70.7% 871,317 64.4% -7.6%
Sales & Advertising
expenses 265,976 23.3% 340,809 25.2% -22.0%
General and administrative
expenses 114,658 10.1% 128,942 9.5% -11.1%
Other income - 0.0% -34,951 -2.6% -
TOTAL OPERATING EXPENSES 380,634 33.4% 434,800 32.2% -12.5%
EBITDA 424,704 37.3% 436,517 32.3% -2.7%
Depreciation and
amortization 615,433 54.0% 588,886 43.5% 4.5%
OPERATING LOSS -190,729 -16.7% -152,369 -11.3% 25.2%
Other income -46,256 -4.1% - - -
Interest expense, net 236,662 20.8% 222,477 16.5% 6.4%
Foreign exchange loss
(gain) -231,721 -20.3% 379,746 28.1% -
Monetary correction -23,612 -2.1% -64,244 -4.8% -63.2%
INTEGRAL FINANCING COST -18,671 -1.6% 537,979 39.8% -
LOSS BEFORE TAXES AND
STATUTORY PROFIT SHARING
COST -125,802 -11.0% -690,348 -51.1% -81.8%
Part (Income) loss
Subsidiaries -207 0.0% 10,387 0.8% -
Taxes 23,985 2.1% 28,465 2.1% -15.7%
Extraordinary items -22,992 -2.0% - 0.0% -
NET LOSS BEFORE
MINORITY INTEREST -126,588 -11.1% -729,200 -53.9% -82.6%
Minority interest -3,039 -0.3% -15,319 -1.1% -80.2%
NET LOSS -123,549 -10.8% -713,881 -52.8% -82.7%
GRUPO IUSACELL CELULAR CONSOLIDATED BALANCE SHEET
COMPARISON OF SECOND QUARTER 2003 WITH SECOND QUARTER 2002
(Figures in thousands of constant June 30, 2003 pesos)
2Q03 2Q02 Change
2Q03/
2Q02
ASSETS
Current Assets
Cash and marketable
securities 109,348 0.9% 75,809 0.5% 44.2%
Accounts receivable, net 488,314 4.0% 697,586 4.9% -30.0%
Related parties 92,501 0.7% 66,473 0.5% 39.2%
Recoverable taxes and
other 555,483 4.5% 253,071 1.8% 119.5%
Inventories 51,693 0.4% 185,152 1.3% -72.1%
TOTAL CURRENT ASSETS 1,297,339 10.5% 1,278,091 9.0% 1.5%
Property and
equipment, net 7,850,547 63.5% 8,947,824 63.2% -12.3%
Excess of cost of
investments in
subsidiaries over
book value, net 1,803,331 14.6% 2,012,566 14.2% -10.4%
Other assets 1,410,808 11.4% 1,920,346 13.6% -26.5%
TOTAL ASSETS 12,362,025 100.0% 14,158,827 100.0% -12.7%
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities
Accrued liabilities 343,601 2.8% 695,617 4.9% -50.6%
Related parties 97,693 0.8% 397,352 2.8% -75.4%
Accounts payable 105,216 0.9% 259,666 1.8% -59.5%
Short-term debt 4,350,268 2.8% 170,520 1.2% 2,451.2%
TOTAL CURRENT
LIABILITIES 4,896,778 11.0% 1,523,155 9.0% 221.5%
Non-current
liabilities 3,760 32.4% 4,242,129 30.0% -99.9%
TOTAL LIABILITIES 4,900,538 57.0% 5,765,284 67.0% -15.0%
Minority interest - 0.0% 22,592 0.2% -
Shareholders' Equity
Capital stock 16,143,088 130.6% 16,143,088 114.0% -
Legal reserve 28,744 0.2% 28,744 0.2% -
Capital contributions 99,466 0.8% 99,466 0.7% -
Net loss -450,174 -3.6% -616,189 -4.4% -26.9%
Accumulated earnings
from prior years -7,647,374 -61.9% -6,571,895 -46.4% 16.4%
Excess from
restatement of
shareholders' equity -712,263 -5.8% -712,263 -5.0% -
TOTAL SHAREHOLDERS'
EQUITY 7,461,487 43.0% 8,370,951 32.0% -10.9%
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 12,362,025 100.0% 14,158,827 100.0% -12.7%
GRUPO IUSACELL CELULAR CONSOLIDATED INCOME STATEMENT
COMPARISON OF SECOND QUARTER 2003 WITH SECOND QUARTER 2002
(Figures in thousands of constant June 30, 2003 pesos)
2Q03 2Q02 Change
2Q03/
2Q02
REVENUE
Service 1,091,508 94.6% 1,266,891 91.8% -13.8%
Equipment sales and other 61,870 5.4% 112,591 8.2% -45.0%
TOTAL REVENUE 1,153,378 100.0% 1,379,482 100.0% -16.4%
Cost of services 310,703 26.9% 408,577 29.6% -24.0%
Other costs 23,541 2.0% 105,872 7.7% -77.8%
TOTAL COSTS 334,244 29.0% 514,449 37.3% -35.0%
GROSS MARGIN 819,134 71.0% 865,033 62.7% -5.3%
Sales & Advertising
expenses 265,976 23.1% 340,774 24.7% -21.9%
General and administrative
expenses 113,222 9.8% 126,772 9.2% -10.7%
Other income 0 0.0% -34,951 -2.5%
TOTAL OPERATING EXPENSES 379,198 32.9% 432,595 31.4% -12.3%
EBITDA 439,936 38.1% 432,438 31.3% 1.7%
Depreciation and
amortization 572,791 49.7% 558,454 40.5% 2.6%
OPERATING LOSS -132,855 -11.5% -126,016 -9.1% 5.4%
Other income -63,368 -5.5% - 0.0% -
Interest expense, net 93,271 8.1% 101,792 7.4% -8.4%
Foreign exchange loss
(gain) -108,642 -9.4% 182,796 13.3% -
Monetary correction -11,789 -1.0% -35,236 -2.6% -66.5%
INTEGRAL FINANCING COST -27,160 -2.4% 249,352 18.1% -
LOSS BEFORE TAXES AND
STATUTORY PROFIT SHARING
COST -42,327 -3.7% -375,368 -27.2% -88.7%
Part (Income) loss
Subsidiaries -282 0.0% 14,442 1.0% -
Taxes 20,005 1.7% 28,465 2.1% -29.7%
Extraordinary items -22,992 -2.0% - 0.0% -
NET LOSS BEFORE
MINORITY INTEREST -39,058 -3.4% -418,275 -30.3% -90.7%
Minority interest -794 -0.1% -12,046 -0.9% -93.4%
NET LOSS -38,264 -3.3% -406,229 -29.4% -90.6%
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