Iusacell’s loss widens after a challenging 2002

27 Feb 2003

Mexican cellco Iusacell [NYSE:CEL] has reported a loss of MXN2 billion (USD189 million) for the full year 2002, almost quadrupling the MXN528 million loss it posted for 2001. Revenues for the year fell by around 19% to MXN5.4 billion, while EBITDA dropped by 36% to MXN1.7 billion. The operator saw the largest declines in the fourth quarter of the year, when revenues fell 17% on Q3, EBITDA dropped 27% and EBITDA margin declined from 26% to 24%. It has attributed its poor fourth quarter results to higher churn, which exceeded additions during the quarter with a net loss of 95,000 clients, and a trend for high-end customers to adopt hybrid plans contracts that include a pre-paid component.

The downturn of the telecoms market hit Iusacell hard in 2002, and it was forced to embark on a scheme centered on cost containment and cash management. The strategy involved the redundancies of 958 employees during the year as well as significant cuts to capital spending; the company spent around USD88 million in 2002, compared to the USD214 million invested during 2001. According to chief financial officer José Luis Ramirez, Iusacell will be focusing on reducing its USD822 million debt during 2003, as well as expanding its recently launched cdma2000 1X network to cover all of Mexico’s main cities; it says it has to implement the network to keep up with rivals Telefónica Móviles and Telcel, which are currently rolling out 2.5G networks. At the end of 2002 Iusacell claimed 2.1 million subscribers, a 12% increase on the end of 2001.