Losses widen as Iusacell woes continue

27 Jul 2004

The bad times look set to continue for Mexico’s smallest cellular operator Grupo Iusacell, after it saw its net loss widen considerably in the second quarter as subscriber growth stalled. The cellco is believed to be weighed down by debts close to USD850 million, including a structurally subordinated USD350 million bond that matures in 2006, and has tried unsuccessfully to reach a restructuring deal with its creditors. It recently hired US investment bank Hill Street Capital as its financial advisor and – if reports are to be believed – immediately tasked the bank with staving off its potentially imminent bankruptcy. Iusacell is due in the court later this year after a group of creditors filed a lawsuit against the company in January when the operator defaulted on a USD150 million bond. Iusacell had a bid to have the suit thrown out dismissed last week and now faces an appointment at the New York Supreme Court. The cellco says that it will continue its daily operations until a restructuring agreement can be found.

In the three months to the end of June Iusacell posted a net loss of MXP946 million (USD82.4 million), compared to the MXP130 million loss reported a year before, despite revenues rising 7% to MXP1.269 billion. The key to the widening in the company’s loss was a 58% drop in operating income before depreciation and amortisation (Oibda), and a 48% drop in operating income, much of which was blamed on a change in accounting policies. Equally as worrying is Iusacell’s struggle to sign up new customers. The cellco’s economic woes have impacted on its subscriber count which has remained flat at around 1.3 million since the end of 2003, down from a high of 2.17 million at March 2003, relegating it to the role of the smallest of the country’s four cellcos. In an attempt to tempt back users Iusacell rolled out its cdma2000 1xRTT offering nationwide earlier this month, having initially launched the service in Mexico City in January 2003. Iusacell operates in seven of Mexico’s nine telecoms regions, giving it coverage of the country’s principal conurbations including Guadalajara, Monterrey, Tijuana, Acapulco, Puebla, Leon and Merida.

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