Analysts: Positive Outlook for Iusacell Following Debt Deal
Financially troubled Mexican mobile operator Iuscaell reached a deal with creditors over the weekend to restructure its more than US$800mn in debt, the company said in a statement.
Iusacell's parent company Grupo Iusacell told Mexico City's stock exchange BMV on Monday that it had reached the debt deal with 51% of creditors through a bond swap at better interest rates and extensions to maturities.
The news effectively ends a two-year saga that caused much speculation about the company's future.
Iusacell exchanged a US$350mn bond due 2006, with a coupon of 14.25%, for a new bond worth US$175mn with a 10% interest rate that matures in December 2013.
The company also renegotiated a US$150mn loan it had defaulted on in 2004, plus a US$266mn secured syndicated loan, and has essentially reduced its debt by over US$300mn to approximately US$550mn. Analysts consider the new debt load manageable compared to other telecommunications companies around the globe.
The debt restructuring deal is "great news," according to James Harper, director of corporate research at US investment firm BCP Securities.
"Even though creditors have taken a large haircut it was better than expected ... it is better getting paid something than not getting paid at all," Harper told BNamericas.
LOOKING AHEAD
As regards, Iusacell, it is all uphill from here on.
"Let's face it you can't get any worse than being in default," Harper said.
What Iusacell will do now is a matter of speculation.
The company runs almost neck and neck for third place in the mobile phone market with its sister firm Unefon, both of which are owned by media magnate Ricardo Salinas Pliego.
Iusacell targets a higher-end postpaid niche, which it has been trying to consolidate by offering innovative new services on its network such as Palm Treo 650 smartphones. Iusacell is also investing US$21mn to develop TV services over its CDMA2000 EV-DO broadband network.
Analysts recognize that the company's financial results have improved over recent quarters.
Iusacell saw a 6% increase in its subscriber base to 1.72 million in the third quarter 2005 from 1.62 million a year earlier and increased ARPU to US$29 from US$27 in 2Q05.
Once the company gets back on its feet, Salinas has several options, Sergio Rodríguez, an analyst with Fitch Ratings Mexico told BNamericas.
One option is to merge Iusacell with Unefon, also a CDMA operator, given their complementary subscriber bases and complementary geographical coverage, which would make a stronger competitor.
The second option is to sell Iusacell and Unefon off either individually or together to the highest bidder - though analysts assure that the companies are worth more together than individually.
Names that have been mentioned include trunking operator Nextel and Spain's Telefónica Móviles (NYSE:TEM), which controls Mexico's second largest mobile operator Movistar.
DEVELOPMENT
But some analysts believe Salinas may hold onto the company and see what he can make of it.
"I haven't seen or heard anything to indicate that Salinas is thinking of selling off one or the other companies ... together there could be important synergies," Rodríguez said.
The interest rates on the debt deal leave Iusacell with sufficient leg room to invest and upgrade its networks, an analyst that closely follows Iusacell but who preferred to reserve anonymity told BNamericas.
"You're talking about US$45mn in interest expense against US$100mn to US$120mn in Ebitda. That gives them a lot of breathing room for the capex they need for long term upgrading from 2.5G to 3G, to maintain their towers and even subsidize handsets."
Whether Salinas sells or keeps the companies will not affect creditors - who are content enough that a large part of their money is safe, at least for now, according to Harper.
BNamericas.com"
Posted to the site on 24th January 2006