<PAGE> 1
As Filed Pursuant to Rule 424(a)
Registration No. 333-33040
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion,
Dated March 23, 2000
Preliminary Prospectus Supplement
GRUPO IUSACELL, S.A. DE C.V.
15,000,000 American depositary shares,
each representing ten shares of series V common stock
Iusacell is offering 10,000,000 ADSs. Mr. Carlos Peralta is offering
5,000,000 ADSs.
On March 22, 2000, the closing price of Iusacell's ADS on the New York Stock
Exchange was $18.625.
The ADSs are listed on the New York Stock Exchange under the symbol CEL. The
series V shares are listed on the Mexican Stock Exchange.
INVESTING IN THE ADSS INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF
THIS PROSPECTUS SUPPLEMENT.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
________________________________________________________________________________
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO THE
PUBLIC DISCOUNTS IUSACELL SELLING SHAREHOLDER
________________________________________________________________________________
Per ADS $ $ $ $
________________________________________________________________________________
Total $ $ $ $
Iusacell and the selling shareholder have granted the underwriters the right to
purchase up to an additional 2,250,000 ADSs to cover over-allotments. If the
over-allotment option is exercised in full Iusacell and the selling shareholder
will receive proceeds of $ and $ , respectively.
Delivery of the ADSs will be made to investors on or about April , 2000.
JOINT BOOK-RUNNING MANAGERS
J.P. MORGAN & CO. WARBURG DILLON READ LLC
SALOMON SMITH BARNEY
ING BARINGS
, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Page No. Page No.
THE OFFERING.................. 1 DILUTION...................... 11
RISK FACTORS.................. 3 SELLING SHAREHOLDER........... 11
USE OF PROCEEDS............... 9 UNDERWRITING.................. 12
CAPITALIZATION AND LEGAL MATTERS................. 14
INDEBTEDNESS................. 10 EXPERTS........................ 14
</TABLE>
"NEW IUSACELL" AND "IUSACELL" MEAN GRUPO IUSACELL, S.A. DE C.V. THIS COMPANY WAS
FORMERLY KNOWN AS NUEVO GRUPO IUSACELL, S.A. DE C.V.
"OLD IUSACELL" MEANS GRUPO IUSACELL CELULAR, S.A. DE C.V. THIS COMPANY WAS
FORMERLY KNOWN AS GRUPO IUSACELL, S.A. DE C.V. NEW IUSACELL OWNS 99.9% OF THE
CAPITAL STOCK OF OLD IUSACELL.
Unless otherwise specified, all references to "U.S. dollars," "dollars," "U.S.$"
or "$" are to United States dollars, and references to "Ps." and "pesos" are to
Mexican pesos. We publish our financial statements in pesos that are adjusted
to reflect changes in purchasing power due to inflation. Thus, unless otherwise
specified, our financial data is presented in constant pesos of December 31,
1999 purchasing power. Amounts presented in this prospectus may not add up or
may be slightly inconsistent due to rounding.
Mexican generally accepted accounting principles require that financial
statements of Mexican companies such as Iusacell recognize certain effects of
inflation. As a result, unless otherwise indicated, all financial statements
and data presented in this prospectus have been restated in constant pesos as of
December 31, 1999. The U.S. dollar translations provided in this prospectus
are, unless otherwise indicated, calculated at the exchange rate at December 31,
1999 reported by the Federal Reserve Bank of New York as its noon buying rate
for pesos, which was Ps.9.480 per U.S. dollar. On March 21, 2000, the noon
buying rate for Pesos reported by the Federal Reserve Bank of New York was
Ps.9.300 per U.S. dollar. Sums may not add due to rounding.
i
<PAGE> 3
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the United States Securities and Exchange Commission a
registration statement on Form F-3 under the Securities Act of 1933, as amended,
to register the offer contemplated in this prospectus supplement. This
prospectus supplement, which forms a part of the registration statement, does
not contain all of the information presented in the registration statement.
Statements contained in this prospectus supplement or the prospectus that forms
part of the registration statement, which together we refer to as the
prospectus, concerning the provisions of any document are not necessarily
complete. For further information about us, the offer and any document referred
to in this prospectus, you should refer to the registration statement and its
exhibits.
We are subject to the informational requirements of the United States Securities
Exchange Act of 1934, as amended, and are required to file with or furnish to
the Commission certain reports and other information. As a foreign private
issuer, we are exempt from the provisions of the Exchange Act that require us to
furnish proxy statements to shareholders and the provisions that relate to short
swing profit reporting and liability.
The registration statement, its exhibits and schedules, reports, and other
information that we have filed with or furnished to the Commission may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices at 7 World Trade Center,
13th Floor, New York, New York 10048 and at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. You can obtain copies of such
material by mail from the Public Reference section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
ENFORCEABILITY OF CIVIL LIABILITIES
Iusacell is incorporated with limited liability in Mexico and substantially all
of its assets are located in Mexico. In addition, the majority of the directors
and officers of Iusacell and the experts named in this prospectus reside outside
the United States (principally in Mexico) and all or a significant portion of
the assets of those persons and of Iusacell are located outside the United
States. As a result, it may not be possible for investors to effect service of
process upon such persons within the United States or to enforce against such
persons or Iusacell judgments obtained in the courts of the United States,
including without limitation, judgments predicated upon the civil liability
provisions of the federal securities laws of the United States.
Iusacell has been advised by De Ovando y Martinez del Campo, S.C., its special
Mexican counsel, that there is doubt as to the enforceability in original
actions in Mexican courts of liabilities predicated solely upon United States
federal securities laws and as to the enforceability in Mexican courts of
judgments of United States courts obtained in actions predicated upon the civil
liability provisions of the United States federal securities laws. As a result,
because substantially all of the assets of Iusacell are located in Mexico,
holders of Iusacell securities may effectively be required to pursue in Mexico,
under Mexican law, any claims they may have against Iusacell.
NEITHER WE NOR THE SELLING SHAREHOLDER ARE MAKING OFFERS TO, NOR ARE WE
ACCEPTING OFFERS TO BUY FROM, PERSONS IN ANY JURISDICTION IN WHICH THIS OFFER
WOULD NOT COMPLY WITH LOCAL SECURITIES LAWS.
Neither we nor the selling shareholder have authorized any person to give you
any information or to make any representation that is not contained in this
prospectus in connection with this offer to sell ADSs. If such information or
representation is given or made to you, you must not rely upon it as having been
authorized by us or the selling shareholder.
We have filed an application with the Mexican National Banking and Securities
Commission (Comision Nacional Bancaria y de Valores), also referred to as the
CNBV, to register our V shares in the Securities and Special Sections of the
National Registry of Securities and Intermediaries (Registro Nacional de Valores
e Intermediarios) maintained by the CNBV and to permit the transactions
mentioned in this prospectus. This registration and permission does not imply
any certification as to the investment quality of our shares, our solvency or
the accuracy or completeness of the information included in this prospectus.
ii
<PAGE> 4
THE OFFERING
THE OFFERING ------------------------ We and the selling shareholder are
offering a total of 15,000,000 ADSs
through a U.S. and international
offering. Each ADS represents 10 series
V shares of Iusacell.
OVER-ALLOTMENT OPTION -------------- Up to 2,250,000 ADSs. Iusacell has
granted to the underwriters an option
covering 1,500,000 ADSs and the selling
shareholder has granted an option covering
750,000 ADSs, solely to cover
over-allotments.
SECURITIES OFFERED BY IUSACELL ----- 10,000,000 ADSs.
SECURITIES OFFERED BY THE SELLING
SHAREHOLDER ------------------------ 5,000,000 ADSs.
THE ADSS --------------------------- The ADSs will be evidenced by American
depositary receipts.
OFFERING PRICE --------------------- U.S.$ per ADS.
USE OF PROCEEDS -------------------- The net proceeds to Iusacell, assuming no
exercise of the over-allotment option,
will be approximately U.S.$
million, which will be used to acquire
cellular network equipment to increase
the capacity coverage and quality of our
network and to fund the initial
deployment of our PCS network in
Regions 1 and 4.
We will not receive any proceeds from
the sale of securities offered by the
selling shareholder.
EXPECTED TIMETABLE ----------------- We expect to deliver ADSs to investors on
April , 2000. The closing date will
be set forth in the final prospectus
supplement filed with the Securities and
Exchange Commission.
PRICING AND PAYMENT ---------------- The underwriters will agree on the price
of the ADSs with Iusacell based on market
demand. Payment for the ADSs will be made
to and through the underwriters in
accordance with their respective
procedures.
DELIVERY OF ADSs ------------------ The underwriters will deliver the ADSs,
subject to their receipt from Iusacell
and the selling shareholder, on the
closing date through the facilities of
The Depository Trust Company in
accordance with its procedures.
NOTICE OF RESULTS OF
DISTRIBUTION ---------------------- The results of this offering will be
reflected in the final prospectus
supplement filed with the Securities and
Exchange Commission.
LISTING AND TRADING MARKETS ------- The ADSs are listed on the New York Stock
Exchange. The series V shares are listed
on the Mexican Stock Exchange.
NYSE TRADING SYMBOL --------------- CEL
1
<PAGE> 5
VOTING RIGHTS------------------------- Iusacell has two series of common stock,
series V shares and series A shares.
Holders of our series V shares may vote
at any general shareholders meeting and
are entitled to elect five of the twelve
members of our Board of Directors.
We have two principal groups of
shareholders. The first, Bell Atlantic,
comprises various subsidiaries of Bell
Atlantic Corporation. Our second group
of shareholders, the Peralta Group,
comprises Mr. Carlos Peralta and a
group of individuals and companies
controlled by or related to him.
Bell Atlantic and the Peralta Group,
who, prior to this offering collectively
owned 55.9% of the series V shares, have
agreed to elect the President and
Director General of Iusacell, whom the
Chairman of the Board of Directors has
the right to appoint, as one of the five
series V directors.
Bell Atlantic, as holder of the majority
of the series A shares, exercises
control, as it has the right to elect
six of the twelve board members,
including the Chairman of the Board of
Directors, whose vote breaks a tie. By
agreement with the Peralta Group, Bell
Atlantic also has the right to nominate
all of the candidates for a seventh
board position.
Holders of our ADSs may exercise the
voting rights of the underlying series V
shares through the ADS depositary. We
will notify the depositary of any
shareholders' meetings. The depositary
will mail the information contained in
any notices it receives to the ADS
holders and will inform them of the
procedures to follow in order to
exercise their voting rights.
DIVIDEND POLICY---------------------- Since becoming a public company in 1994,
Iusacell has not paid dividends. We do
not contemplate paying dividends in the
foreseeable future.
2
<PAGE> 6
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, AS WELL AS RISK
FACTORS AND OTHER INFORMATION PRESENTED IN THE PROSPECTUS TO WHICH THIS
PROSPECTUS SUPPLEMENT RELATES.
RISK FACTORS RELATING TO IUSACELL
WE ARE A HOLDING COMPANY AND WILL DEPEND ON OUR SUBSIDIARIES TO PAY OUR
LIABILITIES
We are a holding company with no significant assets other than the
stock of our subsidiaries. In order to pay our obligations, we will rely on
income from dividends and other cash flow from our subsidiaries. Because we are
a holding company, the claims of all holders of our subsidiaries' debt rank
senior to our obligations. At December 31, 1999, our subsidiaries' total
indebtedness, including trade notes payable, was Ps.4,593.1 million (U.S.$484.5
million) and may increase in the future.
Our current debt agreements prevent our subsidiaries from paying
dividends to us or otherwise making cash available to us until at least May
2004. In addition, substantially all of our subsidiaries' assets are pledged to
secure their obligations under their existing debt instruments. Dividends and
cash flow from our subsidiaries are therefore severely restricted by the
outstanding debt of our subsidiaries and the restrictive covenants that govern
that debt.
Our ability to pay our obligations before May 2004 will depend on our
ability to either
- raise equity or debt capital at the holding company level, or
- generate sufficient cash flow at the subsidiary level and make
dividend payments to the holding company after eliminating the
covenants restricting such dividend payments through the
prepayment of the Old Iusacell debt whose terms restrict
dividend payments.
After the expiration of the restrictive covenants that prevent our
subsidiaries from paying dividends to New Iusacell, our ability to pay our
liabilities will depend on our ability to generate sufficient cash flow and/or
to access equity or debt financing. We cannot assure you that we will be able to
raise equity or debt capital or that our subsidiaries will generate sufficient
cash flow to pay dividends to enable us to pay our obligations.
Furthermore, the ability of our subsidiaries to pay dividends is
subject to Mexican legal requirements, which provide that a Mexican corporation
may declare and pay dividends only out of the profits reflected in its financial
statements, if such payment is approved by its stockholders and after the
creation of required legal reserves and the absorption or satisfaction of losses
suffered in previous fiscal years. Claims of creditors of our subsidiaries,
including trade creditors, and bank and other lenders, will generally have
priority over claims of New Iusacell to the assets and cash flows of our
subsidiaries.
Additionally, in the event we engage in business activities at the
holding company level and incur associated liabilities, or otherwise incur
liabilities at the holding company level, we may not have the resources
available to satisfy those liabilities for the same reasons discussed above. In
the event we incur such liabilities, we could be required to turn to the capital
markets or our principal shareholders in order to help us satisfy those
liabilities. At that time, we may not have access to equity or debt financing.
In addition, our principal shareholders are under no obligation to provide
financial resources to us and there can be no assurance that they would do so. A
material unsatisfied liability at the holding company level could lead to our
bankruptcy or otherwise make it difficult or impossible for us to comply with
our obligations.
WE ARE SUBJECT TO RESTRICTIVE COVENANTS
The terms of our debt and of our subsidiaries' existing debt impose
significant operating and financial restrictions. These restrictions will
affect, and in many respects significantly limit or prohibit our ability and the
ability of our subsidiaries to, among other things,
- borrow money,
- pay dividends on stock,
- make investments,
- use assets as security in other transactions, and
- sell certain assets or merge with or into other companies.
3
<PAGE> 7
If we do not comply with these restrictions, we could be in default
even if we can currently pay our debt. If there were a default, holders of the
relevant debt could demand immediate payment of the aggregate amount of that
debt. This could lead to our bankruptcy or reorganization for the benefit of our
creditors or to our inability to pay our obligations.
WE MAY BE UNABLE TO SERVICE OUR DEBT, ACCESS CREDIT OR PURSUE BUSINESS
OPPORTUNITIES BECAUSE OUR SUBSIDIARIES ARE HIGHLY LEVERAGED AND HAVE
INSUFFICIENT CASH FLOW
Historically, our cash generated from operating activities has not been
sufficient to meet our debt service, working capital and capital expenditure
requirements. We have relied on the capital markets for new equity and debt
financing, vendor financing and borrowings and equity contributions from Bell
Atlantic and the Peralta Group to meet such funding needs.
As of December 31, 1999, our total consolidated indebtedness, including
trade notes payable, was Ps.7,937.6 million (U.S.$837.3 million), or
approximately 60.1% of our total capitalization. Although we had net income of
Ps.333.8 million (U.S.$35.2 million) for the period ended December 31, 1999, we
experienced net losses for each of the six years up to and including the period
ended December 31, 1998. Our positive net income in 1999 was driven primarily by
the benefits of foreign exchange gains attributable to the appreciation of the
peso against the U.S. dollar during 1999, and monetary gains resulting from the
effects of inflation on our net monetary liability position during 1999.
For the year ended December 31, 1998, our earnings were insufficient to
cover our fixed charges by Ps.2,275.5 million (U.S.$240.0 million). We had no
fixed charge coverage deficiency for the year ended December 31, 1999; we had a
fixed charge coverage amount of Ps.501,897 (U.S.$52,943). For this purpose,
earnings are calculated as income or loss before taxes plus (i) integral
financing cost, including amortization of capitalized interest, (ii) the
interest portion of annual rent expense, and (iii) losses from the less than
50%-owned affiliates. Fixed charges include the expensed and capitalized
portions of integral financing cost.
The degree to which we are leveraged and the covenants with which we
have to comply under our various financing agreements may adversely affect our
ability to finance future operations, to finance necessary capital expenditures,
to service our indebtedness, to compete effectively against better capitalized
competitors and to withstand downturns in our business or the Mexican economy
generally. Our high level of indebtedness could limit our ability to pursue
business opportunities that may be in our interest and that of our
security holders.
WE MAY LOSE MONEY BECAUSE OF CURRENCY DEVALUATIONS
While our sales are almost entirely denominated in pesos, the vast
majority of our obligations, and all of our long-term debt, are denominated in
U.S. dollars. As a result, except for those obligations for which we have
hedging arrangements in place, we are exposed to peso devaluation risk. Although
the peso appreciated 4.3% against the U.S. dollar in 1999, the peso has devalued
substantially against the U.S. dollar in the past and may devalue significantly
in the future. For example, the noon buying rate rose from Ps.3.4662 per
U.S.$1.00 on December 19, 1994 to Ps.5.0000 per U.S.$1.00 on December 31, 1994
and Ps.7.7400 per U.S.$1.00 on December 31, 1995, representing a 123.3%
devaluation of the peso relative to the U.S. dollar. In 1998, the peso devalued
22.7% relative to the U.S. dollar to Ps.9.9010 per U.S.$1.00 on December 31,
1998.
Further declines in the value of the peso relative to the U.S. dollar
could adversely affect our ability to meet U.S. dollar-denominated obligations,
including any debt securities. In addition, any further devaluation of the peso
may negatively affect the value of a Mexican company's securities, such as ours.
WE FACE INCREASING COMPETITION WHICH MAY REDUCE OUR OPERATING MARGINS
We face significant competition in our core cellular services business
from Radiomovil Dipsa, S.A. de C.V., commonly known as Telcel, in each region in
which we operate. As a wholly owned subsidiary of Telefonos de Mexico, S.A. de
C.V., the former state telephone monopoly known as Telmex, Telcel has
significantly greater internal financial and other resources than those
available to us, nationwide cellular and PCS concessions, a nationwide cellular
network, and an ability to use Telmex's installed telecommunications systems.
Competition is substantial and we, like Telcel, bear significant promotional
expenses, including the provision of cellular telephones to contract subscribers
free of charge or at a substantial discount. In addition, competition from
Telcel has not always enabled us to implement price increases to keep pace
with inflation and has occasionally forced price rollbacks and reductions.
We face increasing competition from other companies providing
comparable mobile wireless services utilizing emerging technologies, including
PCS services in the 1.9 GHz frequency band, enhanced specialized mobile radio
services and satellite telephony. We also face increasing competition in
providing long distance, paging, wireless local telephony and data transmission
services. The Mexican government may grant additional concessions to other
companies to provide services similar to or the same as those that we provide.
Besides Telmex, some other competitors may also have greater financial
and other resources, which may limit our ability to compete effectively.
IF WE DO NOT OBTAIN SIGNIFICANT CAPITAL FROM OUTSIDE SOURCES, WE WILL NOT BE
ABLE TO CONTINUE TO BUILD OUT OUR WIRELESS INFRASTRUCTURE AND PURSUE LONG
DISTANCE OPPORTUNITIES AND MAY LOSE THE OPPORTUNITY TO GENERATE REVENUES
In order to implement our operating strategy through 2001, we will have
to incur significant capital expenditures. We expect capital expenditures for
2000, 2001 and 2002, not including capital expenditures to build out our PCS
network in northern Mexico, to total approximately U.S.$495.0 million, of which
approximately U.S.$225.0 million will be invested during 2000. We expect capital
expenditures to build out our PCS network in northern Mexico will not exceed
U.S.$55.0 million, in the aggregate, in 2000 and 2001.
As we make additional investments in our cellular network and pursue
long distance opportunities, we will need additional external funding in
mid-2000 and beyond. We will also need additional external funding in 2000 in
order to acquire, build out and operate PCS networks in northern Mexico. The
4
<PAGE> 8
terms of our concessions may, in the future, also require us to make other
significant network investments for which additional funds would be required. We
cannot assure you that we will be able to obtain additional funds, including
funds from Bell Atlantic and/or the Peralta Group, or capital markets, bank or
vendor financing, on acceptable terms or at all.
IF WE ARE NOT ABLE TO OBTAIN CONCESSIONS FOR SPECTRUM AND GOVERNMENT APPROVALS,
DEVELOP NEW TECHNOLOGIES AND HIRE AND RETAIN QUALIFIED PERSONNEL, WE WILL BE
UNABLE TO IMPLEMENT NEW SERVICES AND MAY LOSE BUSINESS TO OUR COMPETITORS
Our ability to expand long distance and paging services and to
implement PCS and wireless local telephony services in accordance with our plans
will depend on a number of factors over which we have limited or no control.
These factors include, among others, our ability to acquire concessions for
spectrum at commercially acceptable prices, raise sufficient capital, obtain
required governmental approvals, negotiate reasonable interconnection
agreements, obtain rights of way for fiber optic cables, successfully deploy
technologies, secure leases for base stations, hire and retain additional
qualified personnel and develop an adequate customer base. Any of these factors
could delay, impede or reduce the scope of the implementation of new services
and result in a material adverse effect on our existing business, financial
condition and results of operations.
THE TECHNOLOGY WE USE MAY BE MADE OBSOLETE BY THE TECHNOLOGY USED BY OUR
COMPETITORS
All companies in the global telecommunications industry must adapt to
rapid and significant changes in technology. The technology that we have
selected in our wireless business may be challenged by competition from new or
improved digital technologies supporting wireless service or other services in
the near future. Technological changes may adversely affect our competitive
position, require substantial new capital expenditures and/or require
write-downs of obsolete technology.
WE MAY NOT HAVE ENOUGH MANAGEMENT RESOURCES TO BE ABLE TO EXPAND AS WE WISH
We plan to continue to access additional opportunities in the wireless
business in Mexico. In May 1998, we won auctions for concessions for a range of
frequencies in the 1.9 GHz band to provide PCS services in two regions in
northern Mexico. In 2000, we plan to launch wireless internet services. We will
have to devote substantial management resources to take advantage of new
opportunities and business ventures. In so doing, we will have to attract and
retain qualified management personnel in pace with our rate of growth. If we are
unable to attract and retain qualified management personnel, our existing
business, financial condition and results of operations could be harmed.
OUR STRATEGY TO EXPAND OUR WIRELESS FOOTPRINT IN MEXICO LEADS US TO CONSIDER
SIGNIFICANT ACQUISITIONS FROM TIME TO TIME THAT MAY ADVERSELY AFFECT OUR
BUSINESS, RESULTS AND FINANCIAL CONDITION
One of our business strategies is to provide our customers with access
to reliable and high-quality wireless service throughout Mexico. Providing
access in regions where we do not own concessions through roaming agreements
does not afford us optimal control over coverage, quality and pricing. As a
result, from time to time we explore possibilities to expand our wireless
footprint in Mexico.
For example, Bell Atlantic was recently engaged in discussions
regarding a transaction in which we would have acquired the four Cellular A-Band
properties in northern Mexico that we do not own, which we refer to as the
Northern Region Properties; as well as discussions regarding a separate
transaction in which we would acquire Grupo Portatel S.A. de C.V., the cellular
A-Band provider in southern Mexico. Although the most recent discussions with
respect to the Northern Region Properties have been terminated, we could discuss
a combination with respect to these properties with the same or different
parties in the future. The discussions with Portatel have not continued although
they have not been formally terminated. We cannot predict at this time when or
whether any acquisition will occur.
Although we believe that these transactions would significantly
strengthen our competitive position, at the same time they pose a number of
significant risks and uncertainties for us and for the holders of our
securities, including, without limitation, that they could involve the
incurrence of significant amounts of additional debt or other liabilities; the
acquisition of significant operational, financial, legal, labor or other
liabilities or risks, or significant financial needs, of which we may not be
aware and that we may not discover until after the acquisition has been
consummated; and the increase in our capital expenditure requirements. Any of
these risks could result in a material adverse change in our financial condition
and/or ability to service debt. In addition, any acquisition made with our
shares could be dilutive to our shareholders.
Because we cannot foresee all of the risks that one or more of these
acquisitions might involve, should they occur, it is not possible for us to
describe all these risks. As a result, holders of our securities must be
prepared to accept any deterioration in our prospects, business, financial
condition, results of operations or cash flow stemming from one or more of these
acquisitions.
In addition, an acquisition of the Northern Region Properties could
result in a change of control, so that Bell Atlantic would no longer control or
manage us. If a change of control were to occur from an acquisition of the
Northern Region Properties or any other transaction, Bell Atlantic would no
longer be in a position to determine our policies and strategy, manage our
operations or provide the technical and financial support that we have
historically relied on. It is not possible for us to describe the strategy that
would be followed by Iusacell following a change of control.
5
<PAGE> 9
CELLULAR FRAUD INCREASES OUR EXPENSES
The fraudulent use of cellular telecommunications networks imposes a
significant cost upon cellular service providers who must bear the cost of
services provided to fraudulent users. We suffer losses of revenue as a result
of fraudulent use, and also suffer cash costs due to our obligation to reimburse
carriers for the cost of services provided to some fraudulent users. These cash
costs approximated Ps.70.7 million (U.S.$7.5 million) and Ps.25.5 million
(U.S.$2.7 million) in 1998 and in 1999, respectively.
Although technology has been developed to combat the fraudulent use of
telecommunications networks, this technology does not eliminate fraudulent use
entirely. We must make significant expenditures periodically to acquire and use
anti-fraud technology. For 1998, our costs for detecting and preventing fraud
were approximately Ps.35.1 million (U.S.$3.7 million). For 1999, we incurred
approximately Ps.1.1 million (U.S.$0.1 million) in fraud detection and
prevention, because we implemented extensive fraud detection and prevention
technology in 1998. We expect to spend only approximately Ps.9.5 million
(U.S.$1.0 million) in 2000 for fraud detection and prevention. However, we
cannot assure you that the anti-fraud technology that we have purchased will
continue to be effective in detecting and preventing fraud. If our anti-fraud
technology becomes obsolete, we will once again have to make significant
expenditures to acquire and use anti-fraud technology.
RISK FACTORS RELATING TO OUR SHAREHOLDERS
We have two principal groups of shareholders. The first, Bell Atlantic,
comprises various subsidiaries of Bell Atlantic Corporation. The second, the
Peralta Group, encompasses Mr. Carlos Peralta and a group of individuals and
companies related to or controlled by him.
IF BELL ATLANTIC SOLD ALL OR A SUBSTANTIAL PART OF ITS INTEREST IN US, THAT SALE
COULD RESULT IN BELL ATLANTIC NO LONGER MANAGING OUR OPERATIONS, IN WHICH CASE
WE WOULD HAVE TO MAKE AN OFFER TO REPURCHASE A SUBSTANTIAL MAJORITY OF OUR DEBT
SECURITIES
Bell Atlantic currently has the right and power to elect a majority of the
members of our Board of Directors and, with certain exceptions, unilaterally
determine our policies and strategy.
If Bell Atlantic were to sell all or a substantial part of its direct
interest in Iusacell, the sale could cause Bell Atlantic to lose its ability to
manage us. Bell Atlantic would then no longer be in a position to determine our
policies and strategies, manage our operations or provide the technical and
financial support that we have historically relied on. It is not possible for us
to describe the strategy that Iusacell would implement following any such
management change.
In addition, any substantial sale by Bell Atlantic would constitute a
change of control under New Iusacell and Old Iusacell debt instruments relating
to up to approximately U.S.$813.5 million of our indebtedness. In the event of
any change of control, New Iusacell or Old Iusacell, as the case may be, would
have to make an offer to repurchase that indebtedness. We cannot assure you that
either New Iusacell or Old Iusacell, or both, would have sufficient funds or
have the ability to obtain sufficient funds on a timely basis to pay for any or
all of the indebtedness that we may have to repurchase if that happened.
WE DEPEND ON BELL ATLANTIC PERSONNEL; IF BELL ATLANTIC RECALLED THEM, WE WOULD
HAVE INSUFFICIENT QUALIFIED EMPLOYEES
Our Chief Executive Officer, Chief Technology Officer and General Counsel
are employees of Bell Atlantic whose services are provided on a consulting or
secondment basis. We also use the services of a number of Bell Atlantic
employees on a consulting basis, primarily in the areas of strategic planning,
network operations, information systems, marketing and customer care operations.
So long as Bell Atlantic controls Iusacell, we expect these or other seconded
employees and consultants to continue to provide services to us. If Bell
Atlantic did not make these employees available to us, our results of operations
and financial condition could be materially adversely affected.
ALLEGATIONS RELATING TO CARLOS PERALTA MAY PREVENT US FROM OBTAINING OR
RETAINING GOVERNMENT CONCESSIONS AND MAY CAUSE OUR CUSTOMERS TO PERCEIVE US
NEGATIVELY
Mr. Carlos Peralta, a member of the Peralta Group of shareholders, is
currently a director of Iusacell. In January 1996, Mr. Peralta stated that he
had transferred funds to bank accounts controlled by the brother of the then
President of Mexico. Press accounts have speculated that those payments were
payments for governmental favors and the Swiss Government has seized the money,
alleging that it was connected to money laundering. Apparently prompted by Mr.
Peralta's disclosure, the Mexican tax authorities initiated tax audits of Old
Iusacell, some of its subsidiaries and Mr. Peralta. In 1997, Mr. Peralta was
indicted on charges of tax evasion. Mr. Peralta was subsequently acquitted of
all related charges. The tax audits of Old Iusacell were completed in early
1999. In May 1999, Mexican tax authorities assessed Old Iusacell a Ps.21.4
million penalty (U.S.$2.3 million at the exchange rate then in effect) for
purported incorrect deductions of certain interest expense for income tax
purposes, which we have already paid.
Our business activities have required and will continue to require licenses
and approvals from the Mexican government. It is possible that Mr. Peralta's
public statements and indictment and the Mexican government's inquiries could
impact our ability to obtain concessions, licenses and approvals for business
opportunities in the future or to obtain the renewal of existing concessions,
licenses and approvals. Various press reports speculated that Mr. Peralta's
public statements contributed to the delay in Old Iusacell and the Mexican
6
<PAGE> 10
Telecommunications and Transportation Ministry (Secretaria de Comunicaciones y
Transportes), commonly referred to as the SCT, reaching agreement regarding
local wireless service in the 450 MHz frequency band. Additionally, the
publicity surrounding Mr. Peralta's statements or indictment may have a
negative impact on consumer perceptions of Iusacell and may adversely
affect our business, financial condition and results of operations.
RISK FACTORS RELATING TO DOING BUSINESS IN MEXICO
THE MEXICAN GOVERNMENT MAY IMPOSE ADDITIONAL CONDITIONS ON OUR CONCESSIONS OR
MAY TAKE THEM AWAY
We provide our services pursuant to concessions granted by the Mexican
government. Our activities are subject to significant government regulation and
supervision. The concessions may be subject to additional conditions or may not
be renewed when they expire. The Mexican government also reserves the right to
revoke, temporarily seize or expropriate concessions or assets related to a
concession for reasons, among others, of public interest or order such as war,
national disaster or significant public disturbances. Moreover, the Mexican
government may grant additional concessions to potential competitors to provide
services similar to those that we provide. Any of these developments or other
government action could harm the value of Iusacell's concessions and our
financial condition and results of operations.
OUR FINANCIAL STATEMENTS MAY NOT GIVE YOU THE SAME INFORMATION AS FINANCIAL
STATEMENTS PREPARED UNDER U.S. ACCOUNTING RULES
Mexican companies listed on the Mexican Stock Exchange, including Iusacell,
must prepare their financial statements in accordance with Mexican generally
accepted accounting principles, referred to as Mexican GAAP. Mexican GAAP
differs in significant respects from United States generally accepted accounting
principles, referred to as U.S. GAAP, including the treatment of minority
interest, deferred income taxes, employee profit sharing, capitalization of
pre-operating costs, interest rate collars, gains from the exchange of
non-monetary assets and the provisioning for the consolidation of facilities. In
particular, all such Mexican companies must incorporate the effects of inflation
directly in their accounting records and in published financial statements. The
effects of inflation accounting under Mexican GAAP are not eliminated in the
reconciliation to U.S. GAAP. For this and other reasons, the presentation of
Mexican financial statements and reported earnings may differ from that of
companies in other countries.
IF MEXICO EXPERIENCES ANY MORE POLITICAL AND ECONOMIC CRISES, WE MAY LOSE MONEY
We are a Mexican company and all of our operations are in Mexico.
Accordingly, the political and economic environment in Mexico has a significant
impact on our financial condition and results of operations.
The Mexican government has exercised, and continues to exercise,
significant influence over the Mexican economy. Mexican governmental actions
concerning the economy and state-owned enterprises could have a significant
impact on Mexican private sector entities in general and on us in particular,
and on market conditions, prices and returns on Mexican securities, including
our securities. In July 2000, Mexico will hold national elections followed by a
change of administration in December of that same year. We cannot predict the
results of these elections nor the impact a change in administration might have
on the Mexican economy, particularly on the current governmental commitment to
the growth and deregulation of the telecommunications industry. Historically,
the Mexican markets have experienced significant volatility following a change
in administration. The volatility could be exacerbated by the fact that the
ruling party may lose power for the first time in more than 70 years.
In the past, Mexico has experienced economic crises, caused by internal and
external factors, characterized by exchange rate instability, high inflation,
high domestic interest rates, economic contraction, a reduction of international
capital flows, a reduction of liquidity in the banking sector and high
unemployment. These economic conditions substantially reduced the purchasing
power of the Mexican population and, as a result, the demand for telephony
services.
Crises such as these could harm our financial condition and results of
operations and the market value of our securities.
IF THE MEXICAN GOVERNMENT IMPOSES EXCHANGE CONTROLS, WE MAY NOT BE ABLE TO MAKE
DIVIDEND, PRINCIPAL AND INTEREST PAYMENTS IN U.S. DOLLARS
In the past, the Mexican economy has experienced balance of payment
deficits and shortages in foreign exchange reserves. While the Mexican
government does not currently restrict the ability of Mexican or foreign
persons or entities to convert pesos to foreign currencies generally, and U.S.
dollars in particular, it has done so in the past and could do so again in the
future. We cannot assure you that the Mexican government will not institute a
restrictive exchange control policy in the future. Any such restrictive exchange
control policy could prevent or restrict access to U.S. dollars or other foreign
currencies to purchase imported goods and to meet our U.S. dollar obligations,
such as the payment of dividends or the principal and interest under any debt
securities.
PAYMENT OF JUDGMENTS ENTERED AGAINST US WILL BE IN PESOS, WHICH MAY EXPOSE DEBT
SECURITY HOLDERS TO EXCHANGE RATE RISKS
If a proceeding to enforce our obligations under any debt securities is
brought in Mexico, Mexican law permits us to pay a resulting judgment in pesos.
Under the Mexican Monetary Law, an obligation payable in Mexico in a currency
other than pesos may be satisfied in pesos at the exchange rate in effect on the
date when payment is made.
7
<PAGE> 11
If a Mexican court declares us to be bankrupt or in suspension of payments,
our obligations under any debt securities:
- would be converted into pesos at the exchange rate prevailing at the
time of the court's declaration of bankruptcy or suspension of
payments and payment would occur at the time claims of creditors are
satisfied, and
- would not be adjusted to take into account depreciation of the peso
against the United States dollar occurring after the court's
declaration.
IF WE ARE UNABLE TO FILE CONSOLIDATED TAX RETURNS, OUR TAX MAY INCREASE AND WE
MAY MAKE LESS MONEY
Prior to January 1, 1999, we prepared our tax returns on a fully
consolidated basis for all but three of our subsidiaries, benefiting from the
ability to offset losses incurred by some subsidiaries against the gains of
others in the consolidated group. We have never fully consolidated for tax
purposes those companies in which we own less than a majority of the voting
shares, even though some of these companies are consolidated for accounting
purposes. Beginning January 1, 1999, as a result of Mexican income tax law
amendments, we must limit our tax consolidation to 60% of our wholly-owned
subsidiaries, although we are contesting such amendments. Related changes to the
Mexican tax law, together with the recapitalization and restructuring plan
completed in August 1999 that resulted in New Iusacell owning more than 50% of
Old Iusacell's shares, may materially impact the ability of Old Iusacell to
continue to prepare consolidated tax returns for itself and most of its
subsidiaries and thereby apply its net operating loss carryforwards against its
subsidiaries' profits. In that case, the taxes that we pay as a group would
increase, resulting in a decrease in our net operating income or an increase in
our net operating loss. We are currently analyzing the effect of these changes
in law and ways to minimize their impact and we cannot predict what the ultimate
result of these changes will be.
RISK FACTORS RELATING TO IUSACELL ADSs AND SHARES
IF YOU HOLD SERIES V ADSs, YOUR PROPORTIONAL EQUITY INTEREST IN IUSACELL COULD
BE REDUCED IN THE FUTURE
Mexican law requires us to offer holders of capital stock of a particular series
of shares the preemptive right to subscribe for a sufficient number of shares to
avoid a proportional reduction of their holding whenever we issue new shares.
United States holders of series V ADSs will not be able to exercise this
preemptive right for the shares underlying their series V ADSs unless a
registration statement under the Securities Act is effective with respect to
those rights or an exemption from those registration requirements is available.
Whenever we are required to make a preemptive rights offering, we will evaluate
the costs and potential liabilities associated with any such registration
statement and any other factors we consider appropriate. However, consistent
with the past practices of Iusacell and similarly situated companies, we may
choose not to file any such registration statement. If we do not file a
registration statement and no exemption from registration under the Securities
Act is available, then holders of series V ADSs, such as yourself, may be unable
to exercise their preemptive rights. Those holders' equity interest in Iusacell
will be reduced proportionately.
FORWARD-LOOKING INFORMATION IS RISKY AND UNCERTAIN
This prospectus contains projections of some financial data and discloses plans
and objectives for the future. These forward-looking statements reflect our
views regarding future events and financial performance. Actual events and
results could differ materially from those projected in the forward-looking
statements as a result of the risk factors described above, as well as factors
discussed below. The words "believe," "expect," "anticipate," "intend" and
"plan" and similar expressions identify forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
in any event speak only as of their dates. Iusacell undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. The risk factors described above,
and many other factors, could cause actual events and results to differ
materially from historical results or those anticipated.
8
<PAGE> 12
USE OF PROCEEDS
We estimate that the net proceeds that we will receive from the offer of ADSs
described in this prospectus will be approximately U.S.$ million. The net
proceeds will be used to acquire cellular network equipment to increase the
capacity coverage and quality of our network and to fund the initial deployment
of our PCS network in Regions 1 and 4. We will not receive any of the proceeds
from the sale of ADSs by the selling shareholder.
9
<PAGE> 13
CAPITALIZATION AND INDEBTEDNESS
The following table presents the capitalization of Iusacell,
* based on the audited historical financial information of Iusacell and
its consolidated subsidiaries as of December 31, 1999 and
* adjusted to give effect to an offer by Iusacell of U.S.$200.0 million
and the use of proceeds.
The amounts are presented in accordance with Mexican GAAP. This table should be
read in conjunction with "Use of Proceeds," "Selected Consolidated Financial and
Operating Information," "Operating and Financial Review and Prospects" and the
Consolidated Financial Statements and their notes included elsewhere in this
prospectus or incorporated by reference.
<TABLE>
<CAPTION>
As of December 31, 1999
------------------------------------------------------------------------------
Historical Adjusted for the offer
---------------------------------------- ------------------------------------
(Millions of (Millions of
constant December (Million of U.S. constant December (Million of U.S.
31, 1999 Pesos) dollars)(1) 31, 1999 Pesos) dollars)(1)
----------------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Cash and marketable securities......... Ps.1,151,961 U.S.$121,515 Ps.2,976,683 U.S.$313,996
Short-term debt(2).....................
Senior Credit Facility.............. 320,578 33,816 320,578 33,816
Eximbank financing.................. 137,572 14,512 137,572 14,512
Handset facilities.................. 142,479 15,029 142,479 15,029
Vendor facilities................... 36,955 3,898 36,955 3,898
------------- -------------- ------------ ------------
Total short-term debt......... 637,584 67,256 637,584 67,256
------------- -------------- ------------ ------------
Long-term debt:(2)
Senior credit facility............... 1,816,607 191,625 1,816,607 191,625
10% notes due 2004................... 1,424,790 150,294 1,424,790 150,294
Eximbank financing................... 726,091 76,592 726,091 76,592
Handset facilities................... 23,750 2,505 23,750 2,505
14.25% notes due 2006................ 3,324,507 350,686 3,324,507 350,686
------------- -------------- ------------ ------------
Total long-term debt.......... 7,315,745 771,703 7,315,745 771,703
------------- -------------- ------------ ------------
Total debt.................... 7,953,745 838,959 7,953,329 838,959
------------- -------------- ------------ ------------
Stockholders' equity
Contributed capital.................. 4,876,530 514,402 6,772,530 714,402
Earned capital....................... 333,762 35,207 333,762 35,207
Minority interest.................... 33,069 3,488 33,069 3,488
------------- -------------- ------------ ------------
Total stockholders' equity.... 5,243,361 553,097 7,139,361 753,097
------------- -------------- ------------ ------------
Total capitalization.... 13,196,690 1,392,056 15,092,690 1,592,056
============== ============== ============ ============
</TABLE>
- ---------
(1) Peso amounts were converted to U.S. dollars at the noon buying rate of Ps.
9.480 per U.S.$1.00 on December 31, 1999. Such conversions should not be
construed as representations that the peso amounts actually represent such
U.S. dollar amounts or could be converted into U.S. dollars at the rate
indicated, or at all.
(2) All of Iusacell's short and long-term debt is denominated in U.S.
dollars.
(3) For a discussion of the availability, terms and conditions of Iusacell's
short and long-term debt, see "Operating and Financial Review and
Prospects-Liquidity and Capital Resources" of our Form 20-F for the year
ended December 31, 1999, which is incorporated by reference.
Total debt guaranteed by Iusacell's principal operating subsidiaries amounts to
Ps.4,270.7 million (U.S.$450.5 million) and includes the 10% notes due 2004, the
Senior Credit Facility and the Eximbank financing. All of this debt is secured.
10
<PAGE> 14
DILUTION
At December 31, 1999, Iusacell had a net tangible book value of Ps.2.47 per
share of capital stock, or Ps.24.69 per ADS. We determine net tangible book
value per ADS by dividing:
* tangible assets, defined as total assets less goodwill, less total
liabilities, by
* the total number of shares of capital stock outstanding, and
* adjusting for the ratio of ten shares per ADS.
We calculate the net tangible book value per ADS of Iusacell before this
offering as the net tangible book value per ADS of Iusacell at December 31,
1999.
Assuming that all of the securities offered in this offering are purchased at a
price of U.S.$18.625 per ADS (Ps.176.57 at the noon buying rate on December 31,
1999), our pro forma net tangible book value as of December 31, 1999 would have
been Ps.34.88 per ADS. This represents an immediate increase in pro forma net
tangible book value of Ps.10.19 per ADS to existing shareholders and an
immediate dilution in pro forma net tangible book value of Ps.141.68 per ADS to
purchasers of ADSs like you. Dilution, for this purpose, represents the pro
forma difference between the price per ADS paid by purchasers in this offering
and the pro forma net tangible book value per ADS of Iusacell.
The following table presents the dilution in net tangible book value per ADS to
purchasers of ADSs in this offering:
Public offer price per ADS........................... Ps. 176.57
Net tangible book value per ADS
before this offering............................... 24.64
Increase per ADS attributable to this offering..... 10.19
Pro forma net tangible book value per ADS
after this offering................................ 34.88
==========
Dilution to purchasers of ADSs in this offering...... Ps. 141.68
==========
SELLING SHAREHOLDER
Mr. Carlos Peralta is selling 5,000,000 ADSs in this offering. He has
granted the underwriters the option to purchase 750,000 ADSs solely to cover
over-allotments.
Mr. Peralta has been a director of Iusacell and its predecessor since 1992
and until 1997 served as vice chairman.
Prior to this offering, the Peralta Group owned 232,499,437 series A shares
and 298,984,939 series V shares. After this offering, the Peralta Group will own
the same number of series A shares and 248,984,939 series V shares, or
241,484,939 series V shares if the over-allotment option is exercised in full.
After this offering, the Peralta Group will continue to own 31.6% of our
series A shares, and will own 36.4% of our series V shares, or 34.6% if the
over-allotment option is exercised in full. This equals an overall economic
interest in Iusacell of 33.9%, or 33.0% if the over-allotment option is
exercised in full.
11
<PAGE> 15
UNDERWRITING
Iusacell, the selling shareholder and the underwriters named below have entered
into an underwriting agreement covering the ADSs to be offered in this offering.
J.P. Morgan Securities Inc., Warburg Dillon Read LLC, Salomon Smith Barney Inc.
and ING Barings LLC are acting as representatives of the underwriters. Each
underwriter has agreed to purchase the number of ADSs set forth opposite its
name in the following table.
Underwriter Number of ADSs
___________ ______________
J.P. Morgan Securities, Inc. ---------------------
Warburg Dillon Read LLC --------------------------
Salomon Smith Barney Inc. ------------------------
ING Barings LLC ----------------------------------
Total -------------------------------------- 15,000,000
The underwriting agreement provides that if the underwriters take any of the
above ADSs, then they must take all of these ADSs. No underwriter is obligated
to take any ADSs allocated to a defaulting underwriter except under limited
circumstances.
The underwriters are offering the ADSs, subject to the prior sale of such ADSs,
and when, as and if such ADSs are delivered to and accepted by them. The
underwriters will initially offer to sell ADSs to the public at the public
offering price set forth on the cover page of this prospectus supplement. The
underwriters may sell ADSs to securities dealers at a discount of up to U.S.$
per ADS from the public offering price. Any such securities dealers may resell
ADSs to certain other brokers or dealers at a discount of up to U.S.$ per ADS
from the public offering price. After the public offering, the underwriters may
vary the public offering price and other selling terms.
If the underwriters sell more than 15,000,000 ADSs, they have the option to buy
up to an additional 1,500,000 ADSs from Iusacell and 750,000 ADSs from the
selling shareholder to cover their sales. They may exercise this option during
the 30-day period from the date of this prospectus supplement. If any ADSs are
purchased with this option, the underwriters will purchase ADSs in approximately
the same proportion as set forth in the table above.
The following table shows the per ADS and total underwriting discounts and
commissions that Iusacell and the selling shareholder will pay to the
underwriters. These amounts are shown assuming both no exercise and full
exercise of the underwriters' option to purchase additional ADSs.
<TABLE>
<CAPTION>
______________________________ __________________________________
Paid by Iusacell Paid by the selling shareholder
______________________________ __________________________________
No exercise Full exercise No exercise Full exercise
_____________ _____________ _____________ _____________
<S> <C> <C> <C> <C>
Per ADS------ U.S.$ U.S.$ U.S.$ U.S.$
Total----- U.S.$ U.S.$ U.S.$ U.S.$
</TABLE>
12
<PAGE> 16
The underwriters may purchase and sell ADSs in the open market in connection
with this offering. These transactions may include short sales, stabilizing
transactions and purchases to cover positions created by short sales. Short
sales involve the sale by the underwriters of a greater number of ADSs than they
are required to purchase in the offering. Stabilizing transactions consist of
certain bids or purchases made for the purpose of preventing or slowing a
decline in the market price of the ADSs while the offering is in progress. The
underwriters may also impose a penalty bid, which means that an underwriter must
repay to the other underwriters a portion of the underwriting discount received
by it. An underwriter may be subject to a penalty bid if the representatives of
the underwriters, while engaging in stabilizing or short covering transactions,
repurchase ADSs sold by or for the account of that underwriter. These
activities may stabilize, maintain or otherwise affect the market price of the
ADSs. As a result, the price of the ADSs may be higher than the price that
otherwise might exist in the open market. If the underwriters commence these
activities, they may discontinue them at any time. The underwriters may carry
out these transactions on the New York Stock Exchange, in the over-the-counter
market or otherwise.
Iusacell estimates that the total expenses of this offering, excluding
underwriting discounts and commissions, will be approximately U.S.$ million,
including without limitation, legal and accounting fees, printing costs,
allocable portion of Securities and Exchange Commission registration fees and
reimbursable underwriters expenses. The selling shareholder will not be
responsible for any of these expenses.
Iusacell and the selling shareholder have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the Securities Act of
1933. Iusacell and the selling shareholder have also agreed to reimburse the
underwriters for some of their expenses.
Iusacell, Mr. Carlos Peralta, Bell Atlantic and our directors and senior
executive officers have agreed with the underwriters not to dispose of or hedge
any of their ADSs, series V shares or series A shares, or securities convertible
into or exchangeable for ADSs, series V shares or series A shares, for a period
of 90 days from the date of this prospectus supplement, except with the prior
written consent of J.P. Morgan Securities Inc.
Iusacell's ADSs are listed on the New York Stock Exchange under the symbol
"CEL".
Iusacell expects that delivery of the ADSs will be made to investors on or about
, 2000.
The underwriters and their affiliates have engaged in commercial and investment
banking transactions with Iusacell, the selling shareholder and their affiliates
in the ordinary course of business. They may continue to do so in the future.
More than 10% of the net proceeds of this offering may be paid to members of the
National Association of Securities Dealers, Inc. participating in this offering.
Therefore, this offering will be made in compliance with the requirements of
Section 2710 (c) (8) of the Corporate Financing Rule under the Conduct Rules of
the National Association of Securities Dealers, Inc.
The underwriters do not intend to sell any ADSs to any account over which they
exercise discretionary authority.
Each underwriter has represented and agreed that:
* it has not offered or sold and, for up to six months following the
consummation of the transactions contemplated in this prospectus supplement,
will not offer or sell, any ADSs in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing
of investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which do not constitute an offer to the public in
the United Kingdom for the purposes of the Public Offers of Securities
Regulations 1995 (as amended),
* it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation to
the ADSs in, from or otherwise involving the United Kingdom and
* it has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issue or sale of
the ADSs to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996 (as amended) or to a person to whom the document may otherwise lawfully
be issued or passed on.
13
<PAGE> 17
LEGAL MATTERS
Certain legal matters will be passed upon for Iusacell by Clifford Chance Rogers
& Wells LLP, New York, New York, special United States counsel to Iusacell, with
respect to matters of New York law and United States federal law, and by De
Ovando y Martinez del Campo, S.C., Mexico D.F., special Mexican counsel to
Iusacell, with respect to matters of Mexican law. De Ovando y Martinez del
Campo, S.C., will pass upon the validity of the series V shares underlying the
ADSs.
Mr. Fernando de Ovando, a director of New Iusacell, Mr. Javier Martinez del
Campo, an alternate director of New Iusacell, and Mr. Ignacio Gomez Morin, an
alternate director of New Iusacell, are members of the law firm of De Ovando y
Martinez del Campo, S.C., which, in 1999, provided legal services to Iusacell in
the amount of approximately Ps.3.3 million (U.S.$352,700).
Certain legal matters will be passed upon for the underwriters by Davis Polk &
Wardwell, New York, New York, and by Ritch, Heather y Mueller, S.C. Mexico D.F.
EXPERTS
The consolidated financial statements of New Iusacell and its subsidiaries and
Old Iusacell and its subsidiaries as of December 31, 1999 and 1998 and for each
of the three years in the period ended December 31, 1999 incorporated by
reference in the registration statement and this prospectus from Iusacell's
Annual Report on Form 20-F for the year ended December 31, 1999 have been
audited by PricewaterhouseCoopers, independent auditors, as stated in their
reports which are incorporated herein by reference and are so incorporated in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
The description of the appraisal of Iusacell's prior analog telecommunications
network incorporated by reference in the registration statement and in this
prospectus from Iusacell's Annual Report on Form 20-F has been prepared by
Consultores y Valuadores de Empresas, S.C., an international property appraiser,
as indicated in their appraisal report. Description of the appraisal is
included in reliance upon such report and information given on the authority of
the firm as experts in property valuation.
14
