SAN PEDRO GARZA GARCIA, Mexico, Oct. 27 /PRNewswire-FirstCall/ -- Axtel, S.A.B. de C.V. ("AXTEL" or "the Company"), a leading Mexican fixed-line integrated telecommunications company, announced today its unaudited third quarter results ended September 30, 2009(1).
Highlights:
-- Net additional voice lines and broadband subscribers totaled 26 and 24 thousand, respectively, in this quarter. AXTEL is once again growing in terms of lines and customers, further proof that the Company is moving in the right direction, while also confirming the WiMAX network's functionality.
-- In September, AXTEL issued a new Senior Notes program for US$300 million, representing the first 10-year Latin American corporate high- yield transaction in 14 months. The offering was successfully received, evidenced by an oversubscription of 11 times and competitive pricing of 9%. This liability management transaction improves AXTEL's capital structure, by extending the Company's average life of debt from 5 to 8 years, while reducing financing costs.
-- In September, AXTEL was granted a concession to provide satellite video services. This service will strengthen the Company's competitive position, particularly in the residential market segment, as triple play services are expected to be offered in 2010.
Revenues from operations
Revenues from operations totaled Ps. 2,732 million in the third quarter of year 2009 from Ps. 2,859 million for the same period in 2008, a decrease of Ps. 127 million, or 4%.
Revenues from operations totaled Ps. 11,205 million in the twelve-month period ended September 30, 2009, compared to Ps. 11,628 million in the same period in 2008, a decrease of Ps. 423 million, or 4%.
Sources of Revenues
Local services. Local service revenues contributed with 43% of total revenues during the third quarter, compared with 47% in the third quarter of 2008, totaling Ps. 1,181 million for the three-month period ending on September 30, 2009, representing a decrease of 12% compared to the same quarter in 2008. During the quarter, measured service and cellular revenues decreased 30% and 28%, respectively, while monthly rents increased 8%. The decrease in measured service is explained by a reduction in lines in service and further penetration of commercial offers including free local calls. The decline of cellular revenues is explained by lower prices made possible from the Company's reduced fixed-to-mobile termination rates, and also from less cellular traffic from one of our largest wholesale customers. Monthly rents, measured service and value-added services revenues represented 66% of local revenues during the twelve-month period ended September 30, 2009.
Long distance services. Long distance service revenues totaled Ps. 297 million in the quarter ending September 30, 2009, compared to Ps. 320 million for the same quarter in 2008. The reduction is mostly explained by a decline in long-distance revenues per minute from Ps. 0.75 to Ps. 0.66 year-over-year, which is attributable to an increase in wholesale traffic and commercial offers including national and international minutes within a monthly rent. For the twelve month period ended September 30, 2009, long distance revenues declined to Ps. 1,203 million from Ps. 1,351 million registered in the same period in 2008.
Data & Network. Data and network revenues amounted to Ps. 585 million in the third quarter of 2009, compared to Ps. 617 million in the same period in 2008, a decrease of Ps. 32 million. Dedicated Internet and VPNs represented 90% of data & network revenues during the quarter. For the twelve month period ended September 30, 2009, data and network services revenues totaled Ps. 2,505 million from Ps. 2,474 million registered in the same period in 2008, an increase of Ps. 31 million.
International traffic. In the third quarter of 2009, International traffic revenues totaled Ps. 368 million, increasing Ps. 186 million or 102% versus same quarter of previous year. This is explained by 13% increase in traffic, an increase in peso revenues due to the Mexican peso devaluation and by a change in the mix of on- and off-net traffic. For the twelve month period ended September 30, 2009, international traffic revenues totaled Ps. 1,311 million from Ps. 922 million registered in the same period in 2008, an increase of Ps. 389 million or 42%.
Other services. Revenue from other services recorded Ps. 300 or 11% of total revenues in the third quarter of 2009, compared to Ps. 400 million registered in the same period in 2008. This is mostly explained by a decrease in equipment sales and non-recurring services provided to the corporate segment, recorded in third quarter 2008. For the twelve month period ended September 30, 2009, other services revenues totaled Ps. 1,409 million from Ps. 1,490 million registered in the same period in 2008, a decrease of Ps. 81 million.
Consumption
Local Calls. Local calls totaled 547 million in the three-month period ended September 30, 2009, a decrease of 72 million, or 12%, from 619 million recorded in the same period in 2008. Less traffic from one of our largest wholesale customers mostly explains this reduction. Excluding this effect, traffic declined 2%, less than the 4% reduction in the average number of lines in service in third quarter 2009 compared to third quarter 2008. For the twelve month period ended September 30, 2009, local calls decreased to 2,147 million from 2,463 million registered in the same period in 2008, a decrease of 316 million calls or 13%.
Cellular ("Calling Party Pays"). Minutes of use of calls completed to a cellular line amounted to 286 million in the three-month period ended September 30, 2009, compared to 345 million in the same period in 2008, a decrease of 17% equivalent to 59 million minutes. Lower cellular traffic from one of our largest wholesale customers explains this reduction. Excluding this effect, total cellular minutes increased 7%, compared to the same period in 2008, due to further penetration of commercial offers including cellular minutes within the monthly rent. For the twelve month period ended September 30, 2009, cellular minutes decrease 147 million, or 11%, from 1,304 million registered in the twelve-month period ended September 30, 2008, to 1,157 million in the same period in 2009.
Long distance. Outgoing long distance minutes amounted to 450 million for the three-month period ended September 30, 2009 from 425 million in the same period in 2008, a 25 million minute increase, mostly explained by growth in wholesale traffic and further penetration of commercial offers including national and international minutes within a monthly rent. Domestic long distance minutes represented 95% of total traffic during the quarter. For the twelve month period ended September 30, 2009, outgoing long distance minutes amounted 1,776 million, compared to 1,690 million registered in the same period in 2008, an increase of 86 million of minutes, or 5%.
Operating Data
Lines in Service. As of September 30, 2009, lines in service totaled 940 thousand, a decrease of 14 thousand from the same date in 2008. During the third quarter of 2009, gross additional lines totaled 89 thousand compared to 51 thousand in the third quarter of 2008. Disconnections in the third quarter of 2009 were 9% lower that third quarter 2008. Net adds for the quarter totaled 26 thousand. As of September 30, 2009, residential lines represented 65% of total lines in service, and bundled offers represented 44% of total lines in service, compared to 29% on the same date in 2008.
Line equivalents (E0 equivalents). We offer from 64 kilobytes per second ("kbps") up to 100 megabytes per second ("Mbps") dedicated data links in all of our thirty-nine existing cities. We account for data links by converting them to E0 equivalents in order to standardize our comparisons versus the industry. As of September 30, 2009, line equivalents totaled 486 thousand, an increase of 24 thousand from the same date in 2008.
Internet subscribers. As of September 30, 2009, Internet subscribers totaled 160 thousand, an increase of 43%, from 112 thousand recorded on the same date in 2008. Broadband subscribers increased 65%, totaling 147 thousand as of September 30, 2009. During the third quarter of 2009, broadband subscribers increased 24 thousand compared to 2 thousand in the same period of 2008. This significant growth is explained by the commercial efforts of the Company and the increased capacity available in our WiMAX network. The increase in broadband subscribers comes from new customers as well as up-selling existing subscribers from non-data or dial-up service to broadband access solutions.
Cost of Revenues and Operating Expenses
Cost of Revenues. For the three-month period ended September 30, 2009, the cost of revenues declined Ps. 133 million, compared with the same period of year 2008, mostly due to a reduction in fixed-to-mobile interconnection costs and lower domestic long distance termination rates. For the twelve month period ended September 30, 2009, the cost of revenues reached Ps. 3,136 million, a reduction of Ps. 812 million in comparison with the same period in year 2008.
Gross Profit. Gross profit is defined as revenues minus cost of revenues. For the third quarter of 2009, the gross profit accounted for Ps. 2,020 million, a marginal increase of Ps. 5 million compared with the same period in year 2008. The gross profit margin increase from 70.5% to 73.9% year-over-year is mostly due to improved cellular margins and domestic long distance costs. For the twelve month period ended September 30, 2009, our gross profit totaled Ps. 8,069 million, compared to Ps. 7,680 million recorded in the same period of year 2008, a gain of Ps. 390 million or 5%.
Operating expenses. For the third quarter of year 2009, operating expenses totaled Ps. 1,051 million compared to Ps. 996 million for the same period in year 2008. The increase is explained by sales commissions generated by the 75% larger gross additional lines acquired in the third quarter of 2009 compared to 2008 and by maintenance and rents denominated in dollars. Personnel represented 47% of total operating expenses in the three month period ended September 30, 2009, versus 53% in the year-earlier quarter. For the twelve month period ended September 30, 2009, operating expenses totaled Ps. 3,901 million, coming from Ps. 3,704 million in the same period in 2008, an increase of Ps. 197 million. The Ps. 3,901 million figure includes a non-cash non-recurring Ps. 135 million benefit due to a change in the uncollectable reserves accounting method for corporate customers, recorded in the fourth quarter of 2008. Therefore, recurring operating expenses for the twelve-month period ending on September 30, 2009 is Ps. 4,037 million.
Adjusted EBITDA(5). The Adjusted EBITDA totaled Ps. 969 million for the three-month period ended September 30, 2009, compared to Ps. 1,019 million for the same period in 2008. As a percentage of total revenues, Adjusted EBITDA represented 35.5% of revenues in the third quarter of 2009, 16 bps lower than the margin recorded in the year-earlier quarter. For the twelve-month period ended September 30, 2009, Adjusted EBITDA amounted to Ps. 4,033 million, compared to Ps. 3,975 million in the same period in year 2008. Adjusted EBITDA for the twelve-month period ending on September 30, 2009 exclude the fourth-quarter-2008 non-cash non-recurring Ps. 135 million operating expense benefit mentioned in the Operating Expenses section.
Depreciation and Amortization(9). Depreciation and amortization totaled Ps. 754 million in the three-month period ending on September 30, 2009 compared to Ps. 715 million for the same period in year 2008, an increase of Ps. 39 million or 5%. The increased quarterly depreciation is mostly explained by the significant capital expenditures incurred in recent years. Depreciation and amortization for the twelve-month period ended September 30, 2009 reached Ps. 3,047 million, from Ps. 2,737 million in the same period in year 2008, an increase of Ps. 310 million, or 11%.
Operating Income (loss). Operating income totaled Ps. 215 million in the three-month period ended September 30, 2009 compared to an operating income of Ps. 303 million registered in the same period in year 2008, a decrease of Ps. 89 million or 29%. For the twelve month period ended September 30, 2009 our operating income reached Ps. 1,121 million when compared to the result registered in the same period of year 2008 of Ps. 1,238 million, a decline of Ps. 117 million.
Comprehensive financial result. The comprehensive financial loss was Ps. 270 million for the three-month period ended September 30, 2009, compared to a loss of Ps. 497 million for the same period in 2008. The Ps. 270 million figure is explained by the following effects: (i) net interest expense in third quarter 2009 contains a non-recurring Ps. 102 million charge for the premium paid on the 2013 Senior Notes tender offer, (ii) the Ps. 186 million non-cash FX loss resulted from a 2% peso devaluation against the U.S. dollar, and (iii) a positive result in the change in fair value of derivative instruments is mostly explained by (a) the accounting effect of the hedging instrument on the dollar-tranche of the syndicated term loan, which was partially prepaid during the quarter, and (b) Ps. 39 million resulting from the price appreciation of AXTELCPO during the quarter which positively impacted the valuation of the zero-strike-calls. For the twelve-month period ended September 30, 2009, the increased loss is mostly explained by the 25% Mexican peso devaluation against the U.S. dollar.
Debt. The Ps. 3,183 million increase in total debt is explained by (i) Ps. 4,051 million from the US$300 million 2019 bond issuance, (ii) Ps. 326 million in net incremental lease obligations, (iii) a Ps. 77 million increase in notes premium and change in the fair value of the syndicated loan, (iv) Ps. 2,884 million decrease from the prepayments of the US$85 million and $129 million Syndicated Loan and 2013 Senior Notes, respectively, and (v) Ps. 1,613 million due to the non-cash effect of the Mexican peso depreciation against the US dollar affecting the valuation of debt denominated in foreign-currency.
Capital Investments. In the third-quarter of 2009, capital investments totaled Ps. 616 million, compared to Ps. 1,153 million in the year-earlier quarter. Accumulated for the first nine months of 2009, capital investments totaled Ps. 1,844 million. Access represents close to 60% of this figure.
Other Investments. During the third quarter, AXTEL sold all 26.1 million AXTELCPOs held under the share repurchase program at an average price of 8.42 pesos. The Company maintained the same economic position in those CPOs by having acquired fully-funded "zero-strike-calls" (ZSC), settlement in cash, with a strike price of 1 cent, during the third quarter of 2009. AXTEL paid an average option premium of $8.53 pesos for the 26.1 million zero-strike-call options.
Cash. As of the end of the third quarter of 2009, our cash and equivalents balance totaled Ps. 2,194 million, compared to Ps. 635 million a year ago. The third-quarter 2009 figure includes the zero-strike-calls position valued at Ps. 262 million. Eighty-seven percent of the cash balance is maintained in dollars, the rest in pesos.
Financial Statements
For the three Months Ended September 30, 2009 Compared with Three Months Ended September 30, 2008
Assets
As of September 30, 2009, total assets sum Ps. 22,487.0 million compared to Ps. 20,066.6 as of September 30,2008, an increase of Ps. 2,420.4 million.
Cash and equivalents. As of September 30, 2009, we had cash and cash equivalents of Ps. 2,194.1 million compared to Ps. 635.4 million in the same date of year 2008, an increase of Ps. 1,558.7 million or 245%. The increase is mainly due to the new senior note for US$300.0 million issued on September 22, 2009. The third-quarter 2009 figure includes the zero-strike-calls position valued at Ps. 262 million.
Accounts Receivable. As of September 30, 2009, the accounts receivable were Ps. 2,150.2 million compared with Ps. 1,900.4 million in the same date of 2008, an increase of Ps. 249.9 million.
Property, plant and equipment, net. As of September 30, 2009, property, plant and equipment, net, were Ps. 15,052.2 million compared with Ps. 14,765.7 million as of September 30, 2008, an increase of Ps. 286.5 million. The property, plant and equipment, net, without discounting the accumulated depreciation, was Ps. 28,283.3 million and Ps. 25,289.2 million as of September 30, 2009 and September 30, 2008, respectively. The increase in property, plant and equipment is due to a higher investment during this period.
Liabilities
Total liabilities was Ps. 14,335.6 million as of September 30, 2009 compared to Ps. 11,327.5 million as of September 30, 2008, an increase of Ps. 3,008.1 million or 26.6 %.
Accounts payable & accrued expenses. On September 30, 2009, the accounts payable and accrued expenses were Ps. 2,272.9 million compared with Ps. 2,453.5 million on September 30, 2008, a decrease of Ps. 180.7 million or -7.4%.
Stockholders Equity
On September 30, 2009, the stockholders equity of the Company was Ps. 8,151.4 million compared with Ps. 8,739.1 million as of September 30, 2008, a decrease of Ps. 587.6 million or 7 %. The capital stock remained unchanged at Ps. 7,562.1 million as of September 30, 2009 and September 30, 2008.
Liquidity and Capital Resources
Historically we have relied primarily on vendor financing, the proceeds of the sale of securities, internal cash from operations and the proceeds from bank debt to fund our operations, capital expenditures and working capital requirements. Although we believe that we would be able to meet our debt service obligations and fund our operating requirements in the future with cash flow from operations, we may seek additional financing in the capital markets from time to time depending on market conditions and our financial requirements. We will continue to focus on investments in property, systems and equipment (fixed assets) and working capital management, including the collection of accounts receivable and management of accounts payable.
Net resources provided by operating activities were Ps. 418.3 million for the three-month period ended on September 30, 2009 compared to Ps. 958.7 million recorded in the same period of year 2008.
Net resources used in investing activities were Ps. (692.6) million for the three-month period ended on September 30, 2009 compared to Ps. (1,178.7) million recorded in the same period of year 2008. These flows primarily reflect investments in fixed assets of Ps. 616.0 million and Ps. 1,153.2 million, respectively.
Net resources (used in) provided by financing activities were Ps. 1,192.7 million and Ps. (439.1) million for the three-month period ended on September 30, 2009 and 2008, respectively.
As of September 30, 2009, the ratio of net debt to Adjusted EBITDA pro forma and the ratio of interest coverage of the company was placing in 2.1x and 4.2x, respectively. As September 30, 2008 the ratio of net debt to Adjusted EBITDA and interest coverage, was 1.7x and 4.9x, respectively.
Since the beginning of operations of the Company, AXTEL has invested Ps. 27,813.7 million in infrastructure. The Company expects to do more investments in the future, according to the expansion of the network in other geographical areas of Mexico in order to gain market and to maintain its current infrastructure and network.
Liquidity and Capital Resources
For the Nine Months Ended September 30, 2009 Compared with Nine Months Ended September 30, 2008
Net resources provided by operating activities were Ps. 2,257.0 million for the nine-month period ended on September 30, 2009 compared to Ps. 2,904.1 million recorded in the same period of year 2008.
Net resources used in investing activities were Ps. 1,929.7 million for the nine-month period ended on September 30, 2009 compared to Ps. 3,014.2 million recorded in the same period of year 2008. These flows primarily reflect investments in fixed assets of Ps. 1,844.5 million and Ps. 2,976.7 million, respectively.
Net resources (used in) provided by financing activities were Ps. 775.4 million and Ps. (835.4) million for the nine-month period ended on September 30, 2009 and 2008, respectively.
Other important information
1) Figures in this release are presented based on Mexican financial
reporting standards (FRS). According to Mexican FRS, the restatement of
financial reports into constant pesos was suspended as of December 31,
2007, the last date in which inflationary accounting for the financial
reports was applied. For comparative purposes, all financial reports of
prior periods are presented in constant pesos as of December 31, 2007.
Financial information of years 2008 and 2009 is presented in nominal
pesos.
2) Revenues are derived from:
i. Local services. We generate revenue by enabling our customers to
originate and receive an unlimited number of calls within a
defined local service area. Customers are charged a flat monthly
fee for basic service, a per call fee for local calls ("measured
service"), a per minute usage fee for calls completed on a
cellular line ("calling party pays," or CPP calls) and value
added services.
ii. Long distance services. We generate revenues by providing long
distance services (domestic and international) for our customers'
completed calls from AXTEL lines.
iii. Data & network. We generate revenues by providing data, Internet
access and network services, like virtual private networks and
private lines.
iv. International traffic. We generate revenues terminating
international traffic from foreign carriers.
v. Other services. Include among others, activation fees, customer
premises equipment ('CPE') sales and revenues generated from
integrated telecommunications services provided to corporate
customers, financial institutions and government entities.
3) Cost of revenues include expenses related to the termination of our
customers' cellular and long distance calls in other carriers'
networks, as well as expenses related to billing, payment processing,
operator services and our leasing of private circuit links.
4) Operating expenses include costs incurred in connection with general
and administrative matters which incorporate compensation and benefits,
the costs of leasing land related to our operations and costs
associated with sales and marketing and the maintenance of our network.
5) Adjusted EBITDA is defined as net income plus interest, taxes,
depreciation and amortization, and further adjusted for unusual or
non-recurring items. For additional detail on the Adjusted EBITDA
Reconciliation, go to AXTEL's web site at www.axtel.com.mx
6) Earnings per CPO are calculated dividing the net income by the average
number of Series A and Series B shares outstanding during the period
divided by seven. The number of outstanding Series A and Series B
shares was 96,636,627 and 8,672,716,596, respectively, as of September
30, 2009.
7) Net Debt to Adjusted EBITDA: The figure comes from dividing the net
debt, including cash and cash equivalents and mark-to-market of
derivative instruments, at the end of the period by the annualized, if
applicable, run-rate Adjusted EBITDA.
8) 802.16e WiMAX is a new IP-based voice and data wireless technology
designed to deliver voice and data solutions, under fixed, portable,
nomadic and mobile environments, to residential and business customers.
9) Depreciation and amortization includes depreciation of all
communications network and equipment and amortization of pre-operating
expenses and cost of spectrum licenses, among others.
For a full version of this release, please visit www.axtel.com.mx
About AXTEL
AXTEL is a Mexican telecommunications company that provides local and long distance telephony, broadband Internet, data and built-to-suit communications solutions in 39 cities and long distance connectivity to business and residential customers in over 200 cities. AXTEL provides telecommunications services using a suite of technologies including FWA, WiMAX, copper, fiber optic, point to multipoint radios and traditional point to point microwave access, among others.
AXTELCPO trades on the Mexican Stock Exchange and is part of the IPC Index. AXTEL's American Depositary Shares are eligible for trading in The PORTAL Market, a subsidiary of the NASDAQ Stock Market, Inc.
Investor Relations:
Adrian de los Santos
IR@axtel.com.mx
+52(81)8114-1226
Media Relations:
Jose Manuel Basave
contacto@axtel.com.mx
+52(81)8114-1144
Axtel, S.A.B. de C.V.
