SAN PEDRO GARZA GARCIA, Mexico, Oct. 24 /PRNewswire-FirstCall/ -- Axtel, S.A. de C.V. (BMV: AXTELCPO)("AXTEL"), one of the leading telecommunications services providers in Mexico, announced its unaudited third quarter results ended September 30, 2006, today. Figures in this release are based on Mexican GAAP, stated in constant pesos (Ps.) as of September 30, 2006. Comparisons in pesos are in real terms, that is, adjusted for inflation.
Revenues from operations
Revenues from operations increased to Ps. 1,497.8 million in the third quarter of year 2006 from Ps. 1,299.9 million for the same period in 2005, an increment of Ps. 197.9 million or 15%.
Revenues from operations totaled Ps. 5,612.2 million in the twelve-month period ended September 30, 2006, compared to Ps. 4,5828.3 million in the same period in 2005, an increase of Ps. 783.9 million or 16%.
Our lines in service at the end of the third quarter of 2006 totaled 733,067 compared to 567,191 at the end of the same period in 2005, an increase of 29%. At the end of the third quarter of 2006, Internet subscribers totaled 61,062 from 43,065 at the end of the third quarter of 2005, a 42% increase. Non dial-up subscribers represented 69% or 42,205 of the total third-quarter 2006 figure.
We derived our revenues from the following sources:
Local services. Local service revenues amounted to Ps. 1,078.9 million for the three-month period ended September 30, 2006, compared to Ps. 935.8 million for the same period ended in 2005, an increase of Ps. 143.1 million or 15%. For the twelve-month period ended September 30, 2006, revenue from local services totaled Ps. 4,070.4 million, an annual improvement of Ps. 634.9 million, or 19%, from Ps. 3,435.5 million recorded in the same period in 2005. The main drivers of these improvements were increased monthly rents and revenues from cellular consumption originated from higher number of lines in service in existing and new cities opened in 2006.
Long distance services. Long distance service revenues amounted to Ps. 126.8 million for the three-month period ended September 30, 2006, compared to Ps. 121.6 million in the same period in 2005, an increase of Ps. 5.2 million or 4%. For the twelve-month period ended September 30, 2006, long distance services grew to Ps. 474.9 million from Ps. 452.2 million registered in the same period in 2005, an increment of Ps. 22.7 million or 5%.
Other services. Revenue from other services totaled Ps. 292.1 million in the third quarter of 2006, a positive variation of Ps. 49.6 million, or 20%, from Ps. 242.5 million registered in the same period in 2005. Other services revenue increased to Ps. 1,066.8 million for the twelve-month period ended September 30, 2006, from Ps. 940.5 million for the same period in year 2005, an increment of Ps. 126.3 million or 13%.
Consumption
Local Calls. Local calls totaled 506.9 million in the three-month period ended September 30, 2006, an increase of 81.4 million, or 19%, from 425.5 million recorded in the same period in 2005. For the twelve-month period ended September 30, 2006, local calls increased to 1,879.6 million from 1,503.4 million registered in the same period in 2005, an increment of 376.1 million calls or 25%. A higher number of lines in service was the main driver for these increases.
Cellular ("Calling Party Pays"). Minutes of use of calls completed to a cellular line amounted to 198.6 million in the three-month period ended September 30, 2006, compared to 154.3 million in the same period in 2005, a 29% improvement equivalent to 44.3 million. For the twelve-month period ended September 30, 2006, cellular minutes grew 183.8 million, or 33%, from 550.0 million registered in the twelve-month period ended September 30, 2005, to 733.8 million in the same period in 2006.
Long distance. Long distance minutes increased to 157.4 million for the three-month period ended September 30, 2006 from 129.1 million in the same period in 2005, an increment of 28.3 million or 22%. For the twelve-month period ended September 30, 2006, long distance minutes amounted 552.1 million, compared to 456.8 million registered in the same period in 2005, an increase of 95.3 million minutes, or 21%. These increases are explained by the larger consumption of bundled offers that incorporate long distance minutes.
Cost of Revenues and Operating Expenses
Cost of Revenues. For the three-month period ended September 30, 2006, the cost of revenues totaled Ps. 457.3 million, an increase of Ps. 61.9 million compared with the same period of year 2005. For the twelve-month period ended September 30, 2006, the cost of revenues reached Ps. 1,724.7 million, an increase of Ps. 199.6 million in comparison with the same period in year 2005. These increments were mainly due to a higher consumption in cellular minutes.
Gross Profit. Gross profit is defined as revenues minus costs of revenues. For the third quarter of 2006, the gross profit accounted for Ps. 1,040.5 million, an increase of Ps. 135.9 million or 15%, compared with the same period in year 2005. For the twelve-month period ended September 30, 2006, our gross profit totaled Ps. 3,887.5 million, compared to Ps. 3,303.1 million recorded in the same period of year 2005, a positive variation of Ps. 584.3 million or 18%.
Operating expenses. For the third quarter of year 2006, operating expenses grew Ps. 75.3 million, or 17%, totaling Ps. 514.2 million compared to Ps. 438.9 million for the same period in year 2005. Additional expenses associated with the five new cities opened in 2006 was the main factor that generated this increase. For the twelve-month period ended September 30, 2006, operating expenses added Ps. 1,888.7 million, coming from Ps. 1,698.8 million in the same period in 2005, an increase of Ps. 189.8 million. This increase was attributable primarily to salaries, rents, sales commissions and network maintenance based on the larger operational level of the Company.
Adjusted EBITDA. The Adjusted EBITDA was Ps. 526.2 million for the three- month period ended September 30, 2006 as compared to Ps. 465.6 million for the same period in 2005, an increase of 13%. As a percentage of total revenues it was 35.1% for the three month period ended September 30, 2006. For the twelve- month period ended September 30, 2006 amounted to Ps. 1,998.8 million, compared to Ps. 1,604.3 million in the same period in year 2005, a positive variation of Ps. 394.5 million, or 25%.
Depreciation and Amortization. As a result of the continuing expansion of our asset base, depreciation and amortization totaled Ps. 364.9 million in the three-month period ended September 30, 2006 compared to Ps. 289.2 million for the same period in year 2005, an increase of Ps. 75.7 million or 26%. Depreciation and amortization for the twelve-month period ended September 30, 2006 reached Ps. 1,363.6 million, from Ps. 1,113.5 million in the same period in year 2005, an increment of Ps. 250.2 million, or 22%.
Operating Income (loss). Operating income totaled Ps. 161.3 million in the three-month period ended September 30, 2006 compared to an operating income of Ps. 176.4 million registered in the same period in year 2005, a decrease of Ps. 15.0 million or 9%. For the twelve-month period ended September 30, 2006 our operating income reached Ps. 635.1 million when compared to the income registered in the same period of year 2005 of Ps. 490.8 million, an increment of Ps. 144.3 million or 29%.
Comprehensive financial result. The comprehensive financial loss was Ps. 11.7 million for the three-month period ended September 30, 2006, compared to a loss of Ps. 76.4 million for the same period in 2005. The reduced loss in the third quarter of 2006 was a result of a 30% lower interest expense combined with a non-cash foreign exchange gain of Ps. 32.9 million. For the twelve-month period ended September 30, 2006, the comprehensive financial result recorded a loss of Ps. 301.2 million, compared to Ps. 154.1 million in the same period in 2005, a larger loss of Ps. 147.1 million. For the twelve- month period ended September 30, 2006, the 95% larger loss is partially explained by the early redemption of our 11% Senior Notes and by a 111% higher non-cash foreign exchange loss.
Capital Expenditures. AXTEL invested Ps. 402.5 million in fixed assets during the third quarter of 2006 vs. Ps. 418.4 million during the same period in 2005, a 4% decrease. For the twelve-month period ended September 30, 2006, Axtel invested Ps. 1,749.5 million in fixed assets compared to Ps. 1,590.6 million in the same period of year 2005, an increase of Ps. 158.9 million or 10%. This investment was targeted towards the expansion of our network infrastructure in existing and new cities.
Highlights
During this quarter, AXTEL launched operations in Irapuato, completing its planned geographic expansion for the year. Irapuato represents the 17th city where AXTEL operates.
Definitions
1) Revenues come from:
Local calling 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 with 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 a monthly fee for value added services and internet when requested by the customer.
Long distance services. We generate revenues by providing long distance services (domestic and international) for our customers' completed calls.
Other services. We generate revenues from other services, which include activation fees for new customers as well as data, interconnection and dedicated private line service charged on a monthly basis.
2) 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.
3) 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.
4) For additional detail on the Adjusted EBITDA Reconciliation, go to AXTEL's web site at: http://www.axtel.com.mx/
5) Depreciation and amortization includes depreciation of all communications network and equipment and amortization of preoperating expenses and the cost of spectrum licenses.
About Axtel
AXTEL is one of the leading fixed-line telecommunications providers in Mexico. It offers local services, national and international long distance services, Internet and value-added services. It provides a basic telecom infrastructure in Mexico through its intelligent network, offering a wide range of services to all its markets. Headquartered in Monterrey, AXTEL also has presence in Guadalajara, Leon, Mexico, Puebla, Toluca, Queretaro, San Luis
Potosi, Aguascalientes, Saltillo, Cd. Juarez, Tijuana, Torreon, Veracruz, Chihuahua, Celaya and Irapuato.
For a full version of the release, please visit AXTEL on the web at http:/// http://www.axtel.com.mx/ .
