Total revenues for the first quarter increased 35% to $119.9 million from $88.9 million for the first quarter of last year. This solid year-over-year improvement was led by a 52% expansion in the Company’s total PCS customer base over the past twelve months, as well as by a ramp-up in wholesale activity. As at March 31, 2001, Microcell provided digital wireless PCS services to 978,866 retail Fido® customers and 21,058 wholesale subscribers, compared with 654,309 and 3,466 retail and wholesale subscribers, respectively, at the end of the first quarter last year.
Subsequent to the end of the quarter, Microcell passed the one million PCS subscriber mark. This occurred less than four years after commercial operations were launched nationally in July 1997 and compares favourably with the more than eight years it took the incumbent cellular operators to reach the same mark. A large customer base provides Microcell with the critical mass to achieve substantial economies of scale with respect to its network investment, stated André Tremblay, President and Chief Executive Officer of Microcell Telecommunications. Moreover, it provides a readily accessible market for the new crop of Internet-based, high-speed data services and applications that the Company will be offering, which should provide incremental revenue opportunities as early as the second half of this year.
The Company continued to exercise prudence in controlling costs. Consolidated operating expenses, excluding depreciation and amortization, increased to $139.0 million in the first quarter of 2001 from $119.1 million for the same period in 2000. This increase was primarily due to network expansion and improvements to service coverage, a higher level of customer acquisition activity, and the ramp-up in non-PCS business operations. Excluding $5.2 million in costs associated with the Company’s non-PCS divisions, the year-over-year increase in quarterly consolidated operating expenses was only 12%.
Commenting on these results, Jacques Leduc, Chief Financial Officer of Microcell Telecommunications, said, We will closely track expenses to ensure that any new services and technologies being developed by our wireless data and Internet division unleash the full potential of our data-centric GPRS-ready network, resulting in greater value for all concerned.
Capital expenditures of $170.3 million in the first quarter included $80.0 million related to the acquisition in January 2001of the remaining shares in Inukshuk Internet Inc. that Microcell did not already own. For accounting purposes, this was recorded as a licence. The remaining $90.3 million in capital spending was primarily PCS-related, reflecting ongoing capacity expansion and increased network coverage, as well as the completion of implementation of packetized data capabilities based on General Packet Radio Service (GPRS) technology. Full-scale, high-speed data transmission capacity should considerably enhance our ability to access the business market segment and improve our competitive consumer service offering through the introduction of innovative data products and services ahead of the competition at a low cost, stated Mr. Leduc.
Although our 2001 capital expenditure plan calls for $375.0 million in spending, a good portion of this budget is discretionary in nature. If necessary, and should market conditions warrant, we would review these plans and reduce non-strategic spending accordingly in order to effectively increase the Company’s addressable liquidity position, noted Mr. Leduc. As at March 31, 2001, Microcell had $395.9 million in cash, short-term investments, marketable securities, and undrawn bank credit facilities.
Microcell’s consolidated operating loss before interest, taxes, depreciation and amortization (negative EBITDA) narrowed by 37% to $19.2 million in the first quarter of 2001 from $30.3 million in the first quarter of last year. This represents the ninth consecutive quarterly year-over-year improvement in EBITDA, reflecting lower costs from improved efficiencies in network service delivery, better control over expenses unrelated to customer acquisition, reduced retail subscriber acquisition costs, and higher revenue from a significantly expanded customer base. Excluding non-PCS-related activities, negative EBITDA for the first quarter was $13.4 million.
Microcell also posted consolidated net losses of $137.2 million, or $2.00 per share, for the quarter ended March 31, 2001. This compares with net income of $129.0 million, or $2.16 per share, for the same three-month period last year, which included an unusual gain arising from Microcell’s sale of both its directly and indirectly held investment in Saraide to InfoSpace.
Microcell’s first quarter 2001 net losses also included reductions in the carrying value of its investments and marketable securities in the amount of $24.7 million, due to continuing unfavourable market conditions for companies in the technology sector, as well as management’s reassessment of the net realizable value of several of its equity-based investments. As a result, the corresponding future income tax liability was adjusted and a deferred income tax benefit of $3.5 million was recorded.
Microcell PCS Operating Results Highlights
As reported on April 12, Microcell PCS acquired 62,767 new subscribers in the first quarter, of which 56,339 were retail customers and 6,428 were non-affiliated wholesale subscribers. This represents an estimated 24% market share of new Canadian wireless net additions in areas covered by Fido Service.
In line with the Canadian wireless industry’s prepaid results in the first quarter, which accounted for more than 50% of all new customers acquired, retail prepaid activations represented 65% of Microcell’s new PCS customers. Although our prepaid performance was strong this past quarter, we continued to establish the foundation for accelerated postpaid customer growth, said Alain Rhéaume, President and Chief Executive Officer of Microcell PCS. Some of the initiatives undertaken recently include the modification of our long-distance and roaming price structures to better address the needs of corporate users; the launch of the Fido Web portal, which will be the primary gateway for accessing Internet-based information and applications; and, most significantly, the completion of our GPRS rollout, which positions Microcell as the first―and, so far, only―Canadian operator with a commercially available 2.5G service offering. In addition, we also launched several time-limited promotions focused on increasing the number of postpaid subscribers.
SOURCE: COMPANY PRESS RELEASE
