<PAGE>
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   ----------
                                    Form 20-F
                                   ----------

            |_| REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                                       OR
            |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 1996
                                       OR
            |_| TRANSITION REPORT PURSUANT TO SECTION 13 or
                     15(d) OF THE SECURITIES EXCHANGE ACT OF
                     1934 for the transition period from     to

                         Commission File Number 1-13120

                             -----------------------

                          GRUPO IUSACELL, S.A. DE C.V.
             (Exact name of Registrant as specified in its charter)

          IUSACELL GROUP INC.                  THE UNITED MEXICAN STATES
      (Translation of Registrant's          (Jurisdiction of incorporation
           name into English)                      or organization)

                             -----------------------

                          Montes Urales 460, 3rd Floor
                         Col. Lomas de Chapultepec, C.P.
                           11000 Mexico, D.F., Mexico
                    (Address of principal executive offices)

                             -----------------------

 Securities registered or to be registered pursuant to Section 12(b) of the Act.

          Title of each class          Name of each exchange on which registered
          -------------------          -----------------------------------------

American Depositary Shares, each representing    New York Stock Exchange  
10 Series D Shares                                                        
                                                 
Series D Shares                                  New York Stock Exchange* 
                         
American Depositary Shares, each representing    New York Stock Exchange   
10 Series L Shares                                                         
                                                                           
Series L Shares                                  New York Stock Exchange*  
                                       
----------
*  Not for trading, but only in connection with the registration of American
   Depositary Shares, pursuant to the requirements of the Securities and
   Exchange Commission.

 Securities registered or to be registered pursuant to Section 12(g) of the Act:
                                      NONE
                                      ----
          Securities for which there is a reporting obligation pursuant
                          to Section 15(d) of the Act:
                                      NONE
                                      ----
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report:
              Series A Capital Stock    428,575,540       Shares
              Series B Capital Stock    205,562,450       Shares
              Series D Capital Stock    204,920,220       Shares
              Series L Capital Stock    142,566,220       Shares


      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
                                Yes |X|  No |_|

      Indicate by check mark which financial statement item the registrant has
elected to follow:
                             Item 17|_|  Item 18 |X|

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                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
PART 1
      ITEM 1.        DESCRIPTION OF BUSINESS.................................  1
      ITEM 2.        DESCRIPTION OF PROPERTY................................. 27
      ITEM 3.        LEGAL PROCEEDINGS....................................... 27
      ITEM 4.        CONTROL OF REGISTRANT................................... 28
      ITEM 5.        NATURE OF TRADING MARKET................................ 31
      ITEM 6.        EXCHANGE CONTROL AND OTHER LIMITATIONS AFFECTING
                     SECURITY-HOLDERS........................................ 34
      ITEM 7.        TAXATION................................................ 36
      ITEM 8.        SELECTED FINANCIAL DATA................................. 39
      ITEM 9.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                     CONDITION AND RESULTS OF OPERATIONS..................... 42
      ITEM 10.       DIRECTORS AND OFFICERS OF REGISTRANT.................... 54
      ITEM 11.       COMPENSATION OF DIRECTORS AND OFFICERS.................. 61
      ITEM 12.       OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR
                     SUBSIDIARIES............................................ 61
      ITEM 13.       INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS.......... 62

PART II
      ITEM 14.       DESCRIPTION OF SECURITIES TO BE REGISTERED.............. 65

PART III
      ITEM 15.       DEFAULT UPON SENIOR SECURITIES.......................... 65
      ITEM 16.       CHANGES IN SECURITIES AND CHANGES IN SECURITY
                     FOR REGISTERED SECURITIES................................65

PART IV
      ITEM 17.       FINANCIAL STATEMENTS.................................... 65
      ITEM 18.       FINANCIAL STATEMENTS.................................... 65
      ITEM 19.       FINANCIAL STATEMENTS AND EXHIBITS....................... 65

                               ------------------

      In this Annual Report on Form 20-F (the "Annual Report"), all 
references to the "Company" or "Iusacell" are to Grupo Iusacell, S.A., de 
C.V. a limited liability stock company (sociedad anonima de capital variable) 
organized under the laws of Mexico on October 6, 1992.

      Effective January 1, 1996, the Mexican Congress approved the 
establishment of a new currency unit, the Peso, which replaced the New Peso 
at the rate of one Peso per one New Peso. Unless stated otherwise, references 
herein to "Pesos" or "Ps." are to Mexican Pesos, and references to "U.S. 
dollars," "$" or "U.S.$" are to United States dollars. Iusacell publishes its 
financial statements in Pesos. Pursuant to Mexican GAAP, financial data for 
all periods in the financial statements included herein, unless otherwise 
indicated elsewhere herein, have been restated in constant December 31, 1996 
Pesos. Restatement into constant December 31, 1996 Pesos is made by 
multiplying the relevant nominal Peso amount by the inflation index for the 
period between the end of the period to which such nominal Peso amount 
relates and December 31, 1996. The inflation index used for 1992 figures is 
2.2316, for 1993 figures is 2.0661, for 1994 figures is 1.9300 and for 1995 
figures is 1.2700. Certain amounts set forth herein may not add up or may be 
slightly inconsistent due to rounding.

      Unless otherwise indicated, the U.S. Dollar amounts have been translated
from Pesos at an exchange rate of Ps.7.8810 per U.S. dollar, the exchange rate
at December 31, 1996, reported by the Federal Reserve Bank of


                                        i
<PAGE>

New York as its noon buying rate for Pesos ("Noon Buying Rate"). Certain 
amounts set forth herein may be slightly inconsistent due to rounding. 
Currency conversions contained in this Annual Report should not be construed 
as representations that the Peso amounts actually represent such Dollar 
amounts. Additionally, these conversions should not be construed as 
representations that these Peso amounts have been, could have been or could 
be converted into Dollars at those or any other rates of exchange.

      As used herein, the number of "POPs" for a particular area means the
population of that area based on the 1990 Mexican census. Population figures
have been calculated by applying the official population growth rates as
published by the Instituto Nacional de Estadistica, Geografia e Informatica (the
National Institute of Statistics, Geography and Information, "INEGI") to the
official 1990 census figures. Where population information is set forth without
reference to a year, the information given is as of December 31, 1996. The
Secretaria de Comunicaciones y Transportes (the Ministry of Communications and
Transportation, the "SCT") divides Mexico into nine geographic regions for the
provision of cellular service (individually a "Region" and collectively the
"Regions"). Information regarding the numbers of POPs within a given Region has
been calculated using the national population growth rate, as published by
INEGI. Information regarding the number of POPs within a given city has been
calculated using the growth rate for that city, as published by INEGI, which may
not be the same as the national growth rate published by INEGI. The number of
POPs in any Region or other geographic area should not be confused with the
current number of users of cellular services in that Region or other geographic
area and is not indicative of the number of users of cellular services in the
future.

Exchange Rates

      This Annual Report contains translations of certain Peso amounts into 
U.S. dollars at specified rates solely for the convenience of the reader. The 
following table sets forth, for the periods indicated, the period-end, 
average, high and low free market rate, or, as the case may be, Noon Buying 
Rate, all expressed in nominal Pesos per U.S. dollar. The Federal Reserve 
Bank of New York commenced publication of the Noon Buying Rate on November 8, 
1993.

                                    Free Market/Noon Buying Rate(1)
                              -------------------------------------------
                                                                  Period
Period Ended                    High        Low     Average(2)     End
------------                  ---------   -------   ----------   --------
December 31, 1992...........    3.183      3.060      3.094        3.183
December 31, 1993...........    3.240      3.102      3.124        3.108
December 31, 1994(3)........    5.750      3.105      3.385        5.000
December 31, 1995...........    8.050      5.270      6.447        7.740
December 31, 1996...........    8.045      7.325      7.600        7.881

(1)   Source: Banco de Mexico through November 7, 1993; Federal Reserve Bank of
      New York since November 8, 1993.
(2)   Average of month-end rates.
(3)   Beginning on December 22, 1994, Banco de Mexico discontinued regular open
      market transactions to stabilize the Peso.

                               ------------------

      The Company will provide without charge to each person to whom this report
is delivered, on the written or oral request of each such person, a copy of any
or all of the documents incorporated herein by reference (other than exhibits,
unless such exhibits are specifically incorporated by reference in such
documents). Written requests for such copies should be directed to Grupo
Iusacell, S.A. de C.V., Montes Urales 460, 3rd Floor, Col. Lomas de Chapultepec,
C.P. 11000 Mexico, D.F., Mexico. Attention: Cynthia Pelini, Vice President of
Investor Relations. Telephone requests may be directed to 011-52-5-104-4147.


                                       ii
<PAGE>

                  GLOSSARY OF CERTAIN TELECOMMUNICATIONS TERMS

<TABLE>
<S>                            <C>
Analog:                        A transmission method employing a continuous electrical
                               signal that varies in amplitude or frequency in response to
                               changes in sound, light, position, etc., impressed on a
                               transducer in the sending device.
 
Band:                          A range of frequencies between two defined limits.
 
Bandwidth:                     The relative range of frequencies that can be passed through
                               a transmission medium without distortion. The greater the
                               bandwidth, the greater the information carrying capacity.
                               Bandwidth is measured in Hertz.
 
Base Station:                  In mobile telecommunications, the central radio
                               transmitter/receiver that maintains communications with the
                               mobile radiotelephone sets within range. In cellular and
                               personal communications applications, each cell or microcell
                               has its own base station; each base station in turn is
                               interconnected with other cells' base stations and with the
                               public switched telephone network.
 
CDMA:                          Code Division Multiple Access, a standard of digital
                               cellular technology which provides more call carrying
                               capacity than analog or TDMA.
 
CDPD:                          Cellular Digital Packet Data, a new packet data network
                               protocol which offers fast and reliable data transmission
                               without using large amounts of network capacity.
 
Cell Site:                     The location of a transmitting/receiving station serving a
                               given geographic area in a cellular communications system.
 
Channel:                       A pathway for the transmission of information between a
                               sending point and a receiving point.
 
Covered POPs:                  The number of POPs in a defined area for whom a cellular
                               signal is accessible.
 
Digital:                       A method of storing, processing and transmitting information
                               through the use of distinct electronic or optical pulses
                               that represent the binary digits 0 and 1. Digital
                               transmission and switching technologies employ a sequence of
                               discrete, distinct pulses to represent information, as
                               opposed to the continuous analog signal.
 
Hand-off:                      The act of switching a call in progress from one weak-signal
                               site to a strong-signal site without disrupting the call. In
                               current cellular systems, this function is performed by the
                               MSC, which monitors the signal strength of ongoing calls
                               continuously. In cellular networks, both the MSC and the
                               user equipment participate in the hand-off process.
</TABLE>

                                      iii
<PAGE>
<TABLE>
<S>                            <C>
Hertz:                         The unit measuring the frequency with which an alternating
                               electromagnetic signal cycles through the zero-value state
                               between lowest and highest states. One hertz (abbreviated
                               Hz) equals one cycle per second. KHz (kilohertz) stands for
                               thousands of hertz; MHz (megahertz) stands for millions of
                               hertz and GHz (gigahertz) stands for billions of hertz.
 
IMTS:                          Improved mobile telephone service; IMTS systems are analog
                               mobile telephone systems that employ a single powerful radio
                               base station to communicate with IMTS mobile telephones that
                               are within approximately a 25-mile-wide radius.
 
LATA:                          Local Access and Transport Area; an area in which a local
                               exchange carrier is permitted to provide service as
                               designated by the 1982 United States federal court decree
                               resulting from antitrust litigation brought by the United
                               States Department of Justice against AT&T Corp.
 
Mobile Switching Center:       The computer-controlled mobile switching center selects the
                               appropriate path for the transmission of a cellular call and
                               monitors the hand-off process.
 
PCS:                           Personal Communications Services, a wireless communications
                               service, typically offers such features as voice, video and
                               data applications, paging, voicemail, caller ID, call
                               conferencing and call forwarding. PCS suppliers promote this
                               service on the ability of its features to be customized, or
                               "bundled," to the needs of the individual customers. PCS is
                               characterized by the utilization of a digital network and
                               may operate on an 800 MHz frequency or higher.
 
Penetration rate:              A cellular operator's subscribers within a defined area
                               divided by total POPs within that area.
 
POPs:                          The population of a particular area based on the 1990
                               Mexican census. Population figures for 1992, 1993, 1994,
                               1995 and 1996 have been calculated by applying the forecast
                               annual population growth rate for 1992 and 1995, as
                               published by the INSTITUTO NACIONAL DE ESTADISTICA,
                               GEOGRAFIA E INFORMATICA (the National Institute of
                               Statistics, Geography and Data Processing, "INEGI") to the
                               official 1990 census figures. Where the population
                               information is set forth without reference to a year, the
                               information given is as of December 31, 1996. The number of
                               POPs in any region or other geographic area should not be
                               confused with the current number of users of cellular
                               services in that region or other geographic area and is not
                               indicative of the number of users of cellular services in
                               the future.
 
Region 1:                      Consists of the states of Baja California Norte and Baja
                               California Sur. Major cities in the region include Tijuana,
                               Mexicali and La Paz.
 
Region 2:                      Consists of the states of Sonora and Sinaloa. Major cities
                               in the region include Hermosillo, Ciudad Obregon, Culiacan
                               and Mazatlan.
 
Region 3:                      Consists of the states of Chihuahua and Durango. Major
                               cities in the region include Ciudad Juarez, Chihuahua,
                               Durango and Gomez Palacio.
</TABLE>
 
                                      iv
<PAGE>

<TABLE>
<S>                            <C>
Region 4:                      Consists of the states of Tamaulipas, Nuevo Leon and
                               Coahuila. Major cities in the region include Monterrey,
                               Saltillo, Ciudad Victoria, Tampico and Reynosa.
 
Region 5:                      Consists of the states of Colima, Jalisco, Michoacan and
                               Nayarit. Major cities in the region include Guadalajara
                               (population 1.8 million), Mexico's second largest city,
                               Morelia, Tepic and Manzanillo.
 
Region 6:                      Consists of the states of Aguascalientes, Guanajuato,
                               Queretaro, San Luis Potosi and Zacatecas. Major cities in
                               the region include Leon, San Luis Potosi, Aguascalientes and
                               Queretaro.
 
Region 7:                      Consists of the states of Guerrero, Oaxaca, Puebla, Tlaxcala
                               and Veracruz. Major cities in the region include Puebla,
                               Veracruz, Acapulco and Oaxaca.
 
Region 8:                      Consists of the states of Yucatan, Quintana Roo, Campeche,
                               Chiapas and Tabasco. Major cities in the region include
                               Merida, Cancun, Villahermosa, Campeche, Tuxtla Gutierrez and
                               San Cristobal de las Casas.
 
Region 9:                      Consists of Mexico City, one of the world's most populous
                               cities, and the states of Mexico, Hidalgo and Morelos.
 
Repeater:                      A device which automatically retransmits received signals on
                               an outbound circuit, generally in an amplified form.
 
Roaming:                       A service offered by mobile communications providers which
                               allows a subscriber to use his or her telephone while in the
                               service area of another carrier.
 
SCT:                           Secretaria de Comunicaciones y Transportes.
 
Site Splitting or              The process of dividing sites or cells into smaller coverage
  Cell Splitting:              areas by reducing their power output and the antenna height
                               of the station transmitter. Site or cell splitting allows
                               for the further reuse of frequencies by a mobile
                               communications system.
 
Switch:                        A device that opens or closes circuits or selects the paths
                               or circuits to be used for transmission of information.
                               Switching is the process of interconnecting circuits to form
                               a transmission path between users.
 
TDMA:                          Time Division Multiple Access, a standard of digital
                               cellular technology, which provides more call carrying
                               capacity of analog but less than CDMA.
</TABLE>

                                        v
<PAGE>

                                     PART 1

ITEM 1. DESCRIPTION OF BUSINESS

 
COMPANY OVERVIEW
 
    Iusacell is the largest non-wireline cellular telecommunications company in
Mexico, owning and operating the non-wireline cellular concessions in four
contiguous regions in Mexico. These regions include Mexico City, one of the
world's most populous cities, and the cities of Guadalajara, Puebla, Veracruz,
Leon, Acapulco and San Luis Potosi, and combined represent approximately 65.1
million POPs or 70% of Mexico's population. The Company had a total of 232,906
cellular subscribers at December 31, 1996, and an average monthly cellular 
revenue per subscriber during the year ended December 31, 1996 of Ps. 490
(approximately U.S.$62). In addition to its core cellular services, the Company
also provides a wide range of other telecommunications services including
paging, long distance, local telephony and data transmission. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"--Cellular Services" and "--Other Services."
 
    In February 1997, Bell Atlantic Corporation, a diversified 
telecommunications company, through certain of its subsidiaries (together 
with Bell Atlantic Corporation, "Bell Atlantic"), assumed control of the 
Board of Directors and management of Iusacell. Bell Atlantic has invested 
approximately U.S.$1.1 billion since 1993 for its 42.1% economic interest in 
the Company. Prior to 1997, Bell Atlantic participated substantially in the 
financial and technological operations of the Company. In February 1997, Bell 
Atlantic appointed a new Iusacell management team, which has assumed control 
of Iusacell's operations, including marketing, distribution and customer 
service, and has developed, and is in the process of implementing, a 
comprehensive operating and strategic plan.
 
    The new management team at Iusacell is able to draw extensively upon Bell
Atlantic's expertise in the development and implementation of the Company's new
operating strategy. Iusacell's Chief Executive Officer is also President of Bell
Atlantic's international wireless operations and has significant experience with
Bell Atlantic's wireless operations in the United States. The Company's Chief
Operating Officer was formerly the Chief Financial Officer of Iusacell and has
29 years of experience with Bell Atlantic in a variety of operating and
financial roles. Iusacell's current Chief Financial Officer has 13 years of
experience with Bell Atlantic. In June 1997, the Company appointed as its
Director General a Mexican citizen with extensive experience in multinational
operations, who most recently had been president of the Mexican cellular company
which operates the non-wireline cellular concessions in two contiguous northern
regions in which Iusacell does not currently have cellular operations. The new
management team is supported by other personnel from Bell Atlantic.

BELL ATLANTIC RELATIONSHIP

    Since making its initial investment in the Company in late 1993, Bell
Atlantic has become increasingly involved in the management and operations of
Iusacell. From late 1993 through February 1997, Bell Atlantic participated
substantially in the financial and technological operations of the Company.
Today, Bell Atlantic personnel seconded to Iusacell and Bell Atlantic
consultants are integrally involved in managing the day-to-day operations and
defining and implementing the long-term strategy of Iusacell. In particular,
Bell Atlantic seconded employees are now directing the Company's marketing,
distribution, customer service and financial operations.

    Bell Atlantic is one of the largest cellular providers in the United States,
serving over 4.6 million subscribers along the East Coast and in the Southwest.
In addition, Bell Atlantic has substantial investments in wireless
telecommunications companies, including PrimeCo Personal Communications, L.P. in
the United States, Omnitel Pronto Italia S.p.A. in Italy, Eurotel Praha S.R.D.
in the Czech Republic and Eurotel Bratislava S.R.D. in the Slovak Republic, and
has extensive experience in the development and implementation of marketing
programs designed to promote subscriber growth. In its wireless markets, Bell
Atlantic has emphasized the delivery of high-quality customer service through
customer service centers and its extensive distribution system. The Company
believes that it will benefit from Bell Atlantic's recent assumption of
management control and Bell Atlantic's plans to utilize its expertise gained in
other markets to enhance Iusacell's performance.
 
    In November 1993, Bell Atlantic invested U.S.$520.0 million in exchange for
a 23.2% equity interest in Iusacell. Following completion of the Company's
initial public offering in June 1994, Bell Atlantic purchased for U.S.$520.0
million an additional interest in the Company. As a result of these
transactions, Bell Atlantic owned shares representing 41.9% of the economic
interest of Iusacell and 44.3% of the voting rights relating to the Company's
common stock.

                                      1

<PAGE>

    In February 1997, Bell Atlantic assumed control of the Board of Directors 
and management of Iusacell from Carlos Peralta Quintero and his affiliated 
companies (the "Peralta Group"). The Peralta Group, however, still retains 
52.3% of the voting stock of the Company and certain veto rights. In February 
1997 Bell Atlantic also converted U.S.$32.9 million of debt into equity, 
committed to provide the Company up to U.S.$150.0 million of subordinated 
convertible debt financing and granted the Peralta Group put options with 
respect to all outstanding shares of the Company held by the Peralta Group. 
See "Interest of Management in Certain Transactions--Specific Transactions." 
As a result of these transactions, Bell Atlantic currently owns approximately 
42.1% of the economic interest of Iusacell and approximately 44.6% of the 
Company's voting rights. Bell Atlantic consolidates Iusacell's financial 
results for financial reporting purposes. Recently, Iusacell appointed a new 
Chief Executive Officer, Director General, Chief Operating Officer and Chief 
Financial Officer in order to implement the Company's operating strategies. 
See "Control of Registrant" and "Directors and Officers of Registrant."
 
    Bell Atlantic, one of the largest telecommunications companies in the United
States in terms of revenue and assets, has extensive knowledge of the
telecommunications and wireless businesses. In the District of Columbia and six
states in the mid-Atlantic region of the United States, Bell Atlantic provides
local exchange telephone service to its customers, utilizing over 20.6 million
access lines and employing over 62,600 people. Bell Atlantic had operating
revenues and net income of approximately U.S. $13.0 billion and U.S.$1.9
billion, respectively, for the fiscal year ended December 31, 1996, and total
assets of approximately U.S.$24.9 billion as of the same date.
 
    In April 1996, Bell Atlantic and NYNEX Corporation, a global communications
and media corporation, announced a definitive agreement for a merger of equals.
The merger is expected to close by the third quarter of 1997. NYNEX Corporation
had operating revenues and net income of approximately U.S.$13.5 billion and
U.S.$1.5 billion, respectively, for the fiscal year ended December 31, 1996, and
total assets of approximately U.S.$27.7 billion as of such date. Bell Atlantic
and NYNEX Corporation are reporting companies under the Securities Exchange Act
of 1934, as amended (the "Exchange Act").

BUSINESS STRATEGY

    Iusacell's new management team has developed, and is in the process of
implementing, a comprehensive operating and strategic plan primarily focused on
increasing Iusacell's subscriber base, subscriber usage, revenues and
profitability in its core wireless businesses. This strategic plan incorporates
the following key elements:
 
    NEW PRODUCT OFFERINGS AND SALESFORCE INCENTIVES.  Iusacell has introduced
new product and pricing packages targeted both at high-usage contract customers,
who favor value-added products, and at low-usage prepay customers. The Company
considers its contract customers to be particularly receptive to bundled product
offerings that include paging, long distance and other telecommunications
services. In addition, the Company is considering marketing its cellular
services to limited zone customers. In May 1997, the Company's salesforce
compensation plan was overhauled to be largely performance based and to reward
the sales of value-added products as well as any migration of qualified prepay
customers to contract plans.

                                      2

<PAGE>

    ENHANCED DISTRIBUTION.  Iusacell has developed a plan to improve the
distribution of its products based upon the Bell Atlantic model which emphasizes
consistent, standardized merchandising through a well-balanced mix of
company-owned stores and independent distributors conveniently located
throughout the Company's operating regions. By the end of 1999, the Company
intends to have significantly increased the number of Iusacell-owned and
operated customer service centers, incorporating a new, uniform store design. In
1997, in addition to opening a number of customer service centers with the new
store designs, the Company plans to refurbish its existing 57 Iusacell-owned and
operated customer service centers. In March 1997, Iusacell signed a contract
with Precel S.A. de C.V. ("Precel"), formerly one of the largest distributors 
for the Company's competitor, adding 75 locations, thereby increasing 
Iusacell's total points of sale in Mexico City by over 40% and reducing the 
competition's distribution presence. Iusacell plans to enter into agreements 
with other distributors to further increase its points of sale.
 
    DIGITAL NETWORK AND EXPANDED FOOTPRINT.  The Company plans to launch a fully
digital CDMA network in the first quarter of 1998 in order to upgrade its
existing integrated network infrastructure. Iusacell believes that it will be
the first cellular operator in Mexico with a commercial launch of a digital
network. The Company believes that, based on its and Bell Atlantic's evaluation
of both CDMA and TDMA technologies, CDMA technology is superior to TDMA. As part
of its strategy to improve customer satisfaction, the Company plans to augment
capacity by adding a total of 61 new cell sites in 1997. In addition, the
Company plans to expand its geographic coverage into northern Mexico by
acquiring or forming strategic alliances with cellular concession holders or by
acquiring PCS licenses in the 1.9 GHz frequency band.
 
    REVITALIZED CUSTOMER SERVICE.  Iusacell's marketing strategy emphasizes
proactive and timely customer service. The Company utilizes welcome packages,
customer satisfaction calls, Executive Blue Chip programs for corporate
customers and customized billing to communicate its commitment to its customers.
In addition, Iusacell's customer service centers offer "one-stop-shopping" for
cellular, paging, long distance, local telephony and data transmission as a
convenience to its customers. Iusacell continues to focus on reducing its fraud
rate, as evidenced by its plan to deploy CDMA technology with its proven
encryption benefits. The Company is considering other fraud prevention measures,
including the introduction of authenticated handsets and fingerprinting for
analog signals, the investigation of cloning activities and restrictions on
international long distance dialing. Iusacell is also installing a new prepay
operating system which is expected to improve customer satisfaction through
automated card activation and account information, provide voice messaging and
other value-added services, and to lower the cost of support for prepay
services.
 
    REALIGNMENT OF ORGANIZATIONAL STRUCTURE.  Iusacell has consolidated its
business divisions in order to increase operating efficiencies, to facilitate
cross-marketing of services and to reduce duplicative costs. Overall headcount
has been reduced by approximately 10% in 1997 with the elimination of over 230
positions not directly associated with sales and distribution. Furthermore, the
Company has signed a long-term lease in Mexico City that will consolidate
corporate activities previously conducted at five separate locations.
 
    REDESIGNED BRAND IMAGE AND PROMOTIONAL CAMPAIGNS.  Iusacell recently
launched its newly designed brand logo and product packages with a new
advertising campaign targeted at higher usage customers. For the first time, all
product offerings will be marketed under the single, well-recognized IUSACELL
brand name. As a result, the Company expects to increase brand awareness and
customer loyalty, thereby increasing usage in its addressable market.

                                      3

<PAGE>

    LOCAL TELEPHONY SERVICE OFFERINGS.  Iusacell has historically provided 
local telephony in Mexico on a limited basis through a mobile nationwide IMTS 
radiotelephony network and through both rural and public cellular-based 
telephony programs. The Company also has approximately 18,000 customers who 
participate in a trial of local wireless service in the 450 MHz frequency 
band, which the Company began in 1994. The Company plans to expand its 450 
MHz service or pursue other alternatives for the provision of local telephony 
on a larger scale, including limited zone product offerings in the 800 MHz 
(cellular) or 1.9 GHz (PCS) frequency bands using digital technology that 
permits mobility. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Local Telephony in the 450 MHz Frequency
Band; CDMA Overlay."

    STRATEGIC PRICE INCREASES FOR CELLULAR SERVICE.  Since April 1997, Iusacell
has raised the per minute airtime price on its contract and prepay plans by a
weighted average of 15.0% and has raised the fixed monthly charge on all its
contract plans by a weighted average of 8.3%. Iusacell believes that its recent
price increases will not have a material adverse effect on customer growth,
retention or usage in the near-term, and the Company intends to implement future
price increases to the extent economic and competitive conditions permit.
 
THE TELECOMMUNICATIONS INDUSTRY IN MEXICO
 
    MARKET LIBERALIZATION
 
    The Mexican government initiated its efforts to liberalize the 
telecommunications industry in 1989, dividing Mexico into nine geographic 
regions for the provision of cellular service. Two concessions were granted 
in each region, one to Radio Movil DIPSA, S.A. de C.V. ("Telcel"), a 
wholly-owned subsidiary of Telefonos de Mexico ("Telmex"), and the other to an 
independent operator, in order to provide an alternative for cellular 
customers. In addition, Telmex was required to interconnect non-wireline 
cellular operators to its network in an effort to facilitate competition.
 
    In December 1990, the Mexican government initiated the privatization of
Telmex, the sole provider of landline local, long distance and wireline cellular
services, when it sold 20.4% of the equity and 50.1% of the voting power in
Telmex to a private consortium for U.S.$1.76 billion. The winning consortium
consisted of Grupo Carso, S.A. de C.V., a Mexican conglomerate which owns or
otherwise controls a majority of the consortium's voting interest, SBC
Communications Inc. and France Telecom S.A. Subsequent to the original
privatization, the Mexican government further reduced its holdings in Telmex
through additional transactions and has now substantially completed the
privatization process.
 
    Telcel obtained the wireline cellular concession in each of the nine
cellular regions and is therefore Mexico's largest cellular operator. The
non-wireline concession holders and the regions in which they serve are: (i)
Baja Celular, S.A. de C.V. in Region 1; (ii) Movitel del Noroeste, S.A. de C.V.
in Region 2; (iii) Telefonia Celular de Norte, S.A. de C.V. in Region 3; (iv)
Celular de Telefonia, S.A. de C.V. in Region 4; (v) Portatel del Sureste, S.A.
de C.V. in Region 8; and (vi) subsidiaries of the Company in Regions 5, 6, 7 and
9. Motorola, Inc. is a controlling or significant shareholder in the
aforementioned five non-Company concession holders. Telcel is the sole
competitor for each non-wireline company.
 
    In connection with the privatization of Telmex in 1990, the Mexican
government granted Telmex a concession to provide public domestic and
international long distance telephone service with an exclusivity period of six
years. In August 1996, the exclusivity period expired, and full open competition
commenced in January 1997. Currently, a presubscription balloting process is
being conducted on a city by city basis to enable customers to choose a long
distance provider.

                                      4

<PAGE>

    The SCT has also granted long distance concessions to the following
applicants: (i) Alestra S. de R.L. de C.V.; (ii) Avantel, S.A. de C.V.; (iii)
Marcatel S.A. de C.V.; (iv) Investcom, S.A. de C.V.; (v) Miditel, S.A. de C.V.;
(vi) Amaritel, S.A. de C.V.; (vii) PCM "Extensa", S.A. de C.V.; (viii) Bestel,
S.A. de C.V. (ix) Telinor, S.A. de C.V.; and (x) Iusatel, S.A. de C.V.
("Iusatel"), a subsidiary of Iusacell. Each concession has a nationwide scope
and a thirty-year term and authorizes domestic and international long distance
services and value-added services, including voice and data transmission
services.
 
    The Mexican government has initiated the liberalization process for
competition in local telephony service. Accordingly, the SCT has already granted
three concessions for local telephone service and has officially announced its
plans to auction spectrum in the 450 MHz, 1.9 GHz (PCS) and 3.4-3.7 GHz
frequency bands for local wireless service during the fall of 1997.

    GROWTH OPPORTUNITIES
 
    UNDERSERVED TELEPHONY MARKET.  The Company believes that there is
substantial unmet demand for telephone service in Mexico as demonstrated by the
relatively low level of residential, business line and cellular penetration and
the long customer wait for landline service. According to the International
Telecommunications Union ("ITU"), an agency of the United Nations, as of
December 31, 1995, there were approximately 9.6 lines per 100 inhabitants in
Mexico, which is lower than the teledensity rates in certain other Latin
American countries and substantially lower than in developed countries such as
the United States. The ITU forecasts that Mexican teledensity will reach 14.6
lines per 100 inhabitants by the end of the year 2000.
 
    The following table presents, for major Latin American countries and the
United States, telephone lines in service per 100 inhabitants as of December 31,
1995.

                         SELECTED TELEPHONE PENETRATION
 
<TABLE>
<CAPTION>
                                                                                                LINES IN SERVICE PER
COUNTRY                                                                                          100 INHABITANTS(1)
---------------------------------------------------------------------------------------------  -----------------------
<S>                                                                                            <C>
United States................................................................................              62.6%
Uruguay......................................................................................              19.6
Argentina....................................................................................              16.0
Chile........................................................................................              13.2
Venezuela....................................................................................              11.1
Colombia.....................................................................................              10.0
Mexico.......................................................................................               9.6
Brazil.......................................................................................               7.5
Peru.........................................................................................               4.7
</TABLE>
 
------------------------
 
(1) Source: International Telecommunications Union--World Telecommunications
    Development Report 1997.
 
    EXPECTED RECOVERY IN CONSUMER SPENDING.  The Company expects consumer
spending to recover following the recent economic crisis in Mexico. According to
WEFA forecasts, GDP growth is expected to be 5.4% and 6.4% in 1997 and 1998,
respectively. With GDP per capita expected to increase by an average of 4.0%
during this period based on an annual population growth rate of 1.8% (as
forecasted by WEFA), the Company anticipates increased demand for its services.
 
    CHANGING COMPETITIVE DYNAMICS
 
    The Company's cellular competitor is Telcel, a wholly owned subsidiary of
Telmex, which holds the wireline cellular concessions in all nine regions of
Mexico. The Company believes that Telmex faces increasing competition,
especially in the long distance market, which was fully opened to competition in
January 1997. Telmex's major long distance competitors include two joint
ventures in which AT&T Corp. ("AT&T") and MCI Communications Corporation 
("MCI") are the strategic partners.
 
    In late 1995, the Company brought a suit charging Telmex with unlawfully
cross-subsidizing Telcel's cellular phone operations. The Company believes that
the increased competition in the long distance market is hindering Telmex's
ability to continue to cross-subsidize Telcel.
 
CELLULAR SERVICES
 
    HISTORY AND OVERVIEW
 
    Iusacell's predecessor became the first Mexican provider of cellular
telecommunications services in 1989, when it commenced operation of the
non-wireline cellular network in Region 9. Through a series of
 
                                      5

<PAGE>

transactions from 1990 to 1994, Iusacell acquired 100% beneficial ownership
interests in the entities which hold the non-wireline cellular concessions in
Regions 5, 6 and 7. Regions 5, 6, 7 and 9 are among the most attractive cellular
markets in Mexico based upon total POPs and demographic characteristics. These
regions cover a contiguous geographic area in central Mexico, which allows
Iusacell to achieve certain economies of scale.
 
    Iusacell's regions cover a variety of industries. Region 9 includes Mexico
City, which has the greatest concentration of service and manufacturing
industries and is also the center of Mexico's public and financial services
sectors. Region 5 includes Guadalajara, Mexico's second largest city and the
commercial and service center of western Mexico. Region 6 includes Leon and San
Luis Potosi and has historically been dominated by the agricultural sector,
although it has recently begun to develop as an automobile manufacturing center.
Region 7 includes Puebla, Veracruz and Acapulco and contains the major
operations of the Mexican petrochemical industry.
 

      Subscribers and System Usage

      As of December 31, 1996, Iusacell had a total of 130,318 cellular 
subscribers in Region 9. Of this number, approximately 72.3% were contract 
plan subscribers and 27.7% were prepay customers. According to Company 
customer profiles, professionals comprise a large portion of its Region 9 
revenue base. The Company offers a number of value-added services designed 
specifically to fulfill the demands of this important group of contract 
subscribers. For example, Iusacell offers secretarial services and provides 
English-speaking operators to serve the large English-speaking market in 
Region 9. The Company also provides financial news reporting, emergency 
services, entertainment information, reservations services and sports 
reports. The Company believes that these value-added services help increase 
contract subscriber usage and also enhance Iusacell's market image as a full 
service cellular provider. Furthermore, the Company also believes that a 
strong distribution network is necessary in order to develop and sustain a 
significant presence in this important market. The Company believes it has 
particularly strengthened its competitive position in Region 9 with a new 
distribution contract with Precel which increased the Company's number of 
independent distributors in Region 9 by 40%. See "--Marketing 
Strategy--Distribution."

      As of December 31, 1996, Iusacell had a combined total of 102,588 
cellular subscribers in Regions 5, 6 and 7. Of this number, 65.4% were 
contract plan subscribers and 34.6% were prepay customers. The Company 
believes that its subscriber base in these regions consists of subscribers 
engaged in a variety of occupations. Due to the lower landline penetration 
outside of Region 9, the subscriber base in Regions 5, 6 and 7 includes a 
number of users who purchase cellular services as a principal means of 
telecommunications. Compared to Region 9, the marketing programs in these 
regions have focused more on the benefits inherent in basic cellular service, 
such as mobility and convenience, than on the benefits that value-added 
services provide. Although few value-added services are currently being 
offered to contract subscribers, Iusacell is evaluating the feasibility of 
offering a broader range of value-added services similar to those offered to 
its contract subscribers in Region 9.

                                        6
<PAGE>

      The table below sets forth information regarding the cellular subscriber
base for Region 9 and Regions 5, 6 and 7 combined at the dates or for the
periods indicated.

                     Selected Cellular Subscriber Base Data

<TABLE>
<CAPTION>
                                                                                 At or For the
                                                                             Year Ended December 31,
                                                                    ----------------------------------------
                                                                      1994            1995            1996
                                                                    ---------       --------        --------
<S>                                                                 <C>             <C>             <C> 
Region 9
Total POPs (in millions).......................................          23.3           23.8            24.3
Covered POPs (in millions).....................................          19.9           20.3            22.1
Percentage of population covered...............................          85.4%          85.3%           91.0%
Subscribers:
   Contract....................................................       127,138        129,099          94,218
   Prepay......................................................             0          1,399          36,100
   Total Subscribers...........................................       127,138        130,498         130,318
Non-wireline penetration(1)....................................          0.55%          0.55%           0.54%
Average monthly MOUs per subscriber(2).........................           186            154             133
Nominal average monthly cellular revenue per subscriber(3).....        Ps.604         Ps.469          Ps.496
Nominal average monthly cellular revenue per subscriber(4).....     U.S.$ 178       U.S.$ 73        U.S.$ 65
Regions 5, 6 and 7 Combined
Total POPs (in millions).......................................          38.9           39.7            40.3
Covered POPs (in millions).....................................          19.6           20.0            23.4
Percentage of population covered...............................          50.4%          50.4%           58.1%
Subscribers:
   Contract....................................................        67,585         79,703          67,059
   Prepay......................................................             0              0          35,529
   Total Subscribers...........................................        67,585         79,703         102,588
Non-wireline penetration(1)....................................          0.17%          0.20%           0.25%
Average monthly MOUs per subscriber(2).........................           165            117              94
Nominal average monthly cellular revenue per subscriber(3).....       Ps. 630        Ps. 457         Ps. 481
Nominal average monthly cellular revenue per subscriber(4).....     U.S.$ 186       U.S.$ 71        U.S.$ 63
</TABLE>
----------
 
(1) Non-wireline penetration represents the end of period non-wireline
    subscribers divided by the end of period POPs.
 
(2) Average monthly MOUs per subscriber is calculated by dividing the total MOUs
    for the respective period by the average number of subscribers for such
    period and dividing the resulting quotient by the number of months in such
    period.
 
(3) Nominal average monthly cellular revenue per subscriber is calculated by
    dividing the total cellular service revenue for the respective period (in
    nominal Pesos) by the average number of subscribers for such period and
    dividing the resulting quotient by the number of months in such period.
 
(4) Calculated as described in note (3) above, converted to U.S. dollars using
    the Noon Buying Rate for the relevant period. See "Exchange Rates."
 
    CONTRACT CHURN
 
    Contract churn measures both voluntarily and involuntarily disconnected
subscribers. The Company calculates contract churn for a given period by
dividing, for each month in that period, the total number of contract
subscribers disconnected in such month by the number of contract subscribers at

                                       7
<PAGE>

the beginning of such month and dividing the sum of the resulting quotients 
for all months in such period by the number of months in such period. 
Voluntarily disconnected subscribers encompass subscribers who choose to (i) 
no longer subscribe to cellular service, (ii) become a prepay customer of the 
Company or (iii) obtain cellular service (either on a contract or a prepay 
basis) from the Company's competitor. Involuntarily disconnected subscribers 
encompass customers whose service is terminated after failing to meet the 
Company's payment requirements. The Company believes that a significant part 
of its contract churn in 1996 was due to customers switching from its 
contract plans to a prepay program. Following the introduction of Telcel's 
prepay program in February 1996, the Company launched its Control Plus prepay 
plan in June 1996 in order to attract, service and retain subscribers. See 
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations--Increase in Prepay Subscriber Base."
 
    PREPAY TURNOVER
 
    Currently, a prepay customer is no longer considered a customer of the 
Company when 60 days have elapsed since the customer purchased and activated 
his or her last prepay card. The customer's telephone number is then 
deactivated, and he or she is considered to have turned over. The Company's 
current prepay customers who want to continue to have cellular service must 
choose to (i) continue to be prepay customers of the Company by purchasing 
another card, (ii) become contract customers of the Company or (iii) become 
customers (either on a contract or a prepay basis) of Telcel. Due to the 
higher turnover among its prepay customers, the Company is attempting to 
migrate its qualified prepay customers to contract plans, where customer 
loyalty and retention have been historically higher. The Company is 
evaluating different methods of determining turnover, as the current method 
is dependent upon, among other things, the number of days of use the Company 
permits before expiration of prepay cards (currently 60 days). Iusacell is 
installing a new prepay operating system which the Company expects will 
better track those customers who turn over and, at the same time, allow 
customers to reinstate their prior telephone numbers up to 30 days after the 
expiration of their Iusacell cards. Iusacell anticipates that this new 
operating system, together with initiatives to increase the number of 
distribution points for prepay cards, improve customer care and otherwise 
improve the convenience of the Company's prepay program, will enhance the 
Company's ability to retain prepay customers. See "Management's Discussion 
and Analysis of Financial Condition and Results of Operations--Increase in 
Prepay Subscriber Base."
 
    ROAMING
 
    Iusacell offers its contract cellular subscribers nationwide and
international service via roaming agreements. Subscribers can make calls from
any location in Mexico served by a non-wireline cellular operator, and can
receive any call made to the subscriber's number ("automatic call delivery")
regardless of the region in Mexico in which such subscriber is located. Iusacell
also provides cellular services to all subscribers of other non-wireline
cellular operators in Mexico while such subscribers are temporarily located in a
region served by Iusacell.
 
    An operator (a "host operator") providing service to another operator's
subscriber temporarily located in its service region ("in-roamers") earns usage
revenue. Iusacell bills such other operators (the "home operator") of an
in-roamer for the in-roamer's usage. In the case of roaming by a Iusacell
subscriber in the region of a host operator (an "out-roamer"), Iusacell is
billed by the host operator for the subscriber's usage. Iusacell remits the
billed amount to the host operator and bills its own customer, the out-roamer,
without any mark-up. As a result, Iusacell retains the collection risk for
roaming charges incurred by its own subscribers. Conversely, roaming charges
billed by Iusacell for in-roaming usage by subscribers of other non-wireline
operators are the responsibility of those operators. Roaming charges between
non-wireline operators are settled monthly. Interconnection charges owed to
Telmex and long-distance charges owed to the carrier as a result of roaming are
the responsibility of the host operator. In
 
                                       8
<PAGE>

addition to higher per minute charges for airtime (as compared to home region
rates), the host operator is entitled to receive a fee for each day roaming
service is initiated. During 1996, in-roaming fees and usage revenue represented
3.2% of Iusacell's total revenues.
 
    Iusacell has signed over sixty agreements with United States and other
foreign operators to provide its subscribers with international roaming
capabilities. These operators include Bell Atlantic NYNEX Mobile, AT&T Wireless,
BellSouth Mobility, Rogers Cantel and AirTouch Communications. Iusacell is
continually reviewing opportunities to enter into agreements with other cellular
operators to expand its international roaming capabilities. In addition,
Iusacell provides, through the National Automatic Cellular Network, automatic
call delivery throughout most of the United States (including Puerto Rico) and
Canada, whereby Iusacell subscribers may receive telephone calls from Mexico
without the caller having to dial access codes.
 
OTHER SERVICES
 
    PAGING
 
    On December 14, 1995 the Company and Infomin formed Infotelecom, S.A. de 
C.V. ("Infotelecom") as a joint venture to market national and international 
paging services. The Company owns 51% of Infotelecom, while Infomin, S.A. de 
C.V. ("Infomin") owns the other 49%. Infomin has a concession, which expires 
on July 20, 2009, to provide nationwide paging services in Mexico. Under the 
Infotelecom joint venture agreement, Infomin is obligated to contribute this 
concession to Infotelecom. Due to restrictions on foreign ownership under the 
paging concession, however, Infomin cannot contribute its paging license to 
the joint venture so long as Bell Atlantic continues to control the 
management of Iusacell and the Company continues to hold more than 49% of the 
voting shares of Infotelecom.
 
    Pursuant to a marketing agreement that the Company has entered into with
Infomin, Infotelecom has the right to market national paging services on behalf
of Infomin, and Infotelecom is required to make monthly payments to Infomin
equal to 5% of all gross revenues for the preceding month. This payment
represents the amount which Infomin as the concession holder must pay the SCT
for the right to provide paging services.
 
    Infotelecom began marketing paging services in August 1996 and service is
now provided in Mexico City, Guadalajara, Monterrey, Puebla, Cuernavaca, Toluca
and Ciudad Juarez. Infotelecom plans to expand the marketing of paging services
to 30 cities by 2001. The Company plans to take advantage of its existing
cellular network and of its operating and administrative resources in order to
achieve cost efficiencies in the provision of paging services. As of December 
31, 1996, Infotelecom had 3,098 paging customers.
 
    Under the joint venture agreement, the Company and Infomin valued the
Infomin paging concession at U.S.$10.5 million, and the Company agreed to fund
the first U.S.$10.5 million of Infotelecom's capital needs before Infomin would
be required to make pro rata cash contributions. Auctions for paging spectrum
held after execution of this joint venture agreement have valued nationwide
paging concessions as low as Ps.1.0 million. Because of this valuation disparity
and the restrictions against foreign ownership of Infomin's paging concession,
Iusacell is exploring alternatives for the provision of paging services.
 
    LONG DISTANCE
 
    In August 1996, Iusacell became one of Telmex's first competitors in long
distance service when Iusacell began to provide long distance services to its
subscriber base in Mexico pursuant to the 30-year concession Iusatel was awarded
from the SCT on October 16, 1995. The Company's competitors in long
 
                                        9
<PAGE>

distance include the nine other companies granted concessions as well as Telmex,
the former long distance monopoly. The Company believes that competition in the
Mexican long distance market will stimulate growth in demand for long distance
service.
 
    The Company currently provides long distance service using its own 
switches and transmission equipment and a combination of fiber optic lines, 
satellite transmission and lines leased from Telmex. At December 31, 1996, 
the Company provided long distance service to its approximately 248,000 
existing customers for its other services, and anticipates providing service 
in at least 60 cities by mid-1998.
 
    The Company's long distance concession provides for certain coverage and
technological investment requirements. If the Company does not satisy such
requirements, it could be subject to certain fines and penalties and potentially
lose its long distance concession. The Company is currently evaluating the
commercial feasibility of complying with the concession and may request that
relevant government authorities modify the terms of such concession to reflect
the results of such evaluation and any corresponding revisions to Iusacell's
business plan. See "--Government Regulation--Concessions and Permits--Long
Distance Concession" and "Management's Discussion and Analysis of Financial
Condition and Results of Operation--Liquidity and Capital Resources--Capital
Expenditures."
 
    LOCAL TELEPHONY
 
    Iusacell operates a mobile nationwide IMTS radiotelephone network in the 
440-450 MHz, 485-495 MHz and 138-144 MHz frequency bands, providing local 
radiotelephone services to commercial and non-commercial customers across 
Mexico. As of March 31, 1997, Iusacell had 1,598 IMTS radiotelephone 
subscribers. The number of radiotelephone subscribers has been declining and 
Iusacell is considering the cessation of IMTS service with the migration of 
IMTS subscribers to other wireless services or local telephony services.
 
    The Company also operates public and rural telephony programs, utilizing 
available cellular capacity. These programs provide telecommunications 
services through cellular telephones in phone booths, intercity buses and 
rural areas. The provision of services in this way fulfills the terms of the 
Company's concessions for the provision of cellular telephone service and 
utilizes the Company's cellular network to provide telecommunications 
coverage in areas with little or no basic service. At December 31, 1996, the 
Company had 2,133 cellular telephones in service under its public and rural 
telephony programs and as of March 31, 1997, Iusacell had 2,630 cellular 
telphones in service under these programs.
 
    At December 31, 1996, Iusacell was providing, on a trial basis pending 
approval from the SCT, local wireless service in the 450 MHz frequency band 
to 15,876 and as of March 31, 1997, the Company was providing such service to 
17,980 customers in selected markets in Mexico. The Company 
believes that there is substantial unmet demand for telephone service in 
Mexico as demonstrated by the relatively low level of residential, business 
line and cellular penetration and long customer wait for landline service. 
See "--The Telecommunications Industry in Mexico--Growth Opportunities." 
Iusacell has developed a rate plan for local wireless service in the 450 MHz 
frequency band which, while differing in some respects from the plan used by 
Telmex, would result in a target revenue range which approximates a typical 
Telmex customer's monthly bill.
 
    The Company has experienced substantial delays in obtaining the SCT's
approval of its technical and economic plans for local wireless service in the
450 MHz frequency band. However, on June 10, 1997, the SCT and the Company
reached agreement on a process by which the Company could obtain a concession
issued and recognized by the SCT to provide local wireless service in the 450
MHz frequency band. Under this agreement, Iusacell would convert and consolidate
certain of its existing concessioned radiotelephony frequencies into 450 MHz
spectrum in Regions 4, 5, 6, 7 and 9 and would have a right of first refusal to
acquire the concessions to provide local wireless service over such frequencies
at prices derived from the prices of the winning bids in the auctions for 450
MHz and 1.9 GHz (PCS) frequency bands scheduled by the Mexican government for
the fall of 1997. Until the conclusion
 
                                       10
<PAGE>

of such auctions, Iusacell has received a provisional authorization to use 450
MHz spectrum to provide local wireless service to up to 50,000 subscribers.
 
    As a result of the delays experienced by the Company and the uncertainty 
relating to the Company's ability, at a commercially acceptable cost, to 
obtain concessions to provide local wireless service in the 450 MHz frequency 
band, the Company is exploring alternatives for providing local telephony 
services, including limited zone wireless services in the 800 MHz (cellular) 
or 1.9 GHz (PCS) frequency bands deploying digital technology that permits 
mobility. If the Company were to determine that it would be preferable to 
pursue such an alternative rather than to continue to pursue local wireless 
service in the 450 MHz frequency band, such alternative could require the 
acquisition of concessions, other regulatory approvals and the payment of 
substantial fees, and the Company would record substantial non-cash losses in 
writing off assets relating to its 450 MHz local wireless service. See 
"--Government Regulation--Concessions and Permits--Local Telephony" and 
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations--Local Telephony in the 450 MHz Frequency Band; CDMA Overlay."
 
    In expanding its local telephone services, the Company plans to capitalize
on synergies between its cellular and local wireless services, utilizing its
existing cellular network for connections with the local subscribers' premises.
Furthermore, the Company believes that local wireless service requires a lower
infrastructure investment per line than landline service.
 
    Iusacell also has applied for a license to provide local wireline service,
including dedicated circuits, local switching and data service. While the
Company currently does not anticipate that the provision of local wireline
service will become a significant part of its services, the Company may provide,
on a case-by-case basis, local wireline telephone service as part of its overall
provision of telecommunications services.
 
    DATA TRANSMISSION
 
    Iusacell began providing data transmission services in 1993. The Company
provides both public and private data transmission through its cellular network,
utilizing CDPD technology. The Company provides its data transmission services
primarily to the financial services and consumer products industries.
 
MARKETING STRATEGY
 
    With the assumption of control by Bell Atlantic, Iusacell has redefined its
strategy for achieving profitable growth, particularly in its cellular business.
The Company seeks to increase its average monthly revenue per subscriber,
increase its cellular subscriber base, decrease the cost of acquiring additional
subscribers, reduce contract churn and prepay turnover by improving its
marketing efforts to its existing and potential cellular subscribers.
 
    The Company's subscribers consist of contract and prepay customers who can
be classified as high, moderate or low-usage customers. Iusacell is implementing
distribution, advertising, customer service support and pricing plans targeted
to each specific customer segment.
 
    CONTRACT SUBSCRIBERS
 
    Contract subscribers seek uninterrupted mobile cellular service, including
long distance, access to high-quality customer service and the ability to choose
among value-added services such as call waiting and *911 services, all for one
monthly fee.
 
    High-usage contract subscribers include corporate customers, professionals,
owners of small to medium-sized businesses and other subscribers who have a high
need for mobility and who rely on cellular service daily. These subscribers are
willing to pay a higher monthly fee in exchange for a large block of free
minutes, a lower airtime rate and a full range of value-added services and
customer service
 
                                       11
<PAGE>

conveniences. These subscribers are concentrated in the Company's premium plans.
The Company is aggressively pursuing customer growth in this segment through
targeted marketing and distribution (customer service centers, corporate
representatives, direct salesforce), advertising campaigns (business and leisure
publications, moving billboards) and pricing plans.
 
    Moderate-usage contract subscribers include some professionals, small
business owners and residential customers who use cellular services frequently
and require the reliability of a contract plan, but do not generate the monthly
MOUs of high-usage contract subscribers. The Company plans to continue to
generate revenue from this segment through targeted distribution (customer
service centers, direct salesforce, distributors), advertising and pricing
plans.
 
    While the Company does not target low-usage contract customers as
aggressively as other customers, it provides service options to meet the
requirements of this subscriber group. The low-usage contract plan segment
consists primarily of residential customers and small business owners who prefer
the reliability of contract plan service, but whose usage may not justify the
inclusion of various value-added services in the fixed monthly charge. The
Company targets this segment through its group of independent distributors and,
to some extent, through its commission agents and advertising programs. Three
pricing plans are currently offered to meet the needs of lower usage customers.
 
    PREPAY SUBSCRIBERS
 
    Since the inception of the Company's prepay plan in 1996, the number of 
prepay subscribers has grown to represent approximately 31% of Iusacell's 
subscribers at December 31, 1996. A prepay subscriber can activate a cellular 
phone at a Company customer service center, purchase a prepaid card with a 
fixed amount of credit to be used over a period of no more than 60 days, and 
credit the prepaid card value to the subscriber's account either at a 
customer service center or by a phone call. Such a customer will have access 
to cellular service (including long distance, but without roaming capability 
and limited access to *911 emergency service) until the credit is fully used 
or until the card expires at the end of 60 days, whichever occurs first.
 
    The prepay market is composed of customers who typically cannot afford to
purchase a contract plan, do not have the credit profile required to purchase a
contract plan or seek cellular services for emergency or limited use only.
Iusacell believes that prepay plans are attractive to a wide range of cellular
customers. In addition to helping customers control costs, Control Plus has no
monthly bill and allows customers to prepay for cellular services in cash.
Iusacell is now marketing these features to new classes of potential customers.
Currently, prepay subscribers lose their phone numbers 60 days following the
purchase and activation of their most recently purchased card, whether or not
there is credit remaining on such card. The Company has recently implemented a
program under which prepay customers can reacquire their number for a fee within
30 days after expiration. In an effort to discourage turnover, the Company
charges an activation fee for prepay subscribers. The Company has recently
waived this fee in response to market conditions. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Increase in
Prepay Subscriber Base."
 
    Iusacell believes the prepay service offerings provide an opportunity to
improve margins due to higher average per minute airtime charges, the lower cost
to acquire prepay subscribers and the absence of billing costs, credit concerns
and payment risk. Iusacell is installing a new prepay operating system, allowing
it to better track the usage patterns and identity of its prepay subscribers.
The new operating system also is expected to improve customer satisfaction
through automated reactivation, voice messaging and other value-added services,
and to lower the cost of support for prepay services. The Company anticipates
that the new operating system, together with initiatives to increase the number
of distribution points for prepay cards, will improve customer care and
otherwise improve the convenience of the Company's prepay program, and will
enhance the Company's ability to retain prepay customers.
 
                                       12
<PAGE>

    DISTRIBUTION

    Iusacell targets the various segments of its subscriber base through five
sales and distribution channels: customer service centers, independent
distributors, corporate representatives, a direct salesforce and commission
sales agents. The Company is aggressively increasing the number of its points of
distribution in order to acquire additional subscribers.
 
    Historically, Iusacell's salesforce compensation was based largely upon
salary and a commission structure which encouraged the sale of prepay cards.
Since the assumption of control of the Company by Bell Atlantic, the Company has
overhauled its sales compensation plan. The new plan, implemented in May 1997,
is designed to motivate the salesforce within each distribution channel through
monetary incentives. In addition, this new plan will provide training so that
the salesforce is encouraged to activate profitable and loyal accounts,
cross-sell the full line of the Company's service offerings and maintain the
Iusacell standards in advertising, promotions and customer service.
 
    CUSTOMER SERVICE CENTERS.  Iusacell has reconfigured each of its customer
service centers to offer one-stop-shopping for a variety of cellular, long
distance and paging services, as well as accessories. Walk-in customers can
subscribe to cellular service contract plans, purchase prepay cards, sign up for
long distance service and purchase equipment such as handsets, pagers and
accessories. In an effort to maximize customer loyalty, reduce contract churn
and prepay turnover and to increase average monthly revenue per subscriber
through cross-selling, the Company plans to significantly increase the number of
Iusacell-owned and operated customer service centers by the end of 1999,
incorporating a new, uniform store design. In 1997, in addition to opening a
number of new customer service centers, the Company expects to complete the
redesign of its existing 57 owned and operated customer service centers.
 
    INDEPENDENT DISTRIBUTORS.  In order to broaden its market, Iusacell
maintains relationships with a broad network of 61 exclusive distributors in 164
locations. This includes a new distribution contract with Precel, formerly one
of Telcel's largest distributors, to obtain exclusive distribution in 75
locations. The Company's distribution arrangement with Precel increased the
number of Company locations in Regions 5, 7 and 9, by 7, 3 and 65 locations,
respectively, and significantly reduced Telcel's distribution presence in Mexico
City. In order to ensure that Iusacell's standards are maintained at all
distribution points, the Company provides assistance to its distributors in
training, promotions and advertising and provides information on its customer
base to allow the distributors to service the Company's customers effectively.
 
    CORPORATE REPRESENTATIVES.  To service the needs of its large corporate and
other high-usage customers, the Company has created a dedicated corporate sales
group, which currently includes 70 full-time sales representatives.
This group of trained representatives seeks to increase sales to high-usage
customers by (i) "bundling" combinations of services into customized packages
designed to meet customers' requirements, (ii) developing and marketing new
services to satisfy the demands of such customers and (iii) educating corporate
purchasing managers about alternative pricing plans and services. The Company
plans to increase the size and geographic reach of this salesforce in the
future.
 
    DIRECT SALESFORCE.  Currently, the Company employs 15 direct sales 
representatives to target moderate-usage contract plan subscribers. These 
direct sales representatives travel extensively to deliver personalized 
service to subscribers such as small and medium-sized businesses and 
individuals. The Company carefully selects, trains and motivates this 
salesforce to maintain Iusacell's service standards.

    COMMISSION SALES AGENTS.  The Company retains commission agents as a
flexible salesforce in Regions 5, 6 and 7. The agents function as cellular
service brokers for the Company, working out of their own premises to better
target their customers. These agents provide additional distribution outlets
with
 
                                       13
<PAGE>

minimal Company support. Currently, the Company has an arrangement
with 59 commission sales agents who distribute the Company's product with no
direct costs to Iusacell.
 
    ADVERTISING
 
    Iusacell has launched an integrated media plan emphasizing the benefits of
the Company's products and supported by the Iusacell brand image, the logo for
which was recently redesigned. For the first time, all product offerings are
under the single, well-recognized IUSACELL brand name. The media plan targets
the Company's subscribers through a coordinated print, radio, television and
fixed and moving outdoor advertising campaign. A key element of this integrated
media plan is the periodic agency review wherein the sales results of a given
campaign are evaluated. The integrated media plan enables the Company to
negotiate more favorable advertising rates. Print advertisements prominently
feature an ad-response telephone number to solicit new customer inquiries. A
24-hour line is staffed with trained representatives who are equipped to answer
questions regarding services and products. The Company believes that this
24-hour line helps to convey the image of Iusacell as a high-quality, customer
service-oriented telecommunications service provider.
 
    CUSTOMER SERVICE
 
    Iusacell views superior customer service as essential in order to
distinguish itself in the competitive Mexican cellular telecommunications
market. The Company provides training for its customer service representatives
to ensure that each customer receives prompt attention, informed answers to any
inquiries and satisfactory resolution of any concerns. The Company believes that
enhanced customer service, especially after-sales support, is integral in
developing brand loyalty and supports the efforts of its salesforce to
cross-sell the Company's services and products. For prepay customers, Iusacell
is installing a new operating system that will better track the usage patterns
and identities of these subscribers. The new operating system will improve
customer satisfaction through automated activation, voice messaging and other
value-added services and will lower the cost of support services. To further
enhance customer service, Iusacell has installed dedicated personal computer
terminals linked to the Company's billing system so that each customer service
representative, either personally or through the 24-hour service line, can
handle customer inquiries, billing questions and account payments with real-time
data and a full customer profile in hand. Customer data gathered from such
sources as the activation process, the billing system and exit interviews with
customers who terminate service, will allow Iusacell to better tailor its
marketing strategy to each customer. Along with providing information as to how
the Company can improve its customer service, this data is expected to enable
representatives from each of the distribution channels to better target their
sales approach to each customer when cross-selling the Company's services and
products.
 
    PRICING
 
    Since 1994, Iusacell has offered a variety of flexible pricing options for
its cellular service. The primary components of the contract pricing plans
include monthly fees, per minute usage charges and a certain number of free
minutes per month. Additionally, the Company's prepay program markets cards
which credit a finite number of Pesos to a customer's account, to be utilized
over a period of no more than 60 days.
 
    The contract pricing plans are designed to target high, moderate and
low-usage contract subscribers. High-usage customers are typically willing to
pay higher monthly fees in exchange for larger blocks of free minutes,
value-added services, a free handset and lower per minute airtime charges under
a single contract. The Company offers the Productivity and Premium plans which
are specifically targeted at the high end of the market. Moderate-usage contract
subscribers typically prefer pricing options which have a lower monthly charge,
fewer free minutes and higher per minute airtime charges than those options
chosen by high-usage customers. The Company offers the Flex 75 and Flex 150
plans to satisfy the needs of the moderate-usage contract subscriber base. In
addition, on June 7, 1997, the
 
                                       14
<PAGE>

Company launched its Ganador (Winner) plan which is distinct in that it offers,
at no additional charge, three-way-dialing, call forwarding and call waiting,
and comes with a choice of handsets, including the latest model from Nokia. To
satisfy the more limited needs of the low-usage contract subscribers, the
Company offers the Security, Standard and Tu Tiempo plans, which offer a
moderately priced, fixed monthly charge coupled with a high per minute airtime
charge and relatively few free minutes.
 
    In contrast to contract subscribers, prepay customers typically generate low
levels of cellular usage, do not have access to value-added services (except for
purchases of Control Plus Ps.500 card) or roaming, generally already own a
handset and often cannot afford to or do not have the credit profile to purchase
contract plan cellular services. Other prepay customers include vacationers and
travelling businesspeople who require cellular service for short periods of
time. In addition, prepay plans have no monthly bill and offer customers a
greater degree of flexibility. In June 1996, the Company introduced Control
Plus, a prepay cellular telephone service whereby a customer may bring a handset
to a customer service center for activation and purchase a prepay card in
denominations of Ps.100, Ps.250 and Ps.500 from a customer service center or any
of a variety of vendors, including newsstands, lottery stands, supermarkets and
other retail outlets. Once the card is purchased and the handset is activated,
the customer can call the Company with the card's serial number to credit the
corresponding value of cellular service to the customer's account. When this
credit occurs, the service is active and ready for the customer's use. A phone
number is assigned at the time of activation. That number is terminated when 60
days have elapsed from the date of the last credit.
 
    With the exception of Tu Tiempo and Control Plus, all packages include a
selection of free cellular handsets. The table below sets forth the various
contract and prepay plan rate options implemented by the Company as of May 20,
1997.
 
                             CELLULAR RATE OPTIONS
 
<TABLE>
<CAPTION>
                                             FIXED                       PEAK          NON-PEAK        FREE       CONTRACT
                                            MONTHLY    ACTIVATION     PER MINUTE      PER MINUTE      MONTHLY      PERIOD
                                            CHARGE       FEE (1)      CHARGE (2)      CHARGE (2)      MINUTES     (MONTHS)
                                          -----------  -----------  --------------  --------------  -----------  -----------
<S>                                       <C>          <C>          <C>             <C>             <C>          <C>
Contract Plans:
  Premium...............................    Ps. 1,039      Ps. --       Ps. 1.80        Ps. 1.25           600       12
  Productivity..........................          729          --           2.30            1.65           300       12
  Flex 150..............................          419          --           2.60            1.75           150       18
  Flex 75...............................          259          --           3.30            2.15            75       18
  Ganador...............................          299          --           2.25            1.30           100       18
  Standard..............................          239          --           2.60            1.95            30       24
  Security..............................          169          --           3.90            2.25            30       24
  Tu Tiempo.............................           99         149           2.75            2.75            --       --
  C300..................................          569         140           1.50            1.00           300        6
  R150..................................          259         130           2.25            1.40           150       12
 
Prepay Plans:
  Control Plus Ps.500 Card..............           --          --           2.78            2.78            --       NA
  Control Plus Ps.250 Card..............           --          49           3.16            3.16            --       NA
  Control Plus Ps.100 Card..............           --          99           3.45            3.45            --       NA
</TABLE>
 
------------------------
 
(1) Iusacell waives activation fees from time to time in response to market
    conditions. It is currently waiving the activation fees for its Control Plus
    cards.
 
(2) Peak per minute charges currently apply to usage between 8:00 A.M. and 10:00
    P.M. Monday through Friday. Non-peak per-minute charges apply at all other
    times.
 
                                       15
<PAGE>

    Since April 1997, the Company has implemented two price increases for its
cellular plans. On April 1, 1997, the Company raised the per minute airtime
price on all its contract and prepay plans by a weighted average of 15.0%. This
weighted average price increase was calculated by applying the actual price
increases implemented in April 1997 to both peak and non-peak per minute airtime
charges for each of the Company's contract and prepay plans, weighted by the
ratio of each plan's contribution to overall airtime revenues during the month
of April 1997. On May 20, 1997, the Company raised the fixed monthly charges on
all its contract plans by a weighted average of 8.3%. This weighted average
price increase was calculated by applying the actual price increases implemented
on May 20, 1997 for all the Company's contract plans, weighted by the ratio of
each plan's contribution to overall monthly fixed charges during the month of
April 1997.
 
    Since Iusacell implemented these price increases, Telcel has responded by
raising the per minute prices on its prepay plans. The Company intends to
continually review its market pricing and will attempt to increase prices, if
economic and competitive conditions permit, to keep pace with inflation.
 
ACTIVATION, BILLING AND COLLECTION PROCEDURES
 
    The Company can activate a phone within 30 minutes of receiving credit
approval for customers who intend to pay their monthly charges with a credit
card. For customers who intend to pay their monthly charges in cash, there is a
credit review process of no longer than 48 hours prior to the delivery and
activation of a cellular telephone and a requirement of a security deposit in an
amount equal to double the assigned credit limit. For Control Plus customers,
activation time is 30 minutes or less. The Company believes that its ability to
activate a cellular telephone number promptly gives the Company a competitive
advantage over Telcel.
 
    The Company mitigates its credit exposure in four ways: (i) for those
customers paying by credit card, by obtaining a credit report from the BUREAU
NACIONAL DE CREDITO ("National Credit Bureau"), a Mexican affiliate of
TransUnion Corporation; (ii) by requiring payment to be made by credit card or,
for those customers who do not pay by credit card, by requiring security
deposits and conducting a credit investigation; (iii) by requiring that
customers paying by credit card purchase a bond, which provides for payment in
the event of customer defaults; and (iv) by utilizing prepay cards, which
eliminate all credit risk.
 
    The Company has instituted customer retention procedures whereby a
late-paying customer is contacted by a service representative prior to
termination to urge such customer to settle his or her account and to inquire
about the reasons for nonpayment. Iusacell believes that these follow-up
procedures help decrease the rate of nonpayment and improve customer goodwill by
allowing Iusacell to address any customer grievances which may have led to
customer delinquency, thereby helping to retain potentially profitable accounts.
 
    Iusacell has also implemented a system to monitor MOU levels and the number
of calls to certain geographic areas in order to identify abnormal usage by
contract subscribers. When abnormal usage is detected, Iusacell contacts the
subscriber to determine whether such usage has been authorized. The Company
believes that these procedures are effective in reducing the number of billing
disputes with subscribers and losses due to cellular fraud.
 
    Billing is administered using a customized version of Bell Canada's "Link"
billing system in Regions 6, 7 and 9 and the Communication Administration System
in Region 5. The Company's current billing and call-rating capacity is
sufficient to service its existing subscriber base. In connection with the
planned implementation of CDMA, the Company plans to upgrade its current billing
system to accomodate future subscriber growth. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation--Liquidity and Capital
Resources--Capital Expenditures." The Company compiles billing information on a
real-time basis by transmitting the information via dedicated microwave
facilities from the Company's switching stations to its billing system.
Protective and disaster recovery measures are taken in connection with all
billing information. Iusacell continues to evaluate alternative billing and
account management system solutions in order to accommodate future growth.
 
                                       16

<PAGE>

NETWORK AND EQUIPMENT
 
    CELLULAR SERVICES
 
    Iusacell's integrated cellular network is currently composed of five
cellular switches, 236 cell sites and 42 repeaters, and covers approximately 70%
of total regional POPs. Iusacell currently uses analog technology to link its
subscribers and its cellular network. The Company plans to launch a digital CDMA
overlay network in 1998, which will significantly enhance network performance.
The overlay will begin in Region 9 in the first quarter of 1998, with the
remaining regions to be completed during the remainder of that year.
 
    The Company has elected to deploy CDMA technology instead of TDMA 
technology based on its and Bell Atlantic's evaluation of the two 
technologies. For the past year, Iusacell has used TDMA technology for 
internal purposes across 106 cell sites in Region 9. Bell Atlantic is 
successfully using CDMA technology in several of its U.S. markets to 
favorable customer response. CDMA offers significantly greater call-carrying 
capacity and superior voice quality and is more compatible for future 
upgrading than TDMA. The Company believes that it will be the first cellular 
operator in Mexico to launch a fully digital CDMA network. Iusacell will 
maintain transmitting equipment to serve both analog and digital formats, and 
the Company expects to market dual-mode cellular telephones capable of 
sending and receiving both analog and digital transmissions. Depending on the 
choice of vendor for CDMA equipment, the Company may be required to 
discontinue using a substantial portion of its existing network 
infrastructure, particularly the TDMA technology now being used for internal 
purposes in Region 9 and, accordingly, could record substantial non-cash 
losses in respect thereof. The Company cannot anticipate the magnitude of any 
such potential write-off at this time. See "Management's Discussion and 
Analysis of Financial Condition and Results of Operations-- Local Telephony 
in the 450 MHz Frequency Band; CDMA Overlay."
 
    Iusacell's cellular network consists of digital switching systems that are
capable of serving multiple markets. Regions 6, 7 and 9 are served by four
Northern Telecom DMS 250 (MTX) switches, and Region 5 is served by one Motorola
switch (EMX 2500). All switching equipment is fully networked. Iusacell
installed its first mobile switching center in 1989 in Region 9 and currently
operates 141 cell sites, providing telephone coverage to substantially all of
the populated territory and major highway routes of Region 9. Regions 5, 6 and 7
currently operate with a total of 95 cell sites, resulting in cellular telephone
coverage in all major population centers as well as along the principal highway
routes in the regions. Iusacell plans to install an additional 39 cell sites and
31 repeaters in its regions during 1997 in an effort to increase geographic
coverage, as well as boost call-carrying capacity within areas already covered.
The Company increases call-carrying capacity and coverage by three principal
means: "cell splitting," deploying "micro-cells," and using cell site repeaters
or enhancers. Approximately 70% of the cells in Region 9 were created as a
result of cell splitting.
 
    Digital microwave links between cell sites and the landline system are
supplied by various equipment manufacturers. The entire microwave network
consists of 329 individual microwave point to point links (hops). Taking
advantage of the ability of its various switching systems to run customized
software, Iusacell has developed a proprietary software package which is able to
track and report, in real-time, all aspects of network performance, including
traffic analysis, call quality and alarms. Iusacell seeks to upgrade and improve
its cellular network as new technologies become available.
 
    The Company has a network operations and control center in Mexico City,
which oversees, administers and provides technical support to all regions. The
Company plans to upgrade its control center, utilizing a more flexible platform,
capable of adjusting to an increasingly more complex network. This effort is
currently under evaluation and implementation of the new system is expected
during the first half of 1998.
 
                                       17
<PAGE>

    OTHER SERVICES
 
    Iusacell provides paging services primarily using its own cellular network
facilities. For long distance, the Company uses fiber optics and
state-of-the-art digital systems. In particular, Iusacell uses its three long
distance switches and its own transmission equipment, as well as other
facilities leased from Telmex.
 
    Iusacell provides private data transmission services primarily using excess
capacity in the Company's microwave backbone in its existing cellular network in
Region 9, its X.25 packet switching network and its nationwide satellite
transmission through Satelitron, S.A. de C.V. ("Satelitron"), a shared hub for
private networks which is being developed as part of a joint venture with Hughes
Network Systems and other entities. Iusacell also provides private and public
data transmission through its cellular network, utilizing CDPD technology.
 
    The Company's local wireless network, if implemented in the 450 MHz
frequency band, is expected to be based on the most modern digital switching,
transmission and subscriber connection equipment that is readily available and
commercially feasible. The Company intends to utilize its existing
infrastructure to the extent possible. If the Company opts to provide local
wireless service through its 800 MHz or 1.9 GHz frequency bands, the digital
technology that would be employed would offer additional features such as
out-of-zone mobility.
 
    In April 1994, the Company and Northern Telecom Limited ("Nortel") entered
into a five-year, U.S.$315.0 million agreement (the "Nortel Agreement") pursuant
to which Nortel has in the past supplied and, upon approval of the Company's
technical and economic plans by the SCT, will continue to supply network
switching equipment, switching center transmission equipment and radio base
station equipment, as well as associated software and technical services, for
the development of the 450 MHz local wireless network. The Nortel Agreement is
currently suspended and will terminate if the Company's technical and economic
plans for the 450 MHz project are not approved by, or if the Company does not
receive a concession to provide local wireless telephony in the 450 MHz
frequency band from, the SCT on or before December 31, 1997. The Company has
made U.S.$26.8 million in purchases under the Nortel Agreement to date and, if
the suspension is lifted, anticipates making a total of U.S.$288.2 million in
additional purchases under the agreement. In addition, the Company has made an
advance payment of U.S.$15.0 million for future purchases as required under the
agreement. The Company has also entered into a U.S.$5.0 million agreement with
Nortel for the purchase of 12,000 450 MHz local wireless terminals and a
U.S.$82.0 million purchase agreement with Telrad Telecommunications Electronics
Industries, Ltd. ("Telrad") for terminals.

    INFRASTRUCTURE SYNERGIES
 
    While cellular transmitters are unique to cellular service, towers can be
used for cellular and paging transmissions, and the same physical infrastructure
(land, shelter, etc.) can be used for cellular, paging and long distance
equipment. Synergies also exist in maintenance, workforce training and equipment
purchasing. For example, since plugs (electronic circuit boards used in
switches) can be used in both cellular and long distance switches, a
proportionately lower inventory of plugs can be maintained. The Company believes
that, as it expands its non-cellular offerings, these synergies will allow it to
reduce its infrastructure costs significantly and will reduce the time needed
for implementation of a new service.
 
    For a discussion of the Company's capital expenditure plans for its cellular
and other services, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources--Capital
Expenditures."
 
                                       18
<PAGE>

COMPETITION
 
    The offering of cellular services in Mexico is currently a regulated duopoly
in each region. Iusacell's cellular competitor in all regions in which it
provides service is Telcel, the holder of the wireline cellular concession for
service throughout Mexico and the country's largest cellular provider. Cellular
systems compete principally on the basis of quality of telecommunications
services, customer service, roaming capabilities, value-added services, breadth
of coverage area and, more recently, price. Operators are largely free to set
their own rates, provided such rates are set on the basis of cost. See
"--Government Regulation."
 
    While Iusacell currently faces limited competition from entities providing
telecommunications services utilizing other existing technologies, the Company
will likely face increased competition from technologies being developed or to
be developed in the future. Emerging technologies such as enhanced specialized
mobile radio, PCS and satellite telephone will compete with current cellular
services. The Mexican government has announced its intention to auction spectrum
in the 450 MHz, 1.9 GHz (PCS) and 3.4-3.7 GHz frequency bands in the fall of
1997. Several of the Company's competitors have announced their intention to
enter these auctions to obtain access to the local wireless markets.
 
    In paging services, the Company competes with established companies such 
as Comunicaciones MTEL (Skytel), S.A. de C.V., Enlaces Radiofonicos, S.A. de 
C.V. (Digitel), Telecomunicaciones Elektra, S.A. de C.V. (Biper), Grupo Radio 
Beep, S.A. de C.V., Comunicacion Dinamica Metropolitana (Codime) and 
Buscatel, S.A. de C.V., a Telmex subsidiary. In addition, several new 
concessions have been awarded in the last year. Other companies have publicly 
announced their intention to provide similar services in Mexico.
 
    In providing long distance telephone service, Iusacell faces competition
from ten other concession holders, including Telmex and joint venture companies
in which AT&T and MCI have beneficial ownership interests. Presubscription
balloting is currently taking place in certain cities whereby telephone
customers choose their long distance carrier. The Company has chosen not to
commit significant marketing resources to the balloting process and has fared
poorly in initial balloting results.
 
    In the local telephony market, the Company expects to face significant
competition from both Telmex, the existing monopoly, and new competitors
entering this market through the upcoming 450 MHz and 1.9 GHz (PCS) auctions.
 
    In providing data transmission services, Iusacell competes for customers
with Telmex and Telecom. In addition, the Company believes that the current
Mexican data transmission industry includes over 1,000 private networks that
provide data transmission services.

    The Company has filed suit with the Federal Competition Commission against
Telmex and Telcel, claiming that the two companies have engaged in monopolistic
practices in the Mexican telecommunications market, including unlawful
cross-subsidies by Telmex of Telcel's cellular phone operations. In addition,
the Company is currently involved in disputes with Telmex over the rates that
Telmex charges for interconnection services and over billing and collection
services the Company renders on behalf of Telmex. See "--Legal Proceedings."

INTERNATIONAL JOINT VENTURES
 
    Iusacell owns directly 27.3% and, indirectly through its 70.1% interest in a
Colombian holding company, 3.5% of the equity interest in Consorcio Ecuatoriano
de Telecommunicaciones, S.A. ("Conecel"), one of two Ecuadorean cellular
companies. The Peralta Group holds an additional 15.1% of Conecel's equity.
Iusacell's investment in Conecel is passive. Iusacell does not intend to fund
any significant capital calls that may be issued by Conecel in the future. The
Company is currently considering divesting its interest in Conecel.
 
                                       19
<PAGE>

    In December 1996, Iusacell agreed to sell its wholly-owned subsidiary,
Iusatel Chile, a Chilean long distance company, to Inversiones Druma, S.A.
("Inversiones") for U.S. $5.0 million. The sale transaction also includes a
capitalization of U.S. $13.3 million of obligations of the Company to Iusatel
Chile. In March 1997, Inversiones notified Iusacell that it seeks to rescind the
transaction due to alleged omissions and misrepresentations and therefore was
not going to pay the purchase price. Iusacell intends to seek to enforce the
December 1996 agreement.
 
GOVERNMENT REGULATION
 
    Telecommunications systems in Mexico are regulated by the SCT and the
Mexican Federal Telecommunications Commission, an independent regulatory body
within the SCT, pursuant to the LEY FEDERAL DE TELECOMUNICACIONES (the "1995
Telecommunications Law"), which became effective on June 8, 1995, although
certain rules set forth in the LEY DE VIAS GENERALES DE COMUNICACION, the
REGLAMENTO DE TELECOMUNICACIONES and the rules promulgated thereunder
(collectively, the "Original Communications Laws") generally remain effective.
These laws and regulations define the regulatory structure applicable to the
nationwide telecommunications infrastructure and the provision of
telecommunications services. They govern, among other things, applications to
install, maintain and operate telecommunications systems; the establishment of
technical standards for the provision of telecommunications services; and the
granting, revocation and modification of concessions and permits. In particular,
concessions and permits granted under the Original Communications Laws (which is
the case for most concessions and permits granted to the Company and its
subsidiaries) should be governed by the Original Communications Laws, except for
provisions included in the 1995 Telecommunications Law which grant rights
enhancing those set forth in the Original Communications Laws. However, rates
charged by holders of concessions and permits granted under the Original
Communications Laws will continue to require prior approval from the SCT, unless
such concession or permit is amended.
 
    CONCESSIONS AND PERMITS
 
    To provide public telecommunications services in Mexico through a public
network, the service provider must first obtain a concession from the SCT.
Pursuant to the 1995 Telecommunications Law, concessions for public networks may
not exceed a term of 30 years, and concessions for radioelectric spectrum may
not exceed a term of 20 years. Concessions may be extended for a term equivalent
to the term for which the concession was originally granted. Concessions
specify, among other things, (i) the type of network, system or service, (ii)
the allocated spectrum, if applicable, (iii) the geographical region in which
the holder of the concession may provide the service, (iv) the required capital
expenditure program, (v) the term during which such service may be provided,
(vi) the payment, where applicable, required to be made to acquire the
concession, including, where applicable, the participation of the Mexican
government in the revenues of the holder of the concession, and (vii) any other
rights and obligations affecting the concession holder. In addition to
concessions, the SCT may also grant permits for (i) establishing, operating or
exploiting private telecommunications services not constituting a public network
and (ii) installing, operating or exploiting transmission-ground stations. There
is no specified maximum term for permits. Under the 1995 Telecommunications Law,
only registration with the SCT is required to provide value-added
telecommunications services.
 
    Under the 1995 Telecommunications Law and the LEY DE INVERSION EXTRANJERA
(the "Foreign Investment Law"), concessions may only be granted to Mexican
individuals and to Mexican corporations whose foreign investment participation
does not exceed 49% of the voting shares thereof or who are not otherwise
controlled by non-Mexicans, except that, in the case of concessions for cellular
communications services, foreign investment participation may exceed 49% with
the prior approval of the Mexican Foreign Investment Commission. There are no
foreign investment participation restrictions in respect of operations conducted
under permits.
 
                                       20
<PAGE>

    A concession or a permit may be terminated pursuant to the 1995
Telecommunications Law upon: (i) expiration of its term, (ii) resignation by the
concession holder or the permit holder, (iii) revocation, (iv) expropriation or
(v) dissolution or bankruptcy of the concession holder or the permit holder.
 
    A concession or a permit may be revoked prior to the end of its term under
certain circumstances, such as: (i) unauthorized interruption of service, (ii)
the taking of any action that impairs the rights of other concessionaires or
permit holders, (iii) failure to comply with the obligations or conditions
specified in the concession or permit, (iv) failure to provide interconnection
services with other holders of telecommunications concessions and permits, (v)
loss of the concession or permit holder's Mexican nationality, (vi) unauthorized
assignment, transfer or encumbrance of the concession or permit, any rights
thereunder or assets used for the exploitation of the concession or permit,
(vii) failure to pay to the Mexican government its fee for the concession or,
where applicable, its participation in the revenues of the holder of the
concession and (viii) participation of any foreign government in the capital
stock of the holder of the concession. In addition, the SCT may establish for
any concession further events which could result in revocation of that
concession.
 
    The Mexican government, through the SCT, may also temporarily seize all
assets related to a concession or permit in the event of a natural disaster,
war, significant public disturbance or threats to internal peace and for other
reasons related to preserving public order or for economic reasons. In addition,
the government has the statutory right to expropriate related assets for public
interest reasons. Under Mexican law, the Mexican government is obligated to
compensate the owner of the assets in the case of a statutory expropriation or
temporary seizure, except in the event of war. If the Mexican government
temporarily seizes such assets, it must indemnify the concession holder for all
losses and damages, including lost revenues. In the case of an expropriation,
the amount of the compensation is to be determined by appraisers. If the party
affected by the expropriation disagrees with the amount appraised, such party
may initiate judicial action against the government. Should no agreement be
reached on the amount of the indemnity in the case of a seizure or
expropriation, such determination will be made by an independent appraiser.
Iusacell is not aware of any instance in which the SCT has exercised any of the
foregoing powers in connection with a cellular company.
 
    THE ORIGINAL CONCESSION.  Iusacell's right to provide radiotelephony, local
wireless and data transmission services nationwide, as well as cellular service
in Region 9, is based upon the concession granted to the predecessor of
Iusacell's wholly owned subsidiary, SOS Telecomunicaciones, S.A. de C.V.
("SOS"), on April 1, 1957, as amended (the "Original Concession"). The term of
the Original Concession is 50 years, and it expires on April 1, 2007. The
Original Concession may, however, be revoked prior to such date in the event
that SOS fails to comply with its terms or applicable law. In consideration for
the Original Concession, SOS must make payments to the Mexican government equal
to 5% of all gross revenues derived from services provided through its Region 9
cellular network and payments in an amount which is the greater of (i) 4% of all
gross revenues and (ii) 10% of net income, in either case, derived from services
provided through its nationwide radiocommunication network. Under the terms of
the Original Concession, SOS must continually modernize its services. In
updating its services, SOS must submit technical and economic plans for approval
by the SCT. In determining whether to approve these plans, the SCT is authorized
to consider whether the plans sufficiently address factors such as the public
interest and efficiency and uniformity in telecommunications throughout Mexico.
The Original Concession is renewable upon timely application to the SCT,
provided that SOS has complied with all of the requirements of the Original
Concession and agrees to any new terms and conditions established by the SCT at
the time of such renewal.
 
                                       21

<PAGE>

    Initially, the Original Concession authorized only the installation and
commercial operation of nationwide mobile (vehicle-installed) radiotelephone
public service in the 132-144 MHz frequency range. Since then, however, the
Original Concession has been amended numerous times, thereby allowing Iusacell
to expand the types of telecommunications services which it may offer. In 1978,
the Original Concession was amended to grant SOS an additional allocation in the
440-450 MHz and 485-495 MHz frequency ranges in return for yielding a portion of
its 132-144 MHz frequency range allocation. SOS retained the frequencies between
138 and 144 MHz. Between 1986 and 1989, the Original Concession was further
amended to enable SOS to provide fixed rural radiotelephone service, to offer
telex and data transmission with the obligation to link its subscribers to the
network owned by Telecom, and to interconnect its radiocommunications ground
stations through satellite. In 1989, SOS was authorized to install, operate and
maintain a mobile public radiocommunications network with cellular technology in
the 825-835 MHz and 870-880 MHz frequency ranges in Region 9. In 1990, SOS was
authorized to carry intra-regional cellular-to-cellular communications
throughout Region 9 without being required to interconnect with the long
distance carrier. In 1992, SOS was authorized to provide public data
transmission service nationwide through its radio communications networks
without the obligation to link its subscribers to the Telecom network. In 1993,
SOS was granted an additional 5 MHz band in the 800 MHz frequency range for the
provision of cellular service, due to the high volume of cellular traffic
experienced in Region 9. In the same year, SOS was authorized to improve its
radiocommunications public service in the 440-450 MHz and 485-495 MHz frequency
ranges by utilizing digital technology and to interconnect its
telecommunications systems through fiber optic, satellite and microwave
technologies. The SCT also clarified the ability, and indeed the obligation, of
SOS to interconnect customers of its nationwide radio communications network
regardless of whether such customers use fixed, mobile or portable telephones.
 
    In accordance with the 1995 Telecommunications Law, SOS applied to renew the
Original Concession in March 1995. Given the nearly 10 years remaining on the
term of the Original Concession, the Company does not expect any definitive
determination by the SCT with respect to the renewal application in the near
term.
 
    CELLULAR CONCESSIONS.  Mexico is divided into nine cellular regions. The SCT
has allocated cellular telephone system frequencies in each region from the
825-835 and 870-880 MHz frequency bands ("Band A") and from the 835-845 and
880-890 MHz frequency bands ("Band B") of the radio spectrum. In each region,
Telcel, the holder of the wireline cellular concession, is assigned Band B, and
the holder of the non-wireline cellular concession in each region is assigned
Band A.
 
    In Region 9, Iusacell holds the right to provide cellular service pursuant
to an authorization granted to SOS by the SCT in 1989 under the Original
Concession. In Regions 5, 6 and 7, Iusacell holds the right to provide cellular
service through its subsidiaries Comcel, Sistemas Telefonicos Portatiles
Celulares, S.A. de C.V. ("Portacel") and Telecomunicaciones del Golfo, S.A. de
C.V. ("Telgolfo"), respectively. See Note 2 to the Audited Consolidated
Financial Statements. Comcel, Portacel and Telgolfo each hold 20-year
concessions expiring in 2010 which authorize these subsidiaries to install,
operate, maintain and exploit mobile public radiotelephone networks with
cellular technology for commercial use in Band A. In consideration for these
authorizations and concessions, the subsidiaries made initial payments to the
Mexican government and, in addition, must make payments as follows:
 
<TABLE>
<CAPTION>
                                                                                PERCENT OF GROSS
                                                                               REVENUES PAYABLE TO
                                                                               MEXICAN GOVERNMENT
                                                                           ---------------------------
<S>                                                                        <C>
Comcel...................................................................                   8%
Portacel.................................................................                   7
Telgolfo.................................................................                   8
</TABLE>
 
                                       22
<PAGE>

    By the terms of their concessions, Comcel, Portacel and Telgolfo must
continually modernize their services after receiving approval of their technical
and economic plans from the SCT. In determining whether to approve these plans,
the SCT is authorized to consider whether the plans sufficiently address factors
such as the public interest and efficiency and uniformity in telecommunications
throughout Mexico. These concessions may be revoked or terminated prior to their
expiration dates in the event the concession holder fails to comply with certain
conditions set forth in the concessions or applicable law. The concessions may,
however, be renewed for a term equal to the original term upon timely
application to the SCT, provided that the concession holder had complied with
all of the requirements of its concession and agrees to any new terms and
conditions established by the SCT at the time of such renewal.
 
    PAGING.  On December 14, 1995, the Company and Infomin formed Infotelecom 
as a joint venture to market national and international paging services. 
Infomin has a concession, which expires on July 20, 2009, to provide 
nationwide paging services in Mexico. Although the joint venture agreement 
between Iusacell and Infomin contemplates that Infomin will ultimately 
transfer its paging concession to Infotelecom, Infomin's paging concession 
prohibits foreign ownership of more than 49% of the voting shares of the 
entity holding the concession. As a result, Infomin will be unable to 
contribute its paging license to the joint venture so long as Bell Atlantic 
continues to control the management of Iusacell and Iusacell continues to 
hold more than 49% of the voting shares of Infotelecom. See "--Other 
Services--Paging." Infotelecom is required to make monthly payments to 
Infomin equal to 5% of all gross revenues for the preceding month. This 
payment represents the amount which Infomin as concession holder must pay the 
SCT for the right to provide paging service.
 
    LONG DISTANCE CONCESSION.  Iusacell's right to provide international long
distance services is based upon a long distance concession granted by the SCT to
Iusatel on October 16, 1995. The term of the long distance concession is 30
years and may be renewed upon timely application to the SCT, for an equal period
of time, provided that Iusatel complies with certain requirements. Pursuant to
the concession, Iusatel is required to comply with certain technical
specifications and must serve with its own facilities a minimum of 60 cities by
May 31, 1998 and 22 additional cities by December 31, 2000. See "--Other
Services--Long Distance" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources--Capital
Expenditures."
 
    LOCAL TELEPHONY.  Iusacell believes its right to provide local telephony
service is derived from the Original Concession. The Original Concession, as
originally granted, permitted the Company to provide radiocommunications service
to vehicle-mounted terminal equipment nationwide. In 1986, the SCT amended the
Original Concession to authorize the Company to provide fixed public
radiotelephony service in rural areas nationwide in accordance with plans to be
approved by the SCT. In 1990, the REGLAMENTO DE TELECOMUNICACIONES was
promulgated by the Mexican government which further modified the Original
Concession. These regulations classified radiocommunications services on the
basis of the networks used to provide such services rather than upon the basis
of subscriber terminal equipment. Radiocommunications networks are generally
classified as either "fixed" or "mobile." Iusacell's radiocommunications network
is a mobile network. In 1993 the SCT clarified the ability, and indeed the
obligation, of SOS to interconnect customers of its nationwide
radiocommunications network regardless of whether such customers use fixed,
mobile or portable telephones.
 
    Pursuant to the Original Concession, the commencement of construction and
marketing of local wireless service in the 450 MHz frequency band on a
commercial basis requires the prior approval of the SCT. The Company has
experienced substantial delays in obtaining the SCT's approval of its technical
and economic plans for local wireless service in the 450 MHz frequency band.
However, on June 10, 1997, the SCT and the Company reached agreement on a
process by which the Company could obtain a concession issued and recognized by
the SCT to provide local wireless service in the 450 MHz
 
                                       23
<PAGE>

frequency band. Under this agreement, Iusacell would convert and consolidate
certain of its existing concessioned radiotelephony frequencies into 450 MHz
spectrum in Regions 4, 5, 6, 7 and 9 and would have a right of first refusal to
acquire the concessions to provide local wireless service over such frequencies
at prices derived from the prices of the winning bids in the auctions for 450
MHz and 1.9 GHz (PCS) frequency bands scheduled by the Mexican government for
the fall of 1997. Until the conclusion of such auctions, Iusacell has received a
provisional authorization to use 450 MHz spectrum to provide local wireless
service to up to 50,000 subscribers.
 
    The Company is exploring alternatives for providing local telephony
services, including limited zone wireless services in the 800 MHz (cellular) or
1.9 GHz (PCS) frequency bands deploying digital technology that will permit
mobility. See "Management's Discussion and Analysis of Financial Condition and 
Results of Operations--Local Telephony in the 450 MHz Frequency Band; CDMA 
Overlay."
 
    DATA TRANSMISSION.  Iusacell's right to offer telex and provide public data
transmission service throughout Mexico is derived from the Original Concession.
Iusacell utilizes its allocations in the 138-144 MHz, 440-450 MHz and 485-495
MHz frequency bands nationwide to provide data transmission services.
 
    SATELLITE TRANSMISSION PERMIT.  On December 15, 1991, Satelitron, a joint
venture formed among Hughes Network Systems, Iusacell and two other investors,
was granted a 15-year permit to provide dedicated circuit services and private
networks through Mexican satellites or any other satellites designated by the
Mexican government. The Satelitron permit is renewable for 15 additional years
upon timely application to the SCT, provided Satelitron has complied with all of
the requirements of the permit and agrees to any new terms and conditions
established by the SCT at the time of such renewal. Under this permit,
Satelitron is required to make monthly payments to the SCT equal to 2.5% of all
gross revenues derived from its provision of access to its satellite bandwidth,
and 2.5% of all such gross revenues to Telecom for supervision and supporting
services.
 
    DEDICATED MICROWAVE CIRCUIT SERVICES PERMIT.  On December 8, 1993, the SCT
authorized SOS to use its microwave network's excess capacity to provide
dedicated circuit services. In accordance with the terms of this permit, these
dedicated microwave circuits cannot be interconnected to public exchange
networks, and the service must only be provided through the links of the
microwave network authorized by the SCT. On February 1, 1994, the SCT authorized
SOS to carry voice, data and video conferencing through these dedicated circuit
services.
 
    VALUE-ADDED SERVICES PERMIT.  On June 17, 1993, SOS was granted a permit to
provide through its public network the following value-added telecommunications
services to its cellular subscribers: (i) secretarial service, (ii) voice mail
and (iii) data transmission. The term of this permit is the same as that of the
authorization for using the Region 9 cellular network through which the
value-added services are to be provided. Under this permit SOS is required to
make annual payments to the Mexican government equal to 5% of all gross revenues
derived directly from the provision of these services. In October 1994, Comcel,
Telgolfo and Portacel were each granted a permit to provide secretarial services
under the same terms granted to SOS, including the making of the aforementioned
payments to the Mexican government.
 
    FOREIGN OWNERSHIP RESTRICTIONS
 
    Pursuant to the 1995 Telecommunications Law and the Foreign Investment Law,
holders of concessions to provide telecommunications services in Mexico
(including long distance and local telephony, but not cellular service) cannot
have a majority of their voting shares owned by, and cannot be otherwise
 
                                       24
<PAGE>

controlled by, foreign persons. In February 1997, the Foreign Investment
Commission conditioned its approval of Bell Atlantic assuming management control
over the Company and its subsidiaries upon the requirement that, within a
renewable period of 180 days, Iusacell would transfer at least 51% of the voting
shares of Iusatelecomunicaciones and Iusatel to Mexican investors on terms
acceptable to the Foreign Investment Commission. Iusacell intends to comply with
this requirement by transferring 51% of the voting shares of these subsidiaries
to Mexican nationals while retaining a larger equity interest through the
ownership of "neutral" limited-voting shares (INVERSION NEUTRA).
 
    Iusacell has commenced discussions with Mexican nationals with respect to
the sale of the requisite voting interest in Iusatelecomunicaciones and Iusatel.
Iusacell intends that, as part of any such transfer, it will enter into a
shareholders agreement with the purchaser that will contain adequate protections
for Iusacell, including governance rights commensurate with Iusacell's equity
interest in such subsidiaries.
 
    In order to participate in the auctions for concessions for microwave
frequencies scheduled to be held in July 1997, the Company recently formed a
joint venture with Jose Ramon Elizondo, a Director of the Company and a Mexican
investor. The Company has petitioned the Foreign Investment Bureau to approve a
capital structure substantially similar to that authorized for Iusatel and
Iusatelecomunicaciones for the microwave joint venture.
 
    The concession pursuant to which the Company commercializes paging services
is also subject to foreign ownership restrictions. See "--Concessions and
Permits--Paging."
 
    RATES FOR TELECOMMUNICATIONS SERVICES
 
    Under the Original Communications Laws, SCT approval was required for rates
charged for all basic and certain value-added cellular services and for data
transmission services. Historically, the SCT permitted rate increases based on
the cost of service, the level of competition, the financial situation of the
carrier and certain macroeconomic factors. Carriers were not allowed to discount
the rates authorized by the SCT, although operators occasionally waived
activation fees on a promotional basis. Interconnection rates were also
authorized by the SCT. All terms of interconnection (such as point of
interconnection) other than interconnection rates were negotiated between the
regional non-wireline cellular carriers and Telmex under the SCT's supervision.
Rates for dedicated circuit services through microwave networks, and dedicated
circuits and private networks through satellites, were not regulated under the
Original Communications Laws.
 
    Under the 1995 Telecommunications Law, rates for telecommunications services
(including cellular and long distance services) are now freely determined by the
providers of such services. Providers are prohibited from adopting
discriminatory practices in the application of rates. In addition, the SCT is
authorized to impose specific rate requirements on those companies determined by
the Federal Competition Commission to have substantial market power. All tariffs
for telecommunications services (other than value-added services) must be
registered with the Federal Telecommunications Commission prior to becoming
effective.
 
    UNITED STATES REGULATION
 
    Bell Atlantic, like all other regional Bell operating companies, was subject
to a consent decree (the "Decree") entered in a United States federal court in
1982 resulting from antitrust litigation brought by the United States Department
of Justice against AT&T. The Decree required AT&T to divest itself of its local
telephone companies. Under the Decree, Bell Atlantic was prohibited from
providing interLATA (long distance) telecommunications, engaging in the
manufacture of customer premises equipment ("CPE"), or engaging in the
manufacture or sale of telecommunications equipment.
 
                                       25
<PAGE>

    The Telecommunications Act of 1996 (the "1996 Act"), which became effective
on February 8, 1996, includes provisions that would open local telephony markets
to competition and would permit regional Bell operating companies, such as Bell
Atlantic, to provide interLATA services (long distance) and video programming
and to engage in manufacturing. Under the 1996 Act, Bell Atlantic was allowed to
provide certain interLATA (long distance) services immediately upon enactment,
including interLATA (long distance) services originating outside the states
where its subsidiaries provide local exchange telephone services or interLATA
(long distance) services that are "incidental" to other permitted business such
as wireless services. However, the ability of Bell Atlantic and its affiliates
to engage in businesses previously prohibited by the Decree, including providing
interLATA (long distance) services originating in the states where Bell
Atlantic's subsidiaries provide local exchange telephone service, and
manufacturing CPE or telecommunications equipment, is largely dependent on
satisfying certain conditions contained in the 1996 Act and any regulations
promulgated thereunder.
 
    As a company affiliated with Bell Atlantic, the operations of Iusacell had
been subject to the Decree and the various waivers granted thereunder. Bell
Atlantic obtained waivers under the Decree in 1986 and 1993 that together
permitted it to conduct business outside the United States, subject to certain
exceptions and restrictions. Under such exceptions and restrictions, a foreign
telecommunications entity affiliated with Bell Atlantic (an "FTE"), such as
Iusacell, could not provide interexchange (long distance) telecommunications
services between points in the United States or own any international
telecommunications facilities in the United States. As to telecommunications
traffic between the United States and a foreign country, an FTE could provide
only the foreign "half" of such traffic. An FTE was also subject to certain
prohibitions on discrimination in handling traffic to and from the United States
and limitations on interests it could own in international cables and satellite
facilities to and from the United States. Finally, an FTE was subject to
prohibitions on exporting to the United States any telecommunications equipment
or CPE manufactured outside the United States.
 
    The 1996 Act eliminated the restrictions under the Decree that preclude an
FTE from providing the United States "half" of traffic originating in a foreign
county, from exporting to the United States telecommunications equipment or CPE
manufactured outside the United States and, subject to the same conditions that
Bell Atlantic must satisfy under the 1996 Act and any regulations promulgated
thereunder only with respect to interLATA (long distance) telecommunications
services originating in Bell Atlantic's local exchange territories, from
providing interLATA (long distance) telecommunications services between points
in the United States or international long distance service originating in the
United States and owning international telecommunications facilities in the
United States. Under the 1996 Act, Iusacell may now provide both the foreign
"half" and the United States "half" of telecommunications traffic originating in
Mexico (or any other foreign country) and may now carry "transit" traffic (that
is, international telecommunications traffic which, though routed through the
United States, neither originates nor terminates in the United States) through
the United States. In addition, Iusacell may, on a resale basis, carry United
States originated traffic bound for Mexico (or other foreign countries) so long
as the point of interconnection is, and the traffic originates, outside the
states where Bell Atlantic's subsidiaries provide local exchange telephone
service. Activities permitted by the 1996 Act are not subject to the
prohibitions set forth in the Decree and the waivers issued thereunder on
discrimination in handling traffic to and from the United States and on
limitations on interests an FTE could own in international cables and satellite
facilities to and from the United States.
 
    In 1996, Iusatel applied for and received authorization under Section 214 of
the Communications Act of 1934 to become a facilities-based provider of
international long distance services from the United States (the "Section 214
Authorization"). The Section 214 Authorization was transferred to a Peralta
Group entity in January 1996 in anticipation of the consummation of the 1996
Share Conversion Agreement (as defined). Upon the completion of the
restructuring of Iusatel to comply with the 1995 Telecommunications Law and the
Foreign Investment Law, Iusatel and such Peralta Group entity will seek to
formally return control of the Section 214 Authorization to Iusatel. The Company
has not yet
 
                                       26
<PAGE>

determined whether it will engage in activities permitted by the 1996 Act or,
upon any reassignment to Iusatel, the Section 214 Authorization. If the Company
chooses to engage in such activities, no definitive prediction can be made as to
the specific impact of such activities on the Company's business, financial
condition or results of operations.
 
    Other laws of the United States may restrict certain activities of Iusacell
by virtue of Bell Atlantic's ownership interest. Such laws may include the
United States Trading with the Enemy Act, the United States Cuban Democracy Act,
the Cuban Liberty and Democratic Solidarity (Libertad) Act of 1996 and other
laws and regulations that restrict trade with, and investments in, certain
countries, including Cuba, and the United States Foreign Corrupt Practices Act.
 
    The New Shareholders Agreement contains, and the predecessor agreement
thereto contained, certain provisions, designed to require Iusacell to refrain
from taking any actions that would cause Bell Atlantic to be in violation of
applicable law.

Employees

      As of December 31, 1996, Iusacell had approximately 2,280 full-time and
part-time employees, of whom approximately 23% were members of a labor union. In
April 1997, as part of its reorganization, Iusacell implemented a headcount
reduction. As of May 31, 1997, Iusacell had approximately 1,996 employees. The
Company has never experienced a work stoppage and management considers its
relationship with its employees to be good.

ITEM 2. DESCRIPTION OF PROPERTY

      Throughout the regions served by its cellular operations, Iusacell
operates 57 customer service centers and a total of 236 cell sites, 42
repeaters, five mobile switching centers, two switches for local wireless
service and three switches for long distance service.

      The Company generally leases the land where the Iusacell customer 
service centers, cell sites and mobile switching centers are located. 
Iusacell owns and leases administrative offices in Mexico City as well as in 
Guadalajara, Puebla, Monterrey, Leon and Ciudad Juarez. The Company generally 
owns its cellular network equipment subject to certain liens.

ITEM 3. LEGAL PROCEEDINGS

    Although Iusacell is a party to certain legal proceedings in the ordinary
course of its business, the Company's management believes that none of these
proceedings, individually or in the aggregate, is likely to have a material
adverse effect on the Company.
 
    The Company is currently involved in a dispute with Telmex over the terms 
of Telmex's interconnection agreements with the Company and other cellular 
carriers. Telmex is the exclusive provider of interconnection services in 
Mexico and has unilaterally increased interconnection rates for two 
consecutive years. The Company has disputed the increases and continues to 
pay Telmex the interconnection rate in effect prior to the increases. In 
addition, Iusacell's cellular subsidiaries have been offsetting their charges 
for the termination of Telmex customers' local calls in their cellular 
networks against Telmex's charges for interconnection. The billed, disputed 
interconnection charges totalled approximately Ps. 89.4 million (U.S.$11.3 
million) as of December 31, 1996, and are continuing to accrue. The Company 
also claims to be entitled to a fee for billing and collection services 
rendered to Telmex on long distance charges incurred on the Company's network 
by the Company's cellular customers. This fee has been deducted from amounts 
paid by the Company to Telmex for interconnection services provided to the 
Company's cellular customers. The disputed amounts equaled approximately Ps. 
29.6 million (U.S.$3.8 million) as of December 31, 1996, and are continuing 
to accrue. In addition, Telmex has asserted that Iusacell
 
                                       27
<PAGE>

owes interest on such disputed charges in the amount of approximately Ps. 29.2
million (U.S. $3.7 million) as of December 31, 1996.
 
    While the Company believes that Telmex's actions are in violation of its
agreement with cellular carriers, that the Company is not obligated to pay
Telmex at the increased rates and that Telmex is obligated to pay reciprocal
termination charges and for billing and collection services rendered to Telmex
in the long distance services provided to Iusacell's cellular customers, there
can be no assurance that the Company will not be required to pay Telmex all or a
portion of the amounts in dispute either on a going-forward basis or
retroactively, or that the Company will not have to return to Telmex the amounts
Iusacell has retained for such reciprocal termination charges or such billing
and collection services.
 
    A ruling by the Federal Competition Commission is still pending on the suit
filed by the Company in November 1995, against Telmex and Telcel, claiming that
the two companies have engaged in monopolistic practices in the Mexican
telecommunications market, including unlawful cross-subsidies by Telmex of
Telcel's cellular phone operations. Telmex and Telcel filed eight motions
against the suit, all of which motions were rejected by the Federal Competition
Commission. In February 1997, the Federal Competition Commission imposed a fine
of Ps. 847,500 (U.S.$107,537) on Telmex and Telcel for their refusal to provide
the expert appointed by the Company with the necessary information to prepare
his opinion on the cross-subsidies claim. Telmex and Telcel filed for an
injunction (AMPARO) against the Federal Competition Commission asserting that
Mexican antitrust laws do not apply to Telmex and Telcel and questioning the
constitutionality of the Federal Competition Commission. Although Mexican courts
have stayed the payment of the fines levied against Telmex and Telcel, the fines
continue to accrue interest.
 
    Mitsubishi Electronics America, Inc. ("Mitsubishi") filed a complaint in the
United States on July 18, 1996 against the Company, Bell Atlantic and Bell
Atlantic Latin American Holdings, Inc. alleging, among other things, that the
Company breached a purported contract for the purchase of 60,000 local wireless
telephone terminals at a cost of U.S.$510 each. The Company's motions to dismiss
the complaint for lack of personal jurisdiction and on substantive grounds were
rejected, although the court reserved judgment on the Company's motion to
dismiss for FORUM NON CONVENIENS. The Company is unable at this time to estimate
its potential liability, if any, and accordingly has not created any contingency
reserve with respect to the litigation.
 
    On August 2, 1996, the SCT ordered Comcel, the Company's Region 5 concession
holder, to pay a Ps. 50.3 million penalty for alleged late payments of fees in
connection with the original granting of the cellular concession for Region 5.
Comcel filed a request for review of the order with the SCT on August 22, 1996,
which is still pending. On February 25, 1997, the Ministry of Finance and Public
Credit also notified Comcel of the alleged obligation. The Company believes that
the penalty is unwarranted since the SCT had granted Comcel extensions of the
fee payment in 1991 and 1992. As a result, the Company has not created any
contingency reserves for the penalty.
 

                                       28
<PAGE>

ITEM 4. CONTROL OF REGISTRANT

    The Peralta Group currently owns approximately 47.7% of the economic
interest of Iusacell and approximately 52.3% of the Company's voting rights.
Bell Atlantic currently owns approximately 42.1% of the economic interest of
Iusacell and approximately 44.6% of the Company's voting rights. The following
table sets forth the ownership of all classes of the capital stock of Iusacell
by the Peralta Group and Bell Atlantic. Excluding shares held by the Peralta
Group as disclosed below, the Company's remaining directors and executive
officers as a group own less than 1% of the outstanding Series D shares and less
than 5% of the outstanding Series L shares.
 
<TABLE>
<CAPTION>
                                                               IDENTITY OF
TITLE OF CLASS                                               PERSON OR GROUP    AMOUNT OWNED    PERCENT OF CLASS
-----------------------------------------------------------  ----------------  ---------------  ----------------
<S>                                                          <C>               <C>              <C>
Series A...................................................  Peralta Group        332,966,159           44.6%
                                                             Bell Atlantic        413,787,251            55.4
Series B...................................................  Bell Atlantic          5,562,450           100.0
Series D...................................................  Peralta Group        158,613,110            84.9
Series L...................................................  Peralta Group         27,834,000            18.6
                                                             Bell Atlantic         38,792,690            25.9
</TABLE>
 
    In February 1997, Bell Atlantic and the Peralta Group consummated certain of
the transactions contemplated by the 1996 Share Conversion Agreement entered
into among the Peralta Group, Bell Atlantic and the Company (the "1996 Share
Conversion Agreement"). As a result of the surrender to the Company by Bell
Atlantic and the Peralta Group of shares of certain series of the Company's
capital stock for conversion into shares of other series of the Company's
capital stock, Bell Atlantic obtained management control of Iusacell despite the
Peralta Group maintaining a majority of the voting rights pertaining to the
Company's capital stock. Bell Atlantic paid the Peralta Group U.S.$50.0 million
as consideration for such conversions. In order to effect this change of
management control, the bylaws of the Company were amended. Pursuant to these
amendments to Iusacell's bylaws. Bell Atlantic has the ability to determine the
outcome of any action requiring the approval of the Company's shareholders,
except that the Peralta Group's concurrence is currently required in order to
change the nationality, corporate nature or corporate purpose of the Company, to
amend the Company's bylaws, to merge or dissolve the Company, to spin off parts
of the Company, to increase the fixed capital of the Company, to issue bonds or
preferred capital stock, to redeem shares of capital stock, to cancel the
registration of the Series L Shares of the Company on the Mexican Stock Exchange
or any other securities exchange, to sell or acquire, or exercise withdrawal
rights with respect to, shares of other companies if the relevant consideration
exceeds 20% of the stockholders' equity of the Company and with respect to any
other matter which, pursuant to applicable law or the Company's bylaws, may
require a special quorum at the relevant shareholders meeting.
 
    In accordance with the bylaws of the Company and the Amended and Restated
Shareholders Agreement dated as of February 18, 1997 (the "New Shareholders
Agreement"), Iusacell's Board of Directors consists of 21 members. The Series A
shareholders have the right to appoint ten Series A Directors and their
alternates, the Series B shareholders have the right to appoint nine Series B
Directors and their alternates, the Series D shareholders have the right to
appoint one Series D Director and an alternate and the Series L shareholders
have the right to appoint one Series L Director and an alternate. Pursuant to
the New Shareholders Agreement, Bell Atlantic and the Peralta Group each have
the right to nominate two Series A Directors and their respective alternates and
have agreed to vote their respective Series A shares to elect all such nominees.
Bell Atlantic and the Peralta Group have also agreed to consult with each other
to attempt to agree upon the remaining six Series A Directors and their
alternates; in the absence of any such agreement, Bell Atlantic, as holder of a
majority of the Series A Shares, has the right to nominate and elect such
remaining Series A Directors and their alternates.
 
                                       29
<PAGE>

    The Company's bylaws provide that resolutions of the Board of Directors
shall be valid when approved by a majority of the vote of the members present,
including the favorable vote of at least one Series A Director and one Series B
Director.  As a result, the Directors nominated by Bell Atlantic have the power
under the bylaws to approve, without the affirmative vote of any other
Directors, all resolutions of the Board of Directors. The New Shareholders
Agreement, however, grants the Peralta Group supermajority rights with respect
to certain transactions. For actions of the Board of Directors, a "supermajority
vote" means the affirmative vote of a majority of the members of the Board of
Directors, including at least one Series A Director, one Series B Director and
one Series D Director. The following transactions are subject to a supermajority
vote by the Company's Board of Directors: (i) acquisitions of
non-telecommunications businesses for a purchase price in excess of U.S.$30.0
million; (ii) certain acquisitions, joint ventures and mergers within the
telecommunications business involving assets in excess of U.S.$100.0 million;
(iii) certain dispositions of assets for a consideration in excess of U.S.$30.0
million in any twelve month period; (iv) certain incurrences of indebtedness
after January 1, 1998 in an amount exceeding U.S.$100.0 million in the aggregate
within any twelve month period; (v) certain issuances of capital stock in an
amount exceeding U.S.$50.0 million in the aggregate within any twelve month
period; (vi) entering into, amending or terminating contracts with or for the
benefit of certain affiliates of the Company, except for any renewals or
extensions on substantially similar terms of certain consulting and seconded
employee arrangements with Bell Atlantic affiliates; (vii) termination or
disposition of any telecommunication transmission business with annual revenues
of more than U.S.$10.0 million in each of the two most recent fiscal years; and
(viii) certain terminations of concessions relating to telecommunications
operations.
 
    After January 1, 1998, each of Bell Atlantic Latin America Holdings, Inc.
("BALAH") and Bell Atlantic International Inc. ("BAII"), acting on behalf of
itself, its affiliates and its transferees, and one member of the Peralta Group,
acting on behalf of the Peralta Group and its transferees, each will have the
right to cause Iusacell to facilitate two registered secondary public offerings
of their shares, subject to certain minimum ownership requirements. In addition,
after January 1, 1998, each of BALAH and BAII and such Peralta Group member has
a one-time option to cause Iusacell to effect a six-month shelf registration of
their shares. After one party's exercise of its registration rights, all other
parties having registration rights may elect to include their shares in the
offering. Any party holding registration rights may not exercise such rights
during the 90-day period commencing on the effective date of any registration
statement filed by Iusacell for a primary equity offering in which gross
proceeds are expected to exceed U.S.$30.0 million. The New Shareholders
Agreement also provides that if Iusacell registers any equity securities for a
primary or secondary offering after January 1, 1998, it must permit BALAH and
BAII and the Peralta Group (and anyone to whom they have transferred shares
otherwise than in a public offering) to include their shares in such offering.
Iusacell has agreed to bear all expenses of any of the above-described primary
or secondary offerings (other than the fees of counsel to the holders of the
registration rights). In addition, the Company has agreed not to effect any
public sale or distribution of securities similar to those being registered
during the period commencing 21 days prior to the effective date of a
registration statement covering the registered securities and continuing until
90 days following such effective date.

                                       30

<PAGE>

ITEM 5. NATURE OF TRADING MARKET

      The Series D and L Common Shares (the "Shares") are listed on the Mexican
Stock Exchange and the American Depositary Shares ("ADSs") representing such
shares are listed on the New York Stock Exchange. The ADSs are evidenced by
American Depositary Receipts ("ADRs") issued by the Bank of New York, as
Depositary under a Deposit Agreement among the Company, the Depositary and the
holders from time to time of ADRs.

      The following tables set forth for the period indicated the high, low and
period end sales prices of the Series D and Series L Common Shares on the
Mexican Stock Exchange as reported by the Mexican Stock Exchange, and the high,
low and period end sales price of the Series D and Series L ADSs on the New York
Stock Exchange as reported by the New York Stock Exchange.


                                       31
<PAGE>

                         Mexican Stock Exchange (in Ps.)

     Period                                           High       Low       Close
     ------                                           ----       ---       -----

Series D
First Quarter 1995                                    7.10       6.70       7.00
Second Quarter 1995                                   7.50       5.94       6.06
Third Quarter 1995                                    7.20       5.80       7.20
Fourth Quarter 1995                                     --         --         --

First Quarter 1996                                    7.20       6.88       6.88
Second Quarter 1996                                   7.00       6.60       6.98
Third Quarter 1996                                      --         --         --
Fourth Quarter 1996                                   6.98       4.98       5.75

Series L
First Quarter 1995                                   10.00       5.40       6.80
Second Quarter 1995                                   8.48       7.00       7.28
Third Quarter 1995                                    9.18       7.08       8.98
Fourth Quarter 1995                                   8.80       8.14       7.96

First Quarter 1996                                    9.60       8.00       8.50
Second Quarter 1996                                  10.10       8.32       8.34
Third Quarter 1996                                    8.30       6.00       6.00
Fourth Quarter 1996                                   7.20       5.25       5.75

                       New York Stock Exchange (in U.S.$)

     Period                                           High       Low       Close
     ------                                           ----       ---       -----

Series D
First Quarter 1995                                   16.00       7.38      10.38
Second Quarter 1995                                  13.13       9.00      10.50
Third Quarter 1995                                   12.38       9.50      10.50
Fourth Quarter 1995                                  10.38       8.00       8.00

First Quarter 1996                                  11.125      8.000      8.875
Second Quarter 1996                                 11.875      8.375      8.750
Third Quarter 1996                                   8.875      6.750      6.750
Fourth Quarter 1996                                  7.125      5.625      5.750

Series L
First Quarter 1995                                   18.75       8.75      11.88
Second Quarter 1995                                  15.88      10.88      12.00
Third Quarter 1995                                   15.50      11.25      13.00
Fourth Quarter 1995                                  13.38       9.25      10.13

First Quarter 1996                                  13.375     10.000     10.875
Second Quarter 1996                                 14.375      9.375     10.750
Third Quarter 1996                                  10.875      7.375      7.500
Fourth Quarter 1996                                  9.500      6.500      7.625


                                       32
<PAGE>


Trading on the Mexican Stock Exchange

      The Mexican Stock Exchange, which was founded in 1894 and has operated
continuously since 1907, is located in Mexico City and is Mexico's only stock
exchange. The Mexican Stock Exchange is organized as a corporation with its
shares being held by 33 brokerage firms.

      Equity trading takes place on the Mexican Stock Exchange between 8:30 AM
and 3:00 PM, Mexico City time, each weekday other than public holidays. The
Mexican Stock Exchange operates a system of automatic suspension of trading in
shares of a particular issuer as a means of controlling excessive price
volatility. The automatic suspension system does not apply to equity securities,
such as the Company's shares, which trade, directly or in the form of depositary
shares, in markets other than the Mexican Stock Exchange, including the New York
Stock Exchange and automated quotation systems.

      Settlement is effected two trading days after a share transaction on the
Mexican Stock Exchange. Deferred settlements, even if by mutual agreement, are
not permitted without the approval of the Comision Nacional Bancaria y de
Valores (National Banking and Securities Commission) ("CNBV"). Most securities
traded on the Mexican Stock Exchange are on deposit with S.D. Indeval, S.A. de
C.V., Institucion para el Deposito de Valores ("Indeval"), a privately owned
central securities depositary that acts as a clearing house, depositary,
custodian, settlement, transfer and registration institution for Mexican Stock
Exchange transactions, eliminating the need for physical transfer of securities.

      As of December 31, 1996, the shares of 158 Mexican companies, excluding
mutual funds, were listed on the Mexican Stock Exchange. In 1996, the ten most
actively traded equity issues represented approximately 71.29% of the total
volume (in terms of Pesos) of equity issues traded on the Mexican Stock
Exchange. There is no active over-the-counter market for equity securities in
Mexico. As of December 31, 1996, the total market value of all shares, excluding
mutual funds, listed on the Mexican Stock Exchange was Ps.838.7 billion.

Registration Standards

      In order to offer securities to the public in Mexico, an issuer must meet
certain qualitative and quantitative requirements. The CNBV published general
rules to implement an intermediate securities market in addition to the current
market operated by the Mexican Stock Exchange, in order to permit less liquid
issues and issuers with a lower capitalization to participate in a public
securities market. In essence, the general rules divide the Securities Section
of the Registro Nacional de Valores e Intermediarios (the "National Registry of
Securities and Intermediaries" or "RNVI") into two subsections, Subsection "A"
and Subsection "B." Registration of securities in Subsection "A" enables such
securities to be eligible for certain transactions for which only securities
classified as "high-liquidity" issues by the Mexican Stock Exchange are eligible
(i.e., issuance of warrants). The Company has been classified as a Subsection
"A" issuer.

      In general, in order to become registered and maintain such registration
in Subsection "A" of the RNVI, an issuer is required to meet more stringent
qualitative and quantitative requirements than for Subsection "B." For example,
in order to become registered in Subsection "A," an issuer is generally required
to have (i) at least three years of operating history; (ii) shareholders' equity
of at least Ps.100,000,000; (iii) profits for the last three years of operations
taken as a whole; (iv) a public float of at least 15% of the capital stock on a
fully diluted basis; and (v) as a result of the offering, there must be at least
200 shareholders, with diversified individual participation with respect to the
total amount of the offering. To maintain their registration in Subsection "A,"
issuers are required to have (i) a shareholders' equity of at least
Ps.50,000,000; (ii) a public float of at least 12% of the capital stock on a
fully diluted basis; and (iii) at least 100 shareholders, whose individual
participation is diversified with respect to the total capitalization of the
issuer, in accordance with the current market price for the securities. The
amounts mentioned herein are updated on a yearly basis to reflect changes in the
National Consumer Price Index (Indice Nacional de Precios al Consumidor or the
"INPC").

      The requirements for Subsection "B" are of the same nature, but the
quantitative requirements are lower. The Mexican Stock Exchange will carry out
on a yearly basis a review of each issuer to determine if it continues


                                       33
<PAGE>

to meet the requirements to be eligible for registration in Subsection "A." The
registration of the securities will be reclassified to Subsection "B" if (a) the
issuer does not meet the shareholders' equity requirements for subsection "A";
or (b) as a result of a spin-off the issuer (spinning company) does not meet the
requirements for subsection "A." In all other cases, if an issuer does not meet
the requirements for either subsection, such issuer shall be required to submit
to the Mexican Stock Exchange a program to cure such failure. In the event the
issuer fails to submit the program or comply with the same, the issuer's
registration and the listing thereof on the Mexican Stock Exchange may be
cancelled by the CNBV.

      Registration with the CNBV does not imply any kind of certification or
assurance related to the merits or the quality of the securities, or the
solvency of the issuer. Issuers of listed securities are required to file
unaudited quarterly financial statements and audited annual financial statements
as well as various other periodic reports with the CNBV and the Mexican Stock
Exchange.

Market Regulation

      In 1946, the Comision Nacional de Valores ("CNV"), sometimes referred to
as the "Mexican National Securities Commission," was set up to regulate stock
market activity. The CNV was merged with the Comision Nacional Bancaria (the
National Banking Commission) in April 1995 to form the CNBV. The Ley del Mercado
de Valores (the "Mexican Securities Market Law"), which took effect in 1975,
introduced important structural changes to the Mexican financial system,
including the organization of brokerage houses as corporations. The Mexican
Securities Market Law sets standards for the registration of brokerage houses in
the RNVI, a prerequisite to becoming a member of the Mexican Stock Exchange.
Registration of brokerage houses is granted by the Secretaria de Hacienda y
Credito Publico (the Ministry of Finance and Public Credit) (the "MFPC") upon
the recommendation of the CNBV. Foreign securities firms are not permitted to be
recorded in the Intermediaries Section of the RNVI and, therefore, they are not
allowed to be members of the Mexican Stock Exchange, unless they incorporate an
affiliate brokerage house (as defined in the Securities Market Law). In addition
to setting standards for brokerage houses, the Mexican Securities Market Law
empowers the CNBV to regulate the public offering and trading of securities. The
CNBV regulates the Mexican securities market, the Mexican Stock Exchange and
brokerage houses through a board of governors composed of a President (appointed
by the MFPC) and two Vice Presidents (appointed by the President of the CNBV), 5
members appointed by the MFPC, 3 by Banco de Mexico (the central bank), one by
the Comision Nacional para el Sistema de Ahorro Para el Retiro (the Commission
for the National Retirement Savings System) and one by the Comision Nacional de
Seguros y Fianzas (the National Insurance and Bonding Commission).

      Pursuant to the Mexican Securities Market Law, the CNBV must be notified
before shareholders of a company listed on the Mexican Stock Exchange effect one
or more simultaneous or successive transactions resulting in the transfer of ten
or more percent of such company's shares of capital stock, other than on the
Mexican Stock Exchange. The parties involved in the transactions are also
obligated to inform the CNBV of the results of the transactions within three
days of completion of the last transaction, or that the transactions have not
been completed. The CNBV will notify the Mexican Stock Exchange of such
transactions, without specifying the names of the parties involved.

      The Mexican Securities Market Law was amended in 1993 to include, among
other things, a chapter regarding the internationalization of the Mexican
securities market. Subject to certain approvals, the offering of securities
issued by non-Mexican companies and trading thereof on the Mexican Stock
Exchange is permitted.

ITEM 6. EXCHANGE CONTROL AND OTHER LIMITATIONS AFFECTING SECURITY-HOLDERS

      Mexico abolished its exchange control system on November 11, 1991. Under
the previous Mexican exchange control system established in 1982, Mexican
residents and companies were entitled to purchase, and required to sell, foreign
currencies for certain purposes at a controlled rate of exchange (the
"Controlled Rate") that was established daily by Banco de Mexico. Transactions
to which the Controlled Rate applied included payments


                                       34
<PAGE>

for virtually all merchandise imports, revenues from virtually all merchandise
exports, royalty payments and payments of principal, interest and related
expenses with respect to indebtedness to foreign creditors registered with the
Mexican government. For all transactions to which the Controlled Rate did not
apply, foreign currencies could also be purchased, if they were available, at
the then prevailing domestic free market rate for the type of transaction (the
"Free Market Rate").

      From November 11, 1991 to October 20, 1992, Banco de Mexico permitted the
Free Market Rate to fluctuate according to supply and demand within a moving
band. In late December 1994, the Mexican government responded to exchange rate
pressures first by increasing by 15% the upper limit of the Peso/Dollar exchange
rate band and then, two days later, allowing the Peso to fluctuate freely
against the Dollar. By December 31, 1994, the Peso/Dollar exchange rate, which
had been Ps.3.466 to $1.00 on December 19, 1994, was Ps.5.000 to $1.00. At
December 31, 1996, the Peso/Dollar exchange rate was Ps.7.88 to $1.00.

      Fluctuations in the exchange rate between the Peso and the Dollar affect
the Dollar equivalent of the Peso price of securities traded on the Mexican
Stock Exchange, including the Shares and, as a result, are likely to affect the
market price of the ADSs. The Peso devaluation most likely had a direct effect
on the drop in the market price of the ADSs recorded after the devaluation. See
"Nature of Trading Market." Such fluctuations also would affect the Dollar
conversion by the Depositary of any cash dividends paid in Pesos on Shares
represented by ADSs. Fluctuations in the exchange rate can also affect the
Company's operating results depending on the terms of its contractual
arrangements and the effect of the fluctuation on the specific industries served
by the Company.

      Except for the period from September through December 1982 during the
Mexican liquidity crisis, Banco de Mexico consistently has made foreign currency
available to Mexican private sector entities (such as the Company) to meet their
foreign currency obligations. Nevertheless, in the event of renewed shortages of
foreign currency, there can be no assurance that Banco de Mexico would continue
to make foreign currency available to private sector companies or that foreign
currency needed by the Company to service foreign currency obligations could be
purchased in the open market without substantial additional cost.

      Foreign investment in capital stock of Mexican corporations in certain
economic sectors, including cellular telephony, is regulated by the Foreign
Investment Law (the "Foreign Investment Law") and the regulations applicable
thereto (the "Foreign Investment Regulations"). Under the Foreign Investment
Law, foreign investment is defined in general as the participation of foreign
investors in the capital stock of Mexican corporations, or investments made
therein by Mexican corporations in which foreign capital has a majority
participation, and the participation of foreign investors in certain activities
regulated by the Foreign Investment Law. Foreign investors are defined as
non-Mexican individuals, non-Mexican legal entities and foreign entities without
legal personality. The National Commission on Foreign Investment (the "Foreign
Investment Commission") and the National Registry of Foreign Investment are
responsible for the administration of the Foreign Investment Law and Foreign
Investment Regulations. In order to comply with restrictions on the percentage
of their capital stock that may be owned by non-Mexican investors, Mexican
companies typically limit particular classes of their stock to ownership by
Mexican individuals and Mexican corporations in which foreign investment has a
majority participation.

      As a general rule, the Foreign Investment Law allows foreign investment in
up to 100% in the capital stock of Mexican companies except for those engaged in
certain specified restricted industries, such as basic telephone service, where
foreign investment control is limited to 49%. Foreign investment may, however,
participate in a proportion in excess of 49% of the capital stock of a Mexican
corporation engaged in the cellular telephone business with the advance approval
of the Foreign Investment Commission. The Company has applied for and obtained
such approval. In addition to the limitations on share ownership, the Foreign
Investment Law and Foreign Investment Regulations require that Mexican
shareholders retain the power to determine the administrative control and the
management of Mexican corporations engaged in industries in which special
restrictions as to foreign investment are applicable. Pursuant to the Mexican
Federal Telecommunications Law, concessions (including a concession for basic
telephone service) may only be granted to Mexican individuals or Mexican
companies where foreign investment does not exceed 49% (except that with respect
to cellular telephony such percentage may be higher when approved by the Foreign
Investment Commission).


                                       35
<PAGE>

      Under the Company's ByLaws, and as permitted by the approval mentioned
above, the Shares of the Company are not restricted to Mexican ownership.
Pursuant to the Company's ByLaws, the Series A shares must always represent at
least 51% of the voting stock of Iusacell.

ITEM 7. TAXATION

General

      The following is a general summary of certain anticipated U.S. federal and
Mexican tax consequences of the ownership of Shares or ADSs. The tax treatment
of a holder of the Shares or ADSs may vary depending upon the particular
situation of the holder. The following summary of U.S. federal income tax
consequences is limited to investors who are U.S. Persons (as defined below)
(except as explicitly provided below) who will hold the Shares or ADSs as
"capital assets" within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended (the "Code") and whose "functional currency" within the
meaning of Section 985 of the Code is the Dollar. Certain holders (including,
but not limited to, insurance companies, tax-exempt organizations, financial
institutions, persons subject to the alternative minimum tax, holders that are
not U.S. Persons, brokers-dealers and holders of 10% or more of the voting
shares of the Company) may be subject to special rules not discussed below. The
discussion below also does not address the effect of any United States state or
local tax law on a holder of the Shares or ADSs. As used herein, the term "U.S.
Person" means an individual who is a citizen or resident of the United States, a
corporation organized in or under the laws of the United States or any state
thereof, or an estate or trust that is subject to United States federal income
taxation without regard to the source of its income. In the case of a holder of
shares or ADSs that is a partnership, the taxation in the United States of each
partner on the partner's allocable share of dividends or capital gains realized
by the partnership on such shares or ADSs will depend on the partner's status as
a U.S. person or a non-U.S. person. The summary does not constitute, and should
not be considered as, legal or tax advice to holders of Shares or ADSs.

      The summary is for general information purposes only and is based upon the
tax laws of the United States and Mexico as in effect on the date hereof, which
are subject to change. Prospective purchasers of ADSs should consult their own
tax advisers as to the U.S., Mexican or other tax consequences of the purchase,
ownership and disposition of Shares and ADSs, including, in particular, the
effect of any foreign, state or local tax laws.

      Mexico and the United States have signed and ratified a Convention for the
Avoidance of Double Taxation and the Prevention of Tax Evasion with Respect to
Taxes on Income and Protocols thereto (collectively, the "Tax Treaty"). The Tax
Treaty is currently in effect and provisions of the Tax Treaty that may affect
holders of Shares or ADSs are summarized below. Mexico has also executed double
taxation treaties with other countries as well as agreements providing for the
exchange of information with respect to tax matters, some of which are in force.
The following summary does not take into account the effect of any such
treaties. Holders must consult with their tax advisors as to their entitlement
to the benefits afforded by the Tax Treaty.

      In general, for U.S. federal income tax purposes, holders of ADRs
evidencing ADSs will be treated as the owners of the Shares represented by those
ADSs.

Taxation of Dividends

      U.S. Tax Considerations

      Distributions with respect to the L Shares and the B Shares represented by
the Shares or ADSs (other than distributions in redemption of the Shares or the
ADSs subject to Section 302(b) of the Code or in a liquidation of the Company)
will, to the extent made from current or accumulated earnings and profits of the
Company as determined under U.S. federal income tax principles, constitute
dividends for U.S. federal income tax purposes. Whether such current or
accumulated earnings and profits will be sufficient for all such distributions
on the Shares or ADSs to qualify as dividends for U.S. federal income tax
purposes depends on the future profitability of the Company and other factors,
many of which are beyond the control of the Company. To the extent that such a


                                       36
<PAGE>

distribution exceeds the amount of the Company's earnings and profits, it will
be treated as a non-taxable return of capital to the extent of the holder's
basis in the Shares or ADSs, and thereafter as capital gain (provided the Shares
or ADSs are held as capital assets). As used below, the term "dividend" means a
distribution that constitutes a dividend for U.S. federal income tax purposes.
Dividends paid with respect to the L Shares and B Shares represented by the
Shares or ADSs will be includible in the gross income of a holder that is a U.S.
Person (a "U.S. holder"), as ordinary income when the dividends are received by
the Depositary or by the U.S. holder of a certificated ADR and will not be
eligible for any dividends received deduction otherwise allowable to
corporations under Section 243 of the Code. Dividends paid in Pesos will be
includible in the income of a U.S. holder in a Dollar amount calculated by
reference to the exchange rate in effect on the day the Pesos are received by
the Depositary or by the U.S. holder of a certificated ADR. U.S. holders should
consult their own tax advisers regarding the treatment of any foreign currency
gain or loss on any Pesos received which are not converted into Dollars on the
day the Pesos are received. Dividends generally will constitute foreign source
"passive income" (or in the case of certain holders, "financial services
income") for U.S. foreign tax credit purposes.

      Distributions of additional L Shares or B Shares to holders of Shares with
respect to their ADSs that are made as part of a pro rata distribution to all
shareholders of the Company generally will not be subject to U.S.
federal income tax.

      A holder of Shares or ADSs that is, with respect to the United States, not
a U.S. holder (a "non-U.S. holder") generally will not be subject to U.S.
federal income or withholding tax on dividends received on Shares or ADSs,
unless such income is effectively connected with the conduct by the holder of a
trade or business in the United States.

      Mexican Tax Considerations

      Dividends, either in cash or in any other form, paid with respect to the B
Shares and L Shares represented by Shares or ADSs will not be subject to any
Mexican withholding or other tax, if the amount maintained in the "cuenta de
utilidad fiscal neta" or "previously taxed net earnings account" ("CUFIN")
exceeds the dividend payment to be made. However, if the Mexican corporation's
CUFIN balance is less than the dividend payment then the Company will be
required to pay a 34% income tax on the gross amount which exceeds such balance
(calculated as the amount of such excess times 1.515).


                                       37
<PAGE>

Taxation of Capital Gains

      U.S. Tax Considerations

      Gain or loss realized by a U.S. holder on the sale or other disposition 
of ADSs or Shares will be subject to U.S. federal income taxation as capital 
gain or loss in an amount equal to the difference between such holder's basis 
in the ADSs or the Shares and the amount realized on the disposition. Such 
gain or loss will be treated as a capital gain or loss and will be a 
long-term capital gain or loss if the ADSs or Shares are held for more than 
one year on the date of such sale or exchange. Gain realized by a U.S. holder 
on a sale or other disposition of ADSs or Shares, including gain that arises 
because the U.S. holder's basis in the Shares or the ADSs has been reduced 
because a distribution is treated as a return of capital rather than as a 
dividend, generally will be treated as U.S. source income for foreign tax 
credit purposes unless the gain is attributable to an office or other fixed 
place of business maintained by the U.S. Holder outside the United States and 
certain other requirements are satisfied. Deposits and withdrawals of Shares 
by U.S. holders in exchange for ADSs will not result in the realization of 
gain or loss for U.S. federal income tax purposes. U.S. holders that withdraw 
any Shares should consult their own tax advisers regarding the treatment of 
any foreign currency gain or loss on any Pesos received in respect of such 
Shares. If a Mexican tax is imposed on the sale or disposition of Shares (see 
"Taxation of Capital Gains--Mexican Tax Considerations"), the amount realized 
by a U.S. holder will include the gross amount of the proceeds of such sale 
or disposition before deduction of the Mexican tax. The availability of U.S. 
foreign tax credits for these Mexican taxes is subject to certain limitations 
and involves the application of rules that depend on a U.S. holder's 
particular circumstances. Thus, a U.S. holder may not be able to use the 
foreign tax credit that results from Mexican tax imposed on the gain unless 
it can appropriately apply the credit against its tax due on income from 
foreign sources. U.S. holders should consult their own tax advisers regarding 
the application of the foreign tax credit rules to their investment in, and 
disposition of, Shares.

      A non-U.S. holder of Shares or ADSs will not be subject to U.S. federal
income or withholding tax on gains realized on the sale of Shares or ADSs,
unless (i) such gain is effectively connected with the conduct by the holder of
a trade or business in the United States or (ii) in the case of gain realized by
an individual holder, the holder is present in the United States for 183 days or
more in the taxable year of the sale and certain other conditions are met.

      Mexican Tax Considerations

      The sale or other disposition of ADSs by holders who are nonresidents 
of Mexico (as described below) will not be subject to Mexican tax. Deposits 
of Shares in exchange for ADSs and withdrawals of Shares in exchange for ADSs 
will not give rise to Mexican tax. Pursuant to the Tax Treaty, gain realized 
by qualifying U.S. Holders from the sale or other disposition of ADSs, even 
if the sale is not conducted through a recognized stock exchange or a highly 
exchangeable market, will not be subject to Mexican income tax except that 
Mexican taxes may apply if (i) 50% or more of the assets of the Company 
consist of immovable property situated in Mexico, (ii) such U.S. Holder owned 
25% or more of the capital of the Company, directly or indirectly, during the 
12-month period preceding such disposition, or (iii) the gain is attributable 
to a permanent establishment or fixed base of the U.S. Holder in Mexico.

      Gain realized by a nonresident of Mexico on the sale or other disposition
of stock of a Mexican corporation (like the Company) through a recognized stock
exchange or a highly exchangeable market is exempt from Mexican income tax if
the stock is on the list of publicly traded shares published by the Ministry of
Finance in the Official Gazette. The Shares are included on that list.
Accordingly, gain realized by a nonresident holder on the sale or other
disposition of Shares through a recognized stock exchange or a highly
exchangeable market, such as the Mexican Stock Exchange and the New York Stock
Exchange, is exempt from Mexican income tax.

      Information Reporting and Backup Withholding

Dividends paid in the United States with respect to ADSs 
or Shares, and proceeds on a sale or other disposition of 
ADSs or Shares through a United States broker (or certain 
brokers having significant connections with the United 
States), may be subject to the information reporting 
requirements of the Internal Revenue Code. Under existing 
regulations, such dividends (and under certain 
circumstances proceeds from a sale or other disposition 
of Shares or ADSs) are not subject to backup 
withholding. Under proposed regulations, however, such 
dividends (and proceeds) are subject to backup 
withholding at the rate of 31% unless the U.S. holder 
provides a taxpayer identification number on a properly 
completed Form W-9 or otherwise establishes an exemption. 
Non-U.S. Holders of ADSs or Shares generally are exempt 
from information reporting and backup withholding, but 
may be required to provide a properly completed Form W-8 
or otherwise comply with applicable certification and 
identification procedures in order to prove their 
exemption. Any amounts withheld from payments to a holder 
under the backup withholding rules will be refunded (or 
credited against such holder's U.S. federal income tax 
liability, if any) provided that the required information 
is furnished to the Internal Revenue Service.

                                       38
<PAGE>

      Under current law, gains realized by a nonresident holder on the sale or
disposition of Shares not conducted through a recognized stock exchange or a
highly exchangeable market generally are subject to a Mexican tax at a rate of
20% of the gross sale price. However, if the holder is a resident of a country
which is not considered to be a low tax rate country (by reference to a list of
low rate countries published by the Mexican Ministry of Finance and Public
Credit), the holder may elect to designate a resident of Mexico as its
representative, in which case the tax generally would be 30% of the gain on such
disposition. Pursuant to the Tax Treaty, the gain realized by a U.S. holder from
the sale or other disposition of Shares may not be subject to Mexican taxes if
the applicable conditions contemplated by the Tax Treaty are met. Brokerage
commissions paid in connection with transactions on the Mexican Stock Exchange
are subject to a value added tax of 15%.

      For purposes of Mexican taxation, an individual is a resident of Mexico if
he or she has established his or her home in Mexico, unless he or she has
resided in another country for more than 183 calendar days during a year and can
demonstrate that he or she had become a resident of that country for tax
purposes, and a legal entity is a resident of Mexico if its principal
administrative office is located in Mexico. A Mexican citizen or a legal entity
with its corporate domicile in Mexico and established under Mexican law is
presumed to be a resident of Mexico unless such person or entity can demonstrate
otherwise. If a legal entity has a permanent establishment in Mexico, such
permanent establishment shall be required to pay taxes in Mexico in accordance
with relevant tax provisions.

      Other Mexican Taxes

      There are no inheritance or succession taxes applicable to the ownership,
transfer or disposition of ADSs or Shares. There are no Mexican stamp, issuer,
registration or similar taxes or duties payable by holders of ADSs or Shares.

      Treaties to prevent double taxation have been executed between Mexico and
several countries. This summary does not discuss the effects of the treaties
entered into by, or effective with respect to, Mexico.

ITEM 8. SELECTED FINANCIAL DATA

      The following tables present selected consolidated financial information
for Iusacell and its consolidated subsidiaries. This information has been
derived from, and should be read in conjunction with, the Consolidated Financial
Statements.

      Except as otherwise indicated, all of the financial statements included
herein have been prepared in accordance with Mexican GAAP, which differs in
significant respects from U.S. GAAP. Note 19 to the Consolidated Financial
Statements provides a description of the principal differences between Mexican
GAAP and U.S. GAAP as they relate to Iusacell and a reconciliation to U.S. GAAP
of net income and total shareholders' equity.

      All financial statements included herein were prepared giving effect to
the Third Amendment to Bulletin B-10 (as so amended, "Bulletin B-10") and
Bulletin B-12 ("Bulletin B-12") issued by the Mexican Institute of Public
Accountants, both of which became effective in 1990. Generally, Bulletin B-10 is
designed to provide for the recognition of certain effects of inflation by
requiring companies to restate nonmonetary assets at current replacement cost,
to restate nonmonetary liabilities using the Mexican National Consumer Price
Index (Indice Nacional de Precios al Consumidor or the "INPC"), to restate the
components of shareholders' equity using the INPC and to record gains or losses
in purchasing power from holding monetary assets or liabilities. Bulletin B-10
requires restatement of all financial statements to constant Pesos as of the
date of the most recent balance sheet presented. All data in the financial
statements included herein and the selected financial information derived
therefrom set forth below therefore have been restated in constant December 31,
1996 Pesos. Bulletin B-12 requires that the statement of changes in financial
position reconcile changes from the restated prior year balance sheet to the
current year balance sheet. See Note 4 to the Consolidated Financial Statements.
The effect of inflation accounting under Mexican GAAP has not been eliminated in
the reconciliation to U.S. GAAP. See Note 19 to the Consolidated Financial
Statements.


                                       39
<PAGE>

<TABLE>
<CAPTION>
                                                               As of and for the Year Ended December 31,
                                        ----------------------------------------------------------------------------------------
                                             1992          1993           1994           1995            1996           1996
                                        -------------  -------------  -------------  -------------  -------------  -------------
                                               (Thousands of constant December 31, 1996 Pesos, except ratios       (Thousands of
                                                                  and subscriber data)((1)                         U.S. dollars,
                                                                                                                   except ratios
                                                                                                                   and subscriber
                                                                                                                      data)(2)
<S>                                     <C>            <C>            <C>            <C>            <C>            <C>      
Income Statement Data:
Revenues:
  Services ..........................   Ps. 1,088,542  Ps. 1,347,603  Ps. 1,881,985  Ps. 1,517,693  Ps. 1,375,421  U.S.$ 174,524
  Telephone equipment sales
    and other .......................          67,832        120,473        256,744        270,425        221,853         28,150
                                        -------------  -------------  -------------  -------------  -------------  -------------
    Total ...........................       1,156,374      1,468,076      2,138,729      1,788,118      1,597,274        202,674
Cost of sales:
  Cost of services ..................         228,723        331,803        546,938        556,425        504,263         63,985
  Cost of telephone
    equipment and other .............          57,465        106,449        126,234        150,095        123,686         15,694
                                        -------------  -------------  -------------  -------------  -------------  -------------
    Total ...........................         286,188        438,252        673,172        706,520        627,949         79,679
Gross profit ........................         870,186      1,029,824      1,465,557      1,081,598        969,325        122,995
Operating expenses ..................         440,840        590,083        910,495        789,788        691,983         87,804
Depreciation & amortization .........         116,812        227,128        547,930        629,191        568,021         72,075
Operating profit (loss) .............         312,534        212,613          7,132       (337,381)      (290,679)       (36,884)
Integral financing cost (gain):
 Interest Expense, net ..............         164,876        277,627        191,680        162,767        264,062         33,506
 Foreign exchange (gain)
   loss, net ........................          18,593         17,766        492,904        662,473        (58,357)        (7,405)
 Gain on net monetary
  position ..........................         (62,664)      (113,726)       (46,946)      (471,190)      (327,220)       (41,520)
Financing cost incurred in
 the acquisition of Regions
 5, 6 and 7 .........................              --        218,864             --             --             --             --
                                        -------------  -------------  -------------  -------------  -------------  -------------
    Total ...........................         120,805        400,531        637,638        354,050       (121,515)       (15,419)
Equity participation in net
 income (loss) of associated
 companies ..........................          10,857          6,888          2,911        (36,773)        (5,631)          (715)
Other income ........................          22,035          3,418             --             --             --             --
Income (loss) from continuing
 operations before asset tax,
 employee profit sharing,
 minority interest and
 extraordinary item .................         224,621       (177,612)      (627,595)      (728,204)      (174,795)       (22,180)
Provisions for:
  Asset tax .........................          48,814         21,521         30,498         27,333         33,069          4,196
  Employee profit sharing ...........           3,541             --            608          1,956             --             --
                                        -------------  -------------  -------------  -------------  -------------  -------------
    Total ...........................          52,355         21,521         31,106         29,289         33,069          4,196
Income (loss) before minority
 interest and extraordinary
 item ...............................         172,266       (199,133)      (658,701)      (757,493)      (207,864)       (26,376)
Minority interest ...................              --          6,462             42         34,789          2,987            379
                                        -------------  -------------  -------------  -------------  -------------  -------------
Income (loss) before
 extraordinary item .................         172,266       (192,671)      (658,659)      (722,704)      (204,877)       (25,997)
Extraordinary item(3) ...............          16,520             --             --             --       (136,407)       (17,308)
                                        -------------  -------------  -------------  -------------  -------------  -------------
Net income (loss) ...................     Ps. 188,786  Ps.  (192,671) Ps.  (658,659) Ps.  (722,704) Ps.  (341,284) U.S.$ (43,305)
                                        =============  =============  =============  =============  =============  =============
U.S. GAAP:(4)
Total revenues ......................   Ps. 1,156,374  Ps. 1,468,076  Ps. 2,138,729  Ps. 1,788,118  Ps. 1,684,755  U.S.$ 213,774
Operating profit (loss) .............         312,534        212,613          7,132       (337,381)      (597,864)       (75,861)
Net Income (loss) ...................   Ps.   150,731  Ps.   (88,502) Ps.  (643,633) Ps.  (341,265) Ps.  (131,661) U.S.$ (16,706)
Other Financial Data and
  Ratios:
EBITDA(5) ...........................   Ps.   429,346  Ps.   439,741  Ps.   555,062  Ps.   291,810  Ps.   277,342  U.S.$  35,191
EBITDA (U.S. GAAP)(4) ...............         429,346        439,741        555,062        291,810        140,935         17,883
Capital expenditures ................         695,171        629,670      1,155,526        442,749        198,466         25,183
Interest Expense, net ...............         164,876        496,491        191,680        162,767        264,062         33,506
Subscriber Data:
POPs ................................      59,108,617     60,301,858     61,464,945     63,447,714     64,782,192
Subscribers(6)
</TABLE>


                                       40
<PAGE>

<TABLE>
<CAPTION>
                                                             As of and for the Year Ended December 31,
                                     -----------------------------------------------------------------------------------------------
                                          1992           1993            1994            1995            1996              1996
                                     -------------   -------------   -------------   -------------   -------------   ---------------
                                             (Thousands of constant December 31, 1996 Pesos, except ratios            (Thousands of 
                                                                and subscriber data)((1)                              U.S. dollars,
                                                                                                                      except ratios
                                                                                                                      and subscriber
                                                                                                                         data)(2)
<S>                                  <C>              <C>            <C>             <C>             <C>             <C>       
  Contract plan ..................         114,838         127,361         194,723         208,802         161,277   
  Prepay .........................               0               0               0           1,399          71,629   
                                     -------------   -------------   -------------   -------------   -------------   
    Total ........................         114,838         127,361         194,723         210,201         232,906   
Gross subscriber additions .......          86,295          68,551         117,539         103,733         119,968   
Average subscribers(7) ...........          89,930         121,100         161,042         202,462         221,554   
Contract Churn(8) ................            3.00%           3.66%           2.67%           3.62%           4.28%
Penetration(9) ...................            0.19%           0.21%           0.32%           0.33%           0.36%
Average monthly MOUs per                                                                                             
  subscriber(10) .................             237             211             179             140             117   
Nominal average monthly                                                                                              
  revenue per subscriber(11) .....   Ps.       736    Ps.      638   Ps.       595   Ps.       464   Ps.       490   U.S.$      62
Nominal cost to acquire a                                                                                            
  new subscriber(12) .............           3,738            5,808          5,717           6,143           6,076             771
Balance Sheet Data:                                                                                                  
Working capital(13) ..............   Ps. (437,978)    Ps.  184,513   Ps. (358.422)   Ps.(1,357,016)  Ps.(1,531,167)  U.S.$(194,286)
Property & equipment, net ........       1,913,459       2,699,680       4,205,133       4,026,757       3,107,307         394,278
Total assets .....................       2,706,058       5,952,465       7,410,677       6,844,797       5,600,380         710,618
Total debt .......................       1,466,274       1,774,510       1,357,752       1,559,495       1,319,720         167,456
Stockholders' equity .............         916,793       3,845,114       5,273,656       4,122,484       3,132,193         397,436
                                                                                                                     
U.S. GAAP:(4)                                                                                                        
Working capital(13) ..............   Ps.       N/A    Ps.      N/A   Ps.       N/A   Ps. 1,570,831   Ps.(1,642,530)  U.S.$(208,416)
Property & equipment, net ........       1,913,459       2,699,680       4,205,133       4,026,757       3,107,307         394,278
Total assets .....................       2,461,354       5,906,647       7,387,509       7,453,918       6,227,453         789,651
Total debt .......................       1,466,273       1,774,510       1,357,753       1,559,495       1,319,720         167,456
Stockholders' equity .............         671,010       3,787,626       5,104,726       3,486,625       2,830,243         359,122
</TABLE>

----------
(1)   Pursuant to Mexican GAAP, financial data for all periods in the financial
      statements included herein have, unless otherwise indicated elsewhere
      herein, been restated in constant December 31, 1996 pesos. Restatement
      into constant December 31, 1996 Pesos. Restatement into December 31, 1996
      Pesos is made by multiplying the relevant nominal Peso amount by the 
      inflation index for the period between the end of the period to which 
      such nominal peso amount relates and December 31, 1996. The inflation 
      index used in this Annual Report for 1992 figures is 2.2316, for 1993 
      figures is 2.0661, for 1994 figures is 1.9300 and for 1995 figures is 
      1.2700.

(2)   Peso amounts were converted to U.S. dollars at the exchange rate of
      Ps.7.8810 per U.S.$1.00 reported by the Federal Reserve Bank of New York
      as its noon buying rate for Pesos on December 31, 1996. 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.

(3)   For 1996, the extraordinary item represents restructuring expenses
      associated with the reorganization of and change in management control of
      the Company, the write-off of certain obsolete network equipment and an
      additional reserve for doubtful accounts.

(4)   See Note 19 to the Audited Consolidated Financial Statements and
      "Management's Discussion and Analysis of Financial Condition and Results
      of Operations--U.S. GAAP Reconciliation" for a discussion of certain
      differences between U.S. GAAP and Mexican GAAP.

(5)   EBITDA represents operating profit (loss) plus depreciation and
      amortization. The Company believes that EBITDA provides useful information
      regarding the Company's debt service ability and should not be considered
      in isolation or as a substitute for the consolidated income statement or
      statements of changes in financial position prepared in accordance with
      generally accepted accounting principles and included herein.

(6)   Subscribers refers to the Company's subscribers in its operating regions
      at the end of the respective periods. A prepay customer is included as a
      subscriber if, at the end of the period, the customer's card has not yet 
      expired.

(7)   Average subscribers represents the rolling monthly average number of
      subscribers for the respective periods.

(8)   Contract churn for a given period is calculated by dividing for each 
      month in that period the total number of contract subscribers 
      disconnected in such month by the number of contract subscribers at the 
      beginning of such month and dividing the sum of the resulting quotients 
      for all months in such period by the number of months in such period. 
      For a discussion of prepay turnover, see "Management's Discussion and 
      Analysis of Financial Condition and Results of Operations--Increase in 
      Prepay Subscriber Base"

(9)  Penetration represents the end of period subscribers divided by the end of
      period POPs.

(10)  Average monthly MOUs (minutes of use) per subscriber is calculated by
      dividing the total minutes of use for the respective period by the number
      of average subscribers for the respective period dividing the result by
      twelve.

(11)  Nominal average monthly cellular revenue per subscriber is calculated by 
      dividing the total cellular service revenue for the respective period 
      by the average number of subscribers for the respective period and 
      dividing the quotient by twelve.

(12)  Nominal cost to acquire a new subscriber represents sales, marketing and
      advertising costs plus the cost of cellular telephones Iusacell gives 
      to its cellular customers for the respective period (in nominal Pesos) 
      divided by gross customer additions for such period.

(13)  Working capital represents current assets current liabilities.


                                   41

<PAGE>

ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

      ALL PESO AMOUNTS DISCUSSED HEREIN ARE PRESENTED IN THOUSANDS OF CONSTANT
DECEMBER 31, 1996 PESOS IN ACCORDANCE WITH MEXICAN GAAP.

GENERAL

    The following discussion and analysis is intended to facilitate an 
understanding and assessment of significant changes and trends in the 
historical results of operations and financial condition of Iusacell and 
factors affecting the Company's financial resources. It should be read in 
conjunction with the Consolidated Financial Statements and the notes thereto 
appearing elsewhere in this Annual Report. The Consolidated Financial 
Statements have been prepared in accordance with Mexican GAAP, which differs 
in significant respects from U.S. GAAP. Note 19 to the Audited Consolidated 
Financial Statements provides a description of the principal differences 
between Mexican GAAP and U.S. GAAP as they relate to the Company, and a 
reconciliation to U.S. GAAP of the Company's net income and total 
stockholders' equity as of and for the years ended December 31, 1994, 1995 
and 1996.

    As a Mexican company, Iusacell maintains its financial records in Pesos. 
Pursuant to Bulletin B-10, "Recognition of the Effects of Inflation on 
Financial Information," and Bulletin B-12, "Statement of Changes in Financial 
Position," issued by the Mexican Institute of Public Accountants, the 
Company's financial statements are reported in period-end Pesos to adjust for 
the interperiod effects of inflation. In calendar years 1994, 1995, and 1996, 
the rates of inflation in Mexico, as measured by changes in the INPC, were 
7.1%, 52.0%, and 27.7% respectively. The presentation of financial 
information in period-end, or constant, currency units is intended to 
eliminate the distorting effect of inflation on the financial statements and 
to permit comparisons across comparable periods in comparable monetary units. 
Except where otherwise indicated, financial data for all periods in the 
Consolidated Financial Statements and throughout this Annual Report have been 
restated in constant Pesos as of December 31, 1996. References in this Annual 
Report to "real" amounts are to inflation-adjusted Pesos and to "nominal" 
amounts are to unadjusted historical Pesos. Bulletin B-10 requires the 
Company to restate nonmonetary assets at current replacement cost, to restate 
nonmonetary liabilities using the INPC and to restate the components of 
stockholders' equity using the INPC. The effects of these inflation 
accounting principles have not been eliminated in the reconciliation to U.S. 
GAAP. See Note 19 to the Audited Consolidated Financial Statements.
 
    In reporting under Mexican GAAP and in accordance with Bulletin B-10, the 
Company is required to quantify all financial effects of operating and 
financing the business under inflationary conditions. For presentation 
purposes, "integral financing cost (gain)" refers to the combined financial 
effects of: (i) net interest expense or interest income; (ii) net foreign 
exchange gains or losses; and (iii) net gains or losses on monetary position. 
Net foreign exchange gains or losses reflect the impact of changes in foreign 
exchange rates on assets and liabilities denominated in currencies other than 
Pesos. A foreign exchange loss arises if a liability is denominated in a 
foreign currency which appreciates relative to the Peso between the time the 
liability is incurred and the date it is repaid, as the appreciation of the 
foreign currency results in an increase in the amount of Pesos which must be 
exchanged to repay the specified amount of the foreign currency liability. 
The gain or loss on monetary position refers to the gains or losses realized 
from holding net monetary assets or liabilities and reflects the impact of 
inflation on monetary assets and liabilities. For example, a gain on monetary 
position results from holding net monetary liabilities in Pesos during 
periods of inflation, as the purchasing power of the Peso declines over time.

Peso Devaluation and Inflation

    On December 20, 1994, the Mexican government responded to exchange rate 
pressures by increasing the upper limit of the then existing free market 
Peso/U.S. dollar exchange rate band by 15% and, two days later, by 
eliminating the band to allow the Peso to fluctuate freely against the U.S. 
dollar. This resulted in a major devaluation of the Peso relative to the U.S. 
dollar. By December 31, 1994, the Noon Buying Rate, which had been Ps. 3.4662 
to U.S.$1.00 on December 19, 1994, was Ps. 5.0000 to U.S.$1.00, representing 
a 44.3% devaluation. The Peso continued to decline against the U.S. dollar 
during 1995, closing at a Noon Buying Rate of Ps. 7.7400 to U.S.$1.00 on 
December 31, 1995, which represented a 54.8% devaluation relative to the U.S. 
dollar. On December 31, 1996, the Noon Buying Rate was Ps. 7.8810 to 
U.S.$1.00, representing a 1.8% decline of the Peso as compared to December 
31, 1995. Cumulatively, the value of the Peso has declined 127.4% from 
December 19, 1994 to December 31, 1996.
 
    The Mexican government's response to the devaluation and ensuing high 
levels of inflation was to enact a series of fiscal and monetary measures 
which, among other things, restricted credit and the money supply, raised 
prices for public goods and services, and restricted federal spending. As a 
result, the annual inflation rate declined from 52.0% in 1995 to 27.7% in 
1996, and GDP grew by 5.1% in 1996 compared to a contraction of 6.2% in 1995. 
 
    IMPACT ON THE COMPANY'S RESULTS OF OPERATIONS
 
    The general economic conditions in Mexico resulting from inflation and the
devaluation of the Peso have had an overall negative impact on the Company's
results of operations primarily as a result of the following factors:
 
         (i) The devaluation resulted in a significant decrease in the
    purchasing power of Mexican consumers, resulting in a decrease in the demand
    for cellular telephony.
 
        (ii) Due to competitive market conditions and the overall state of the
    Mexican economy, the Company was not able to increase its prices in line
    with the significant inflation in the economy.
 
        (iii) The significant inflation led to an upward restatement of the
    Company's assets and therefore resulted in a substantial increase in
    depreciation and amortization expense in 1995, which had an adverse impact
    on the Company's earnings. In 1996, while there was still significant
    inflation, depreciation and amortization expense decreased as the result of
    a substantial reduction in capital expenditures and the reduction in the
    carrying value of dollar-acquired non-monetary assets in accordance with the
    rules of the Mexican Stock Exchange (which in turn resulted from the fact
    that the rate of inflation exceeded that of devaluation).
 
        (iv) The significant devaluation of the Peso as compared to the U.S.
    dollar in 1994 and 1995 resulted in the recording of exchange losses given
    the Company's net U.S. dollar liability position in both years. In 1996, the
    Company recorded a gain because of the appreciation of the Peso against the
    U.S. dollar during a significant portion of the year.
 
        (v) A portion of the Company's costs and expenses (e.g., depreciation
    and amortization and interest expense) is denominated in U.S. dollars or
    calculated on the basis of Peso/U.S. dollar devaluation, while almost all of
    the Company's revenues are denominated in Pesos, which, in a period of Peso
    devaluation, had a negative impact on the Company's margins.
 
    IMPACT ON THE COMPANY'S FINANCIAL CONDITION
 
    The general economic conditions in Mexico resulting from inflation and the
devaluation of the Peso have had an overall negative impact on the Company's
financial condition as a result of the following factors:
 
                                       42
<PAGE>
         (i) The majority of the Company's indebtedness is denominated in U.S.
    dollars. As a result, the Peso carrying amount of such debt increased to
    reflect the additional Pesos required to meet such foreign liabilities.
 
        (ii) Whenever the inflation rate exceeds the rate of devaluation, as was
    the case in 1996, the carrying value of the Company's assets purchased in
    foreign currencies will be reduced. This is because, assuming the foreign
    currency value of a given asset remains unchanged between periods, the value
    of such asset for the prior period is restated upwards using the inflation
    rate, while the valuation of such asset for the current period is restated
    using a foreign exchange rate which increased at a lower rate.
 
INCREASE IN PREPAY SUBSCRIBER BASE
 
    In June 1996, the Company introduced its Control Plus prepay program in 
response to economic conditions in Mexico and to a prepay cellular card 
program offered by Telcel. Control Plus has been extremely popular, and 
prepay customers have increased from an insignificant percentage of the 
Company's subscriber base in June 1996 to 30.8% at December 31, 1996 and to 
35.1% at March 31, 1997. The Company expects that the percentage of its 
customers who subscribe to cellular service on a prepay basis will continue 
to increase.
 
    The Company believes that prepay programs represented an effective means of
attracting and retaining subscribers during a difficult economic and competitive
environment in 1996. However, the Company also believes that prepay plans are
attractive to a wider range of cellular consumers than just those experiencing
financial difficulties. In addition to helping customers control costs, Control
Plus has no monthly bill and allows customers to prepay for cellular services in
cash. Iusacell is marketing these features to new classes of potential customers
and, as a result, expects prepay plans to continue to help the Company increase
cellular market penetration, grow its customer base and generate positive cash
flow. Compared to the average contract plan, prepay plans involve higher per
minute airtime charges, a lower cost to acquire new subscribers (principally
because the Company does not provide a phone to such customers, as it does with
its contract subscribers), and no billing expenses or credit or collection risk.
Prepay customers are also potential customers for the Company's other services
and products, and the Company intends to focus marketing efforts on "migrating"
qualified prepay customers to higher revenue contract plans. In addition, the
Company is considering new methods to increase minutes of use by its prepay
customers.
 
    Prepay customers, on average, have substantially lower minutes of use than
contract customers and do not pay monthly fees and, as a result, generate
substantially lower average monthly revenues per customer. Moreover, because
prepay cards expire after 60 days, prepay customers have more frequent
opportunities to decide whether to renew service with the Company or to choose
the Company's competitor as their cellular carrier. If a prepay customer "turns
over" his or her prepay card by not adding credit to the card prior to its
60-day expiration, the customer loses his or her assigned telephone number and
must reapply for a new number, which may be obtained either from the Company or
from the Company's competitor. Iusacell believes that, because the Company
currently waives its activation fee for customers who have previously turned
over while Telcel does not, such customers currently have an incentive to choose
the Company's Control Plus program when reapplying for telephone numbers.
 
    Between May 31, 1996 and December 31, 1996, the number of the Company's 
prepay customers increased from 2,730 to 71,629. Since the Company's first 
Control Plus customers began to turn over, a monthly average of 21% of the 
Company's total prepay customers have turned over. This turnover statistic, 
however, does not account for customers who reactivated Control Plus prepay 
service after their cards expired. The Company is evaluating different 
methods of determining turnover, as the current method is dependent upon, 
among other things, the number of days of use the Company permits before 
expiration of the prepay cards (currently 60 days). Iusacell is installing a 
new prepay operating system which the Company expects will enable the Company 
to better track those customers who turn over by determining the percentage 
of customers who subsequently purchase prepay cards from the Company and the 
time period between such purchases. The new operating system is also expected 
to allow customers to reinstate their prior telephone numbers up to 30
 
                                       43
<PAGE>

days after expiration of their Iusacell prepay cards. In addition, Iusacell
anticipates that the new prepay operating system, together with initiatives to
increase the number of distribution points for prepay cards, improve customer
care and otherwise improve the convenience of the Company's prepay program, will
enhance the Company's ability to retain prepay customers.
 
    In 1996, the Company experienced a 22.8% reduction in the number of contract
customers, who generate higher average revenue per subscriber than do prepay
customers. Many of these contract customers migrated to the Company's prepay
program, resulting in lower revenues and cash flow from these customers.
Iusacell did not introduce Control Plus until June 1996. Consequently, results
of operations in 1996 do not fully reflect the shift from contract to prepay
customers. If the year-end mix of contract and prepay
customers had been in effect throughout 1996, the effect of the lower per
customer revenues and cash flow resulting from the shift in Iusacell's
subscriber mix would have been significantly greater. The Company believes,
however, that this effect would have been partially offset by having been able
to offer Control Plus prior to June 1996 to its credit-challenged contract
customers who were otherwise switching to Telcel's prepay plan and to those
prospective customers who were choosing Telcel's prepay plan in the absence of
alternatives. The Company anticipates further growth in its prepay subscriber
base and an increase in the percentage of total subscribers who are prepay
customers, as well as growth in the number of contract subscribers.
 
LOCAL TELEPHONY IN THE 450 MHZ FREQUENCY BAND; CDMA OVERLAY
 
    The Company has experienced substantial delays in obtaining the SCT's
approval of its technical and economic plans for local wireless service in the
450 MHz frequency band. However, on June 10, 1997, the SCT and the Company
reached agreement on a process by which the Company could obtain a concession
issued and recognized by the SCT to provide local wireless service in the 450
MHz frequency band. Under this agreement Iusacell would convert and consolidate
certain of its existing concessioned radiotelephony frequencies into 450 MHz
spectrum in Regions 4, 5, 6, 7 and 9 and would have a right of first refusal to
acquire the concessions to provide local wireless service over such frequencies
at prices derived from the prices of the winning bids in the auctions for 450
MHz and 1.9 GHz (PCS) frequency bands scheduled by the Mexican government for
the fall of 1997. Until the conclusion of such auctions, Iusacell has received a
provisional authorization to use 450 MHz spectrum to provide local wireless
service to up to 50,000 terminals.
 
    As a result of the delays experienced by the Company and the uncertainty
relating to the Company's ability, at a commercially acceptable cost, to
implement full scale local wireless service in the 450 MHz frequency band, the
Company is exploring alternatives for providing local telephony services,
including limited zone wireless service in the 800 MHz (cellular) or 1.9 GHz
(PCS) frequency bands deploying digital technology that permits mobility. At
this time, however, the Company has not made a decision as to which alternative
to pursue and continues with its trial program to provide local wireless service
in the 450 MHz frequency band. If the Company were to determine not to continue
to pursue local wireless service in the 450 MHz frequency band, the Company
would record substantial non-cash losses.
 
    The Company believes that approximately 75% of the fixed assets currently
employed in its 450 MHz trial service could be used in its cellular operations
(with the cost of each such asset being depreciated over its remaining useful
life). If such remaining fixed assets are sold for less than their book
value, the Company would be required to write off such assets to the extent of
the deficiency between their book value and the sale proceeds. At December 31,
1996, the book value of the fixed assets (including capitalized interest)
deployed in the Company's 450 MHz local wireless service totaled Ps. 547.6 
million (U.S.$69.5 million). Assuming that 25% of these fixed assets could not
be sold, the non-cash charge to Iusacell's earnings would be Ps. 136.9 million
(U.S.$17.4 million).
 
                                       44
<PAGE>

Results of Consolidated Operations

      The following table sets forth for the periods indicated the percentage
relationships which certain amounts bear to revenues:

                                                      Years ended December 31,
                                                      -------------------------
                                                      1994      1995      1996
                                                      -----    ------    ------
Revenues:
   Services .........................................  88.0%     84.9%     86.1%
   Telephone equipment sales and other ..............  12.0      15.1      13.9
                                                      -----    ------    ------
      Total ......................................... 100.0%    100.0%    100.0%
Cost of sales .......................................  31.5      39.5      39.3
                                                      -----    ------    ------
   Gross profit .....................................  68.5      60.5      60.7
Operating expenses ..................................  42.6      44.2      43.3
Depreciation and amortization .......................  25.6      35.2      35.6
                                                      -----    ------    ------
Operating profit (loss) .............................   0.3     (18.9)    (18.2)
Integral financing cost (gain):
      Interest expense, net .........................   9.0       9.1      16.5
      Foreign exchange (gain) loss, net .............  23.0      37.0      (3.7)
      Gain on net monetary position .................  (2.2)    (26.3)    (20.5)
                                                      -----    ------    ------
       Total ........................................  29.8      19.8      (7.7)
                                                      -----    ------    ------
Equity in net income (loss) of associated
   companies ........................................   0.1      (2.0)     (0.4)
                                                      -----    ------    ------
Income (loss) from continuing operations before asset
   tax, employee profit sharing, minority interest
   and extraordinary items .......................... (29.4)    (40.7)    (10.9)
Provision for asset tax and
   employee profit sharing ..........................   1.4       1.6       2.1
Minority interest ...................................   0.0       1.9       0.1
Extraordinary item ..................................   0.0       0.0       8.5
                                                      -----    ------    ------
   Net income (loss) ................................ (30.8)%   (40.4)%  (21.4)%
                                                      =====    ======    ======

Year Ended December 31, 1995 Compared to Year Ended December 31, 1996

       Revenues

      The following table sets forth the source of the Company's revenues for
the years ended December 31, 1995 and 1996.

<TABLE>
<CAPTION>
                                               Year Ended             Year Ended
                                            December 31, 1995      December 31, 1996      
                                           -------------------    -------------------       %
                                             Ps.          %         Ps.          %       Change
                                           -------     -------    -------     -------    -------
<S>                                        <C>           <C>      <C>           <C>        <C>    
Cellular service revenues ............     1,216.8        68.1%   1,122.1        70.2%      (7.8)%
Other service revenues ...............       300.9        16.8      253.3        15.9      (15.8)
                                           -------     -------    -------     -------    -------
Total service revenues ...............     1,517.7        84.9     1375.4        86.1       (9.4)
Telephone equipment and other revenues       270.4        15.1      221.9        13.9      (18.0)
                                           -------     -------    -------     -------    -------
Total revenues .......................     1,788.1       100.0%   1,597.3       100.0%     (10.7)%
                                           =======     =======    =======     =======    =======
</TABLE>


                                       45

<PAGE>

      Cellular Services. The table below sets forth the cellular service
revenues by source and operating region for 1995 and 1996.

<TABLE>
<CAPTION>
                                                    For the Year Ended December 31, 1995(1)
                                          -------------------------------------------------------------
                                                                 Regions 5, 6
                                               Region 9          and 7 combined            Total
                                          -----------------    -----------------    -------------------
                                            Ps.        %         Ps.        %         Ps.          %
                                          -------   -------    -------   -------    -------     -------
<S>                                         <C>       <C>        <C>       <C>      <C>           <C>   
Airtime(2) ..........................       311.8      39.4%     147.4      34.7%     459.2        37.7%
Monthly fees ........................       338.8      42.8      188.3      44.3      527.1        43.3
Long distance(3) ....................        50.0       6.3       33.9       8.0       83.9         6.9
Value-added services(4) .............        65.0       8.2       39.0       9.2      104.0         8.6
In-roaming(5) .......................        24.8       3.1       14.6       3.4       39.4         3.2
Activation fees .....................         1.6       0.2        1.6       0.4        3.2         0.3
                                          -------   -------    -------   -------    -------     -------
      Total cellular service revenues       792.0     100.0%     424.8     100.0%   1,216.8       100.0%
                                          =======   =======    =======   =======    =======     =======
</TABLE>

<TABLE>
<CAPTION>
                                                    For the Year Ended December 31, 1996(1)
                                          -------------------------------------------------------------
                                                                 Regions 5, 6
                                               Region 9          and 7 combined            Total
                                          -----------------    -----------------    -------------------
                                            Ps.        %         Ps.        %         Ps.          %
                                          -------   -------    -------   -------    -------     -------
<S>                                         <C>       <C>        <C>       <C>      <C>           <C>   
Airtime(2) ..........................       247.6      36.1%     144.3      33.0%     391.9        34.9%
Monthly fees ........................       312.7      45.7      199.0      45.5      511.7        45.6
Long distance(3) ....................        45.7       6.7       38.1       8.7       83.8         7.5
Value-added services(4) .............        53.9       7.9       29.6       6.7       83.5         7.4
In-roaming(5) .......................        24.9       3.6       26.2       6.0       51.1         4.6
Activation fees .....................         0.0        --        0.1       0.1        0.1          --
                                          -------   -------    -------   -------    -------     -------
Total cellular service revenues .....       684.8     100.0%     437.3     100.0%   1,122.1       100.0%
</TABLE>

----------
(1)   Figures reflect intercompany eliminations. These figures do not include
      revenues derived from paging, long distance, local telephony and data
      transmission services.
(2)   Airtime is charged on a per-minute basis for peak (Monday to Friday, 8:00
      A.M. to 10:00 P.M.) and non-peak airtime.
(3)   Long distance revenues generated by cellular subscriber were passed
      through to Telmex prior to August 11, 1996. Since that date, such revenues
      have been retained by the Company.
(4)   Includes fees for value-added services such as call waiting, call
      transfer, emergency service, secretarial service and conference calling,
      and revenues from activation bonds, insurance-related charges payable by
      subscribers, rural and public telephony and the Company's cellular
      magazine. Does not include charges for related airtime. Customers using
      certain value-added services such as news, weather, sports and
      entertainment reports are charged only for airtime, which is therefore
      included in Airtime.
(5)   See "Description of Business--Cellular Services--Roaming" for a 
      discussion of the differences between in-roaming and out-roaming and the 
      revenues associated therewith. Out-roaming revenues are reflected in 
      telephone equipment and other revenues and are passed through to the 
      applicable host operator.

      Cellular service revenues declined by 7.8% to Ps.1,122.1 million
(U.S.$142.4 million) from Ps.1,216.8 million (U.S.$154.4 million) and
represented 70.2% and 68.1% of total revenues in 1996 and 1995, respectively.
Despite a 10.8% increase in total subscribers, revenues declined primarily due
to a 9.1% decrease in total MOUs. The Company experienced a significant change
in the composition of its subscriber base in 1996 and 1995 with the introduction
of the Company's Control Plus program in June 1996. Average monthly revenues
generated by Control Plus customers are substantially lower than those generated
by contract subscribers because Control Plus tends to attract lower volume users
who pay no monthly fee, although such users are charged a higher rate per
minute. The decline in the number of contract subscribers also resulted in a
decline in revenues from value-added services. The proportion of the Company's
customers that subscribes to the Company's prepay plan as opposed to the
Company's contract plans has grown significantly since the introduction of
Control Plus. The Company believes that the trend towards the increased
percentage of total subscribers and the significance to the Company's revenues
of prepay plan subscribers are likely to continue.

      Iusacell had 232,906 and 210,201 cellular subscribers at December 31, 1996
and 1995, respectively. During the year ended December 31, 1996, prepay
subscribers increased from a negligible percentage of total subscribers to 30.8%
of total subscribers, and the number of contract subscribers declined by 22.8%.
Contract subscribers decreased to 161,277 at December 31, 1996 from 208,802 at
December 31, 1995, and prepay


                                       46

<PAGE>

subscribers grew to 71,629 at December 31, 1996 from 1,399 at December 31, 1995.
A prepay customer is included as a customer if, at the end of the period, the
customer's card has not yet expired. See "--Increase in Prepay Subscriber Base."

      During 1996, contract subscriber churn increased to an average monthly
level of 4.28% compared to 3.62% during 1995, which the Company believes was due
to the continuing effect of the Mexican recession on the consumer segment of the
economy and the migration of contract plan customers to the prepay programs of
the Company and its competitor. For a discussion of prepay turnover, see
"--Increase in Prepay Subscriber Base."

      Average MOUs for 1996 were 117, a decrease of 16.4% compared to the
average of 140 MOUs in 1995. This decline in MOUs was largely due to the
significant increase in the number of the Company's prepay customers, who
generate substantially average lower MOUs than contract customers. In addition,
the Company has experienced a trend toward lower MOUs as Iusacell's expanded
customer base is now attracting subscribers who tend to generate fewer MOUs.
During the second half of 1996, the Company introduced three new contract
plans--Flex 75, Flex 150 and Tu Tiempo--which are designed to encourage higher
MOUs, retain and increase contract subscribers and migrate qualified prepay
customers to contract plans. See "Description of Business -- Marketing Strategy
-- Pricing." Nominal average monthly cellular revenue per subscriber increased
5.6% to Ps.490 in 1996 from Ps.464 in 1995.

      Other Services. Other service revenues decreased by 15.8% to Ps.253.3
million (U.S.$32.1 million) in 1996 from Ps. 300.9 million (U.S.$38.2 million)
in 1995. The decline in other services revenue was caused by the Company's
inability to raise prices to keep pace with the rate of inflation (27.0%) in
1996, offset in part by the Company's new paging and long distance services
launched in August 1996. Revenues derived from Iusatel Chile, which the Company
sold in December 1996, were Ps.59.7 million (U.S.$7.6 million).

      Telephone Equipment and Other. Telephone equipment and other revenues
decreased 18.0% to Ps.221.9 (U.S.$28.2 million) in 1996 from Ps.270.4 million
(U.S.$34.3 million) in 1995. This decline reflected fewer sales


                                       47
<PAGE>

and upgrades of handsets. The decline in 1996 from 1995 was partially offset by
a significant increase in sales of used handsets from Inventory.

Cost of Sales

      Total cost of sales decreased 11.1% to Ps.627.9 million (U.S.$79.7
million) in 1996 from Ps.706.5 million (U.S.$89.6 million) in 1995. As a
percentage of total revenues, total cost of sales decreased to 39.3% in 1996
from 39.5% in 1995.

      Cost of Services. Cost of services decreased by 9.4% to Ps.504.3 million
(U.S.$64.0 million) in 1996 from Ps.556.4 million (U.S.$70.6 million) in 1995,
and were 36.7% of total service revenues in each period. Cost of services
remained relatively constant as its primary components were revenue-based fees
paid to the Mexican government and minute-based interconnection fees.

      Cost of Telephone Equipment and Other. Cost of telephone equipment and 
other costs decreased by 17.6% to Ps.123.6 million (U.S.$15.7 million) in 
1996 from Ps.150.1 million (U.S.$19.0 million) in 1995 and, as a percentage 
of telephone equipment and other revenues, increased slightly to 55.8% in 
1996, compared to 55.5% in 1995. The decline in costs is attributable to the 
reduced demand for telephone equipment in 1996, itself a result of continued 
adverse conditions in the consumer segment of the Mexican economy, as well as 
the popularity of the Company's prepay program, where the subscriber 
typically already owns a cellular handset. The cost of a cellular handset 
given to a contract customer is amortized over 18 months (the average length 
of the Company's cellular contract), instead of being expensed in the period 
in which the customer received the telephone.

Operating Expenses

      Operating expenses decreased by 12.4% to Ps.691.9 million (U.S.$87.8 
million) in 1996 from Ps.789.8 million (U.S.$100.2 million) in 1995, and, as 
a percentage of revenues, decreased in 1996 to 43.3% as compared to 44.2% in 
1995. The decrease in operating expenses was principally due to lower sales 
and advertising costs, partially offset by a slight increase in corporate 
overhead expenses. In accordance with Mexican GAAP, pre-operating expenses 
(net of pre-operating revenues) associated with the Company's provision, on a 
trial basis, of local wireless service in the 450 MHz band (as well as with 
certain other services of the Company) are capitalized rather than (as is 
required under U.S. GAAP) expensed. The amount of these pre-operating 
expenses (net of pre-operating revenues) that were capitalized instead of 
expensed in 1996 and 1995 equalled Ps.60.1 million (U.S.$7.6 million) and 
Ps.40.4 million (U.S.$5.1 million), respectively. See Notes 17 and 19 to the 
Audited Consolidated Financial Statements. U.S. GAAP would not have required 
that these pre-operating amounts be expensed in 1995, given the more 
developmental stage of the Company's 450 MHz project at that time. See Notes 
17 and 19 to the Audited Consolidated Financial Statements.

Depreciation and Amortization

      Depreciation and amortization expenses decreased by 9.7% to Ps.568.0
million (U.S.$72.1 million) in 1996 from Ps.629.2 million (U.S.$79.8 million) in
1995. The decline in depreciation and amortization in 1996 compared to 1995 is
attributable to the reduction in the carrying value of fixed assets during 1996
recorded in accordance with Bulletin B-10, as well as, to a lesser extent,
substantially lower capital expenditures in 1996.

Operating Loss

      In 1996, the Company recorded an operating loss of Ps.290.7 million
(U.S.$36.9 million) as compared to an operating loss of Ps.337.4 million
(U.S.$42.8 million) in 1995.


                                       48
<PAGE>

Integral Financing Cost (Gain)

      Integral financing gain was Ps.121.5 million (U.S.$15.4 million) in 1996
compared to a cost of Ps.354.1 million (U.S.$44.9 million) in 1995 due
principally to a foreign exchange gain of Ps.58.4 million (U.S.$7.4 million) in
1996 compared to a foreign exchange loss of Ps.662.5 million (U.S.$84.1 million)
in 1995. The foreign exchange gain was due to the slight appreciation of the
Peso as compared to the U.S. dollar for a significant period during 1996
compared to a significant devaluation of the Peso in 1995. The integral
financing gain was partially offset by a decrease in gain on monetary position
of 30.6% to Ps.327.2 million (U.S.$41.5 million) in 1996 from Ps.471.2 million
(U.S.$59.8 million) in 1995 reflecting the lower rate of inflation in 1996. Net
interest expense increased 62.3% to Ps.264.1 million (U.S.$33.5 million) in 1996
from Ps.162.7 million (U.S.$20.6 million) in 1995. The increase in interest
expense was due to higher levels of borrowing in 1996.

Equity Participation in Net Loss of Associated Companies

      Equity participation in net income (loss) of associated companies
decreased by 84.7% to a loss of Ps.5.6 million (U.S.$0.7 million) in 1996 from a
loss of Ps.36.8 million (U.S.$4.7 million) in 1995. This decrease was due to
operating improvements in the Company's Ecuadorian affiliate. See
"Description of Business--International Joint Ventures."

Extraordinary Item

      In 1996, the Company recorded a Ps.136.4 million (U.S.$17.3 million)
extraordinary charge consisting primarily of restructuring expenses associated
with the reorganization and the change in management control of the Company,
which occurred in February 1997. See Notes 2, 4(d) and 8(b) to the Audited
Consolidated Financial Statements.

Net Loss

      As a result of the factors described above, net loss decreased 52.8% to
Ps.341.3 million (U.S.$43.3 million) in 1996 from Ps.722.7 million (U.S.$91.7
million) in 1995.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Revenues

      The following table sets forth the source of revenues for the Company for
the fiscal years ended December 31, 1994 and 1995.

<TABLE>
<CAPTION>
                                               Year Ended             Year Ended
                                            December 31, 1994      December 31, 1995       
                                           -------------------    -------------------       %
                                             Ps           %          Ps          %       Change
                                           -------     -------    -------     -------    -------
<S>                                        <C>           <C>      <C>           <C>        <C>    
Cellular service revenues ............     1,777.1        83.1%   1,216.8        68.1%     (31.5)%
Other service revenues ...............       104.9         4.9      300.9        16.8      187.0
   Total service revenues ............     1,882.0        88.0    1,517.7        84.9      (19.4)
                                           -------     -------    -------     -------    -------
Telephone equipment and other revenues       256.7        12.0      270.4        15.1        5.3
                                           -------     -------    -------     -------    -------
   Total revenues ....................     2,138.7       100.0%   1,788.1       100.0%     (16.4)%
                                           =======     =======    =======     =======    =======
</TABLE>


                                       49
<PAGE>

      Cellular Services. The table below sets forth the cellular service
revenues by source and operating region for 1994 and 1995.

<TABLE>
<CAPTION>
                                                 For the Year Ended December 31, 1994(1)
                                       ---------------------------------------------------------------
                                                               Regions 5, 6
                                            Region 9           and 7 combined            Total
                                       -------------------    -----------------    -------------------
                                         Ps.          %         Ps.        %         Ps.          %
                                       -------     -------    -------   -------    -------     -------
<S>                                      <C>          <C>       <C>        <C>       <C>          <C>  
Airtime(2) .......................       558.2        48.5%     265.8      42.6%     824.0        46.4%
Monthly fees .....................       387.6        33.6      205.3      32.8      592.9        33.3
Long distance(3) .................        62.1         5.4       59.0       9.4      121.1         6.8
Value-added services(4) ..........       104.9         9.1       52.6       8.4      157.5         8.9
In-roaming(5) ....................        24.0         2.1       34.5       5.5       58.5         3.3
Activation fees ..................        15.2         1.3        7.9       1.3       23.1         1.3
                                       -------     -------    -------   -------    -------     -------
   Total cellular service revenues     1,152.0       100.0%     625.1     100.0%   1,777.1       100.0%
</TABLE>

<TABLE>
<CAPTION>
                                                 For the Year Ended December 31, 1995(1)
                                       ---------------------------------------------------------------
                                                               Regions 5, 6
                                            Region 9           and 7 combined            Total
                                       -------------------    -----------------    -------------------
                                         Ps.          %         Ps.        %         Ps.          %
                                       -------     -------    -------   -------    -------     -------
<S>                                      <C>          <C>       <C>        <C>       <C>          <C>  
Airtime(2) .......................       311.8        39.4%     147.4      34.7%     459.2        37.7%
Monthly fees .....................       338.8        42.8      188.3      44.3      527.1        43.3
Long distance(3) .................        50.0         6.3       33.9       8.0       83.9         6.9
Value-added services(4) ..........        65.0         8.2       39.0       9.2      104.0         8.6
In-roaming(5) ....................        24.8         3.1       14.6       3.4       39.4         3.2
Activation fees ..................         1.6         0.2        1.6       0.4        3.2         0.3
                                       -------     -------    -------   -------    -------     -------
   Total cellular service revenues       792.0       100.0%     424.8     100.0%   1,216.8       100.0%
</TABLE>

----------
(1)   Figures reflect intercompany eliminations. These figures do not include
      revenues derived from paging, long distance, local telephony and data
      transmission.
(2)   Airtime is charged on a per-minute basis for peak (Monday to Friday, 8:00
      A.M. to 10:00 P.M.) and non-peak airtime.
(3)   Long distance revenues generated by cellular subscribers were passed
      through to Telmex.
(4)   Includes fees for value-added services such as call waiting, call
      transfer, emergency service, secretarial service and conference calling,
      and revenues from activation bonds, insurance-related charges payable by
      subscribers, rural and public telephony and the Company's cellular
      magazine. Does not include charges for related airtime. Customers using
      certain value-added services such as news, weather, sports and
      entertainment reports are charged only for airtime, which is therefore
      included in Airtime.
(5)   See "Description of Business--Cellular Services--Roaming" for a 
      discussion of the differences between in-roaming and out-roaming and
      the revenues associated therewith. Out-roaming revenues are reflected
      in telephone equipment and other revenues and are passed through to 
      the applicable host operator.

      Cellular service revenues declined by 31.5% to Ps.1,216.8 million
(U.S.$154.4 million) from Ps.1,777.1 million (U.S.$225.5 million) and
represented 68.1% and 83.1% of total revenues in 1995 and 1994, respectively.
Revenues declined despite a 7.9% increase in total subscribers. The principal
reason for this decrease was the Company's inability, due to competitive market
conditions, to increase its prices in line with inflation. The Company raised
prices by an average of approximately 20% during 1995, when the inflation rate
was 52.0%. In 1995, the number of contract subscribers increased 14,079.
Iusacell had 210,201 and 194,723 cellular subscribers at December 31, 1995 and
1994, respectively.

      During 1995, contract subscriber churn increased to an average monthly
level of 3.62% compared to 2.67% during 1994, which the Company believes was due
to the impact of the Peso devaluation on consumer demand.

      Average MOUs for 1995 were 140, a decrease of 21.8% compared to the
average of 179 MOUs in 1994. This decline in MOUs was largely due to the impact
of the Peso devaluation on consumer demand. In addition, the Company has
experienced a trend toward lower MOUs as Iusacell's expanded customer base
attracts subscribers who tend to generate fewer MOUs. As a result of this
decline in MOUs, nominal average monthly cellular revenue per subscriber
declined 22% to Ps.464 in 1995 from Ps.595 in 1994.


                                       50
<PAGE>

      Other Services. Other service revenues increased substantially to Ps.300.9
million (U.S.$38.2 million) in 1995 from Ps.104.9 million (U.S.$13.3 million) in
1994. This increase is principally due to revenues from the Company's data
transmission services, which Iusacell began providing in 1995.

      Telephone Equipment and Other. Telephone equipment and other revenues
increased to Ps.270.4 million (U.S.$34.3 million) in 1995 from Ps.256.7 million
(U.S.$32.6 million) in 1994, an increase of 5.3%. This increase is primarily due
to an 11% increase in outroaming revenues, offset by a 16% decline in sales of
handsets and accessories.

Cost of Sales

      Total cost of sales increased 5.0% to Ps.706.5 million (U.S.$89.6 million)
in 1995 from Ps.673.1 million (U.S.$85.4 million) in 1994.

      Cost of Services. Cost of services increased by 1.7% to Ps.556.4 million
(U.S.$70.6 million) in 1995 from Ps.546.9 million (U.S.$69.4 million) in 1994,
and increased to 36.7% of total service revenues in 1996 from 29.1% of total
service revenues in 1995. The increase was largely due to an increase in
technical expenses and the cost of delivering data services, which the Company
initiated in 1995.

      Cost of Telephone Equipment and Other. Cost of telephone equipment and
other costs increased by 18.9% to Ps.150.1 million (U.S.$19.0 million) in 1995
from Ps.126.3 million (U.S.$16.0 million) in 1994 and, as a percentage of
telephone equipment and other revenues, increased to 55.5% in 1995, compared to
49.2% in 1994. The increase largely resulted from the effect of the Peso
devaluation since the Company purchased equipment in U.S. dollars and sold it in
Pesos. For a discussion of the Company's accounting policy for the cost of
cellular handsets given to customers, see "--Year Ended December 31, 1996
Compared to Year Ended December 31, 1995" and Note 4(f) to the Audited
Consolidated Financial Statements.

Operating Expenses

      Operating expenses decreased 13.3% to Ps.789.8 million (U.S.$100.2
million) in 1995 from Ps.910.5 million (U.S.$115.5 million) in 1994, and as a
percentage of revenues, increased to 44.2% in 1995 from 42.6% in 1994. Sales and
advertising expenses declined 15.7% in 1995 as a result of the economic
downturn, while corporate overhead expenses increased 9.2% in 1995. The amount
of pre-operating expenses (net of pre-operating revenues) that were capitalized,
rather than, as is required under U.S. GAAP, expensed, in 1995 equalled Ps.40.4
million (U.S.$5.1 million). No pre-operating expenses were recorded in 1995 
or 1994 that under U.S. GAAP would have been required to be expensed, instead 
of, as is the case under Mexican GAAP, capitalized.

Depreciation and Amortization

      Depreciation and amortization expenses increased to Ps.629.2 million
(U.S.$79.8 million) in 1995 from Ps.547.9 million (U.S.$69.5 million) in 1994.
The upward revaluation of dollar-denominated assets due to the Peso devaluation
as well as depreciation associated with new capital investments principally
accounted for this increase.

Operating Profit (Loss)

      The Company recorded an operating loss of Ps.337.4 million (U.S.$42.8
million) in 1995 as compared to an operating profit of Ps.7.1 million (U.S.$0.9
million) in 1994.

Integral Financing Cost (Gain)

      Integral financing cost decreased by 44.5% to Ps.354.1 million (U.S.$44.9
million) in 1995 from Ps.637.6 million (U.S.$80.9 million) in 1994 due
principally to an increase in gains on monetary position to Ps.471.2 million
(U.S.$59.8 million) from Ps.46.9 million (U.S.$6.0 million). The increased gains
on monetary position were the result of an increase in the net amount of total
debt outstanding and substantially increased inflation in 1995. Net interest
expense declined to Ps.162.7 million (U.S.$20.6 million) in 1995 from Ps.191.7
million (U.S.$24.3 million)


                                       51
<PAGE>

in 1994, a decrease of 15.0%. This decrease in interest expense principally
resulted from the retirement of high interest debt with the proceeds of the
Company's U.S.$148.7 million global equity offering in June 1994. The decrease
in integral financing costs was partially offset by the fact that net foreign
exchange losses increased to a loss of Ps.662.5 million (U.S.$84.1 million) in
1995 from a loss of Ps.492.9 million (U.S.$62.5 million) in 1994, an increase of
34.4%, principally as a result of the Peso devaluation.

Equity Participation in Net Income (Loss) of Associated Companies

      Equity participation in net income (loss) of associated companies
decreased substantially to a loss of Ps.36.8 million (U.S.$4.7 million) in 1995
from an income of Ps.2.9 million (U.S.$0.4 million) in 1994. This decline was
primarily attributable to losses sustained by the Company's Ecuadorean affiliate
as a result of the economic crisis experienced throughout Latin America in 1995.

Net Income (Loss)

      As a result of the factors described above, net loss increased 9.7% to
Ps.722.7 million (U.S.$91.7 million) in 1995 from Ps.658.6 million (U.S.$83.6
million) in 1994.

Income Tax, Asset Tax and Employees' Profit Sharing

      The Company prepares its tax returns on a consolidated basis, thereby
benefitting from the ability to offset losses incurred by certain subsidiaries
against the gains of others within the consolidated group.

      Iusacell and its subsidiaries are subject to an alternative net asset tax
which is levied on the average value of substantially all assets less certain
liabilities. This tax, which was 2% in 1994 and 1.8% in 1995 and 1996, is
required to be paid if the amount of the asset tax exceeds the computed income
tax liability. The Company provided for Ps.30.5 million (U.S.$3.9 million),
Ps.27.3 million (U.S.$3.5 million) and Ps.33.1 million (U.S.$4.2 million) of net
asset taxes for 1994, 1995 and 1996, respectively. These taxes may be applied in
subsequent years against income tax payments, to the extent income tax
liabilities for such years exceed the net asset tax calculation. Due to net
losses, the Company paid no income taxes in 1994, 1995 and 1996 and paid the
asset taxes specified above. See Note 12 to the Audited Consolidated Financial
Statements for a discussion of the Company's tax loss.

      While Iusacell has no employees at the holding company level, the
Company's subsidiaries are required under Mexican law to pay their employees, in
addition to their required compensation and benefits, profit sharing in an
aggregate amount equal to 10% of the taxable income of the relevant subsidiary
(calculated without reference to inflation adjustments or amortization of tax
loss carryforwards). In 1994, 1995 and 1996, statutory
profit sharing totalled Ps.0.6 million (U.S.$0.1 million), Ps.2.0 million
(U.S.$0.3 million) and Ps.0.3 million (U.S.$0.0 million), respectively. There
was no statutory profit sharing in 1996.

Liquidity and Capital Resources

      Liquidity. Historically, the Company's liquidity has been provided by 
cash from operations, vendor financing and short-term and long-term 
borrowings. Total debt as of December 31, 1996 was Ps.1,319.7 million, a 
decrease of Ps.239.8 million, or 15.4%, compared to 1995. Substantially all 
of the Company's debt outstanding at December 31, 1996 was dollar-denominated 
and unhedged. As of December 31, 1996, the Company's bank debt consisted 
primarily of (i) U.S.$65.0 million under a credit agreement with the Chase 
Manhattan Bank, (ii) U.S.$47.1 million 
outstanding under three credit agreements with Banco Mexicano, S.A. for the 
purchase of equipment from Northern Telecom Corporation, (iii) U.S.$32.9 
million under credit facilities granted by The Chase Manhattan Bank, N.A. and 
supported by an affiliate of Bell Atlantic and (iv) U.S.$45.7 million under 
four credit agreements granted by Banco Nacional de Mexico, S.A. ("Banamex") 
to two of the Company's subsidiaries.

      On February 18, 1997, as part of the transactions relating to the
assumption of management control by Bell Atlantic, the U.S.$32.9 million credit
facilities provided by an affiliate of Bell Atlantic was converted into
approximately 47 million shares of the Company's Common Stock. Simultaneously,
U.S.$37.2 million in loans


                                       52
<PAGE>

from the Peralta Group was converted into approximately 53 million shares of the
Company's Common Stock. These conversions resulted in Bell Atlantic owning 44.4%
of the Company's voting shares and the Peralta Group owning 52.3% of the
Company's voting shares. In addition, Bell Atlantic committed to provide the
Company financing of up to U.S.$150.0 million in exchange for convertible
subordinated debentures. See Notes 5 and 10 to the Audited Consolidated
Financial Statements.

      The Company's operations are conducted through its direct and indirect
subsidiaries. As a holding company, the Company has no independent operations
and, therefore, is dependent on the cash flow of its subsidiaries to meet its
obligations. The Company's subsidiaries operating in Regions 5 and 6 are
currently parties to credit agreements that partially restrict their ability to
pay dividends to the Company if certain financial ratios are not met. These two
subsidiaries made up 23.3% and 30.9% of the Company's consolidated revenues and
cash flow, respectively, in 1996.

      The Company's principal source of funds in 1996 was resources from
operating activities. In 1996, the Company generated Ps.440.9 million, down from
Ps.523.6 million in 1995, a 15.8% decrease. The 1996 decrease was largely due to
(i) a decrease in depreciation and amortization expense of Ps.66.1 million from
1995 reflecting a lower revaluation of assets due to lower inflation in 1996 as
compared with 1995, (ii) a lower contribution from trade accounts payable
resulting from stricter payment terms imposed by key suppliers and (iii) the
reversal of taxes and other payables from a contribution to resources to a use.

      Resources used for financing activities were Ps.328.1 million in 1996,
compared with Ps.201.7 million in resources provided by financing activities in
1995. In 1996 the Company repaid various long-term obligations, offset in part
by a Ps.54.4 million increase in 1996 in notes payable.

      The Company's principal uses of funds in 1996 were for the repayment of
debt and for investing activities. In 1996, the Company's investing activities
used resources of Ps.52.8 million, reflecting a decline of 93.4% from Ps.799.8
million in 1995. Uses of investing activities were composed of capital
expenditures requiring outlays of Ps.198.5 million in 1996, a decrease of
Ps.244.2 million from Ps.442.7 million in 1995. As a result of the economic
situation in Mexico, the Company reduced its capital expenditure program with
outlays principally for expansion of the cellular network and the startup of
long distance and paging.

      Capital Expenditures. The Company expects to have substantial capital 
expenditures to upgrade its network infrastructure, build out its cellular, 
long distance, local telephony and paging networks, redesign Iusacell-owned 
and operated customer service centers and support existing operations and new 
business opportunities. The degree and timing of capital expenditures will 
remain strongly dependent on the competitive environment and economic 
developments in Mexico, including inflation and exchange rates, as well as on 
the timing of regulatory actions and on the availability of suitable 
financing.

     The Company expects capital expenditures for 1997, 1998 and 1999 to total 
approximately U.S.$308 million, of which approximately U.S.$65 million will 
be invested during 1997. Approximately U.S.$235 million, or 75% of the total 
of U.S.$308 million, will be for the development of its wireless network, 
including the deployment of the CDMA digital network beginning in the first 
quarter of 1998 and ongoing upgrades to the network infrastructure that will 
support the Company's existing analog and planned digital networks. The 
balance of U.S.$73 million will be (i) invested in its long distance and 
other networks, (ii) used to redesign Iusacell-owned and operated customer 
service centers, (iii) used to fund certain non-network infrastructure, such 
as the prepay operating platform, an advanced fraud detection system and 
upgrades to its billing and other management information systems, and (iv) 
used for other corporate purposes.


                                       53
<PAGE>

      The Company expects to be able to fund future capital expenditures and
meet its other obligations from funds from operations, borrowings under the Bell
Atlantic U.S.$150 million convertible subordinated debenture commitment, foreign
bank lines of credit and other financing facilities, such as trade financing,
import-export bank financing and vendor financing. To the extent such financing
is not available, the Company may have to scale back capital expenditures and
expansion plans.

      The Company's principal amortization payments due on its existing
indebtedness at December 31, 1996 total Ps.964.7 million (U.S.$122.4 million) in
1997, Ps.141.1 million (U.S.$17.9 million) in 1998, Ps.130.0 million (U.S.$16.5
million) in 1999 and Ps.2,179.1 million (U.S.$276.5 million) in 2000 and
thereafter.

      Limitations on Financings. The Company is party to certain credit 
agreements which, directly or indirectly, restrict its ability to incur 
additional indebtedness. Pursuant to two credit agreements entered into with 
Banco Mexicano, S.A. for a total of U.S.$64.7 million, the Company agreed not 
to contract for loans, financing or guarantees, or make advances to third 
parties without first obtaining the consent of Banco Mexicano, S.A. Pursuant 
to two credit agreements which the Company's subsidiary Comcel entered into 
with Banamex for a total aggregate amount up to U.S.$24.5 million, Comcel 
agreed not to incur any additional long-term debt without Banamex's consent 
and not to incur short-term debt in excess of U.S.$2.0 million in the 
aggregate; and pursuant to three credit agreements which the Company's 
subsidiary Portacel entered into with Banamex for a total aggregate amount up 
to U.S.$35.0 million, Portacel agreed not to incur debt in excess of 
U.S.$2,500 per subscriber. Certain of the Company's and subsidiaries' credit 
agreements contain debt-coverage and leverage ratios. These restrictions may 
effect the Company's ability to access credit or refinance its existing 
indebtedness.

      Dividend Policy. The Company has not paid and currently has no plans to
initiate dividend payments.

U.S. GAAP Reconciliation

      The principal differences between Mexican GAAP and U.S. GAAP as they
relate to the Company are the treatment of minority interest, deferred income
taxes, deferred employee profit sharing and capitalized interest expense. See
Note 19 to the Audited Consolidated Financial Statements.

ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT

    Iusacell is currently managed by a 21-member Board of Directors (the "Board
of Directors"). The Directors nominated by Bell Atlantic have the power under
the bylaws to approve, without the affirmative vote of any other Directors, all
resolutions of the Board of Directors. However, the New Shareholders Agreement
grants the Peralta Group supermajority rights with respect to certain
transactions. See "Control of Registrant."
 
    Pursuant to the New Shareholders Agreement, Mr. Lawrence T. Babbio, Jr.,
Vice Chairman of Bell Atlantic, automatically became the Chairman of the Board
of Directors of Iusacell upon the death of Mr. Alejo Peralta, founder of
Iusacell, on April 8, 1997. That position was reaffirmed at the annual
shareholders' meeting of Iusacell on April 10, 1997.
 
    Generally, the Board of Directors is authorized to elect or appoint
Iusacell's executive officers as well as officers of wholly owned subsidiaries
and employees or agents of the Company. However, Mr. Babbio (or his successor as
Chairman of the Board of Directors, as the case may be) has the power under the
New Shareholders Agreement to appoint and dismiss the Chief Executive Officer,
President, Director General, Chief Operating Officer and Director of the
Cellular Division of Iusacell. Even if Bell Atlantic no longer has control of
the Board of Directors, the Chief Financial Officer and the two principal
officers responsible for strategic and network planning at Iusacell will
continue to be nominated by Bell Atlantic, provided that Bell Atlantic maintains
certain minimum ownership requirements.
 
DIRECTORS AND EXECUTIVE OFFICERS
 
    The following table sets forth certain information with respect to the
current directors and principal executive officers of the Company:
 
<TABLE>
<CAPTION>
           NAME                                                    AGE                          POSITION(S)
           -------------------------------------------------  -------------  -------------------------------------------------
<S>        <C>                                                <C>            <C>
           Lawrence T. Babbio, Jr...........................           52    Chairman of the Board of Directors and Series A
                                                                               Director
*          Thomas A. Bartlett...............................           39    President and Chief Executive Officer and Series
                                                                               B Director
           Fulvio V. del Valle..............................           47    Director General
*          Edward R. Kingman, Jr............................           49    Executive Vice President and Chief Operating
                                                                               Officer and Series L Director
*          Howard F. Zuckerman..............................           53    Vice President--Finance and Audit and Chief
                                                                               Financial Officer and Series B Director
           Carlos Peralta Quintero..........................           45    Series A Director
           Luis Felipe Gonzalez Munoz.......................           42    Series A Director
           William O. Albertini.............................           53    Series A Director
           Dennis C. Strigl.................................           51    Series A Director
           Manuel Somoza Alonso.............................           50    Series A Director
           Jose Ramon Elizondo Anaya........................           43    Series A Director
           Rodolfo Garcia Muriel............................           52    Series A Director
           Gabriel Alarcon Velazquez........................           60    Series A Director
           Eduardo Rihan Azar...............................           75    Series A Director
           Thomas R. McKeough...............................           50    Series B Director
*          Noah S. Asher....................................           35    Vice President--Administration and Series B
                                                                               Director
*          Ruben G. Perlmutter..............................           39    Vice President--Mergers and Acquisitions and
                                                                               General Counsel and Series B Director
           Mack E. Treece...................................           38    Series B Director
           Robert Van Brunt.................................           43    Series B Director
           Fernando de Ovando...............................           45    Series B Director
           Javier Martinez del Campo Lanz...................           38    Series B Director
           Ernesto Canales Santos...........................           56    Series D Director
</TABLE>
 
------------------------
(*)  Indicates an employee of Bell Atlantic who is currently serving as an
     officer of Iusacell pursuant to consulting or secondment arrangements.

                                       54
<PAGE>

    LAWRENCE T. BABBIO, JR. has been a member of the Board of Directors of
Iusacell since November 1993, became Vice Chairman of the Board in February 1994
and, upon the death of Alejo Peralta y Diaz Ceballos on April 8, 1997, became
Chairman of the Board. Since 1966, Mr. Babbio has served in a variety of
capacities with affiliates of Bell Atlantic and its predecessors. In January
1995, he was elected vice chairman of Bell Atlantic. From May 1994 to January
1995, he served as executive vice president and chief operating officer of Bell
Atlantic. From February 1991 to May 1994 he served as chairman, president and
chief executive officer of Bell Atlantic Enterprises International, Inc. Prior
to that, he served as president of Bell Atlantic Mobile Systems, Inc., a
position he had held since November 1990. He currently serves on the board of
directors of Bell Atlantic and Compaq Computer Corporation. Mr. Babbio holds an
undergraduate degree in electrical engineering from Stevens Institute of
Technology and received an M.B.A. from New York University.
 
    CARLOS PERALTA QUINTERO has been a member of the Board of Directors of
Iusacell since October 1992 and served as Vice Chairman of the Company from
October 1992 to February 1997. He also currently serves as vice chairman of
Grupo Industrial IUSA, S.A. de C.V. Mr. Peralta founded the Mexican Association
of Non-Wireline Cellular Telephone Licensees, is a member of the board of
directors of the Cellular Telephone Industry Association and was actively
involved in the formation, and is currently honorary chairman of, the Asociacion
Latinoamericana de Telefonia Celular, A.C. Mr. Peralta is also a member of the
boards of directors of Cambridge Lee Industries Ltd. and Alper Holdings Ltd.
 
    THOMAS A. BARTLETT has been a member of the Board of Directors of Iusacell
since September 1995 and President and Chief Executive Officer of the Company
since February 1997. Since 1983, Mr. Bartlett has served in a variety of
capacities with affiliates of Bell Atlantic. In August 1995, he was appointed
president of Bell Atlantic's international wireless operations. For more than
three years prior thereto, Mr. Bartlett served in several capacities with Bell
Atlantic Mobile Systems, Inc. and Bell Atlantic NYNEX Mobile: as president of
the New England and Upstate New York region for Bell Atlantic NYNEX Mobile in
July and August 1995, as regional vice president for the Philadelphia Tri-State
region for Bell Atlantic Mobile Systems, Inc. from May 1992 through June 1995,
and as vice president for business development for Bell Atlantic Mobile Systems,
Inc. from July 1991 to May 1992. From December 1988 to July 1991, Mr. Bartlett
served as chief financial officer of Bell Atlantic Business Systems Services,
Inc. Mr. Bartlett holds an industrial engineering degree from Lehigh University
and an M.B.A. from Rutgers University.
 
    FULVIO V. DEL VALLE has been the Director General of Iusacell since June
1997. From August 1996 until June 1997, Mr. del Valle served as managing
director of the non-wireline cellular companies in Regions 3 (Norcel) and 4
(CedeTel). For more than 20 years prior thereto, Mr. del Valle served in senior
Latin America region executive positions for several multinational corporations.
Mr. del Valle was employed by AMP Inc., as regional director, Latin America,
from January 1996 through July 1996 and as managing director, Mexico from August
1992 until January 1996. From September 1986 until July 1992, Mr. del Valle
served as Regional Director for South America, Electronics Division for DuPont
Latin America Corp. and from March 1980 through August 1986, he served as
general manager, Latin American North Region for National Semiconductor Corp.
Mr. del Valle holds an undergraduate degree in electrical engineering from the
Instituto Politecnico Nacional of Mexico and a master's degree in physics from
Virginia Polytechnic Institute.
 
    GABRIEL ALARCON VELAZQUEZ has been a member of the Board of Directors of
Iusacell since November 1993. He is currently president and chief executive
officer of the Mexican newspaper EL HERALDO DE MEXICO, Grupo Alarcon, S.A. de
C.V. and Cadena Real, S.A. de C.V. He is also currently on the board of
directors of Grupo Financiero Bancomer, S.A. de C.V. and Grupo Financiero
Interacciones, S.A. de C.V. Mr. Alarcon was chief executive officer of Portacel
from 1989 to 1993. Mr. Alarcon holds a degree in business administration from
Instituto Tecnologico Autonomo de Mexico.
 
                                       55
<PAGE>

    WILLIAM O. ALBERTINI has been a member of the Board of Directors of Iusacell
since November 1993. Since 1967, Mr. Albertini has served in a variety of
capacities with affiliates of Bell Atlantic and its predecessors. Mr. Albertini
has served as executive vice president of Bell Atlantic since February 1995 and
as chief financial officer of Bell Atlantic since February 1991. From February
1991 until February 1995, he served as vice president of Bell Atlantic. He
currently serves on the board of directors of Bell Atlantic, American Water
Works Company, Inc. and Compass Capital Funds. Mr. Albertini holds an
undergraduate degree from the University of Notre Dame, an M.B.A. from Lehigh
University and a master's degree from the Massachusetts Institute of Technology.
 
    NOAH S. ASHER has been Vice President--Administration of Iusacell and a
member of the Board of Directors of Iusacell since February 1997. Mr. Asher has
served in two capacities for Bell Atlantic International Wireless since March
1995--as vice president of Latin American operations from September 1996 until
February 1997 and as chief financial officer from March 1995 until September
1996. For more than four years prior thereto, Mr. Asher worked in a variety of
financial management capacities for Scott Paper Company, including more than two
years as the financial manager of Grupo Crisoba, S.A. de C.V., a Scott Paper
Company joint venture based in Mexico City, and eighteen months in Brussels,
Belgium as manager of European treasury. From September 1984 until May 1987, Mr.
Asher was employed as an auditor by Coopers & Lybrand. Mr. Asher is a Certified
Public Accountant. Mr. Asher holds an undergraduate degree in economics and a
masters degree in international relations from the University of Pennsylvania
and an M.B.A. from the Wharton School of Business.
 
    ERNESTO CANALES SANTOS has been a member of the Board of Directors of
Iusacell since November 1993. Mr. Canales is a founding partner of Canales y
Rios Zertuche, S.C., a law firm formed in 1988. Previously, he was chief legal
counsel of Grupo Industrial Alfa, S.A. de C.V., from 1974 to 1986. Mr. Canales
is a member of the boards of directors of Grupo Financiero Banamex/Accival, S.A.
de C.V., Industrias AXA, S.A. de C.V., Grupo Financiero InverMexico, S.A. de
C.V., Grupo Financiero Promex-Finamex, S.A. de C.V., and Banco del Atlantico.
Mr. Canales is also a commissioner of Telecab, S.A. de C.V., and a member of the
Patronato del Museo de Historia Mexicana. Mr. Canales holds a law degree from
Escuela Libre de Derecho and a master's degree in comparative law from Columbia
University.
 
    FERNANDO DE OVANDO has been a member of the Board of Directors of Iusacell
since February 1997 and was the Secretary of the Company from November 1993
until February 1997. Mr. de Ovando has been a partner in the law firm of De
Ovando y Martinez del Campo, S.C. and its predecessors since 1984. Mr. de Ovando
serves on the board of directors of Grupo Financiero Inverlat, S.A. de C.V. and
Q.B. Industrias, S.A. de C.V., and is a member of the boards of directors and/or
secretary of several other private Mexican corporations and Mexican subsidiaries
of foreign corporations. Mr. de Ovando holds a law degree from the Universidad
Anahuac and an LL.M. degree from the University of Toronto.
 
    JOSE RAMON ELIZONDO ANAYA has been a member of the Board of Directors of
Iusacell since February 1997. Since June 1991, Mr. Elizondo has served as
chairman of the board and chief executive officer of Union de Capitales, S.A. de
C.V. (UNICA), a capital investment fund. For more than ten years prior thereto,
Mr. Elizondo was a manager of Operadora de Bolsa, Casa de Bolsa, including
managing director of the investment banking department and president of its
investment banking committee and managing director of the mergers and
acquisitions and corporate finance departments. Mr. Elizondo is a member of the
boards of directors of Ekco, S.A., Banca Quadrom, S.A. de C.V., Grupo
Embotelladoras, S.A. de C.V., Grupo Financiero BanCrecer, S.A., Grupo Marti,
S.A., Q Tel, S.A. de C.V., TV Azteca, S.A. de C.V.. as well as the companies in
which UNICA has invested. Mr. Elizondo holds an undergraduate public accounting
degree from Universidad LaSalle and received an M.B.A. from the Instituto
Tecnologico y de Estudios Superiores de Monterrey.
 
    RODOLFO GARCIA MURIEL was an alternate member of the Board of Directors of
the Company from November 1993 to May 1994 and became a Director in May 1994. He
is currently general director of Compania Industrial de Parras, S.A. de C.V. Mr.
Garcia Muriel has been a member of the boards of
 
                                       56
<PAGE>

directors of Cementos Mexicanos, S.A. de C.V., Cementos Maya, S.A., Cementos
Tolteca, S.A. de C.V., and Grupo Financiero InverMexico, S.A. de C.V. He also
served as chairman of the boards of directors of Corporacion Industrial Mexico
Francia, Fondo de Optimacion de Capitales, Consejo Regional Metropolitano de
Banco Mexicano, Parras Cone de Mexico, S.A. de C.V. and Lavapar, S.A. de C.V.,
and is currently the vice president of the National Chamber of the Textile
Industry (Canaitex).
 
    LUIS FELIPE GONZALEZ MUNOZ has been a member of the Board of Directors of
Iusacell since April 1997 and between May 1994 and December 1996; between
December 1996 and April 1997, Mr. Gonzalez was an alternate member of the Board
of Directors. Mr. Gonzalez is a member of the Finance and Audit Committee. Mr.
Gonzalez has served as chief financial officer of Industrias Unidas, S.A. de
C.V. since November 1993. For more than ten years prior thereto, Mr. Gonzalez
was employed by Vitrocrisa, S.A. de C.V. and its affiliates, including as
director of administration, finance and human resources from September 1990
until July 1993, and as director of administration and finance from February
1988 to September 1990. Mr. Gonzalez is a member of the board of directors of
Grupo Industrial Iusa, S.A. de C.V., Propulsora de Negocios, S.A. de C.V.,
Cambridge Lee Industries Inc. and Hilpar, S.A. de C.V. Mr. Gonzalez holds an
undergraduate business administration degree and M.B.A. from the Instituto
Tecnologico y de Estudios Superiores de Monterrey.
 
    EDWARD R. KINGMAN, JR. has been Executive Vice President and Chief Operating
Officer of Iusacell since February 1997 and a member of the Board of Directors
of Iusacell since April 1997. Prior thereto, between December 1993 and February
1997, he served as Senior Vice President, Chief Financial Officer and Treasurer
of Iusacell, and was an alternate member of the Board of Directors from April
1995 until April 1997. Previously, Mr. Kingman served as vice president of
finance at Bell Atlantic Network Services, Inc., executive director of finance
for Bell Atlantic Network Services, Inc., principal financial executive,
treasurer and controller for Bell Atlantic--Washington, D.C. (formerly The
Chesapeake and Potomac Telephone Company) and treasurer of each of Bell
Atlantic--Maryland (formerly The Chesapeake and Potomac Telephone Company of
Maryland), Bell Atlantic--Virginia (formerly The Chesapeake and Potomac
Telephone Company of Virginia) and Bell Atlantic--West Virginia (formerly The
Chesapeake and Potomac Telephone Company of West Virginia). Mr. Kingman holds an
undergraduate degree in communications from the American University. Mr.
Kingman's post-graduate training includes an M.B.A. from the American University
and he has advanced post-graduate training in finance from Harvard University
and the University of Pennsylvania.
 
    JAVIER MARTINEZ DEL CAMPO LANZ has been a member of the Board of Directors
of Iusacell since February 1997. Mr. Martinez del Campo has been a partner in
the law firm of De Ovando y Martinez del Campo, S.C. and its predecessors since
1984. Mr. Martinez del Campo serves on the board of directors of Grupo Gigante,
S.A. de C.V. and is a member of the boards of directors or secretary of several
other Mexican subsidiaries of foreign corporations. Mr. Martinez del Campo holds
a law degree from the Universidad Anahuac and a masters degree in comparative
law from the University of San Diego.
 
    THOMAS R. MCKEOUGH has been a member of the Board of Directors of Iusacell
since June 1994. Since 1984, Mr. McKeough has been a member of the legal
department of Bell Atlantic and its affiliates, with principal responsibilities
for mergers and acquisitions and for the legal affairs of Bell Atlantic
Enterprises International, Inc. for more than five years. In December 1994, Mr.
McKeough was elected vice president--mergers and acquisitions and associate
general counsel of Bell Atlantic. Prior thereto, from December 1992 to December
1994, Mr. McKeough served as assistant general counsel of Bell Atlantic, and
from November 1988 to December 1992 as general attorney, mergers and
acquisitions and enterprises. Mr. McKeough holds an undergraduate degree from
Providence College and a law degree from the University of Pennsylvania Law
School.
 
    RUBEN G. PERLMUTTER has served as Vice President, Mergers & Acquisitions and
General Counsel and a member of the Board of Directors of Iusacell since
February 1997. From November 1993 through February 1997, Mr. Perlmutter was
employed as an attorney by Bell Atlantic Network Services, Inc. For
 
                                       57
<PAGE>

more than four years prior thereto, Mr. Perlmutter was a corporate associate at
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, a New York law firm. Mr.
Perlmutter holds degrees from Harvard College and Harvard Law School.
 
    EDUARDO RIHAN AZAR was an alternate member of the Board of Directors from
November 1993 to May 1994 and has been a member of the Board of Directors of
Iusacell since May 1994. Mr. Rihan is president of Acco Mexicana, S.A. de C.V.,
Wearever de Mexico, S.A. de C.V., Mex-Internacional, S.A. de C.V., Inmobiliaria
Chihuahua, S.A. de C.V. and Promotora de Maquiladoras DNC, S.A. de C.V. Mr.
Rihan serves as a member of the board of directors of Baja del Mar, S.A. de
C.V., Grupo Iusa, S.A. de C.V. and Desarrollo Industrial de Tijuana, S.A. de
C.V. Mr. Rihan attended the University of Southern California where he studied
chemical engineering.
 
    MANUEL SOMOZA ALONSO has been a member of the Board of Directors of Iusacell
since February 1997. Since 1966, Mr. Somoza has served in a variety of
capacities within the banking and brokerage industries. Since April 1996, Mr.
Somoza has served as chairman of the board of directors of Somoza, Cortina y
Asociados, Casa de Bolsa and, since December 1996, as chairman of the board of
directors of Grupo Financiero BanCrecer, S.A. Prior thereto, from November 1991
through June 1995, Mr. Somoza served as director general of Grupo Financiero
Invermexico, S.A. de C.V. and, from April through June 1995, as director general
of Banco Mexicano. Mr. Somoza serves on the board of directors of Bolsa Mexicana
de Valores, S.A. de C.V., Corporacion Industrial San Luis, S.A. de C.V. and
Mexicana de Inversiones Femac, S.A. de C.V. Mr. Somoza holds an undergraduate
degree in economics from Universidad Anahuac and received an M.B.A. from the
Instituto Tecnologico y de Estudios Superiores de Monterrey.
 
    DENNIS F. STRIGL has been a member of the Board of Directors of Iusacell
since April 1997 and was a member of the Board of Directors between November
1993 and September 1995. Mr. Strigl has served as president and chief executive
officer of Bell Atlantic Mobile Systems, Inc. and Bell Atlantic NYNEX Mobile
since 1991. Prior thereto, Mr. Strigl was vice president for operations and
chief operating officer of Bell Atlantic New Jersey, Inc. (formerly New Jersey
Bell Telephone Company) and served on its board of directors. Between 1984 and
1989, Mr. Strigl served in a variety of capacities for Ameritech Corporation.
Mr. Strigl holds an undergraduate degree in business administration from
Canisius College and an M.B.A. from Fairleigh Dickinson University.
 
    MACK E. TREECE has been a member of the Board of Directors of Iusacell since
February 1997. Since 1985, Mr. Treece has served in a variety of finance and
treasury capacities with affiliates of Bell Atlantic. In September 1996, he was
appointed chief financial officer of Bell Atlantic's international wireless
operations. Prior thereto, Mr. Treece served as chief financial officer of
Eurotel Praha, S.R.D. and Eurotel Bratislava, S.R.D. between July 1993 and
September 1996, as managing director of Bell Atlantic Financial Services
International, B.V. from July 1992 until July 1993, as director of financing for
Bell Atlantic Financial Services International from January 1990 until July
1992, and as the manager for the debt portfolio of Bell Atlantic Financial
Services, Inc. from 1987 until January 1990. Mr. Treece received an
undergraduate degree in commerce with a concentration in finance and marketing
from the University of Virginia and an M.B.A. from Widener University.
 
    ROBERT VAN BRUNT has been a member of the Board of Directors of Iusacell
since February 1997. Since December 1984, Mr. Van Brunt has served in a variety
of business development, planning and financial analysis capacities with
affiliates of Bell Atlantic. In January 1996, Mr. Van Brunt was appointed vice
president, investments for Bell Atlantic's international wireless operations.
Prior thereto, between November 1993 and December 1995, Mr. Van Brunt served as
vice president, wireless operations and investments for Bell Atlantic
International, Inc. and its Bell Atlantic's international wireless operations.
Between October 1989 and November 1993, Mr. Van Brunt served as vice president,
business development for Bell Atlantic Mobile Systems, Inc. From 1975 to 1984,
Mr. Van Brunt was employed as an
 
                                       58
<PAGE>

accountant and auditor by Deloitte, Haskins & Sells. Mr. Van Brunt received an
undergraduate degree in commerce, with a concentration in accounting, from Rider
University.
 
    HOWARD F. ZUCKERMAN has been Vice President and Chief Financial Officer of
Iusacell since February 1997 and a member of the Board of Directors of Iusacell
since April 1997. Since March 1984, Mr. Zuckerman has served in a variety of
financial management positions with affiliates of Bell Atlantic. In May 1993, he
was appointed vice president, finance of the carrier services division (serving
the United States interexchange carrier market) of Bell Atlantic Network
Services, Inc., the service company for Bell Atlantic's regulated operations.
For more than nine years prior thereto, Mr. Zuckerman had served in a variety of
executive capacities with Bell Atlantic Enterprises International, Inc. and
related affiliates of the unregulated businesses of Bell Atlantic, including
chief financial officer of Bell Atlantic Investment Development Corporation from
1988 to 1992 and director of accounting of Bell Atlantic Enterprises, Inc. From
1975 to 1983, Mr. Zuckerman held financial management positions with Squibb
Corporation, a diversified pharmaceutical company based in the United States,
and was appointed an Assistant Corporate Controller in July 1982. From 1970 to
1975, Mr. Zuckerman was employed by the audit division of the New York office of
Arthur Andersen & Co. Mr. Zuckerman is a Certified Public Accountant in New York
and New Jersey. He holds an economics degree from Cornell University and an
M.B.A. from the University of Chicago.
 
ALTERNATE DIRECTORS
 
    The Company's bylaws authorize Alternate Directors to serve on the Board of
Directors in place of Directors who are unable to attend meetings or otherwise
participate in the activities of the Board of Directors. The Series A Alternate
Directors are Marco Antonio de la Torre Barranco, Gabriel Alarcon Brockmann,
Victor Barreiro Cortes, Antonio Cortina Icaza, Carlos Garcia Muriel, Ignacio
Gomez Morin, Roberto Legriba Castilla, Alejandro Portilla Garceran, Manuel
Romano M. and Pedro Santamarina N. The Series B Alternate Directors are
Katherine A. Dunne, Jose Estandia F., Teresa Gomez Fernandez del Castillo,
Silvia Malagon Soberanes, Armando Olivares, Pilar Olmedo Martell, and Xavier
Sanchez Gavito. The Series D Alternate Director is Francisco Jose Flores
Melendez. The Series L Alternate Director is David A. Riffelmacher.
 
COMMITTEES OF THE BOARD OF DIRECTORS
 
    The Company has established Executive, Finance and Audit, Human Resources
and Compensation, and Strategic Planning and Technology Committees of the Board
of Directors. All decisions of these committees require a majority vote of their
members, including the favorable vote of at least one member appointed by each
of the Series A and Series B shareholders, except for decisions on matters over
which the New Shareholders Agreement provides for a supermajority vote. See
"Control of Registrant."
 
    The Executive Committee, an administrative and decision-making body of the
Board of Directors, may act for the Board of Directors except where Mexican law
requires action of the Board of Directors. The members of the Executive
Committee are Messrs. Albertini, Asher, Babbio, Bartlett, Canales, McKeough,
Peralta and Strigl. The Finance and Audit Committee recommends the Company's
independent public accountants, reviews Iusacell's annual consolidated financial
statements, provides oversight of Iusacell's auditing, accounting, financial
reporting and internal control functions, and reviews with management and the
Company's independent public accountants the plans and results of the auditing
function. The members of the Finance and Audit Committee are Messrs. Albertini,
Bartlett, Canales, Gonzalez, McKeough and Treece. The Human Resources and
Compensation Committee reviews, evaluates and makes recommendations to the Board
of Directors regarding Iusacell's executive compensation standards and
practices, including salaries, bonus distributions, grants under the Stock
Purchase Plan (as defined) and deferred compensation arrangements. The members
of the Human Resources and Compensation Committee are Messrs. Asher, Bartlett,
McKeough and Rihan. The Strategic Planning and Technology Committee reviews and
advises management with respect to long-term
 
                                       59
<PAGE>

business goals, strategies and resource allocations, and monitors and assesses
the Company's technology strategies, policies and investments. The members of
the Strategic Planning and Technology Committee are Messrs. Babbio, Bartlett,
Peralta and Strigl.
 
COMPENSATION
 
    The aggregate amount of compensation paid by the Company during the year
ended December 31, 1996 to all directors and executive officers as a group was
Ps. 32.8 million (U.S.$4.1 million). As part of its general compensation policy,
the Company conducts periodic reviews of its management and employees to
determine bonus compensation.



                                       60

<PAGE>

ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS

      The aggregate amount of compensation paid by the Company during the year
ended December 31, 1996 to all directors and executive officers as a group was
Ps.32.8 (U.S.$4.1 million) million. As part of its general compensation policy,
the Company conducts periodic reviews of its management and employees to
determine bonus compensation.

ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES

      In March 1997, Iusacell adopted an executive employee stock purchase plan
(the "Stock Purchase Plan") in order to help retain key executives and better
align their interests with those of the Company. The Stock Purchase Plan is
administered by a management trust with the assistance of the trust division of
Bancrecer, S.A. Under the Stock Purchase Plan, the technical committee of the
management trust (the "Technical Committee"), which is composed of certain
executive officers of the Company, determines the executive employees to whom
Series L Shares of Iusacell will be offered for purchase under the Stock
Purchase Plan. The Technical Committee determines the number of Series L Shares
to be offered for purchase to such executive employees, the purchase price per
share for such purchase rights (which will be the closing price for the Series L
Shares on the Mexican Stock Exchange on the business day selected by the
Technical Committee as the date of sale), the vesting schedule for such purchase
rights, the payment terms and all other terms and conditions therefor. The
number of Series L Shares that may be granted under the Stock Purchase Plan
cannot exceed 4.9% of the aggregate number of issued and outstanding Iusacell
shares.

      In December 1996, the shareholders of Iusacell approved the issuance of
7,812,500 Series L Shares for sale under the Stock Purchase Plan. In March and
June 1997, the Human Resources and Compensation Committee and, in April and June
1997, the Technical Committee of the Company's Board of Directors granted
purchase rights with respect to a total of 7,013,253 Series L Shares to 40
executive employees at a purchase price of Ps.8.48 per Series L Share in April
1997 and 13.82 Pesos per Series L Share in June 1997. All such purchase rights
vest either in three equal annual installments commencing on April 17, 1998 or
June 6, 1998, or in a lump sum on April 17, 1999 or June 6, 1999.

      As of June 23, 1997, purchase rights with respect to 6,865,397 Series L
Shares were outstanding, and purchase rights with respect to 147,856 Series L
Shares had been forfeited.


                                       61
<PAGE>

ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS

General Policy

      The Company adopted a policy on transactions with related parties in
November 1993 in connection with the acquisition by Bell Atlantic of its
holdings in the Company. This policy provides that the Company will not, and
will not permit any of its subsidiaries to, enter into any contract or
transaction with or for the benefit of any of their affiliates (other than
transactions with, between or among wholly owned subsidiaries), including any
member of the Peralta Group and Bell Atlantic and its subsidiaries, which is not
at a price and on other terms at least as favorable to the Company or the
subsidiary as those which could be obtained on an arm's-length basis from an
unaffiliated third party. Because certain of the transactions described below
were effected before adoption of this policy, certain of these transactions were
not necessarily effected on an arm's-length basis.

Bell Atlantic Facility

      Bell Atlantic and the Company will enter into a debenture purchase 
agreement (the "Bell Atlantic Facility") whereby Bell Atlantic will reaffirm 
ite commitment under the 1996 Share Conversion Agreement to purchase an 
aggregate principal amount of up to U.S.$150.0 million of convertible 
subordinated debentures of Iusacell (the "Debentures"). Any Debentures issued 
under the Bell Atlantic Facility will mature on December 31, 1999, and will 
bear interest at an annual rate equal to six-month LIBOR plus 500 basis points, 
payable semi-annually each year in cash or by issuance of additional 
Debentures, at the option of Bell Atlantic, subject to the terms of the 
Subordination Agreement (as defined) described below.

      The principal amount of the Debentures will be convertible at any time
prior to maturity into Series A shares of the Company at a conversion price of
U.S.$0.70 per share. Any Debentures issued in lieu of cash interest will be
convertible at any time prior to maturity into Series A shares at a conversion
price equal to the average closing price on the New York Stock Exchange of the
American Depository Receipts evidencing Series D American Depository Shares and
Series L American Depository Shares of the Company over 10 trading days
immediately preceding such interest payment date. The Debentures will be
transferable only to affiliates of Bell Atlantic, subject to certain exceptions
to be agreed upon.

      Bell Atlantic has agreed to enter into a subordination agreement (the 
"Subordination Agreement") with The Chase Manhattan Bank, as administrative 
agent under a U.S.$150.0 million five year senior secured term loan facility 
and a U.S.$100.0 million five year senior secured revolving credit facility 
(collectively, the "Chase Credit Facility"), and the Trustee, on behalf of the 
holders of certain Senior Notes that the Company intends to issue (the 
"Notes"). The Subordination Agreement will provide that no payments of 
principal, cash interest or other amounts may be made with respect to the 
Debentures if a default or event of default has occurred and is continuing 
under the Chase Credit Facility or the Indenture relating to the Notes (the 
"Indenture"). In addition, the Subordination Agreement will also prohibit the 
payment of principal, cash interest or other amounts (except for certain 
withholding taxes) except to the extent permitted under certain covenants. 
The Credit Agreement will contain a similar prohibition on such payments. 
Breaches of the Subordination Agreement by Bell Atlantic will constitute a 
default under the Chase Credit Facility and the Indenture.

      Iusacell intends to satisfy its future funding needs with borrowings 
under the Chase Credit Facility and from other independent sources such as 
additional bank debt, export credit agency financing and vendor financing. If 
such financing is not available, the Company intends to borrow under the Bell 
Atlantic Facility. Iusacell may also use the Bell Atlantic Facility to cover 
any short-term funding deficiencies. Because Bell Atlantic controls Iusacell, 
there can be no assurance, however, that Iusacell will be permitted to borrow 
under the Bell Atlantic Facility. The Indenture permits the Company to borrow 
up to an aggregate amount of U.S.$12 million under the Bell Atlantic Facility 
for purposes of funding Iusacell's local 450 MHz wireless subsidiary. Any 
Debentures issued in connection with such borrowings must be promptly 
converted. In the Subordination Agreement, Bell Atlantic will covenant not to 
cause or permit the termination of the Bell Atlantic Facility. During the 
first and second quarters of 1997, Bell Atlantic provided an aggregate amount 
of U.S.$25.0

                                       62
<PAGE>

million in Bell Atlantic New Zealand Holdings, Inc. ("BANZHI") Loans, which 
are either being repaid with certain of the proceeds from the Credit Chase 
Facility, the Notes or will be refinanced by Debentures issued under the Bell 
Atlantic Facility and converted into Series A shares of Iusacell.

Specific Transactions

    Iusacell and certain subsidiaries of Bell Atlantic have entered into a
series of consulting and secondment agreements pursuant to which Bell Atlantic
has agreed, for an indefinite term, to provide Iusacell with management,
technical, marketing, legal and other consulting services and certain seconded
employees. Seconded employees generally agree to expatriate assignments of two
to three years duration, with such employees' salaries being paid by Bell
Atlantic and reimbursed by the Company. Bell Atlantic charges the Company for
the provision of consulting services at cost. With respect to consulting
services rendered in the 1996 fiscal year, Iusacell has been invoiced by Bell
Atlantic for a total of U.S.$3.6 million, which amount includes a fixed
management consulting fee of U.S.$1.1 million for the services of certain senior
Bell Atlantic officials, U.S.$1.5 million in reimbursement of the actual cost of
seconded employees and U.S.$1.1 million in respect of other consulting services.
As part of the 1996 Share Conversion Agreement, consulting services for 1997
after the close of business on February 18, 1997 and for subsequent years will
not include a fixed management consulting fee for the services provided by
certain senior Bell Atlantic officials. With respect to consulting services
rendered in the first quarter of 1997, Iusacell has been invoiced by Bell
Atlantic for a total of U.S.$0.7 million in respect of consulting services and
U.S.$0.7 million for reimbursement of the actual cost of seconded employees.
 
    Pursuant to the 1996 Share Conversion Agreement, in February 1997, Fiusa
Pasteje, S.A. de C.V., a member of the Peralta Group ("FIUSA"), and Bell
Atlantic International Inc. ("BAII"), an affiliate of Bell Atlantic, converted
U.S.$37.2 million and U.S.$32.9 million of Iusacell indebtedness, respectively,
into Series A Shares and Series D Shares at a conversion price of U.S.$0.70 per
share. The indebtedness converted by FIUSA represented indebtedness acquired by
FIUSA from Merrill Lynch International Bank Limited, Merchant Bank in August
1996 (plus accrued interest thereon) and U.S.$6 million in loans made to
Iusacell by FIUSA in December 1996 and January 1997 at an annual interest rate
of LIBOR plus 500 basis points (plus accrued interest thereon). FIUSA received
4,390,619 Series A Shares and 48,754,000 Series D Shares upon such conversion.
The indebtedness converted by BAII represented indebtedness acquired by BAII
from Chase in February 1997 and U.S.$6 million in loans made to Iusacell by BAII
in January and February 1997 at an annual interest rate of LIBOR plus 500 basis
points (plus accrued interest thereon). BAII received 47,017,491 Series A Shares
upon such conversion. See "Control of Registrant."
 
    Desarrollo de Sistemas de Seguridad Privada, S.A. de C.V. ("Desarrollo"), a
member of the Peralta Group, and Sistecel S.A. de C.V., a wholly owned
subsidiary of the Company, entered into a Services Agreement dated January 2,
1996 pursuant to which Desarrollo provided security and secretarial services for
Mr. Peralta. The total amount charged by Desarrollo to Iusacell in 1996 was
approximately U.S.$400,000. As part of the 1996 Share Conversion Agreement, this
arrangement was terminated effective at the close of business on February 18,
1997.
 
    Inmobiliaria Montes Urales 460, S.A. de C.V., a subsidiary of the Company,
leases office space to Servicios Corporativos IUSA, S.A. de C.V. ("Servicios"),
a member of the Peralta Group pursuant to one-
 
                                       63
<PAGE>

year leases which are re-priced on January 1 of each year. Currently, payments
under the lease equal U.S.$15,347 per month. In addition, Servicios has agreed
to pay Iusacell Ps.0.7 million for the purchase of certain vehicles for Mr.
Carlos Peralta.
 
    The Peralta Group owns Fraccionadora y Constructora Mexicana, S.A. de C.V.
("Fracomex"), a company engaged in real estate investment and management that
has entered into lease agreements with certain subsidiaries of the Company. The
total amount paid by Iusacell to Fracomex per month is approximately U.S.$27,000
(such amount being based upon the market rate for such services). In 1996 these
payments totalled approximately U.S.$320,000.
 
    In 1996, Inmobiliaria Reforma Lomas Altas, S.A. de C.V., a company
controlled by the Peralta Group, acquired certain office space from a subsidiary
of Iusacell for approximately Ps. 16.4 million.
 
    Industrias Unidas, S.A. de C.V. ("IUSA"), a company controlled by the
Peralta Group, leases land, buildings, houses and a warehouse to Iusacell at
IUSA's industrial complex in Pasteje. In addition, IUSA has agreed to sell to
Iusacell equipment to provide energy and air conditioning services to the leased
buildings. Iusacell pays IUSA approximately U.S.$26,600 per month for the
foregoing leases and paid Ps. 1.6 million for the purchased equipment. In
addition, Iusatelecomunicaciones, a subsidiary of the Company, has agreed to pay
to IUSA approximately Ps. 32,200 for reimbursement of payroll and related
expenses for workers providing technical service in Pasteje. In turn, IUSA has
agreed to pay Iusacell for cellular telephone services provided in the
operations of automatic teller machines installed at Pasteje, at cost plus 10%.
 
    Iusacell owns 68.3% of Cellular Solutions de Mexico, S.A. de C.V. ("Cellular
Solutions"), a company involved in the sale of cellular accessories. Mr. Marco
Antonio de la Torre Barranco, an alternate director of the Company, owns the
remaining 31.7% of Cellular Solutions. Iusacell and Mr. de la Torre own 70% and
15%, respectively, of Rentacell, S.A. de C.V., a company engaged in the Mexican
cellular telephone rental business. Iusacell owns 75% of Promotora Celular, S.A.
de C.V. ("Promotora"), a company involved in distributing cellular services for
Iusacell. Mr. de la Torre owns 10% of Promotora.
 
    Mr. Marco Antonio Mestre Cardenas, an Alternate Director of Iusacell until
December 1996, is the controlling shareholder of Administracion de Riesgos,
Agente de Seguros S.A., a company which provides insurance brokerage services
for Iusacell.
 
    Iusacell and Jose Ramon Elizondo Anaya, a Director of the Company, have
organized Punto-a-Punto Iusacell, S.A. de C.V. to participate in the auctions
for microwave frequencies scheduled to be held in July 1997. Iusacell owns 94.9%
of the economic interest and 49% of the voting shares of this company; Mr.
Elizondo owns 51% of the voting shares thereof.

                                       64
<PAGE>

                                     PART II

ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED

      Not applicable.

                                    PART III

ITEM 15. DEFAULT UPON SENIOR SECURITIES

      Not applicable.

ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES

      Not applicable.

                                     PART IV

ITEM 17. FINANCIAL STATEMENTS

      The Company has responded to Item 18 in lieu of responding to this Item.

ITEM 18. FINANCIAL STATEMENTS

      See Item 19(a) for a list of financial statements filed under Item 18.

ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS

<TABLE>
<CAPTION>
                                                                                                 Page
                                                                                                 ----
<S>                                                                                           <C>
      (a) Index to Financial Statements...........................................................F-1

Report of Independent Auditors
      Grupo Iusacell, S.A. de C.V. and Subsidiaries--Year Ended December 31, 1996 and 1995........F-2
      Grupo Iusacell, S.A. de C.V. and Subsidiaries--Years Ended December 31, 1994................F-3
      SOS Telecomunicaciones, S.A. de C.V.--Year Ended December 31, 1994..........................F-4
      Comunicaciones Celulares de Occidente, S.A. de C.V.--Years Ended December 31, 1994..........F-5

  Consolidated Balance Sheets--December 31, 1996 and 1995.........................................F-6
  Consolidated Statements of Operations--Fiscal Years Ended December 31, 1996, 1995, and
  1994............................................................................................F-7
  Consolidated Statements of Changes in Stockholders' Equity--Fiscal Years Ended December
  31, 1996, 1995 and 1994.........................................................................F-8
  Consolidated Statements of Changes in Financial Position--Fiscal Years Ended December
  31, 1996, 1995 and 1994.........................................................................F-9
</TABLE>


                                       65
<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                        <C>
  Notes to the Consolidated Financial Statements.................................................F-10

  Reports of Independent Auditors on Financial Statement Schedules
      Grupo Iusacell, S.A. de C.V. and Subsidiaries--Year Ended December 31, 1996 and 1995........S-1
      Grupo Iusacell, S.A. de C.V. and Subsidiaries--Years Ended December 31, 1994................S-2
      SOS Telecomunicaciones, S.A. de C.V.--Year Ended December 31, 1994..........................S-3
      Comunicaciones Celulares de Occidente, S.A. de C.V.--Years Ended December 31, 1994..........S-4

Financial Statement Schedules

       Schedule II--Valuation and Qualifying Accounts.............................................S-5

      (b) List of Exhibits

            ByLaws of the Company, as amended..............................................Exhibit A

            1996 Share Conversion Agreement dated December 27, 1996.........................Exhibit B

            Amended and Restated Shareholders Agreement dated February 18, 1997.............Exhibit C

            Long-distance Concession .......................................................Exhibit D

            Chase Manhattan Bank, N.A. credit agreement dated February 16, 1996,
               as amended ..................................................................Exhibit E
</TABLE>


                                       66
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant certifies that it meets all requirements for filing on
Form 20-F and has duly caused this annual report to be signed on its behalf by
the undersigned, thereunto duly authorized.


                                             GRUPO IUSACELL, S.A. de C.V.


                                             By: /s/ Thomas A. Bartlett
                                                 --------------------------
                                                 Thomas A. Bartlett
                                                 Chief Executive Officer

Date: June 9, 1997


                                       67
<PAGE>

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                            Pages
<S>                                                                                                         <C>
Consolidated Financial Statements of Grupo Iusacell, S.A. de C.V. and Subsidiaries

  Reports of Independent Auditors
      Grupo Iusacell, S.A. de C.V. and Subsidiaries--Year Ended December 31, 1996 and 1995....................F-2
      Grupo Iusacell, S.A. de C.V. and Subsidiaries--Years Ended December 31, 1994............................F-3
      SOS Telecomunicaciones, S.A. de C.V.--Year Ended December 31, 1994......................................F-4
      Comunicaciones Celulares de Occidente, S.A. de C.V.--Years Ended December 31, 1994......................F-5

  Consolidated Balance Sheets--December 31, 1995 and 1996.....................................................F-6
  Consolidated Statements of Operations--Fiscal Years Ended December 31, 1994, 1995, and
  1996........................................................................................................F-7
  Consolidated Statements of Changes in Stockholders' Equity--Fiscal Years Ended December
  31, 1996, 1995 and 1994.....................................................................................F-8
  Consolidated Statements of Changes in Financial Position--Fiscal Years Ended December
  31, 1996, 1995 and 1994.....................................................................................F-9
  Notes to the Consolidated Financial Statements..............................................................F-10


  Reports of Independent Auditors on Financial Statement Schedules
      Grupo Iusacell, S.A. de C.V. and Subsidiaries--Year Ended December 31, 1996 and 1995....................S-1
      Grupo Iusacell, S.A. de C.V. and Subsidiaries--Years Ended December 31, 1994............................S-2
      SOS Telecomunicaciones, S.A. de C.V.--Year Ended December 31, 1994......................................S-3
      Comunicaciones Celulares de Occidente, S.A. de C.V.--Years Ended December 31, 1994......................S-4

  Schedule II--Valuation and Qualifying Accounts..............................................................S-5
</TABLE>


                                       F-1
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors of
Grupo Iusacell, S.A. de C.V.:

We have audited the accompanying consolidated balance sheet of Grupo Iusacell,
S.A. de C.V. and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in stockholders' equity, and changes
in financial position for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audits in accordance with generally accepted auditing standards
in Mexico which are not significantly different than U.S. auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements and are prepared in accordance with generally accepted accounting
principles. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provides a reasonable basis for our opinion.

As of December 31, 1996, the Company established a reserve for restructuring
costs for Ps.136,407,000, which was charged to the income statement as an
extraordinary expense (see Notes 2, 4.d and 8.b to the financial statements).

In our opinion, the consolidated financial statements referred to above present
fairly in all material respects the consolidated financial position of Grupo
Iusacell, S.A. de C.V. and subsidiaries as of December 31, 1996 and 1995, and
the consolidated results of its operations, changes in stockholders' equity and
changes in its consolidated financial position for the years then ended, in
conformity with accounting principles generally accepted in Mexico.

Accounting principles generally accepted in Mexico vary in certain respects from
accounting principles generally accepted in the United States. In our opinion,
based on our audits, application of accounting principles generally accepted in
the United States would have affected the determination of the amount shown as
net loss for the years ended December 31, 1996 and 1995 and the total amount of
stockholders' equity at December 31, 1996 and 1995 to the extent summarized in
Note 19 to the consolidated financial statements.


                                                 Coopers & Lybrand
                                            Despacho Roberto Casas Alatriste


                                             /s/  Juan Manuel Ferron Solis
                                                  Public Accountant

Mexico City, D.F., Mexico.
February 21, 1997.


                                       F-2
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Grupo Iusacell, S.A. de C.V. and Subsidiaries

We have audited the consolidated statements of operations, changes in
stockholders' equity, and changes in financial position of Grupo Iusacell, S.A.
de C.V. and subsidiaries for the year ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of two consolidated
subsidiaries in 1994, which statements reflect total revenues constituting 14%
of the related consolidated total. Those financial statements were audited by
other independent auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to data included for these subsidiaries, is based
solely on the reports of the other auditors.

We conducted our audits in accordance with generally accepted auditing standards
in Mexico and the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the reports of
the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated results of operations, and changes in the
consolidated financial position of Grupo Iusacell, S.A. de C.V. and subsidiaries
for the year ended December 31, 1994, in conformity with accounting principles
generally accepted in Mexico which differ in certain respects from those
followed in the United States (see Note 19 to the consolidated Financial
Statements).


                                                Mancera, S.C.
                                A Member of Ernst & Young International, L.L.P.


Mexico City,
February 17, 1995


                                       F-3
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors
SOS Telecomunicaciones, S.A. de C.V.

      We have audited the balance sheet of SOS Telecomunicaciones S.A. de C.V.
at December 31, 1994, and the related statements of income changes in
stockholders' equity, and changes in financial position for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.

      We conducted our audit in accordance with generally accepted auditing
standards in Mexico and the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly
in all material respects, the financial position of SOS Telecomunicaciones, S.A.
de C.V. at December 31, 1994, and the results of their operations, and changes
in their financial position for the year then ended in conformity with
accounting principles generally accepted in Mexico which differ in certain
respects from those followed in the United States.


                                            Prieto, Ruiz de Velasco y Cia., S.C.


                                                      Ignacio Pineda Luna C.P.A.
                                                                      Partner

Mexico City
February 21, 1997


                                       F-4
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors of
Comunicaciones Celulares de Occidente, S.A. de C.V.



We have audited the balance sheet of Comunicaciones Celulares de Occidente, S.A.
de C.V. as of December 31, 1994, and the related statements of income, changes
in stockholders' equity, and changes in financial position for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audits in accordance with generally accepted auditing standards
in Mexico, which are not significantly different than U.S. auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements and are prepared in accordance with generally accepted accounting
principles. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly in all material respects the consolidated financial position of
Comunicaciones Celulares de Occidente, S.A. de C.V. as of
December 31, 1994, and the results of its operations, changes in
stockholders' equity and changes in its financial position for the
year then ended, in conformity with accounting principles generally accepted in
Mexico, which vary in certain respects from accounting principles generally
accepted in the United States.


                                            Coopers & Lybrand
                                            Despacho Roberto Casas Alatriste


                                            /s/ Juan Manuel Ferron Solis
                                            Public Accountant

Mexico City, D.F., Mexico.
February 10, 1995


                                       F-5
<PAGE>

                  GRUPO IUSACELL, S.A. DE C.V. AND SUBSIDIARIES
                  ---------------------------------------------

                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------

                        AS OF DECEMBER 31, 1995 AND 1996
                        --------------------------------

                              (Notes 1, 2, 3 and 4)
                              ---------------------

         (Adjusted for price-level changes and expressed in thousands of
         ---------------------------------------------------------------

                 constant Mexican Pesos as of December 31, 1996)
                 -----------------------------------------------

                                     ASSETS
                                                       1995              1996  
                                                    -----------     ------------
CURRENT:
  Cash and cash equivalents                        Ps.  167,326    Ps.   90,896

  Accounts receivable
      Trade, net of Ps. 111,311 and
      Ps. 93,000 of allowance
      for doubtful accounts (Note 4.d)                  167,829         131,867
      Related parties (Note 5)                           31,558           7,067
      Recoverable taxes and other                        56,991          80,800
                                                        -------         -------
                                                        256,378         219,734

   Inventories (Note 6)                                 152,819          99,997
                                                        -------         -------
       Total current assets                             576,523         410,627

INVESTMENT IN ASSOCIATED COMPANIES (Note 7)              81,003          87,858

PROPERTY AND EQUIPMENT, net (Note 8)                  4,026,757       3,107,307

OTHER ASSETS, net (Note 9)                              699,439         620,785

EXCESS OF COST OF INVESTMENTS IN SUBSIDIARIES
  OVER BOOK VALUE, net of accumulated
  amortization of $165,600 in 1996 and
  $117,202 in 1995 (Note 4.i)                         1,461,075       1,373,803
                                                      ---------       ---------
      Total assets                                 Ps.6,844,797    Ps.5,600,380
                                                   ------------    ------------
                                                   ------------    ------------


                                  LIABILITIES
                                                      1995             1996  
                                                  -------------   --------------
CURRENT:                                                                        
  Notes payable (Note 10)                         Ps.   644,992   Ps.   699,387
  Current portion of long-term debt (Note 10)           132,442         105,536
  Trade accounts payable (Note 11)                      832,681         433,660
  Related parties (Note 5)                               66,932         351,429
  Taxes and other payables                              255,010         345,345
  Income tax (Note 12)                                    1,162           6,113
  Employee profit sharing (Note 12)                         320             124
                                                      ---------       ---------
    Total current liabilities                         1,933,539       1,941,794


LONG TERM DEBT (Note 10)                                782,061         514,797

TRADE ACCOUNTS PAYABLE, LONG TERM (Note 11)               4,877           9,703

COMMITMENTS AND CONTINGENCIES (Note 13)                   1,836           1,893
                                                      ---------       ---------
    Total liabilities                                 2,722,313       2,468,187
                                                      ---------       ---------

                             STOCKHOLDERS' EQUITY

CONTRIBUTED CAPITAL (Note 14):
  Capital Stock:
    Nominal                                           2,356,133       2,356,153
    Restatement                                       2,556,223       2,556,223
                                                      ---------       ---------
                                                      4,912,376       4,912,376
                                                      ---------       ---------
  Capital contributed:
    Nominal                                              18,655          18,655
    Restatement                                          34,280          34,280
                                                      ---------       ---------
                                                         52,935          52,935
                                                      ---------       ---------
                                                      4,965,311       4,965,311
                                                      ---------       ---------
 
EARNED CAPITAL (Note 15):
  Accumulated losses:
    Legal reserve                                         2,894           2,894
    For prior years                                    (306,457)     (1,029,161)
    For the year                                       (722,704)       (341,284)
                                                       ---------     -----------
 
                                                     (1,026,267)     (1,367,351)

  (Deficit) excess from restatement                     207,512        (470,793)
                                                     -----------     -----------
 
      Total majority stockholders' equity             4,146,556       3,126,967

MINORITY INTEREST                                       (24,072)          5,226
                                                     -----------      ----------
 
      Total stockholders' equity                      4,122,484       3,132,193
                                                     -----------      ----------
 
      Total liabilities and stockholders'
      equity                                      Ps. 6,944,797   Ps. 5,600,380
                                                  -------------   -------------
                                                  -------------   -------------
 
              The accompanying notes are an integral part of these
                             financial statements.


                                       F-6
<PAGE>

                  GRUPO IUSACELL, S.A. DE C.V. AND SUBSIDIARIES
                  ---------------------------------------------

                           CONSOLIDATED INCOME STATEMENTS
                           --------------------------

                     AS OF DECEMBER 31, 1994, 1995 AND 1996
                     --------------------------------------

                              (Notes 1, 2, 3 and 4)
                              ---------------------

    (Adjusted for price-level changes and expressed in thousands of constant
                     Mexican Pesos as of December 31, 1996)

<TABLE>
<CAPTION>
                                                            1994           1995            1996
                                                      -------------   -------------   -------------
<S>                                                   <C>             <C>             <C>      
REVENUES
   Services                                           Ps. 1,881,985   Ps. 1,517,693   Ps. 1,375,421
   Telephone equipment sales and other                      256,744         270,425         221,853
                                                      -------------   -------------   -------------
                                                          2,138,729       1,788,118       1,597,274
                                                      -------------   -------------   -------------
COST OF SALES
   Cost of services                                         546,938         556,425         504,263
   Cost of telephone equipment and other                    126,234         150,095         123,686
                                                      -------------   -------------   -------------
                                                            673,172         706,520         627,949
                                                      -------------   -------------   -------------
      Gross profit                                        1,465,557       1,081,598         969,325

OPERATING EXPENSES                                          910,495         789,788         691,983
DEPRECIATION AND AMORTIZATION (Notes 4.h and 8)             547,930         629,191         568,021
                                                      -------------   -------------   -------------
      Operating profit (loss)                                 7,132        (337,381)       (290,679)
                                                      -------------   -------------   -------------
INTEGRAL FINANCING COST (GAIN) (Notes 4.b and 16)
   Interest expense, net                                    191,680         162,767         264,062
   Foreign exchange loss (gain), net                        492,904         662,473         (58,357)
   Gain on net monetary position                            (46,946)       (471,190)       (327,220)
                                                      -------------   -------------   -------------
                                                            637,638         354,050        (121,515)
                                                      -------------   -------------   -------------
EQUITY PARTICIPATION IN NET (INCOME) LOSS
  OF ASSOCIATED COMPANIES (Note 7)                           (2,911)         36,773           5,631
                                                      -------------   -------------   -------------
      Loss from continuing operations before income
      tax employee profit sharing, minority interest
      and extraordinary item                               (627,595)       (728,204)       (174,795)
                                                      -------------   -------------   -------------
PROVISIONS FOR (Note 12)
   Assets tax                                                30,498          27,333          33,069
   Employee profit sharing                                      608           1,956              --
                                                      -------------   -------------   -------------
                                                             31,106          29,289          33,069
                                                      -------------   -------------   -------------
      Loss before minority interest and
      extraordinary item                                   (658,701)       (757,493)       (207,864)

MINORITY INTEREST                                                42          34,789           2,987
                                                      -------------   -------------   -------------
      Loss before extraordinary item                       (658,659)       (722,704)       (204,877)
                                                      -------------   -------------   -------------
EXTRAORDINARY ITEM
      Reorganization charge (Notes 2, 4.d and 8.b)               --              --         136,407
                                                      -------------   -------------   -------------
      Net loss for the year                           (Ps. 658,659)   (Ps. 722,704)   (Ps. 341,284)
                                                      =============   =============   =============
</TABLE>

    The accompanying notes are an integral part of these financial statements


                                       F-7
<PAGE>

                  GRUPO IUSACELL, S.A. DE C.V. AND SUBSIDIARIES
                  ---------------------------------------------

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
           ----------------------------------------------------------

              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
              ----------------------------------------------------

                              (Notes 1, 2, 3 and 4)
                              ---------------------

         (Adjusted for price-level changes and expressed in thousands of
         ---------------------------------------------------------------

                constant Mexican Pesos as of December 31, 1996)
                -----------------------------------------------

<TABLE>
<CAPTION>
                                      Capital stock subscribed       Capital contributions          Accumulated losses 
                                              (Note 14)                     (Note 14)                    (Note 15)                 
                                    ---------------------------- ------------------------- -----------------------------------------
                                                                                             Legal         Prior         For the   
                                       Nominal     Restatement     Nominal    Restatement   Reserve        years           year    
                                    ------------- -------------- ------------ ------------ ---------- -------------- --------------
<S>                                 <C>            <C>            <C>          <C>         <C>         <C>            <C>     
Balance as of December 31, 1993     Ps.1,573,306   Ps.1,773,252   Ps. 18,655   Ps.34,280   Ps. 2,894   Ps.  544,872   (Ps. 192,670)
   Application of 1993 net loss                                                                            (192,670)       192,670 
   Sale of capital stock                 856,913        857,049                                                                    
   Costs of stock issuance               (74,006)       (74,078)                                                                   
   Recognition of the effects of
      inflation on the financial 
      statements                                                                                                                   
   Minority interest for the year                                                                                                  
   Net loss for the year                                                                                                  (658,659)
                                       ---------      ---------       ------      ------       -----       -------        ---------

Balance as of December 31, 1994        2,356,153      2,556,223       18,655      34,280       2,894       352,202        (658,659)
   Application of 1994 net loss                                                                           (658,659)        658,659 
   Recognition of the effects of 
      inflation on the financial 
      statements                                                                                                                   
   Minority interest for the year                                                                                                  
   Net loss for the year                                                                                                  (722,704)
                                       ---------      ---------       ------      ------       -----       -------        ---------
Balance as of December 31, 1995        2,356,153      2,556,223       18,655      34,280       2,894      (306,457)       (722,704)
   Application of 1995 net loss                                                                           (722,704)        722,704 
   Recognition of the effects of
      inflation on the financial 
      statements                                                                                                                   
   Minority interest for the year                                                                                                  
   Net loss for the year                                                                                                  (341,284)
                                       ---------      ---------       ------      ------       -----       -------        ---------
Balance as of December 31, 1996     Ps.2,356,153   Ps.2,556,223   Ps. 18,655   Ps.34,280   Ps. 2,894   (Ps.1,029,161) (Ps. 341,284)
                                    ------------   ------------   ----------   ---------   ---------   -------------- -------------
                                    ------------   ------------   ----------   ---------   ---------   -------------- -------------

<CAPTION>
                                           (Deficit)                       Total                
                                          excess from     Minority     stockholders'            
                                          restatement     Interest        equity                
                                         ------------- -------------- --------------            
<S>                                      <C>            <C>            <C>                    
Balance as of December 31, 1993          Ps.   79,875   Ps.   10,651   Ps.3,845,115             
   Application of 1993 net loss                                                  --             
   Sale of capital stock                                                  1,713,962             
   Costs of stock issuance                                                 (148,144)            
   Recognition of the effects of                                                                
      inflation on the financial                                                                
      statements                              525,226                       525,226             
   Minority interest for the year                             (3,844)        (3,844)            
   Net loss for the year                                                   (658,659)            
                                              -------         ------      ---------             
Balance as of December 31, 1994               605,101          6,807      5,273,656             
   Application of 1994 net loss                                                  --             
   Recognition of the effects of                                                                
      inflation on the financial                                                                
      statements                             (397,589)                     (397,589)            
   Minority interest for the year                            (30,879)       (30,879)            
   Net loss for the year                                                   (722,704)            
                                              -------        ---------     ---------             
Balance as of December 31, 1995               207,512        (24,072)     4,122,484             
   Application of 1995 net loss                                                  --             
   Recognition of the effects of                                                                
      inflation on the financial                                                                
      statements                             (678,305)                     (678,305)            
   Minority interest for the year                             29,298         29,298             
   Net loss for the year                                                   (341,284)            
                                              -------        ---------     ---------             
Balance as of December 31, 1996          (Ps. 470,793)  Ps.    5,226   Ps.3,132,193             
                                         -------------  -------------- -------------
                                         -------------  -------------- -------------
</TABLE>

      The accompanying notes are an integral part of the financial statements
                                        
                                       F-8
<PAGE>

                  GRUPO IUSACELL, S.A. DE C.V. AND SUBSIDIARIES
                  ---------------------------------------------

                       CONSOLIDATED STATEMENTS OF CHANGES
                       ----------------------------------

                              IN FINANCIAL POSITION
                              ---------------------

              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
              ----------------------------------------------------

                              (Notes 1, 2, 3 and 4)
                              ---------------------

    (Adjusted for price-level changes and expressed in thousands of constant
    ------------------------------------------------------------------------

                     Mexican Pesos as of December 31, 1996)
                     --------------------------------------

<TABLE>
<CAPTION>
                                                                        1994          1995          1996
                                                                    ------------  ------------  ------------
<S>                                                                 <C>           <C>           <C>      
OPERATING ACTIVITIES:
   Loss before extraordinary item                                   (Ps.658,659)  (Ps.722,704)  (Ps.204,877)
   Items not requiring the use of resources:
      Depreciation and amortization                                     556,353       634,078       568,021
      Equity participation in net loss (income) of
      associated companies                                               (2,911)       36,773         5,631
      Minority interest                                                     (42)      (34,789)       (2,987)
                                                                     ----------    ----------    ----------
                                                                       (105,259)      (86,642)      365,788
  Resources provided by (used for) operating activities:
      Trade accounts receivable                                         (66,947)      116,530        35,962
      Related parties                                                    93,797        37,464       308,988
      Recoverable taxes and other                                       (45,312)       74,397       (23,809)
      Inventories                                                      (105,294)       44,806        52,822
      Trade accounts payable                                            465,173       256,123      (394,195)
      Taxes and other payables                                          (19,548)       80,383        90,535
      Income tax                                                             --         1,162         4,951
      Employee profit sharing                                               282          (791)         (196)
      Other                                                                 521           175            57
                                                                     ----------    ----------    ----------
         Resources provided by operating activities
            before extraordinary item                                   217,413       523,607       440,903
   Extraordinary item
      Reorganization charge                                                  --            --       136,407
                                                                     ----------    ----------    ----------
      Resources provided by operating activities                        217,413       523,607       304,496

FINANCING ACTIVITIES:
  (Payments of) proceeds from long-term debt                            522,369        26,085       (98,524)
  Principal payments on long-term debt                                 (634,569)     (411,432)     (284,003)
  Net change in notes payable                                          (304,556)      587,089        54,395
  Proceeds from issuance of common stock, net of costs of issuance    1,565,816            --            -- 
                                                                     ----------    ----------    ----------
  Resources provided by (used for) financing activities               1,149,060       201,742      (328,132)
                                                                     ----------    ----------    ----------
INVESTING ACTIVITIES:
  Purchase of property and equipment                                 (1,155,526)     (442,749)     (198,466)
  Sale (acquisition) of common stock of associated companies           (144,482)      (48,201)       19,799
  Disposal (purchase) of other assets                                  (497,393)     (308,863)      125,873
                                                                     ----------    ----------    ----------
        Resources used for investing activities                      (1,797,401)     (799,813)      (52,794)
                                                                     ----------    ----------    ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS                              (430,928)      (74,464)      (76,430)

CASH AND CASH EQUIVALENTS
   AT THE BEGINNING OF THE YEAR                                         672,718       241,790       167,326
                                                                     ----------    ----------    ----------
CASH AND CASH EQUIVALENTS
  THE END OF THE YEAR                                                Ps.241,790    Ps.167,326    Ps. 90,896 
                                                                     ==========    ==========    ==========
</TABLE>

    The accompanying notes are an integral part of these financial statements


                                       F-9
<PAGE>

                  GRUPO IUSACELL, S.A. DE C.V. AND SUBSIDIARIES

                 Notes to the Consolidated Financial Statements

                     As of December 31, 1994, 1995 and 1996

          (Adjusted for price-level changes and expressed in thousands
              of constant Mexican pesos as of December 31, 1996 and
                           thousands of U.S. dollars)

1. Entity and Nature of Business

      Grupo Iusacell, S.A. de C.V. (the "Company") is a holding company which
was incorporated on October 6, 1992. Its subsidiaries are primarily engaged in
the wireless telecommunications business and hold concessions to operate
cellular telephone systems in four proximate market areas ("Regions") in Mexico.
In October 1995, the Company received a concession from the Mexican Government
to operate as a long distance carrier and started its operations in this market
on August 11, 1996. During 1996, the Company signed a joint venture agreement
for the operation of nationwide and international paging services. The Company
started to provide paging services in August 1996.

      The Peralta Family and Bell Atlantic Corporation ("Bell Atlantic") hold
substantial ownership interests (direct or indirect) in the Company.

      On November 26, 1996, the Company's shareholders announced that they
signed an agreement in principle to change the management control of Grupo
Iusacell, S.A. de C.V., from the Peralta Family to Bell Atlantic, subject to
certain Mexican Government approvals. Bell Atlantic assumed such management
control on February 18, 1997 (see Notes 14 and 18).

      The Company and its subsidiaries are referred to collectively herein as
the "Group" or "Grupo Iusacell."

2. Acquisitions and Group Reorganization

      Acquisition of Region 6 and 7

      In 1993, the Company obtained ownership of Sistemas Telefonicos Portatiles
Celulares, S.A. de C.V. ("Portacel") and Telecomunicaciones del Golfo, S.A. de
C.V. ("Telgolfo"). Portacel and Telgolfo hold the non- wireline cellular
concessions for Region 6 and Region 7, respectively.

      The cost incurred in 1993 to acquire control of Portacel and Telgolfo, has
amounted to Ps.799,111, of which Ps.681,708 represented the excess of investment
cost over the book value.

      In February 1994 the Company purchased the remaining minority ownership
interest of Telgolfo for Ps.48,706, of which Ps.45,336 represented the excess of
investment cost over the book value.

      Acquisition of Region 5

      In 1993, the Company acquired 67% of Hermes Telecomunicaciones, S.A. de
C.V. ("Hermes"), a company that owns 51% of Comunicaciones Celulares de
Occidente, S.A. de C.V. ("Comcel"). Comcel holds the non-wireline cellular
concession for Region 5. The Company could not exercise significant influence
over Comcel as an arbitration proceeding was initiated by a minority shareholder
of Comcel. Although this arbitration was settled in November 1993, the
settlement agreement provided for a stand-still arrangement until January 3,
1994. The expenses related to the arbitration were charged to excess of cost of
investment in subsidiaries over book value in 1994. Accordingly, the Company's
investment in Comcel was accounted for using the cost basis of accounting from


                                      F-10
<PAGE>

the date of acquisition through December 30, 1993. In December 1993, the Company
reached agreement to purchase the remaining interests in both Comcel and Hermes.
The Company's cost of acquiring Comcel and Hermes totaled Ps. 1,043,474, of
which Ps.845,943 represented the excess of investment cost over the book value.

      Other acquisitions

      In 1994, the Company acquired 51% of Telecomunicaciones Digitales
Internacionales, S.A. de C.V. (now Iusatel Chile, S.A. de C.V.). The Company
purchased this ownership interest for Ps.19,194, which was the book value of the
shares acquired. During 1996, the Company increased its ownership in Iusatel
Chile, S.A. de C.V. from 51% to 100% through the capitalization of certain
liabilities and the payment of U.S.$100 to the minority shareholders. In
December 1996, the Company entered into an agreement to sell its debt and equity
in Iusatel Chile, S.A. de C.V. for U.S.$5 million. Payment was received in the
form of three promissory notes which mature between March and July 1997.

      In August 1994, the Company increased its ownership in Compania Colombiana
de Telefonia Celular, S.A. ("Telecel") from 28.5% to 63.25%, by acquiring an
additional 34.75% interest. The cost to acquire this interest was Ps.30,871, of
which Ps.21,869 represented the excess of investment cost over the book value.
In March 1995 the Company increased its ownership interest in Telecel through a
capital contribution of Ps.725. Through this contribution, the Company increased
its ownership in Telecel from 63.25% to 70.14%.

      On December 13, 1994, Iusacell, S.A. de C.V. (subsidiary company) acquired
99.99% of Inmobiliaria Montes Urales 460, S.A. de C. V.. The cost was Ps.66,683,
of which Ps.12,530 represented the excess of investment cost over the book
value.

      In August 1995, the Company acquired from a related party 100% of Iusatel,
S.A. de C.V. Starting August 11, 1996 Iusatel began to provide national and
international long distance basic telephone services pursuant to a concession
received from the Mexican Government in October 1995.

      In August 1995, the Company incorporated as a new subsidiary, Grupo
Iusacell de Nicaragua, S.A.. This company holds the shares of a company named
Radio Telefonia Rural de Nicaragua, S.A. which in July 1995 entered into a joint
venture agreement with the Nicaraguan Telecommunications Ministry for the
provision of fixed wireless local telephone services. In May 1996, the
Nicaraguan Telecommunications Ministry revoked the agreement. As of December 31,
1996, the Company has not made any investment in this project and has no
commitments for any such investments.

      In December 1995, the Company signed a joint venture agreement with
Infomin, S.A. de C.V., a Mexican company which holds a fifteen-year concession
to provide nationwide and international paging services through July 2009.
Pursuant to this agreement, in March 1996, the Company and Infomin established a
joint venture company, Infotelecom, S.A. de C.V., which is owned 51% and 49% by
the Company and Infomin, respectively. The Company committed to contribute up to
U.S.$10.5 million; as of December 31, 1996 the Company had invested U.S.$3.3
million in the joint venture.

      In January 1996, the Company increased its ownership in Rentacell, S.A. de
C.V. from 33.33% to 70%. As of December 31, 1995 the investment in Rentacell,
S.A. de C.V. was accounted for using the equity method. Starting January 1996,
the Company consolidated the assets, liabilities and operating results of this
subsidiary which rents cellular phones.

      Group Reorganization

      In late 1995 and during 1996, the Company's subsidiaries were reorganized.
This reorganization consisted of the following operations:


                                      F-11
<PAGE>

      At an extraordinary stockholders' meeting held on December 29, 1995, the
subsidiaries, Telcom Celular, S.A. de C.V. (Region 7) and Portacom, S.A. de C.V.
(Region 6) were merged with and into Iusacell, S.A. de C.V. This merger was
made based on the financial statements of the three companies as of December 31,
1995.

      At an extraordinary stockholders' meeting held on December 29, 1995,
Servicios Corporativos Iusacell, S.A. de C.V. was merged with and into Sistecel,
S.A. de C.V.. This merger was made based on the financial statements of both
companies as of December 31, 1995.

      At an extraordinary stockholders' meeting held on December 31, 1996, the
respective stockholders of Hermes Telecomunicaciones, S.A. de C.V., GMD
Comunicaciones, S.A. de C.V. and Portaserv, S.A. de C.V., voted to dissolve
these companies. From such date, these three companies will not perform any
transactions except those necessary to wind-up their pending businesses.

      At the end of 1996, and based on the reorganization of the Company and the
change in the managerial and administrative control of the Group, the Company
established a reserve of Ps.136,407 for the restructuring expenses associated
with the reorganization. The plan provides for the termination of 252 employees
in the second quarter of 1997. This reserve, due to its characteristics of being
non-recurrent and unusual, has been presented as an extraordinary item in the
consolidated income statement. This reserve is as follows:

Provision for loss on sale of building                                 Ps.71,700
Employee severance                                                        26,000
Fixed assets obsolescence reserve                                         33,000
Change in estimate for allowance for doubtful accounts                     5,107

      Summary

      The subsidiary companies which are included within the consolidated
financial statements are as follows (directly or indirectly):

                                                                 Ownership as of
                                                                   December 31
                                                                 ---------------
Subsidiary                                                         1995  1996
----------                                                       ------- -------
S.O.S. Telecomunicaciones, S.A. de C.V                              100%  100%
Iusacell, S.A. de C.V                                               100%  100%
Servicios Corporativos Iusacell, S.A. de C.V                        100%   --
Sistecel, S.A. de C.V                                               100%  100%
Satelitron, S.A. de C.V                                              51%   51%
Comunicaciones Celulares de Occidente, S.A. de C.V. (Region 5)      100%  100%
Sistemas Telefonicos Portatiles Celulares, S.A. de C.V. (Region 6)  100%  100%
Telecomunicaciones del Golfo, S.A. de C.V. (Region 7)               100%  100%
Inflight Phone de Mexico, S.A de C.V                                100%  100%
GMD Comunicaciones, S.A. de C.V                                     100%  100%
Hermes Telecomunicaciones, S.A. de C.V                              100%  100%
Inmobiliaria Montes Urales 460, S.A. de C.V                         100%  100%
Portacom, S.A. de C.V                                               100%   --
Portaserv, S.A. de C.V                                              100%  100%
Telcom Celular, S.A. de C.V                                         100%   --
Mexican Cellular Investments, Inc.                                  100%  100%
Iusanet, S.A. de C.V                                                100%  100%
Iusatel Chile, S.A. de C.V                                           51%   --
Compania Colombiana de Telefonia Celular, S.A                        70%   70%
Promotora Celular, S.A. de C.V                                       75%   75%
Cellular Solutions de Mexico, S.A. de C.V                            68%   68%
Iusatelecomunicaciones, S.A. de C.V                                 100%  100%
Iusatel, S.A. de C.V                                                100%  100%


                                      F-12
<PAGE>

                                                                 Ownership as of
                                                                   December 31
                                                                 ---------------
Grupo Iusacell Nicaragua, S.A                                       100%  100%
Infotelecom, S.A. de C.V                                             --    51%
Rentacell, S.A. de C.V                                               33%   70%

3. Basis of presentation

   a) Basis of Presentation

      The Group's consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in Mexico ("Mexican
GAAP").

      The consolidated financial statements for the two periods have been 
presented in thousands of constant Mexican pesos as of December 31, 1996 as
required by Bulletin B-10, "Recognition of the Effects of Inflation on Financial
Information," as amended, issued by the Mexican Institute of Public 
Accountants ("Bulletin B-10"). All amounts presented in U.S. dollars are in 
thousands.

      The amounts as of December 31, 1994 and 1995, presented in the financial
statements and in the notes have been restated based on the 1996 inflation rate
(27%) in order to present them in pesos of purchasing power as of December 31,
1996.

   b) Consolidated financial statements

      Those companies in which the Group holds 50% or more of the capital stock
and exercises control over operating and financing activities are included in
the consolidated financial statements.

      All significant intercompany balances and transactions have been
eliminated in consolidation.

   c) Use of estimates

      The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

4. Accounting Policies

     A summary of the Group's significant accounting policies is as follows:

   a) Monetary unit

      The statements are presented in Mexican pesos, the currency that, based on
the Mexican laws, must be used to prepare the accounting records of the Company
and of its Mexican subsidiaries. All amounts presented in the 1994, 1995 and
1996 consolidated financial statements are expressed in thousands of Mexican
pesos.

   b) Effects of inflation on the financial statements

      The consolidated financial statements of the Group have been prepared in
accordance with Bulletin B-10. The Third Amendment of Bulletin B-10, effective
for fiscal years beginning January 1, 1990 and thereafter, requires the
restatement of all comparative financial statements to constant Mexican pesos
as of the date of the most recent balance sheet presented. Accordingly, the
consolidated financial statements have been restated as follows:


                                      F-13
<PAGE>

            - Consolidated income statements for the current and prior year have
been restated to constant pesos as of December 31, 1996 using the NCPI (National
Consumer Price Index), published by Banco de Mexico (The Mexican Central Bank)
from the periods in which the transactions (income and expenses ) occurred.

            - Bulletin B-12, "Statement of Changes in Financial Information",
issued by the Mexican Institute of Public Accountants ("Bulletin B-12"),
addresses the appropriate presentation of the statement of changes in financial
position where financial statements have been restated to constant pesos as of
the latest balance sheet date. Bulletin B-12 identifies the generation and
application of resources representing differences between beginning and ending
balance sheet balances in constant pesos, excluding the effect of holding
non-monetary assets. Bulletin B-12 also provides that monetary and foreign
exchange gains and losses should not be eliminated from resources provided by
operating activities, nor from financing activities.

      The items which originate from the recognition of effects of inflation on
financial information are as follows:

Restatement of non-monetary assets:

      Inventories are valued at the average price of the purchases made during
the period, and are restated using the NCPI, without exceeding the net
realizable value.

      Property and equipment other than real estate are stated at net
replacement cost. Real estate properties are stated at their fair market value.
Net replacement cost and fair market values were determined from appraisals
performed by independent appraisers registered with the Comision Nacional
Bancaria y de Valores (Mexican National Banking and Securities Commission). The
last appraisal is dated December 31, 1996.

      Property and equipment are depreciated using the straight-line method,
based on the restated values. Useful lives are determined by independent
appraisers. The average annual rates used by the company are as follows:

                                                     1994       1995       1996
                                                     ----       ----       ----
Buildings and facilities                                3%         3%         3%
Communication equipment                                 7%         8%        10%
Furniture and fixtures                                 11%         9%         8%
Transportation equipment                               17%        19%        15%
Computer equipment                                     23%        23%        21%
Cellular rental telephones                             41%        50%        49%

      Investments in associated companies are accounted for using the equity
method based on the investees' equity adjusted for the effects of inflation in
accordance with Bulletin B-10.

Restatement of stockholders' equity:

      The common stock and retained earnings accounts include the effect of
restatement determined by applying the NCPI factor from the date capital was
contributed or earned. The restatement represents the amount required to
maintain the contributions and accumulated results in constant Mexican pesos as
of December 31, 1996.

      The excess or deficit from restatement of capital is an element of
stockholders' equity that includes surplus or deficit from holding non-monetary
assets, which represents the excess or deficit in specific values of net
non-monetary assets in comparison with the increase attributable to general
inflation as measured by the NCPI.

Integral financing cost (gain):

      Integral financing result comprises net interest expense, foreign exchange
gains and losses, and gains and losses from net monetary position.


                                      F-14
<PAGE>

      Foreign exchange gains and losses on transactions denominated in currency
other than Mexican pesos result from fluctuations in exchange rates from the
date transactions are recorded to the time of settlement or valuation at the end
of the period.

      Gains and losses from monetary position represent the effects of
inflation, as measured by the NCPI, on the Group's monetary assets and
liabilities at the beginning of each month. If monetary liabilities exceed
monetary assets, there is a gain from monetary position. Otherwise, if monetary
liabilities are less than monetary assets, there is a resulting loss from
monetary position.

   c) Cash and cash equivalents

      Cash and cash equivalents consist primarily of short-term, fixed rate
investments and bank deposits. The Company invests its excess cash in deposits
with major banks. The investments are carried at cost plus accrued interest,
which approximates market value. These investments are highly liquid cash
equivalents, having a maturity of ninety days or less when acquired.

   d) Allowance for doubtful accounts

      The Company cancels services to those customers with invoices that are 60
days past due. Beginning in 1996, the Company began to fully reserve accounts
receivable that were 90 days past due. Prior to 1996, the Company fully reserved
accounts receivable over 120 days past due. The accumulated effect at the
beginning of the year for the change in estimate was Ps.5,107 and such amount is
presented as part of the reorganization reserve. During 1994, 1995 and 1996 the
Company wrote off accounts receivable against this allowance for Ps.36,830,
Ps.68,580 and Ps.66,619 respectively. The charge to income for the year, to
increase the allowance for doubtful accounts, amounted to Ps.59,710, Ps.77,580
and Ps.66,619, in 1994, 1995 and 1996, respectively.

   e) Investment in associated companies

      Long-term investments in common stock of companies in which the Group owns
not less than 20% nor more than 50% of the entity's voting common stock and over
which the Company can exercise significant influence are accounted for using the
equity method. Under the equity method such investments are carried at cost
adjusted for the Company's share of the net income or losses of these companies
and the effects of their restatement of non-monetary assets. There are
immaterial transactions with such associated companies that have been
eliminated before recognizing the equity method.

      Investments of less than 20% of an entity's voting common stock or over
which the Company cannot exercise significant influence are stated at cost.

   f) Cellular telephones

      Cellular telephones given to customers through an exclusive service
contract, are amortized over the initial contract period. The amortization is
periodically reviewed and adjusted if the customer does not fulfill the original
agreement. The cost of such telephones are included in other assets, net of
amortization.

      The cost of cellular telephones sold to customers is recorded as a cost of
telephone equipment sold. Telephones leased to customers are included in fixed
assets and are depreciated over the initial contract period, generally two
years.

   g) Concessions

      Costs related to the acquisition of concessions issued by the Mexican
Government to provide cellular telephone services have been capitalized and are
included in other assets. Such costs are amortized on a straight-line basis over
a twenty year period, which is the period of the concession. The Mexican
Government requires that the Company comply with the specific requirements of
each concession. The Company has substantially complied with


                                      F-15
<PAGE>

such requirements through December 31, 1996, except for certain informational
requirements of the authorities. The Company believes this does not expose the
concession to any regulatory risk.

   h) Advertising

      Prepaid media advertising costs are included in other assets in the
accompanying balance sheet. Such costs are expensed, as incurred, and
are included in current operating expenses. Advertising expenses amounted to
Ps.180,204, Ps.102,705 and Ps.106,538, for 1994, 1995 and 1996, respectively.

   i) Excess of cost of investment in subsidiaries over book value

      The excess of cost over the book value of net assets of acquired
subsidiaries is amortized on a straight-line basis over twenty years.
Amortization expense was Ps.76,636, Ps.76,352 and Ps.87,272 in 1994, 1995 and
1996, respectively.

      The carrying amount applicable to each acquired subsidiary is reviewed if
the facts and circumstances suggest that it might be impaired.

   j) Income taxes and employee profit sharing

      Income taxes are computed in accordance with the partial liability method,
as required by Bulletin D-4, "Accounting treatment for Income Tax and Employee
Profit Sharing," issued by the Mexican Institute of Public Accountants
("Bulletin D-4"), under which deferred income taxes are provided for
identifiable, non-recurring temporary differences (i.e., those expected to
reverse over a definite period of time) at rates in effect at the time such
differences arise, and reversed at the rates in effect at the time such
differences reverse. In accordance with Bulletin D-4, the Company did not make a
provision for deferred taxes as of December 31, 1994, 1995 and 1996.

      Employee profit sharing is a statutory labor obligation payable to
employees which is determined on the basis of each subsidiary's pre-tax income
as adjusted in accordance with the provisions of the Mexican Labor Law and the
Mexican Tax Law.

   k) Seniority premiums

      In accordance with Mexican Labor Law, the Group's employees are entitled
to seniority premiums after 15 years of service or upon dismissal, disability or
death. The Group follows Bulletin D-3, "Labor Obligations", issued by the
Mexican Institute of Public Accountants ("Bulletin D-3"). Under Bulletin D-3,
the actuarially determined projected benefit obligation is computed using
estimates of salaries that will be in effect at the time of payment. Personnel
not yet eligible for seniority premiums are also included in the determination
of the obligation with necessary adjustments made in accordance with the
probability that these employees will reach the required seniority. At December
31, 1996, the average seniority of the employees is less than 3 years.

      Also, in accordance with Mexican Labor Law, the Company is liable for
severance payments to employees who are dismissed under certain circumstances.
Such compensation is recognized when paid.

      The Company has no employee pension plans and does not provide any other
post retirement benefits.

   l) Revenue recognition

      Cellular air time is recorded as revenue when provided. Sales of equipment
and related services are recorded when goods and services are delivered.
Cellular access charges are billed in advance and recognized when the services
are provided. Other revenue, mainly from paging and long distance services, are
recognized on provision of these services.


                                      F-16
<PAGE>

   m) Foreign currency transactions

      Foreign currency transactions are recorded at the exchange rates in effect
at the transaction date. Assets and liabilities denominated in foreign
currencies are translated to pesos using the exchange rates in effect at the
time of settlement or valuation at each balance sheet date with resulting
exchange differences being recognized as exchange gains or losses.

5. Related Parties

      The Peralta Family and Bell Atlantic hold substantial ownership interests
(direct or indirect) in the Company. In addition, the Peralta Family holds
ownership interests in various other entities, primarily Industrias Unidas, S.A.
de C.V. ("IUSA") and related entities which are customers of or suppliers to the
Company.

      A summary of related party accounts and notes receivable as of
December 31, is as follows:

                                                         1995             1996
                                                     ----------        ---------
IUSA and related entities                            Ps. 27,849        Ps. 4,151
Peralta Family entities                                   3,709            2,916
                                                     ----------        ---------
Total                                                Ps. 31,558        Ps. 7,067
                                                     ==========        =========


      Accounts receivable result from the sale of cellular telephone services,
operating lease contracts and the transfer during 1995 to IUSA of the investment
in a real estate project.

      Accounts and notes payable to related parties as of December 31, are as
follows:

                                                        1995            1996
                                                     ----------      -----------
IUSA and related entities                            Ps. 16,862          Ps. 681
Peralta Family entities                                      20              523
FIUSA Pasteje                                                --          284,799
Bell Atlantic                                            50,050           65,426
                                                     ----------      -----------
Total                                                Ps. 66,932      Ps. 351,429
                                                     ==========      ===========

      The payable accounts result from the leasing of some facilities and
services received. The notes payable to FIUSA Pasteje and Bell Atlantic result
from the financing of the Company's operations.

      Following is an analysis of the related party transactions described
above:

                                     1994          1995          1996
                                 -----------   -----------   -----------
Service revenue                    Ps. 6,744    Ps. 10,832     Ps. 9,327
Lease income                             400         2,192         1,984
Interest income                        9,092           410            --
                                 -----------   -----------   -----------
Total income                      Ps. 16,236    Ps. 13,434    Ps. 11,311
                                 ===========   ===========   ===========

                                     1994          1995          1996
                                 -----------   -----------   -----------
Commission expenses                Ps. 9,422    Ps. 15,775     Ps. 3,088
Technical expenses                    20,254        34,266        59,477
Lease expenses                         2,083         2,456         5,970
Interest expense                       6,477        13,839        29,595
Operating expenses                        --        11,044         6,333
                                 -----------   -----------   -----------
Total expenses                    Ps. 38,236    Ps. 77,380   Ps. 104,463
                                 ===========   ===========   ===========


                                      F-17
<PAGE>

6. Inventories

      As of December 31, inventories are made up by the following:

                                                           1995         1996
                                                       -----------  -----------
Cellular telephones and accessories                    Ps. 135,980   Ps. 81,586
Allowance for obsolete and slow-moving inventories          49,019       32,205
                                                       -----------  -----------
    Net                                                     86,961       49,381
Advances to suppliers                                       65,858       50,616
                                                       -----------  -----------
    Total Inventories                                  Ps. 152,819   Ps. 99,997
                                                       ===========  ===========

7. Investment in associated companies

     As of December 31, the Group's investment in associated companies is as
follows:

                                              1995                 1996
                                    ---------------------  ---------------------
         Entity                     Ownership  Investment  Ownership  Investment
         ------                     ---------  ----------  ---------  ----------
Editorial Celular, S.A. de C.V        40.00%    Ps. 3,454    40.00%   Ps.  2,186
Consorcio Ecuatoriano de                                              
Telecomunicaciones, S.A               27.53%       70,087    27.53%       76,579
Rentacell, S.A. de C.V                33.33%         (273)      --            --
Other                                               7,735                  9,093
                                               ----------             ----------
Total                                          Ps. 81,003             Ps. 87,858
                                               ==========             ==========
                                                                     
      Starting in 1996, Rentacell, S.A. de C.V. is being consolidated, see Note
2.
                                                         
      Summarized financial information for these associated companies accounted
for by the equity method for the years ended December 31, 1995 and 1996, is as
follows:

                                                      1995              1996
                                                  -----------       -----------
Total assets                                      Ps. 519,523       Ps. 448,985
Total liabilities                                     325,853           238,088
Revenues                                              263,177           244,301
Gross income (loss)                                   (13,103)           12,697
Net income (loss)                                     (50,740)            5,321
Group's share of net loss                             (36,773)           (5,772)

8. Property and equipment

      a) At December 31, property and equipment consisted of:

                                                   1995             1996
                                             ---------------  ---------------
Buildings and facilities                       Ps. 1,020,636      Ps. 916,497
Communication equipment                            3,612,713        3,015,522
Furniture and fixtures                                56,102           60,304
Transportation equipment                              30,152           34,135
Computer equipment                                   167,015          166,321
Cellular rental telephones                            21,436           23,207
                                             ---------------  ---------------
                                                   4,908,054        4,215,986
Accumulated depreciation                           1,242,328        1,397,939
                                             ---------------  ---------------
                                                   3,665,726        2,818,047
Land                                                  38,919           32,841
Construction in progress                             211,013          147,835
Advances to suppliers                                 11,099          108,584
                                             ---------------  ---------------
                                               Ps. 4,026,757    Ps. 3,107,307
                                             ===============  ===============


                                      F-18
<PAGE>

      b) Depreciation expense was Ps.160,688, Ps.275,096 and Ps.285,794 for
1994, 1995 and 1996, respectively. In 1996, the Company established an
obsolescence reserve of Ps.33,000 for certain communication equipment, which is
included in the accumulated depreciation and is part of the restructuring
expenses classified as an extraordinary item. The reserve is included in the
balance of accumulated depreciation at December 31, 1996.

9.       Other assets

      At December 31, other assets consisted of the following:

                                               1995              1996
                                          --------------   -------------
Concessions                                  Ps. 162,336     Ps. 151,931
Cellular telephones to be amortized              244,480          89,177
Prepaid expenses                                  64,890          43,899
Advertising expenses                              55,880              --
Preoperating expenses                            142,820         331,094
Other                                             29,033           4,684
                                          --------------   -------------
                                             Ps. 699,439     Ps. 620,785
                                          ==============   =============

      Cellular telephones amortization expense was Ps.255,656, Ps.274,543 and
Ps.194,955 in 1994, 1995 and 1996, respectively.

      Preoperative expenses mainly represent the investment in 450 project (see
Note 17).

10. Notes Payable and Long-Term Debt

      At December 31, the notes payable and long-term debt consisted of the
following:

      Notes payable at December 31, are as follows:

                                                            1995         1996
                                                        -----------  -----------
Short-term loan of U.S.$24,282 bearing interest at a    Ps.      --  Ps. 190,188
  variable rate of LIBOR plus 5.75% and maturing on
  February 28, 1997
Unsecured business short term loan of U.S.$65,000           480,948      509,199
  bearing interest at a variable rate of LIBOR plus 4% 
  and maturity dates from February through March 1997.
Short-term loan of Ps.6,000 bearing interest at a fixed       7,620           --
  rate of 57% and maturing on February 23, 1996.
Short-term loan of U.S.$4,842 bearing interest at a          45,907           --
  fixed rate of 5.30% and maturing on March 13, 1996.
Short-term loan of U.S.$5,086 bearing interest at a          48,214           --
  fixed rate of 10.25% and maturing on March 13, 1996.
Short-term loan of U.S.$6,296 bearing interest at            61,886           --
  variable rates that range from 11.09% to 11.8% 
  and maturity dates from April to November 1996.
Other                                                           417           --
                                                        -----------  -----------
Total                                                   Ps. 644,992  Ps. 699,387
                                                        -----------  -----------


                                      F-19
<PAGE>

                                                            1995         1996
                                                        -----------  -----------
Long-term debt at December 31, consisted of:
Medium term loan of U.S.$134 bearing interest at a      Ps.   2,198  Ps.   1,051
  variable rate of LIBOR plus 3% and maturing on
  February 18, 1998. Interest and principal are payable
  semiannually commencing August 1993.
Long-term loan of U.S.$2,096 bearing interest at a rate      30,903       16,417
  of T. Notes plus 5% maturing September 30, 1998.
  Interest and principal are payable semiannually
  commencing September 1993.
Obligations for equipment under capitalized leases for        8,926        4,644
  U.S.$593 at a variable rate of LIBOR plus 2.5%
  maturing on December 28, 1998. Interest and principal
  are payable semiannually commencing June 1994.
Long-term loan of U.S.$18,000 bearing interest at a         106,893      140,989
  variable rate of LIBOR plus 2.9375% maturing
  December 2001. Interest and principal are payable
  semiannually commencing June 15, 1994.
Long-term loan of U.S.$3,333 bearing interest at a rate      38,717       26,105
  of LIBOR plus 2.4375% maturing April 15, 2002.
  Interest and principal are payable semiannually
  commencing April 1993.
Long-term loan of U.S.$7,935 bearing interest at a rate      90,997       62,153
  of 12.55% maturing on July 15, 2002. Interest and
  principal are payable semiannually commencing January
  1994.
Long-term loan of U.S.$33,952 bearing interest at a         357,302      265,931
  variable rate of LIBOR plus 4% maturing on January 28,
  2004. Interest and principal are payable semiannually
  commencing June 1994.
Long-term loan of U.S.$13,156 bearing interest at a          23,899      103,043
  variable rate of LIBOR plus 3.75% maturing on
  November 14, 2004. Interest and principal are payable
  semiannually commencing July 1994.
Long-term loan of U.S.$10,726 bearing interest at a         105,425           --
  variable rate of LIBOR plus 2.9375% maturing on
  December 19, 2001. Interest and principal are payable
  semiannually commencing March 1996.
Long-term loan of U.S.$16,445 bearing interest at a         145,476           --
  variable rate of LIBOR plus 3.75 % maturing on
  November 14, 2004. Interest and principal are payable
  semiannually commencing May 1995.
Other                                                         3,767           --
                                                        -----------  -----------
Total                                                       914,503      620,333
Less current portion                                        132,442      105,536
                                                        -----------  -----------
                                                        Ps. 782,061  Ps. 514,797
                                                        ===========  ===========

      LIBOR at December 31, 1996 was 6%.

      Certain loan agreements, among other conditions, impose certain
restrictive covenants such as maintenance of certain ratios, restrictions on
incurring of additional debt, and restrictions on the sale or lease of the
Group's assets.


                                      F-20

<PAGE>

      Long term maturities for the years subsequent to December 31, 1996 are as
follows:

                         Year
                 -------------------
                 1998                        Ps. 104,603
                 1999                             94,014
                 2000                             94,013
                 2001                             94,013
                 2002                             48,763
                 2003 and thereafter              79,391
                                             -----------
                                             Ps. 514,797
                                             ===========

      At December 31, 1996, total unused lines of credit totaled Ps.665,763
(U.S.$85,000). The Company has paid no commitment fees for these lines of
credit.

      At December 31, 1995 and 1996, assets collateralizing long-term debt
include substantially all assets, (including the Government concessions) of
Region 5 and 6, and their property and equipment.

      The Group leases certain communication equipment and transportation
equipment under agreements which are classified as capital leases. Most
equipment leases have purchase options at the end of the original lease term.
Leased capital assets, included in property and equipment at December 31, 1995
and 1996, are as follows:

                                               1995                    1996
                                          ---------------          -------------
Communication equipment                    Ps.     20,279          Ps.    22,740
Transportation equipment                            2,327                     --
                                          ---------------          -------------
      Total equipment leased                       22,606                 22,740
Accumulated depreciation                            3,567                  4,478
                                          ---------------          -------------
      Net equipment leased                 Ps.     19,039          Ps.    18,262
                                          ===============          =============

11. Trade Accounts Payable

      At December 31, trade accounts payable consisted of the following:

                                                  1995                1996
                                          ---------------          -------------
Current accounts                           Ps.    287,783           Ps.  254,463
Notes payable                                     544,898                179,197
                                          ---------------          -------------
Total                                       Ps.   832,681           Ps.  433,660
                                          ===============          =============
Long-term notes payable                     Ps.     4,877           Ps.    9,703
                                          ===============          =============

      As of December 31, 1996, the Company has only partially paid amounts
invoiced by Telefonos de Mexico, S.A. de C.V. ("Telmex") since it believes that
Telmex did not have the legal right to charge certain invoiced amounts. These
disputed charges are being negotiated with Telmex. At December 31, 1996, the
Company had established adequate reserves to cover these liabilities.
Additionally, the Group's subsidiaries have claimed from Telmex the payment of
certain fees for reciprocal termination charges which the Company has the right
to collect, based on the Federal Telecommunications Law (Ley Federal de
Telecomunicaciones) published on June 7, 1995 and the regulations issued
thereunder.

12. Income Tax, Assets Tax and Employee Profit Sharing

      In December 1993, the Mexican tax authorities granted the Group permission
to file a consolidated income tax return commencing with the tax year beginning
January 1, 1994.

      The income tax rate is 34%. The provision for income tax differs from the
statutory income tax rate due to temporary and permanent differences in the
determination of the income for tax reporting and financial reporting purposes.
The 


                                      F-21
<PAGE>

most significant temporary differences are the tax deduction for inventory
purchases and certain liability accruals which are deductible only when paid for
tax purposes. The most important permanent items are the differences between
book and tax depreciation, the goodwill amortization and non-deductible
expenses.

      In accordance with Mexican accounting principles, no deferred taxes have
been provided on temporary differences since such differences are of a recurring
nature and their realization cannot be foreseen in a defined period of time.

      The 1.8% (2% in 1994) net assets tax is calculated on the average value of
substantially all assets less certain liabilities. This tax is required to be
paid if this computation exceeds the amount of income tax. The 1.8% assets tax
paid may be utilized as a credit against future income tax in the years in which
the Company generates an income tax in excess of the assets tax. The assets tax
is available as a carry forward for up to ten years and is subject to
restatement based on the National Consumer Price Index when used. As of
December 31, 1996, the net assets tax available as carry forward is Ps.83,194.

      At December 31, 1996, the Group had the following net operating losses for
income tax purposes that may be carried forward and applied against future
taxable earnings:

       Year of loss       Amount of loss         Expiration year
       ------------       --------------         ---------------
         1991               Ps. 17,474                2001
         1992                      260                2002
         1993                  388,931                2003
         1994                  821,344                2004
         1995                  424,397                2005
         1996                   28,166                2006
                                                
      These losses are indexed for inflation from the year incurred to the
sixth month of the year utilized. Accordingly, these amounts include the
inflation up to June 1996. Losses include Ps.222,968 and Ps.148,144 of capital
stock issuance costs expensed for tax purposes in 1993 and 1994. Such amounts
were charged to stockholders' equity in the financial statements.


                                      F-22
<PAGE>

      Employee profit sharing, generally 10%, is computed on taxable income,
with adjustments to exclude inflationary effects and the restatement of
depreciation expense. In the years ended December 31, 1994 and 1996 there was
no profit sharing expense. In the year ended December 31, 1995 employee profit
sharing expense amounted to Ps.1,956.

      The effective income tax expense at effective rate calculation as of
December 31, is as follows:

<TABLE>
<CAPTION>
                 Description                                 1994             1995            1996
--------------------------------------------------       -----------      -----------     -----------
<S>                                                      <C>              <C>             <C>      
Income tax expense (benefit) at statutory rate           Ps.(213,204)     Ps.(247,589)    Ps.(117,312)
    Add (deduct):                                       
    Inventory purchases less cost of sales                   (37,695)         (78,465)        (31,731)
    Depreciation and amortization                            (18,491)        (115,045)        (94,576)
    Differences between interest and inflationary       
      gains or losses                                         24,144          194,021         143,271
    Net assets tax                                            29,521           27,333          33,069
    Application of income tax loss carryforwards             180,495          141,857           9,576
    Provision for doubtful accounts                           12,835            6,300          (1,234)
    Telephones to be amortized                               (22,212)          74,702          50,887
    Goodwill amortized                                        26,055           22,293          24,080
    Other                                                     49,050            1,926          17,039
                                                         -----------      -----------     -----------
Effective income tax expense at effective rate           Ps.  30,498      Ps.  27,333     Ps.  33,069
                                                         ===========      ===========     ===========
</TABLE>

      The effective income tax expense represents basically 1.8% tax on assets,
which is the alternative minimum tax in Mexico.

13. Commitments and Contingencies

      As of December 31, 1996 the Company has the following commitments and
contingent liabilities:

      a) The Company has entered into operating lease agreements for
administrative offices, sales branches, and service facilities. Such lease
agreements expire at various dates through 2002. Some contain options for
renewal. Rental expense was Ps.39,710, Ps.47,840 and Ps.47,018 for the years
ended December 31, 1994, 1995 and 1996, respectively.

      Future minimum rental payments under existing leases with terms in excess
of one year as of December 31, 1996 are as follows:

      1997                   Ps.  33,007
      1998                        17,489
      1999                        15,038
      2000                        11,652
      Thereafter                   6,249

      b) For the taxes and penalties that the tax authorities may collect if
they disagree with the criteria applied by the Company regarding the calculation
of some taxes, rights and federal contributions as a result of prior years' tax
returns. As of this date there has been no notification of disagreement from the
authorities. In February 1996, the Tax authorities (Secretaria de Hacienda y
Credito Publico) started an audit in three companies of the Group (Grupo
Iusacell, S.A. de C.V., Iusacell, S.A. de C.V. and SOS Telecomunicaciones, S.A.
de C.V.). The Company does not anticipate that any tax difference or penalties
will be originated by this audit which would be material to the Company's
financial position or results of operation or liquidity.


                                      F-23
<PAGE>

      c) Mitsubishi Electronics America Inc. filed a complaint in the United
States on July 18, 1996 against Grupo Iusacell, S.A. de C.V. and Bell Atlantic
Corporation. Essentially, Mitsubishi alleges that it had a contract with Grupo
Iusacell for the sale of telephone terminals and that Iusacell has breached the
contract by not purchasing the terminals. Mitsubishi alleges the contract was
for the sale of 60,000 units at a cost of U.S.$0.510 each. Grupo Iusacell has
filed a motion to dismiss for lack of personal jurisdiction. Based on external
lawyers opinion and because of the pending motions it is too early to evaluate
the possibility of settlement or the extent of Grupo Iusacell's exposure, if
any, to loss by judgment.

      d) In 1996, the Company received a notification from the authorities
requesting the payment of surcharges related to the purchase completed in 3
installments in 1990 of the Region 5 concession. This Region was bought by Grupo
Iusacell in 1993 (see Note 2). The opinion of external counsel is that this
request is legally unfounded.

14. Contributed Capital

      Series A, B and D represent shares entitling the holder of each share to
one vote at the Company's stockholders' meetings. The stockholders of Series L
shares may vote only in limited circumstances as described in the Company's
bylaws. Stockholder actions on certain matters require approval by both Series A
and Series B stockholders.

      Series A shares must always represent not less than 51% of the capital
stock with full voting right and, until February 1997, were only acquirable by
Mexicans. Series B, D and L shares may be acquired by foreigners or Mexicans.

      Series B and D shares cannot exceed 24.5% of the total capital stock. 
Series L shares cannot exceed 19% of the total capital stock. Series L shares 
are not considered in determining the amount or proportion of foreign 
investment in the Company as long as the shares are listed on the Mexican 
Stock Exchange.

      In May 1994, the stockholders authorized a 10 for 1 stock split applicable
to all outstanding shares of capital stock at December 31, 1993. Information
contained in these financial statements has been retroactively adjusted to
reflect this split.

      On May 20, 1994, 28,291,350 series D and 66,013,150 series L shares were
issued and sold through a public offering for Ps.1,713,962. Capital stock
includes Ps.1,340,070 of amounts paid in excess of nominal value. Fees charged
by outside advisors for assisting in this sale amounted to Ps.148,144 and were
charged to stockholders' equity. In addition 23,957,620 series A shares were
converted into an equal number of series L Shares. The converted series A shares
were canceled.

      As mentioned in Note 1, on November 26, 1996, Company's shareholders
signed an agreement in principle to change the controlling interest of Grupo
Iusacell to Bell Atlantic. Following the signed agreement, on December 18, 1996,
at an extraordinary stockholders' meeting, the following resolutions modifying
the Company's bylaws were adopted:

      1) Series A shares may be acquired by Mexicans and/or foreigners.

      2) The conversion of 200,000,000 Series "B" shares and 166,769,760 Series
"D" shares, for 366,769,760 Series "A" shares.

      3) The conversion of 100,000,000 Series "A" shares for 100,000,000 Series
"D" shares.

      These resolutions were subject to the authorizations requested before the
Foreign Investment National Commission and the Competition Federal Commission.
(See Note 18).


                                      F-24
<PAGE>

      Subject to the above mentioned authorizations and the adoption of such
resolutions, the stockholders' decided to increase the fixed portion of
the capital stock by up to Ps.720,000 through the issuance of up to
74,163,591 Series "A" shares and up to 54,407,837 Series "D" shares. The present
holders of the Series "D" shares had the right to acquire additional Series "D"
shares in order to allow them to keep their actual ownership proportion; this
right expired fifteen days after the publication of these resolutions in the
Diario Oficial de la Federacion (Mexican Federal Official Journal). (See Note
18). After such term expires the remaining shares will be offered for their
subscription and payment as follows:

      a) Up to 57,142,857 Series "A" shares to Bell Atlantic Latin America
Holdings, Inc. through the capitalization of certain liabilities.

      b) Up to 17,020,734 Series "A" shares and up to 54,407,837 Series "D"
shares to FIUSA Pasteje, S.A. de C.V. through the capitalization of certain
liabilities.

      At the same stockholders' meeting, a Stock Purchase Plan for the Company's
executives was approved. In this regard, the stockholders' meeting decided to
increase the fixed portion of the capital stock of up to Ps.100,000 through
the issuance of up to 15,625,000 Series "L" shares. The present holders of the
Series "L" shares had the right to acquire additional shares in order to
allow them to keep its actual ownership proportion; this right expired fifteen
days after the publication of this resolution in the Diario Oficial de la
Federacion (Mexican Federal Official Journal). After such term expires the
remaining shares will be canceled, except for 7,812,500 shares which will be
designated to the above mentioned Stock Purchase Plan.

      The changes in the number of shares of common stock for the period January
1, 1994 through December 31, 1996 are analyzed as follows:

                                                                      Number of
                                                                        shares
                                                                     -----------
January 1, 1994 balance (restated for stock split)                   887,319,930
      May 20, 1994 - issuance of common stock through
      primary public offering                                         94,304,500
                                                                     -----------
December 31, 1994 balance                                            981,624,430
      No changes                                                              --
                                                                     -----------
December 31, 1995 balance                                            981,624,430
      No changes                                                              --
                                                                     -----------
December 31, 1996 balance                                            981,624,430
                                                                     ===========

      At December 31, 1995 and 1996, the authorized and outstanding shares of
common stock, without par value consist of the following:

                               1995             1996
                           ------------     ------------
Series A                    428,575,540      428,575,540
Series B                    205,562,450      205,562,450
Series D                    204,920,220      204,920,220
Series L                    142,566,220      142,566,220
                           ------------     ------------
Total                       981,624,430      981,624,430
                           ============     ============

15. Earned Capital

      In accordance with the Mexican Corporate Law, a legal reserve must be
created, and annually increased by 5% of the annual net earnings until it
reaches 20% of the common stock amount. This reserve is not available for
dividends, but may be used to reduce a deficit or may be transferred to capital.


                                      F-25
<PAGE>

      As defined in the Federal Income Tax Law, a tax on dividends is calculated
based on the paid dividends which exceed the taxable net income. The accumulated
taxable net income of the the Company as of December 31, 1996 was approximately
Ps.68,477.

      The Company cannot pay dividends until it collects them from its
subsidiaries. Two subsidiaries (Comcel in Region 5 and Portacel in Region 6)
have bank debt that partially restricts their ability to pay dividends to the
holding company if certain financial ratios are not met. As of December 31,
1996, such ratios were met. Both companies have accumulated losses at December
31, 1996.

      The earned capital accounts consist of the following:

<TABLE>
<CAPTION>
                                                     December 31, 1995
                                      ----------------------------------------------
                                                       Accumulated
                                        Historical     adjustments 
                                          value        for inflation       Total
                                      -------------    -------------   -------------
<S>                                   <C>              <C>             <C>  
Legal reserve                           Ps.   1,499   Ps.      1,395    Ps.    2,894
Accumulated losses from prior years        (325,251)          18,794        (306,457)
Net loss for the year                      (805,911)          83,207        (722,704)
Excess from restatement                          --          207,512         207,512
                                      -------------    -------------   -------------
Total                                 (Ps.1,129,663)   Ps.   310,908   (Ps.  818,755)
                                      =============    =============   =============
</TABLE>

<TABLE>
<CAPTION>
                                                    December 31, 1996
                                      ----------------------------------------------
                                                       Accumulated
                                        Historical     adjustments 
                                          value        for inflation       Total
                                      -------------   --------------   -------------
<S>                                   <C>              <C>             <C>  
Legal reserve                          Ps.    1,499    Ps.     1,395    Ps.    2,894
Accumulated losses from prior years      (1,131,162)         102,001      (1,029,161)
Net loss for the year                      (515,635)         174,351        (341,284)
Deficit from restatement                         --         (470,793)       (470,793)
                                      -------------   --------------   -------------
Total                                 (Ps.1,645,298)  (Ps.   193,046)  (Ps.1,838,344)
                                      =============   ==============   =============
</TABLE>

16. Foreign Currency Position

      The balance sheet as of December 31, includes assets and liabilities
denominated in U.S. dollars as follows:

                                               1995               1996
                                         ----------------   ----------------
Monetary assets                          U.S.$     16,028   U.S.$     12,752
Monetary liabilities                              234,538            254,629
                                         ----------------   ----------------
Net liability position in U.S. dollars   U.S.$    218,510   U.S.$    241,877
                                         ================   ================
Equivalent in nominal Mexican pesos      Ps.    1,691,180   Ps.    1,894,502
                                         ================   ================


                                      F-26
<PAGE>

            During 1994, 1995 and 1996, interest expense paid and interest
income collected on assets and liabilities denominated in US dollars were as
follows:

<TABLE>
<CAPTION>
                                            1994               1995               1996
                                        ------------       ------------       ------------
<S>                               <C>                  <C>                <C>

Interest income                         U.S.$  2,935       U.S.$  7,749       U.S.$ 18,298
Interest expense                              14,660             28,779             52,011
                                        ------------       ------------       ------------
Net interest expense                    U.S.$ 11,725       U.S.$ 21,030       U.S.$ 33,713
                                        ============       ============       ============
Equivalent in nominal Mexican pesos     Ps.   58,566       Ps.  162,764       Ps.  264,057
                                        ============       ============       ============
</TABLE>

      The exchange rate as of December 31, 1994, 1995 and 1996 was Ps.4.995,
Ps.7.7396 and Ps.7.8325 per U.S.$1, respectively. At the issuance date of these
financial statements the exchange rate in effect was Ps.7.778 per U.S.$1.

17. Project 450

      During 1994, the Company created a subsidiary to be in charge of providing
fixed wireless local telephone services (Project 450). At December 31, the
following has been incurred during the start-up phase of the project:

                                                      1995              1996
                                                  ------------      ------------
Fixed assets                                      Ps.  426,607      Ps.  396,850
Capitalized interest                                    30,351           135,318
Inventory                                               13,913            19,976
Pre-operating expenses                                  40,404            60,208
Total                                                  511,275           612,352
                                                  ------------      ------------
                                                  ------------      ------------

      Capitalized interest and pre-operating expenses are included in "Other
Assets" in the attached consolidated balance sheet (see Note 9).

      The Company has an agreement with a foreign supplier under which it
anticipates buying approximately U.S.$315,000 of network switching equipment and
radio base station equipment as well as associated software and technical
services for the development of the local wireless network, in a five year
period commencing when the Ministry of Communications and Transportation ("SCT")
grants the required licenses. The SCT has announced that by the end of 1997 it
will auction the frequencies in the 450 MHz band to enable operators to provide
services therein.

      The realization of these assets is subject to the acquisition of this
frequency. However, the Company's management believes that at least 75% of such
fixed assets could be used in its cellular operations.

18. Subsequent events

      On February 12, 1997, Grupo Iusacell's new share ownership and management
control structure described more fully in the Notes 1 and 14, received the
required Mexican Government authorizations.

      The increase in the fixed portion of the capital stock, agreed to at the
extraordinary stockholder's meeting held on December 18, 1996 (see Note 14), was
approved on February 18, 1997. The subscription of shares was finally as
follows:

            a)    Bell Atlantic    47,017,491 Series "A" shares

            b)    Peralta Family   4,390,619 Series "A" shares
                                   48,754,000 Series "D" shares

      After such subscription and the resolutions adopted to modify the
Company's bylaws, Series B shares cannot exceed 29.1% of the total capital stock
and Series D Shares cannot exceed 19.9% of the total capital stock.


                                      F-27
<PAGE>

19.   Differences between Mexican and United States Generally Accepted
      Accounting Principles ("GAAP")

      The Company's consolidated financial statements are prepared based on
accounting principles generally accepted in Mexico ("Mexican GAAP"), which
differ in certain significant respects from United States generally accepted
accounting principles ("U.S. GAAP").

      The following reconciliation to U.S. GAAP does not include the
reversal of the adjustments to the financial statements for the effects of
inflation required under Mexican Bulletin B-10. The application of Bulletin B-10
represents a comprehensive measure of the effects of price level changes in the
financial statements based on historical cost for Mexican and U.S. accounting
purposes. The principal differences, other than inflation accounting, between
Mexican and U.S. GAAP are listed below, together with an explanation where
appropriate, of the adjustments that affect consolidated net income and
stockholders' equity for each of the years ended December 31, 1994, 1995 and
1996.

      a) Deferred income taxes and employee profit sharing

      Under Mexican GAAP deferred income taxes are provided for identifiable,
non-recurring timing differences (those expected to reverse over a definite
period of time) at rates in effect at the time such differences originate.
Benefits from loss carryforwards are not allowed to be recognized before the
period in which the carryforward is utilized. For purposes of this
reconciliation to U.S. GAAP, the Company has applied Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" ("SFAS 109"), for all
periods presented.

      SFAS 109 requires an asset and liability method of accounting whereby
deferred taxes are recognized for the tax consequences of all temporary
differences between the financial statements carrying amounts and the related
tax basis of assets and liabilities. Under U.S. GAAP, the effect on deferred
taxes of a change in tax rates is recognized in income in the period that
includes the enactment date.

      SFAS 109 requires deferred tax assets to be reduced by a valuation
allowance if, based on the weight of available evidence, including cumulative
losses in recent years, it is more likely than not that some portion or all of
the deferred tax assets will not be realized.

      As described in Note 12, Mexican tax law requires payment of a 1.8% (2% in
1994) tax on the Company's net assets which may be used to offset future income
tax obligations. Under Mexican GAAP, the net asset tax is charged to the
provision for income taxes. Under SFAS 109, such amounts are treated as a 
deferred tax benefit and offset by a valuation allowance, if required.

      Employee profit sharing expense, which is based on each subsidiary's
taxable income after certain statutory adjustments, is included in the income
tax provision under Mexican GAAP. The provision for employee profit sharing 
is charged to operations for U.S. GAAP purposes.


                                      F-28
<PAGE>

      b) Capitalized interest

      Under Mexican GAAP, capitalization of interest on assets under 
construction is allowed but not required. For Mexican GAAP purposes the 
Company began capitalizing interest on January 1, 1995. Prior to such date 
interests costs were expensed for Mexican GAAP. Under Mexican GAAP, interest 
on those obligations which are identified as relating to construction 
projects is subject to capitalization. For U.S. GAAP purposes interest is 
capitalized by applying the weighted average rate of borrowings to the 
average amount of accumulated expenditures for the asset. In 1994, the 
interest capitalized under Mexican GAAP was not adjusted to reconcile with 
U.S. GAAP (See Note 19.i). For the years ended December 31, 1995 and 1996, 
there was no difference in the amounts capitalized under Mexican and U.S. 
GAAP. As of December 31, 1995 and 1996, the capitalized interest amount to 
Ps.28,515 and Ps.150,827 respectively.

      c) Acquisitions

      Under Mexican GAAP, assets and liabilities of acquired subsidiaries are
carried over to the acquiring entity's financial statements at their book value
as of the date of acquisition. The excess of cost over such book value is
recorded as "excess of cost of investment in subsidiaries over book value"
("goodwill") in the accompanying balance sheets.

      Under U.S. GAAP, for acquisitions accounted for using the purchase method,
the cost of acquiring another entity is allocated to the tangible and
identifiable intangible assets based on their fair values at the date of
acquisition and liabilities assumed are recorded at their then current fair
values. Any excess of cost over such fair values is recorded as goodwill.

      In the accompanying balance sheet the concessions acquired in the
acquisitions of Regions 5, 6 and 7, have been recorded at their book value under
Mexican GAAP and not at their fair value as required by U.S. GAAP. Substantially
all goodwill recorded under Mexican GAAP would be assigned to cellular
concessions under U.S. GAAP. However, since acquired concessions are amortized
over the same twenty year period as goodwill, there is no effect on U.S. GAAP
net income or stockholders' equity.

      d) Investment in Project 450

      Under Mexican GAAP, amounts of capital expenditures, the related finance
costs and preoperating costs related to the project 450 have been capitalized.

      Under U.S. GAAP, the amount of these preoperating costs that meet the 
definition of deferred start-up costs would be expensed as incurred. 

      e) Minority interest

      Under Mexican GAAP, the minority interest in consolidated subsidiaries is
presented as a separate component within the stockholders' equity section of the
consolidated balance sheet. For U.S. GAAP purposes, minority interest is not
included in stockholders' equity and accordingly is deducted as a reconciling
item to arrive at U.S. GAAP equity.


                                      F-29

<PAGE>

      f) Earnings (loss) per share

      Until 1997, there was no requirement for the disclosure of earnings per
share ("EPS") under Mexican GAAP. Under U.S. GAAP, disclosure of earnings per
share is required for public companies. Accordingly, EPS has been computed for
the years ended December 31, 1994, 1995 and 1996, based on the weighted average
number of common shares outstanding during such periods.

      g) Effect of inflation accounting on U.S. GAAP adjustments

      In order to determine the net effect on the financial statements of
recognizing certain of the adjustments described above, it is necessary to
recognize the effects of applying the Mexican GAAP inflation accounting
principles (described in Note 4) to such adjustments.

      h) Extraordinary item

      In the financial statements prepared in accordance with Mexican GAAP
amounts of Ps. 136,407 relating to restructuring charges have been classified as
an extraordinary item. Under U.S. GAAP such amounts would be classified as
operating expenses.

      i) The following is a summary of net loss and stockholders' equity
adjusted to take into account certain material differences between Mexican GAAP
and U.S. GAAP.

<TABLE>
<CAPTION>
                                                        Year ended December 31,
                                            ------------------------------------------------
                                                1994             1995               1996
                                            ------------     -------------     -------------
<S>                                         <C>              <C>               <C>     
Net loss as reported under Mexican GAAP     (Ps. 658,659)    (Ps.  722,704)    (Ps.  341,284)
Deferred income taxes                             55,787           227,497           168,804
Income tax benefit of stock issuance 
  costs, recorded in capital                     (50,369)               --                -- 
Deferred profit sharing                           13,166                --                -- 
Capitalized interest expense                      (5,118)               -- 
450 Project investment                                --                --           (60,227)
Gain on net monetary position                      1,560           153,942            99,546
                                            ------------     -------------     -------------
Net loss under U.S. GAAP                    (Ps. 643,633)    (Ps.  341,265)    (Ps.  133,161)
                                            ============     =============     =============
Weighted average number of shares 
  outstanding (thousands)                        945,711           981,624           981,624
                                            ============     =============     =============
Net loss per share                          (Ps.    0.68)    (Ps.     0.35)    (Ps.     0.14)
                                            ============     =============     =============
</TABLE>


                                      F-30
<PAGE>

<TABLE>
<CAPTION>
                                                           Year ended December 31,
                                            ---------------------------------------------------
                                                 1994                1995             1996
                                            --------------      -------------     -------------
<S>                                         <C>                 <C>               <C>     
Stockholders' equity as reported under 
  Mexican GAAP                              Ps.  5,273,656      Ps. 4,122,484     Ps. 3,132,193
Minority interest                                   (6,807)            24,072            (5,226)
Capitalized interest expense                        67,443                 --                --
Deferred income taxes                             (229,566)          (659,931)         (236,497)
Project 450 investment                                  --                 --           (60,227)
                                            --------------      -------------     -------------
Stockholders' equity as reported under 
  U.S. GAAP                                 Ps.  5,104,726      Ps. 3,486,625     Ps. 2,830,243
                                            ==============      =============     =============
</TABLE>

      In 1994 the income tax benefit of Ps.50,369 relating to stock issuance
costs, included in the above reconciliation of net loss to U.S. GAAP, would be
recorded directly in the capital contributions account in stockholders' equity
under U.S. GAAP.

      j) Supplementary U.S. GAAP disclosures

         1) Cash flow information

      Since SFAS 95 does not provide any specific guidance with respect to
inflation adjusted financial statements, for U.S. GAAP purposes, the following
cash flow statement is presented, using U.S. GAAP balance sheets restated for
inflation. Monetary gains and losses, and unrealized foreign exchange gains and
losses have been included as operating cash flows reconciling items. Other items
have been included based on their cash flows, adjusted by inflation.

<TABLE>
<CAPTION>
                                                                                Year ended December 31,
                                                                    ----------------------------------------------
                                                                          1994            1995           1996
                                                                    --------------    ------------   -------------
<S>                                                                 <C>                <C>           <C>     
Operating activities:
Net loss under U.S. GAAP                                            (Ps. 643,633)     (Ps. 341,265)  (Ps. 133,161)
Adjustments to reconcile net loss to cash provided by (used in)                      
operating activities:                                                                
      Depreciation and amortization                                      553,048           634,078        568,021
      Equity in loss (earnings) of associated companies                   (2,911)           36,773          5,631
      Increase in allowance for doubtful accounts                         70,817            77,580         66,619
      Increase in allowance for obsolete and slow-moving                             
      inventories                                                         31,523            49,019          3,860
      Minority interest                                                      (42)          (34,789)        (2,987)
      Deferred income taxes and employee profit sharing                  (18,584)         (227,497)      (168,804)
</TABLE>


                                      F-31
<PAGE>
 
<TABLE>
<CAPTION>
                                                                              Year ended December 31,
                                                                        1994           1995           1996
                                                                   -------------    -----------    -----------
<S>                                                                <C>              <C>            <C>      
  Gain (loss) on net monetary position and foreign exchange
  losses                                                           Ps.    44,369    Ps.(625,132)   Ps.(571,715)
  Group reorganization reserve                                                --             --        136,407
  Other                                                                   17,729             --             --
  Changes in operating assets and liabilities:                        
  Accounts receivable                                                   (112,259)         6,909        (81,575)
  Inventories                                                           (136,817)        (4,213)        48,964
  Trade accounts payable and related parties                             558,969        459,917        (63,345)
  Taxes and other payable                                                (19,548)       192,946        119,990
  Income tax                                                                 282            371          4,755
  Other                                                                   (3,367)           175             57
                                                                   -------------    -----------    -----------
  Net cash provided by operating activities                              739,576        224,873        (67,283)
  Financing activities:                                            -------------    -----------    -----------
  Proceeds from (payments of) long-term debt                             533,296         26,085        (98,524)
  Principal payments on long-term debt                                  (964,815)      (411,432)      (284,003)
  Net change in notes payable                                           (468,144)       885,823        253,999
  Sale of capital stock net of issuance costs                          1,516,375             --             --
                                                                   -------------    -----------    -----------
  Total cash provided (used) by financing
  activities:                                                            616,712        500,476       (128,528)

Investing activities:                                                 
Purchase of property and equipment                                 Ps.(1,067,976)   Ps.(442,749)   Ps.(198,466)
Acquisition of Regions and investment in associated                     (144,481)       (48,201)        19,799
companies, net of cash acquired                                       
Purchase of other assets                                                (574,759)      (308,863)       298,048
                                                                   -------------    -----------    -----------
Total cash used in investing activities                               (1,787,216)      (799,813)       119,381
                                                                   -------------    -----------    -----------
Net decrease in cash and cash equivalents                               (430,928)       (74,464)       (76,430)
Cash and cash equivalents at beginning of year                           672,718        241,790        167,326
                                                                   -------------    -----------    -----------
Cash and cash equivalents at end of year                           Ps.   241,790    Ps. 167,326    Ps.  90,896
                                                                   =============    ===========    ===========
Interest expense paid                                              Ps.   136,482    Ps. 130,472    Ps. 154,481
                                                                   =============    ===========    ===========
Income tax paid                                                    Ps.    27,419    Ps.  21,156    Ps.  29,681
                                                                   =============    ===========    ===========
</TABLE>

As detailed in Note 2, the sale of the investment in Iusatel Chile and the 
increase in the participation in the equity of Rentacell are non-cash 
operations.



                                      F-32
<PAGE>


2) Deferred income taxes and employee profit sharing

      Significant components of deferred income taxes under U.S. GAAP are as
follows:
                                                              December 31,
                                                       ------------------------
                                                           1995         1996
                                                       ----------    ----------
Deferred liabilities:
  Inventories                                          Ps. 51,958    Ps. 33,999
  Property and equipment                                1,098,711       844,080
  Cellular telephones to be amortized                      83,123        30,320
  Concessions                                              35,260        10,398
                                                       ----------    ----------
Total deferred tax liabilities                          1,269,052       918,797
                                                       ----------    ----------
Deferred assets:
  Allowance for doubtful accounts                      Ps. 36,750    Ps. 31,620
  Net operating loss and tax credit carryforward          643,327       654,588
  Group reorganization reserve                                 --        46,378
  Allowance for deferred tax assets                        70,956       (50,286)
                                                       ----------    ----------
Total deferred tax assets                                 609,121       682,300
                                                       ----------    ----------
Net deferred tax liabilities                           Ps.659,931    Ps.236,497
                                                       ==========    ==========

      The effect of the restatement of non-monetary assets is recorded directly
to stockholders' equity. Accordingly, the deferred taxes related to such assets
would be reflected directly in equity under U.S. GAAP. Deferred taxes recorded
directly to stockholders' equity relating to the restatement of non-monetary
assets were Ps.180,900, Ps.624,169 and (Ps.254,631) for the years ended at
December 31, 1994, 1995 and 1996, respectively.

      The Company has recorded a deferred tax asset of Ps.682,300 reflecting 
the benefit of tax loss carryforwards (see paragraph 2 above), which expire 
in varying amounts between 2001 and 2006. Realization is dependent on 
generating sufficient taxable income prior to expiration of the loss 
carryforwards. Although realization is not assured, management believes it is 
more likely than not that all of the deferred tax asset will be realized. 
However, the amount of the deferred tax asset considered realizable could be 
reduced in the near term if estimates of future taxable income during 
carryforward period are reduced.

3) Fair values of financial instruments

      The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments at December 31,
1995 and 1996.

      Cash and cash equivalents: The carrying amount reported in the balance
sheet approximates fair value.

      Notes payable: The carrying amount approximates fair value because of the
relatively short period of time between the origin of the obligations and their
expected settlement.

      Management believes that the fair value of the Company's long-term debt is
not materially different to its carrying value due to the fact that:

            (i)   Most of the Company's long-term debt is at variable interest
                  rates; and

            (ii)  The fixed rate debt is at interest rates which are not
                  materially different from market rates.

      Consequently, the carrying values and the fair values of the Company's
long-term debt are as follows:


                                      F-33
<PAGE>

                  1995                                    1996
     -------------------------------        ------------------------------
     Carrying Value       Fair Value        Carrying Value      Fair Value
       Ps.973,397         Ps.973,397          Ps.660,281        Ps.660,281

      4) Economic environment

      The Company is a Mexican corporation with substantially all its operations
situated in Mexico and approximately 99.5% of its revenues in 1996 resulted from
sales generated within Mexico. Accordingly, the economic environment within
Mexico, which is significantly affected by the actions taken by the Mexican
government, can be expected to have significant impact on the Company's
financial condition and results of operations and on the Company's ability to
meet its future obligations. The Company imports handsets, cellular sites and
other telecommunication equipment, while their pricing and receivable are quoted
and stated in Mexican pesos.

      5) Disclosure of certain significant risks and uncertainties

      The carrying values of the Company's property, plant and equipment are 
dependent on the assumption that these assets will continue to be used in the 
operation of the Company.

      The Company is currently:

           i) Planning to introduce digital CDMA technology into its 
communications system. The extent to which the current communication 
equipment of the Company will become obsolete will depend on the extent to 
which digital technology is introduced and the compatibility of the choice of 
the digital technology with the Company's existing technology. As yet the 
Company has not made a decision regarding the extent of the digital roll out 
nor the choice of the equipment supplier.

          ii) Exploring alternatives to Project 450 in the provision of local 
telephone services. The Company has not made a decision whether to continue 
Project 450 or to purchase alternatives and accordingly, is continuing its 
trial program to provide local wireless service in the 450 MHz frequency band.

      Based on any such decisions, it is reasonably possible that the 
estimated useful lives of the Company's communication equipment will be 
reduced significantly in the near term. As a result, the carrying amount of 
the Company's communication equipment may be reduced materially in the near 
term.

                                      F-34
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS
                        ON FINANCIAL STATEMENTS SCHEDULES

The Board of Directors
Grupo Iusacell, S.A. de C.V. and Subsidiaries

We have audited the consolidated Financial Statements of Grupo Iusacell, S.A. de
C.V. and subsidiaries as of December 31, 1996 and 1995, and for the year then
ended and have issued our report thereon dated February 21, 1997 (included
elsewhere in this Annual Report 20-F). Our audits also included the financial
schedules listed in Item 19 of this Annual Report 20-F. These schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audit.

In our opinion, based on our audit, the financial statements schedules referred
to above, when considered in relation to the basic financial statements taken as
a whole, present fairly in all material respects the information set forth
therein.

                                              Coopers & Lybrand
                                        Despacho Roberto Casas Alatriste

                                            /s/ Juan Manuel Ferron Solis
                                            ----------------------------
                                            Juan Manuel Ferron Solis
                                               Public Accountant

Mexico City, D.F., Mexico.
February 21, 1997.


                                      S-1
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS
                        ON FINANCIAL STATEMENTS SCHEDULES

The Board of Directors
Grupo Iusacell, S.A. de C.V. and Subsidiaries

We have audited the consolidated financial statements of Grupo Iusacell, S.A. de
C.V. and subsidiaries as of December 31, 1994, and for the year then ended and
have issued our report thereon dated February 17, 1995 (included elsewhere in
this Annual Report 20-F). Our audit also included the financial statement
schedule listed in Item 19 of this Annual Report 20-F. This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audit. We did not audit the financial statements of two
consolidated subsidiaries which statements reflect total revenues constituting
14% of the related consolidated total. Those financial statements were audited
by other independent auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to data included for these subsidiaries, is based
solely on the reports of the other auditors.

In our opinion, based on our audit and the reports of other auditors, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.

                                                  Mancera, S.C.
                                A Member of Ernst & Young International, L.L.P.

Mexico City,
February 17, 1995


                                      S-2
<PAGE>



                         REPORT OF INDEPENDENT AUDITORS
                        ON FINANCIAL STATEMENT SCHEDULES

Stockholders
SOS Telecomunicaciones, S.A. de C.V.

      We have audited the financial statements of SOS Telecomunicaciones, S.A.
de C.V. as of December 31, 1994, and for the year then ended, and have issued
our report thereon dated February 10, 1995, (included elsewhere in this Annual
Report F-20). Our audit also included the financial statements schedules listed
in Item 19 of this Annual Report F-20. These schedules are the responsiblity of
the Company's management. Our responsibility is to express an opinion based on
our audit.

      In our opinion, based on our audit the financial statements schedules
referred to above, when considered in relation to the basic financial statements
taken as a whole, present fairly in all material respects the information set
forth therein.

                                          Prieto, Ruiz de Velasco y Cia., S.C.

                                            /s/ Ignacio Pineda Luna CPA
                                           -----------------------------
                                                Ignacio Pineda Luna CPA
                                                           Partner

Mexico City
February 21, 1997


                                      S-3
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS
                        ON FINANCIAL STATEMENTS SCHEDULES

The Board of Directors
Comunicaciones Celulares de Occidente, S.A. de C.V.

We have audited the balance sheet of Comunicaciones Celulares de Occidente,
S.A. de C.V. as of December 31, 1994, and have issued our report thereon dated
February 10, 1995 (included elsewhere in this Annual Report 20-F). Our audit
also included the financial schedules listed in Item 19 of this Annual Report
20-F. These schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audit.

In our opinion, based on our audit, the financial statements schedules referred
to above, when considered in relation to the balance sheets, present fairly in
all material respects the information set forth therein.

                                              Coopers & Lybrand
                                            Despacho Roberto Casas Alatriste
                                           /s/Juan Manuel Ferron Solis
                                           ---------------------------
                                            Juan Manuel Ferron Solis
                                               Public Accountant

Mexico City, D.F., Mexico.
February 13, 1995.


                                      S-4
<PAGE>

                  GRUPO IUSACELL, S.A. DE C.V. AND SUBSIDIARIES

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                    YEARS ENDED DECEMBER 1994, 1995 AND 1996
               (THOUSANDS OF MEXICAN PESOS, WITH PURCHASING POWER
                            AS OF DECEMBER 31, 1996)

<TABLE>
<CAPTION>
COL. A                                  COL.B                     COL. C                  COL. D           COL.E
-----------------------------------   ----------       --------------------------       ----------       ----------
                                                                ADDITIONS
                                      BALANCE AT       CHARGED TO      CHARGED TO                        BALANCE AT
                                      BEGINNING        COST AND        OTHER                             END OF
DESCRIPTION                           OF PERIOD        EXPENSES        ACCOUNTS         DEDUCTIONS       PERIOD
-----------                           ----------       ----------      ----------       ----------       ----------
<S>                                    <C>              <C>             <C>                     <C>               
1994
ALLOWANCE FOR OBSOLETE AND SLOW- 
MOVING INVENTORIES.................    $ 24,625         $ 31,523        $      --       $                 $ 56,148

ALLOWANCE FOR DOUBTFUL ACCOUNTS ...     159,128           59,710               --          72,670          146,168

1995
ALLOWANCE FOR OBSOLETE AND SLOW- 
MOVING INVENTORIES.................      56,148            1,680               --           8,809           49,019

ALLOWANCE FOR DOUBTFUL ACCOUNTS ...     146,168           77,580               --         112,438          111,311

1996
ALLOWANCE FOR OBSOLETE AND SLOW- 
MOVING INVENTORIES.................      49,019            3,860               --          20,674           32,205

ALLOWANCE FOR DOUBTFUL ACCOUNTS ...     111,311           66,619               --          84,930           93,000
ALLOWANCE FOR OBSOLETE FIXED ASSETS          --          104,700               --              --          104,700
</TABLE>


                                      S-5
<PAGE>

                                  ANNUAL REPORT
                       PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                                  EXHIBIT INDEX

Exhibit
Number                     Description of Exhibit                           Page
-------                    ----------------------                           ----

1.A   Bylaws of Grupo Iusacell, S.A. de C.V., as amended.                     1

2.B   1996 Share Conversion Agreement dated December 27, 1996 among           1
      Grupo Iusacell, S.A. de C.V., Alejo Peralta, Carlos Peralta,
      Iusa Grupo Comunicaciones S.A. de C.V., Langness Investments
      Limited, FIUSA Pasteje, S.A. de C.V. and Bell Atlantic Latin
      America Holdings, Inc.

2.C   Amended and Restated Shareholders Agreement dated February 18,          1
      1997 among Grupo Iusacell, S.A. de C.V., Alejo Peralta, Carlos
      Peralta, Iusa Grupo Comunicaciones S.A. de C.V., Langness
      Investments Limited, FIUSA Pasteje, S.A. de C.V., Bell Atlantic
      Latin America Holdings, Inc., Bell Atlantic New Zealand
      Holdings, Inc. and Bell Atlantic International, Inc.

2.D   Long-distance Concession                                                1

2.E   Chase Manhattan Bank, N.A. credit agreement dated February 16,          1
      1996, as amended.