Cincinnati Bell Ups YoY, Keeps View

Revenue grew 5% year over year to $369 million in the reported quarter and was above the Zacks Consensus Estimate of $361 million. The strong performance was driven by growth in Data Center Colocation as then as IT Services and Hardware earnings. This represents the highest quarterly revenue since 2003.

Wireline revenue dipped 1% year over year to $182.7 million. Lower voice revenue was partially compensated by higher earnings from entertainment, long-distance and VoIP (Voice over Internet Protocol) and data revenue.

The company added 8,000 high-speed Internet clients while the reported quarter, bringing the total subscriber base to 258,700.

Cincinnati Bell continues to expand the availability ofits Fioptics fiber-to-the-home product suite, which provides entertainment, high-speed Internet and voice services.Wireline added 4,000 Fioptics entertainment subscribers to reach 38,000 clients at the end of the third quarter.

Wireless earnings fell 6% year over year to $68.1 million due to lower service revenue partially compensated by higher equipment revenue.

The company exited the quarter with 471,800 wireless clients, including 322,200 and 331,400 post-paid and prepaid clients, respectively. This compares unfavorably with 501,100 wireless clients at the end of year-ago quarter. Post-paid churn improved to 2.1% in the third quarter from 2.3% in the year-ago quarter during prepaid churn deteriorated to 7.3% from 6.3%. Post-paid average revenue per user was $50.36 and prepaid ARPU was $28.48.

IT Services and Hardware earnings rose 26% year over year to $78.9 million attributable to solid demand for hardware. Earnings from Telecom and IT equipment distribution, Managed services and Professional services increased 29%, 17% and 27%, respectively.

For fiscal 2011, Cincinnati Bell reiterated its revenue, adjusted EBITDA and free cash flow guidance of in broad outline $1.4 billion, $545 million and $5 million, respectively.

Cincinnati Bell has strong long-term prospects driven by its 3G and 4G wireless services plus handset offerings. We believe recent acquisitions, expansion of data center business and Fioptics products, and increased smartphone adoption are catalysts for the company's future growth.

The other side

On the other side, the company's debt exposure may affect its ongoing wireless and broadband expansion efforts and build-outs of additional data center space. Additionally, Cincinnati Bell continues to experience erosion in local access lines as Tier-1 competitors just as AT&T Inc. and Verizon Communications shifted their technologies to wireless services.

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