Cincinnati Bell Misses, Revenues Up

Wireline: Revenues from the Wireline segment fell 2% year over year to $185.2 million. Lower voice revenues (down 8%) and data services revenues (down 2%) were partially offset by higher revenues from long-distance and VoIP (up 12%).

Total local access lines reached 686,900 (down 6.9% year over year) in the reported quarter, including 612,300 in-territory lines and 74,600 out-of-territory lines. Losses in business access lines continued to partially offset growth in traditional consumer access lines.

High-speed Internet subscriber base reached 251,300 (including DSL broadband connections of 231,500). Cincinnati Bell continues to expand the availability ofits Fioptics fiber-to-the-home product suite, which provides entertainment, high-speed Internet and voice services and attained a customer penetration rate of approximately 30% at quarter end.

Wireline added 3,900 Fioptics entertainment subscribers and 2,300 high-speed Internet customers (including both Fioptics and DSL) to reach 20,900 and 19,800 subscribers, respectively, during the third quarter.

Post-paid average revenue per user (ARPU) improved to $50.31 from $49.27 in the year-ago quarter owing to increased smartphone adoption. Total smartphone subscriber base reached 87,000 at the end of the third quarter, up 35% from the year-ago quarter. Prepaid ARPU increased $1.20 year over year to $29.90 as the company focused on higher revenue rate plans.

Cincinnati Bell remains committed to expanding its data center operation and Fioptics platform going forward. We believe increased smartphone adoptions coupled with 3G services continue to boost data revenue per user.

Although management remains optimistic about opportunities for its wireless and technology solution businesses, we remain cautious about the company’s highly leveraged balance sheet and accelerated wireline erosion. Moreover, theintegration of the recently completed acquisition of CyrusOne is challenging and time consuming.