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Cincinnati Bell Q3 wireline revenue declines slightly to $182M

Next-gen broadband, data center services continue to offset POTS revenue declines
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Cincinnati Bell (NYSE: CBB) on Tuesday reported that is continuing to balance POTS revenue losses with a rise in next-gen services as the telco's Q3 2012 wireline revenues dropped slightly year-over-year to $182 million from $183 million from the same period a year ago.

The telco's wireline unit operating income was $51 million, down year-over-year from $65 million in Q3 2011, due to the $8 million gain from the 2011 sale of the home security business and the expected impact of landline access voice line losses. Likewise, the wireline division's adjusted EBITDA in the quarter was $84 million compared to $87 million in the third quarter of 2011, and the segment's Adjusted EBITDA margin was 46 percent.

One of the continual high points in Cincinnati Bell's wireline portfolio in Q3 was the growth in its Fioptics network.

During the quarter, the service provider expanded the Fioptics network to pass 15,000 additional homes and businesses, ending the quarter with a total of 184,000 premises passed with the service. In addition, the telco added 5,000 new Fioptics entertainment and broadband Internet subscribers during the quarter, increasing total subscribers to 51,000 and 52,000, respectively.

Similar to other telcos, Cincinnati Bell reported that it added 3,000 total broadband subscribers during the quarter, ending the quarter with a total of 260,000 broadband subscribers. Similar to AT&T (NYSE: T) and Verizon (NYSE: VZ) with their U-verse and FiOS broadband subscriber bases, the growth of Fioptics broadband subscribers was partially offset by an expected loss in DSL subscribers that are either defecting to cable or migrating to the higher speed service.

In addition to Fioptics, the other highlight in the wireline segment was CyrusOne, the telco's data center and cloud division, where revenues rose to $57 million, up $10 million or 20 percent year-over-year from Q3 2011, while the segment's operating income of $11 million was comparable to the same period in 2011.

To build a foundation for further growth, CyrusOne completed work on adding 95,000 square feet of new data center space in the DASH (Dallas, San Antonio, and Houston) segment, increasing total data center capacity to 896,000 square feet. CyrusOne's data center expansion efforts have been paying off as the company reported that it sold 11,000 square feet of new space during the quarter.

From an overall company revenue perspective, Cincinnati Bell's revenues remained relatively flat, declining slightly year-over-year to $368 million from $368.8 million in Q3 2011.

Meanwhile, net income of $4 million resulted in diluted earnings per share of 1 cent compared to 7 cents in Q3 2011. The service provider said the net income decline was due primarily to $6 million of mark-to-market charges on compensation plans associated with a 53 percent increase in the company's stock price during the third quarter of 2012 and an $8 million gain in 2011 on the sale of the company's home security business.

"Cincinnati Bell delivered strong financial results again this quarter, building on its performance from the first half of 2012," said Jack Cassidy, president and chief executive officer. "During the third quarter, the company achieved its highest stock price in almost five years, up 88 percent since the beginning of the year."

For more:
- see the earnings release

Special Report:  Wireline telecom earnings in the third quarter

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