Cincinnati Bell to slow FTTH expansion in 2017

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Cincinnati Bell continues to find success with its FTTH-based Fioptics service, but the service provider said that in 2017 it will start winding down its network build as it reaches greater penetration in its wireline market.

Speaking to investors during the fourth quarter 2015 earnings call, Ted Torbeck, CEO of Cincinnati Bell, said since its FTTH build is success-based the provider will continue to look for opportunities to deliver the service to more parts of its network territory

"Our buildout of fiber is 100 percent success-based and as long as we see the returns that are appropriate we're going to continue to build," Torbeck said. "We anticipate by the end of the year we'll be somewhere over 60 percent and we fully anticipate that we'll be getting close to the upper range where in 2017 our build will decline significantly."

Torbeck added that "there will still be neighborhoods [we] go back to and upgrade with fiber to the home, but in 2017 it will decline."

Another factor in its FTTH drawdown is the cost of construction, which is rising as it gets to the end of its build out.

"The cost of the build is increasing as we expected as we build out and we're getting to the edge of the buildout and it's getting more expensive," Torbeck said. "Once we reach the threshold where the margin decreases to the level is acceptable we'll stop the build."

Torbeck said that the rising cost is related to "density and also whether it's aerial or buried wire -- it's both of those issues."

Regardless of its future plans, Fioptics continued to be a large part of Cincinnati Bell's revenue base, rising 34 percent year-over-year to $54 million for the quarter and $191 million for the year.

Cincinnati Bell continued to ramp up its Fioptics video and Internet subscriber base, adding 5,600 video and 6,100 Internet subscribers in the fourth quarter.

Throughout 2015, the service provider continued to expand the reach of Fioptics, making it available to a total of 423,000 addresses, or 53 percent of greater Cincinnati. It passed 97,000 new addresses during the year.

Overall Entertainment and Communications revenue totaled $188 million for the quarter and $744 million for the full year, up $3 million and $14 million, respectively, from the same periods in 2014 after excluding revenue from services provided to its discontinued wireless business.

In the Services and Hardware Segment, Cincinnati Bell reported revenues of $105 million, down $5 million from the fourth quarter of 2014. Full year revenue was $435 million, up $2 million compared to the prior year.

However, the provider saw Telecom and IT hardware revenue of $49 million for the quarter, down from $65 million in the same period a year ago.  For the full year telecom and IT hardware revenue was $230 million, down 13 percent compared to the prior year.

From an overall financial perspective, Cincinnati Bell's fourth quarter consolidated revenue was $289 million, down 2 percent compared to the prior year primarily due to the anticipated decline in lower margin hardware sales.  Adjusted EBITDA for the year was $302 million and $71 million in the fourth quarter. 

Looking toward the full year 2016, Cincinnati Bell has forecast revenue of $1.2 billion.

Shares of Cincinnati Bell were trading at $3.05, down 29 cents, or 8.68 percent in Thursday morning trading on the Nasdaq stock exchange.

For more:
- see the earnings release
- hear the earnings call (reg. req.)

Special Report: From Adtran to Zayo: Tracking wireline earnings in Q4 2015

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