Cincinnati Bell's Q2 wireline growth driven by Fioptics, Cyrus One revenues

Revenue reached $368 million, up from $363 million in Q1 2012
Tools

Cincinnati Bell (NYSE: CBB) reported on Wednesday that Q2 revenue rose sequentially due to ongoing gains in its emerging Fioptics service suite and its Cyrus One data center division.

The Ohio-based service provider said that Q2 2012 revenue was $368 million, up from $363 million in Q1 2012.

Company operating income was $65 million compared to $78 million in Q2 2011, while net income of $5 million resulted in diluted earnings per share of 1 cent compared to 5 cents in the second quarter of 2011, both down from 2011 due primarily to a $13 million non-cash impairment write-down of assets.

CyrusOne, Cincinnati Bell's data center unit, reported $54 million in revenue, up $9 million or 20 percent from Q2 2011 due to an uptick in data center space sales over the past year. However, it did report a $2 million operating loss during the quarter, a factor it attributes to the $13 million non-cash write-down of facilities and intangibles related to its acquisition of Gramtel in 2007.

During the quarter, CyrusOne built out an additional 19,000 square feet of data center space and decommissioned low-value legacy space totaling 24,000 square feet, ending the quarter with a total of 801,000 square feet. Taking the decommissioned space out of the equation, the provider said it sold an additional 19,000 square feet of space.

In the traditional wireline segment, revenues were $184 million, down slightly from $185 million in Q2 2011 and but up from $182 million in Q1 2012. The telco said that the growth of the "entertainment, data and VoIP product lines, combined with its ongoing cost reduction efforts, continue to offset the impact of access line losses on revenue and Adjusted EBITDA."

A key piece of the wireline segment is the ongoing expansion of the Fioptics footprint, which passed a 22,000 additional homes and businesses during the quarter. It ended the quarter with a total of 169,000 units passed. The wireline segment also added 4,000 new Fioptics entertainment and high-speed Internet subscribers during the quarter, bringing each of the entertainment and high-speed internet subscriber bases to 47,000 at the end of the quarter.

However, the overall broadband Internet subscriber base remained flat at 257,000 as the increase in Fioptics subscribers was offset by a decrease in DSL Internet subscribers.

"The success of CyrusOne and Fioptics continues to be a strong catalyst for the growth in Cincinnati Bell's revenue and Adjusted EBITDA despite the challenges of ongoing access line and wireless subscriber losses," said Jack Cassidy, president and chief executive officer. "This success helped to generate our highest first half revenue since 2003, and keeps us on track to meet our guidance for 2012."

Shares of Cincinnati Bell were trading at $4.13, up 0.38, or 10.29 percent, in late morning trading Wednesday on the New York Stock Exchange.  

For more:
- see the earnings release

Special report: Wireline in the second quarter of 2012

Related articles:
Cincinnati Bell to bring ESPN to its broadband base
Cyrus One ups sales force to deal with growing customer demand
Cincinnati Bell's 21% data center growth drives plans for CyrusOne IPO
Cincinnati Bell plans IPO for data center business
Cincinnati Bell puts cloud services into the hands of the SMB customer