Cincinnati Bell's 21% data center growth drives plans for CyrusOne IPO

Cincinnati Bell (NYSE: CBB) is so confident about the growth prospects of its CyrusOne data center business that it's planning to take the unit public sometime later this year.

Any proceeds it gets from the impending IPO will be used to not only grow its data center capabilities, but also pay down debt in its traditional wireline telecom business.

Jack Cassidy, the CEO of Cincinnati Bell, said that the telco plans to "keep a large portion of the ownership of CyrusOne, so Cincinnati Bell will continue to participate and share in the future value generated by this business."

Although Cassidy would not say exactly when it would file necessary IPO paperwork with the U.S. Securities and Exchange Commission, it "likely be in at least the fourth quarter of this year until we can be in the market, should those market conditions be favorable."

Data center services continue to be a major growth engine for Cincinnati Bell since it purchased CyrusOne in 2010. In the first quarter of 2012, data center revenue rose 21 percent year-over-year to $53 million. During the quarter it added 43,000 square feet of new data center space, including a new data center in Singapore, to increase overall data center capacity to 806,000 square feet.

The service provider plans to expand its data center footprint further. Kurt Freyberger, chief financial officer for Cincinnati Bell, said in the earnings statement that the company plans "to construct an additional 140,000 square feet of space in the remainder of the year, which will provide the inventory necessary to continue the growth trajectory of CyrusOne."

Like other traditional wireline service providers, Cincinnati Bell continues to see erosion in its traditional landline voice business, which was mitigated by next-gen residential services such as its Fioptics IPTV and fiber-based broadband services.

First quarter wireline revenue was $182 million, up from $180 million in Q1 2011 but down less than 1 percent from Q1 2011.

The service provider passed 13,000 additional homes and businesses with its Fioptics product suite, bringing the total number of units passed to 147,000. The wireline unit also added 3,000 new Fioptics entertainment subscribers and 4,000 new Fioptics high-speed internet subscribers during the first quarter, ending the quarter with 43,000 entertainment and high-speed Internet subscribers.

Overall company revenue rose to $363 million, up from $361 million in Q1 2011.

Cincinnati Bell's shares closed at $3.87, up $0.31 or 8.7 percent, in after-hours trading.

For more:
- see the earnings release
- The Cincinnati Enquirer has this article

Special Report: Wireline in the first quarter of 2012

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