Cincinnati Bell's 50 percent Fioptics revenue gains offset wireline voice line losses

Cincinnati Bell's (NYSE: CBB) Fioptics service portfolio remains the revenue catalyst in the telco's wireline portfolio, rising 50 percent year-over-year in the second quarter to $24 million.

Ted Torbeck, Cincinnati Bell

Torbeck (Image source: Cincinnati Bell)

Fioptics' performance helped drive up Q2 2013 wireline revenue to $182 million and helped to "partially mitigate" the effect of the drop in landline voice revenues due to the loss of 11,400 local voice access lines.

The telco added 5,600 new Fioptics entertainment customers and 6,100 broadband subscribers. At the end of the quarter, it had 67,000 Fioptics broadband subscribers and 63,000 video subscribers, up 42 and 36 percent, respectively.

"The $12 million quarterly growth achieved as a result of our strategic investments fully offset the decline from legacy copper-based products," said Ted Torbeck, CEO, president and director of Cincinnati Bell, during the earnings call. "This is very exciting and reinforces our belief that wireline is poised to achieve year-over-year revenue growth in 2014, especially when you consider the ongoing demand for Fioptics and increased demand for additional bandwidth from our business customers."

Total residential broadband subscribers, including both Fioptics and DSL, rose to 262,000 up from 258,000 in Q2 2012. Overall, it added a total of 2,000 broadband subscribers as new Fioptics customer wins offset the losses of legacy DSL customers.

Because of the last mile networks upgrades it has made, Cincinnati Bell can deliver up to 10 Mbps to over 50 percent of its market.

Torbeck said these speed upgrades have been a major churn reducer.

"Where we've done a DSL upgrade, customer churn in upgraded areas is 1.6 percent, a very strong metric that is 60 basis points better than in areas that are not upgraded," he said.

The service provider said that it can pass 60-70 percent of Greater Cincinnati with fiber and achieve returns of about 20 percent.

"As we've previously stated, all of our investments are success based and we will continue to monitor the key metrics and cost to deploy the fiber," Torbeck said. "In the event that we identify trends indicating that high returns are no longer probable, we would cease any further investment in this product."

In the first half of this year, Cincinnati Bell passed another 33,000 premises with Fioptics, ending the quarter with a total of 238,000 units passed. Fioptics service is now available in "30 percent of Greater Cincinnati."

No less impressive was its business and carrier services results where total revenues rose sequentially to $142 million. Out of that number, strategic business and carrier revenue totaled $67 million in the quarter, up 7 percent year-over-year.  

Torbeck said the "increase is coming from strong enterprise demand for faster data speeds, growth in cell site backhaul and increases in our managed and professional services."

Similar to its consumer fiber to the premises (FTTP) drive for Fioptics, the telco is being no less aggressive in deploying fiber to businesses and to cell towers for wireless backhaul. About 4,300 buildings and wireless towers have been connected to its fiber network and it plans to light 400 more multi-tenant units (MTUs).

Taking out CyrusOne, the telco's former data center segment, Cincinnati Bell's total Q2 revenue was $312 million, down $3 million year-over-year.

Cincinnati Bell has reiterated its financial guidance for 2013 with $1.2 billion in revenue and adjusted EBITDA of about $390 million.

Shares of Cincinnati Bell were listed at $3.35, up 3 cents, or 0.80 percent in Friday morning trading on the New York Stock Exchange. 

For more:
- see the earnings release
- here's the earnings transcript (sub req.)

Earnings roundup: Wireline telecom earnings in the second quarter of 2013

Special report: Comparing broadband pricing: where do AT&T, Verizon, Cincinnati Bell and others stand?

Related articles:
Cincinnati Bell takes modest approach to Fioptics buildout
Cincinnati Bell's Fioptics revenue jumps 52 percent in Q1
Cincinnati Bell's Q4 wireline revenue remains flat at $182 million
CyrusOne extends colocation reach into Phoenix

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