Cincinnati Bell has taken a bet that fiber-based broadband should be its focus, one that continued to pay off in the third quarter as the demand for its Fioptics service suite totaled $37 million, up 39 percent year-over-year.
The service provider continued to expand the availability of Fioptics, passing an additional 15,900 homes and it is now available to 40 percent of Greater Cincinnati. During the quarter, it added 8,400 new Fioptics Internet and 5,300 Fioptics video subscribers to end the quarter with a total of 106,700 and 87,800 total subscribers, respectively.
"We are on target to achieve year-over-year wireline revenue growth for the first time since 2007," said Leigh Fox, CFO of Cincinnati Bell during the earnings call, according to a Seeking Alpha transcript. "The exceptional customer responses to our fiber products and the increased demand for our Internet speeds continue to be the driving force behind the wireline results."
In terms of overall broadband penetration, the service provider expanded the number of households capable of receiving at least 10 Mbps speeds to 468,700, or over 55 percent of its market.
Cincinnati Bell said the number of its Internet subscribers subscribing to 10 Mbps and above has "grown 37 percent year-over-year and now accounts for 45 percent of our internet subscriber base."
Revenue from strategic products totaled $111 million for the quarter, up 19 percent over the prior year.
Ted Torbeck, president and CEO, said in the earnings release that the sale of its wireless spectrum and monetization in CyrusOne has enabled it to enhance its fiber-to-the-premises (FTTP) build strategy.
"The completion of the wireless spectrum sale and the initial monetization of our CyrusOne investment has created an opportunity to accelerate our fiber investments and capitalize on the growing demand for our strategic products," Torbeck said.
Torbeck added that: "Our fiber investments have significantly changed the perception of Cincinnati Bell and are essential to creating a fiber based entertainment, communications, and IT solutions company with growing revenue, growing profits, and significant cash flows."
Per the industry-wide trend, Cincinnati Bell reported that local and long-distance voice revenue declined to $49.6 million and $26.9 million, respectively.
But Fioptics was just one contributor to overall wireline growth during the quarter. The service provider also reported revenue gains in its IT services and hardware segments.
Driven by strong gains in strategic and managed services and hardware, IT services and hardware segment revenues rose year-over-year to $120 million. Strategic managed and professional services were $35 million in the quarter, up 15 percent in the same period a year ago, while hardware revenue was $83 million for the quarter, up 48 percent year-over-year. Likewise, strategic business revenues were $42 million (including $2 million of Fioptics revenue) for the quarter, up 10 percent compared to the same period a year ago.
Torbeck said that while Cincinnati Bell continues to see positive growth with its larger enterprise business customer, they are seeing some challenges in the smaller business market where cable competitor Time Warner Cable (NYSE: TWC) has been able to offer higher speed services in areas where the Fioptics network does not reach yet.
"The good news in this market we have excellent relationships with the enterprise customers and that plays such a big part in IT business and -- so we always see competition, but we've been very successful in marinating and growing our business with enterprise customers and we continue to do so," Torbeck said. "Where we do see pretty stiff competition is in with Time Warner's on the lower end some of the smaller companies where we don't have fiber already build out, they offer very competitive offers that the fact that we don't -- can't provide the speeds it puts us at disadvantage. It's really another reason why we're building out faster on fiber."
Overall company consolidated revenue for the third quarter was $328 million, up $17 million from the prior year.
Excluding its wireless assets, which it has sold to Verizon Wireless (NYSE: VZ), Cincinnati Bell has revised its total forecast for 2014 revenues to be $1.1 billion.
Shares of Cincinnati Bell were listed at $3.43, down 28 cents or 7.55 percent, in Wednesday morning trading on the Nasdaq stock exchange.
- see the earnings release
- see the earnings transcript (sub req.)
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This article was updated with further information about its earnings call from Cincinnati Bell on Nov. 6.