By purchasing Hawaiian Telcom and OnX, Cincinnati Bell's CEO says the company will be well-positioned to pursue new SD-WAN and Unified Communications as a Service (UCaaS) opportunities.
While offering SD-WAN could potentially create revenue cannibalization challenges for some service providers who have large MPLS customer bases, Cincinnati Bell sees it as an opportunity to capitalize on the broader footprint it will gain when it completes these two acquisitions.
Leigh Fox, president and CEO of Cincinnati Bell, told investors during its call announcing the Hawaiian Telcom and OnX deals that if had not made a move to expand its territory, the telco would have seen greater revenue growth issues.
“I think SD-WAN does in certain circumstances cannibalize revenue, but by us expanding into a much greater footprint there’s nothing but upside for us in that scenario,” Fox said. “If we were to stay stable and just sit in Cincinnati there would have been a longer-term risk of revenue compression as people come into the market with new products.”
“Businesses are going through the challenge today of what to take to the cloud and what to keep,” Fox said. “We’ve created a company that can help customers even greater than we do today with answering those challenges.”
Already, the service provider is finding that its SD-WAN vision is resonating with customers.
The service provider recently won a deal to equip Major League Baseball's Cincinnati Reds with its SD-WAN and network as a service (NaaS) offerings as a way to help player scouts evaluate new talent, for example.
Joe Putnick, managing director of new solution design for CBTS, told FierceTelecom in a previous interview that it is “installing close to 30 sites a month” with SD-WAN, adding that the number continues to rise.
Besides SD-WAN, Cincinnati Bell is also seeing continued growth with its UCaaS services line, a factor that was seen in its first quarter earnings.
During the first quarter, Cincinnati Bell reported that Telecom & IT hardware revenue was $86 million, down $16 million from Q1 2016. The service provider said the decline reflects customers’ shift to cloud services like Unified Communications as a Service (UcaaS).
Cincinnati Bell has $80 million of UCaaS revenue that’s growing at mid-teens percentages every year.
Fox said OnX, which has mainly focused on providing storage and other infrastructure solutions, is very complementary to Cincinnati Bell’s SD-WAN and UCaaS offerings.
“Since the Cyrus One spinoff, we have been focused on the front end infrastructure or managing the voice side,” Fox said. “UcaaS has become a big product of ours and we’re probably a bit ahead on developing software-defined types of solutions, but they bring expertise on the backend like storage, server, and data center.”