Cincinnati Bell's Fox: FTTH is helping us reduce churn, drive up broadband adds

Cincinnati Bell

Cincinnati Bell says that in areas where it currently offers FTTH services, broadband subscriber penetration is rising as consumers can get a broader range of speeds not available on traditional copper-based DSL.

Leigh Fox, president and COO of Cincinnati Bell, told investors during the telco's first-quarter earnings call that because Fioptics FTTH is driving up subscriber numbers and reducing churn, it will continue to build out its network.

Leigh Fox, CEO of Cincinnati Bell
Leigh Fox

“We believe in fiber and believe that fiber is winning,” Fox said. “Honestly, where we have fiber to the home, our penetration rates on broadband are higher and our churn rates are lower.”

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Fioptics is clearly resonating with Cincinnati Bell’s customers.

As of the end of the quarter, Cincinnati Bell had a total of 207,300 Fioptics customers, up from 197,600 a year ago. However, the telco only had 100,100 DSL subscribers, down from 105,600.

Fox said that the experience it gained in installing homes with fiber makes it confident that it can reach more residents with FTTH service.

“Ultimately, we can hit more and more of our footprint because we have gotten better and better at this and the strategy is winning,” Fox said. “As long it still makes sense and we continue to win and we win at rates and capital investment cycles are within reasonable returns on investment why slow down?”

Fiber resonates

Cincinnati Bell continues to be aggressive with its FTTH expansion strategy, passing over 100,000 homes passed with fiber in 2016.

In the areas where it has installed fiber, Cincinnati Bell is seeing positive penetration rates for video, data and voice: 26% for video, 38% for internet and voice is at 18%.

Andy Kaiser, CFO of Cincinnati Bell said that penetration rates in the fiber markets continues to rise every year after it installs fiber in a new part of its territory.

“What we see over the course of several years is penetration continues to grow in a very strong manner from year to year,” Kaiser said. “From a high speed internet perspective, when we first roll past addresses were at about 27% and that will grow by the fourth year at 49%.”

Kaiser added that “we anticipate we will continue to see year over year penetration expansion as the product is in market.”

Entertainment, IT services show mixed results

Similar to earlier quarters, Cincinnati Bell continued to see revenue strength in its entertainment and communications sector, one where it is seeing growing uptick in Fioptics FTTH subscribers.

However, its business customers' migration from hardware to cloud-based services has continued to take a toll on its IT services and hardware revenues.

Here’s a breakdown of Cincinnati Bell’s key metrics:

Entertainment and Communications: Revenue was $195 million, up $5 million compared to the prior year. Fioptics was once again the star in this portfolio as revenue rose 26% year-over-year to $74 million.

From a product perspective, data and video were the top performers. Data service revenue was $87.6 million, up year-over-year from $85.2 million, while video was $36 million, an increase over $29 million in the same period a year ago.

However, voice revenues were $67.7 million, down year-over-year from $70.2 million.

Business and wholesale: Strategic business and wholesale revenue totaled $51 million for the quarter, up $4 million year-over-year.

IT Services and Hardware: Revenue was $86 million, down $16 million compared to the prior year. Strategic revenue was $44 million in the quarter, down from $48 million in the prior year. Telecom and IT hardware revenue was $36 million for the quarter, compared to $48 million in the first quarter of 2016.

Cloud services revenue, for instance, were $13.7 million, up from $10.2 million in the same period a year ago.

Financials: Consolidated revenue for the first quarter of 2017 was $278 million, down 4% from the prior year primarily due to the decline of telecom and IT hardware sales. Restructuring and severance related charges associated with cost-out initiatives resulted in an operating loss of $5 million for the quarter. 

For the year 2017, Cincinnati Bell has forecast $1.2 billion in total revenues.