Telecom services provider
Cincinnati Bell Inc.
) first quarter 2012 adjusted earnings of 6 cents per share came in
line with the Zacks Consensus Estimate. Adjusted earnings fell 2
cents from the year-ago quarter.
Revenue inched up 1% year over year to $362.8 million but was
below the Zacks Consensus Estimate of $365 million. The
year-over-year improvement was driven by growth in Data Center
Colocation and IT Services and Hardware. The rest of the segment
recorded declines in revenues.
Adjusted EBITDA grew 5.2% year over year to $138.8 million in
the reported quarter.
revenue dipped 1% year over year to $182.4 million. Lower voice
revenue (down 10%) was partially compensated by higher revenues
from entertainment (up 33%), data (up 7%) and long-distance and
VoIP revenues (up 4%).
Total local access lines declined 8.3% year over year to 608,600
at the end of the reported quarter, and comprised 541,600
in-territory lines and 67,000 out-of-territory lines.
The company lost about 1,000 high-speed Internet customers
(including Fioptics and DSL) during the reported quarter, bringing
the total subscriber base to 257,200 (including 214,400 DSL
Cincinnati Bell continues to expand the availability of its
Fioptics fiber-to-the-home product suite, which provides
entertainment, high-speed Internet and voice services. Wireline
added 3,100 Fioptics entertainment subscribers to reach 47,700
customers at the end of the first quarter.
revenues declined 11% year over year to $63.7 million due to lower
equipment (down 27%) and service (down 9%) revenues.
The company exited the first quarter with 446,000 wireless
customers, including 297,700 and 148,700 post-paid and prepaid
customers, respectively. This compares unfavorably with 504,000
wireless customers in the year-ago quarter and 459,000 in the last
quarter. Post-paid churn deteriorated slightly to 2.2% from 2.1% in
the year-ago quarter and prepaid churn also deteriorated to 6.4%
from 5.5%. Post-paid average revenue per user (ARPU) was $50.82 and
prepaid ARPU was $28.53 in the first quarter.
Data Center Colocation
climbed 21% year over year to $52.6 million aided by the
acquisition of CyrusOne.
Data center utilization was 85% on 806,000 square feet of data
center space in the reported quarter as opposed to 90% on 659,000
square feet in the year-ago quarter.
IT Services and Hardware
revenues grew 4% year over year to $73.2 million. Revenues from
Managed and Professional services increased 26% while Telecom and
IT equipment distribution revenues decreased 6%.
Cincinnati Bell ended first quarter with cash and cash
equivalents of $6.9 million. This was drastically down from $84
million in the year-ago quarter. Net debt increased to $2.52
billion from $2.46 billion in the last quarter.
The company incurred negative free cash flow of $62.5 million
compared with $10.8 million in the year-ago quarter.
For fiscal 2012, Cincinnati Bell expects revenue and adjusted
EBITDA of approximately $1.5 billion and $530 million,
We believe Cincinnati Bell remains committed towards expanding
its data center business and Fioptics products that are considered
key catalysts for the company's growth. In addition, increased
smartphone adoption as well as 3G and 4G services continue to boost
data revenue per user.
However, we remain concerned about Cincinnati Bell's ongoing
expansion into new markets and substantial investments undertaken
to keep pace with updated technologies of Tier 1 companies such as
Although persistent erosion in local access lines will limit the
upside potential of the stock, we expect an improvement in the long
We currently have a long-term Neutral recommendation on
Cincinnati Bell. The stock retains a Zacks #3 (Hold) Rank for the
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