Cincinnati Bell Inc. (CBB): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
We believe that Cincinnati Bell is poised to deliver stable financial performance in the months ahead, owing to its investment in strategic products, high speed Internet and strong managed service demand. The company's Wireline segment stands as the prime growth driver with strength in the Fioptics business from continuous fiber deployment. Further, the acquisition of CyrusOne will support high demand for data center colocation service. However, erosion in local access lines due to fierce competition poses a major roadblock in the company's growth path. Cincinnati Bell is also winding down its wireless operation amid constant subscriber loss to national carriers, thus removing a recurring revenue stream. Hence, we expect the stock to perform on par with the broader market and adhere to our Neutral recommendation.

Overview:

Based in Cincinnati, OH, Cincinnati Bell Inc. is a full-service regional provider of data and voice communications services over wireline and wireless networks, a full-service provider of data center colocation and related managed services, and a reseller of information technology (IT) and telephony equipment. The company provides telecommunications service to businesses and consumers in the Greater Cincinnati and Dayton areas primarily on its owned wireline and wireless networks. Cincinnati Bell also provides business customers with outsourced data center colocation operations and related managed services in world class, state-of-the-art data center facilities, primarily located in Cincinnati, Houston, Dallas and Austin.

The company has three operating segments: Wireline, Wireless, and IT Services and Hardware.

Wireline (accounted for 57.7% of 2013 revenue): This segment provides local voice, data, long-distance, Voice-over-Internet Protocol (VoIP) and other related services to customers primarily in Ohio, northern Kentucky, and southeastern Indiana. Wireline voice and data services are offered through the company's ILEC subsidiary Cincinnati Bell Telephone Company LLC. The company also offers expanded voice and data services through its other subsidiary Cincinnati Bell Extended Territories LLC in Dayton and Mason, Ohio.

Wireless (16%): The segment offers advanced digital voice and data communications services through the operation of a Global System for Mobile Communications/General Packet Radio Service (GSM) network with a 3G Universal Mobile Telecommunications System (3G) network overlay. Cincinnati Bell provides services in the company's licensed service territory, which includes Greater Cincinnati and Dayton, Ohio, and areas of northern Kentucky and southeastern Indiana.

IT Services and Hardware (26.1%): This segment provides a full range of managed IT solutions, including managed infrastructure services, IT and telephony equipment sales, and professional IT staffing services. These services and products are provided in several states through the company's subsidiaries, Cincinnati Bell Technology Solutions Inc. (CBTS), CBTS Canada Inc. and CBTS Software LLC.

In Jan 2013, Cincinnati Bell separated its Data Center Colocation segment through an initial public offering of CyrusOne Inc.

Data Center Colocation (0.2%): From Jan 2013, CyrusOne Inc. Cincinnati Bell's former data center business started operating as a separate entity under the symbol CONE. An operating partnership CyrusOne LP will manage the data center business. Although Cincinnati Bell owns approximately 69% of the interests of CyrusOne via its ownership of common shares and partnership units of CyrusOne L.P, the former exhibits no control over the operations of the newly formed company.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: CBB , GSM , IT

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