Telecom services provider
Cincinnati Bell Inc.
) reported third-quarter 2012 adjusted earnings of one cent per
share, missing the Zacks Consensus Estimate of 5 cents by 80.0%.
Earnings also declined 4 cents from the year-ago quarter.
Revenue edged down 0.2% year over year to $368.2 million and
missed the Zacks Consensus Estimate of $370 million. The
underperformance was due to decline in Wireline and Wireless
revenue that was partly compensated by growth in Data Center
Colocation and IT Services and Hardware segments.
Adjusted EBITDA declined 2.2% year over year to $130 million
in the reported quarter.
Wireline revenue dipped 0.2% year over year to $182.3 million.
Lower voice (down 9%) and other (down 12%) revenues were
partially offset by higher revenues from entertainment (up 36%)
and data (up 5%).
Total local access lines declined 7.8% year over year to
585,800 at the end of the reported quarter and comprised 521,800
in-territory lines and 64,000 out-of-territory lines.
The company added about 2,500 high-speed Internet customers
(including Fioptics and DSL) during the reported quarter,
bringing its total subscriber base to 260,000 (including 207,800
DSL broadband subscribers).
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 4,700 Fioptics entertainment subscribers to reach 51,100
customers at the end of the third quarter.
Wireless revenues declined 3.7% year over year to $59.5
million due to lower equipment (down 22%) and service (down 12%)
The company exited the third quarter with 415,600 wireless
customers, including 270,700 and 144,900 post-paid and prepaid
customers, respectively. This compares unfavorably with 471,800
wireless customers in the year-ago quarter and 430,100 in the
Revenues from Data Center Colocation climbed 5% year over year
to $56.7 million. Data center utilization was 78% on 896,000
square feet of data center space in the reported quarter as
opposed to 86% on 736,000 square feet in the year-ago
Cincinnati Bell received a favorable verdict on its private
letter ruling requests with the Internal Revenue Service
regarding CyrusOne's qualification as a real estate investment
IT Services and Hardware revenues grew 1.3% year over year to
$78.3 million. Revenues from Managed and Professional services
increased 5% while Telecom and IT equipment distribution revenues
nudged down 1%.
Cincinnati Bell ended the third quarter with cash and cash
equivalents of $7.7 million, drastically down from $90.7 million
at the end of the year-ago quarter. Net debt increased to $2.57
billion from $2.55 billion at the end of the last quarter.
The company incurred a negative free cash flow of $17.0
million compared with a positive $5 million at the end of the
previous year quarter.
For fiscal 2012, Cincinnati Bell continues to expect revenue
and adjusted EBITDA of approximately $1.5 billion and $530
Cincinnati Bell filed with U.S. regulators to spin off its
data center business, CyrusOne, through an IPO. The company would
use the proceeds to pay off CyrusOne's debt. Other details of the
spin-off plans have not been disclosed.
The company is expected to benefit from its expanding data
center business and Fioptics products that are considered key
catalysts for the company's growth in the long term. However,
persistent erosion in local access lines and substantial
investments undertaken to keep pace with updated technologies of
Tier 1 companies - such as
Verizon Communications Inc.
) - will limit the upside potential of the stock in the short
We currently maintain a long-term Neutral recommendation on
Cincinnati Bell Inc. However, it holds a Zacks #4 Rank, implying
a short-term Sell rating.
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