Wireline Biz Holds Key to Cincinnati Bell's Growth - Analyst Blog


On Jul 4, 2014, we issued an updated research report on regional communication service provider Cincinnati Bell Inc. ( CBB ). The carrier is expected to deliver stable financial performance in the months ahead, owing to its investment in strategic products, high speed Internet and strong managed service demand.

However, erosion in local access lines due to fierce competition and the winding up of its wireless operation could affect the company's performance. Cincinnati Bell currently carries a Zacks Rank #3 (Hold).

Cincinnati Bell expects to increase its wireline revenues based on a well-designed marketing program, popular brand value and a strong reputation of offering high-quality service. The company's investments in Fioptics products, which provide entertainment, high-speed Internet, and traditional voice via fiber line to the home, are on an uptrend.

Cincinnati Bell continues to deploy fiber network, which is expected to provide high quality video and internet service to its residential customers. The company also intends to continue investing in Fioptics network and expects to spend $75-80 million in expansion. These investments enrich the customer experience, thus improving ARPU and churn in return.

Cincinnati Bell, through its team of efficient and highly skilled IT professionals, offers a wide array of services to clients at competitive rates and is foreseeing increased demand for our virtual data center and staff augmentation services. Demand for Managed & Professional services remains strong and is expected to enhance the company's results. Further, the carrier continues to scrutinize all options to monetize its investments in CyrusOne and enhance shareholder returns.

On the flip side, Cincinnati Bell continues to experience erosion in high margin local access lines. Like other wireline carriers, Cincinnati Bell is confronting competitive threats from local cable operators like Time Warner Cable Inc. ( TWC ), who aggressively deploy local phone service in addition to television. This has already resulted in the loss of major business customers at the company.

The carrier is winding up its wireless operations, which remains highly challenged by competition from large national carriers. The company is lagging national competitors in the construction of 4G network as well as in terms of their speeds, which leads to increased customer churn. Apart from removing a recurring revenue stream, the closure will also impact the company's 2014 cash balance.

Key Picks from the Sector

Better-ranked stocks like KT Corp. ( KT ) and BT Group Plc. ( BT ) with a Zacks Rank #1 (Strong Buy) look attractive in the short term.

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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 , Business , Stocks

Referenced Stocks: CBB , BT , KT , TWC



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