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Cincinnati Bell Retains '13 Guidance


Trades from $3

Telecom and technology service provider, Cincinnati Bell Inc. (CBB - Analyst Report) reaffirmed its financial projections for 2013. The company maintains a revenue projection of $1.2 billion and adjusted EBITDA estimate of approximately $390 million. This forecast excludes the results of its former data center segment.

We believe that Cincinnati Bell enjoys a comfortable market position owing to its distinguished brand name, attractively priced service bundles as well as proactive marketing and expansion strategies. Cincinnati’s Wireline segment remains the prime growth driver based on its strong Fioptics business. Taking up new projects and the spin-off of CyrusOne into a separate entity are expected to work in favor of the company and aid it in reaching its financial projection in 2013 and beyond.

Cincinnati Bell’s strategy of offering attractively priced service bundles, including customized blends of local and long-distance phone service, broadband Internet access, and strength in wireless operations will enable it to satiate the growing demand. With a well-designed marketing program, plus well-known brand and strong reputation for offering high-quality service, the company is likely to increase market share. The company operates a number of distribution channels with stores located at affordable areas to support the functions of the wireless and wireline segments. We also appreciate the company’s constant investments in growth opportunities along with consolidation of product offerings, systems and back office work.

However, Cincinnati Bell continues to experience erosion in local access lines, which can remain a deterrent to its growth goals. With Digital Subscriber Line (DSL) and cable modems gaining widespread acceptance, customers are deactivating extra phone lines that were used to access the Internet via dial-up modem. In addition, the shift toward wireless services and aggressive rollout of VoIP and long distance services by Tier-1 competitors such as AT&T Inc. (T - Analyst Report) and Verizon Communications Inc. (VZ - Analyst Report) in Cincinnati and Dayton have further contributed to access line erosion. Like other wireline carriers, Cincinnati Bell is confronting competitive threats from local cable operators such as Time Warner Cable Inc. (TWC - Analyst Report), which aggressively deploys local phone service in addition to television. This has already resulted in the loss of major business customers.

Cincinnati Bell currently holds a Zacks Rank #3 (Hold).