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Telecom services provider, Cincinnati Bell Inc. (CBB - Analyst Report) reported third-quarter 2013 adjusted earnings of 3 cents per share, beating the Zacks Consensus Estimate of loss per share of one cent. The results also surpassed the year-ago earrings of 1 cent per share.

Revenues declined 16.0% year over year to $310.8 million but surpassed the Zacks Consensus Estimate of $305.0 million.

Adjusted EBITDA decreased 20.5% year over year to $103.3 million in the reported quarter. EBITDA margin was 33% versus 35% in the prior-year quarter.

Segment Results

Wireline revenueswere $181 million versus $182 million in the year-ago quarter.  The decline was due to a drop of 11%, 10% and 5% in Other, Voice and Long distance revenues, respectively. This was partially offset by 55% and 3% growth in Entertainment and Data revenues, respectively.

Total local access lines were 541,200 at the end of the reported quarter and comprised 485,300 in-territory lines and 55,900 out-of-territory lines.

Total High-speed Internet customers for the quarter were 265,600 including 191,300 DSL broadband subscribers and 74,300 Fioptics users.

Cincinnati Bell continues to expand the availability of its Fioptics fiber-to-the-home products suite, which provides entertainment, high-speed Internet and voice services. Fioptics entertainment subscribers reached 74,300 at the end of the third quarter, up from 52,300 in the year-ago quarter.

Wireless revenues declined 17% year over year to $49.1 million due to lower service (down 18%) and equipment (9%) revenues. The company exited the third quarter with 355,200 wireless customers, including 209,400 post-paid and 145,800 prepaid customers.

IT Services and Hardware revenues climbed 12% year over year to $87.5 million while revenues from Managed and Professional services were up 9% year over year. Telecom and IT equipment distribution revenues grew 14%.

Liquidity

Cincinnati Bell ended the quarter with net debt of $2.20 billion compared with $2.67 billion at the end of 2012. The company incurred capital expenditure of $46.0 million during the quarter.

Outlook

For full-year 2013, Cincinnati Bell expects revenues and adjusted EBITDA of approximately $1.2 billion and $400–$410 million, respectively.

Our Take

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 for the company based on its strong Fioptics business. New projects and the spin-off of CyrusOne into a separate entity are expected to work in favor of the company and aid earnings growth in the future.

Other Stocks

Cincinnati Bell, which operates with other carriers like Frontier Communications Corp. (FTR - Analyst Report) and CenturyLink Inc. (CTL - Analyst Report) and Windstream Corporation (WIN - Analyst Report), carries a Zacks Rank #3 (Hold).

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