Telecom services provider Cincinnati Bell Inc. ( CBB - Analyst Report ) is entering into a new business arena that allows it to offer energy services to its residential customers through its new subsidiary Cincinnati Bell Energy.

Cincinnati Bell inked a partnership deal with Connecticut-based renewable energy supplier, Viridian Energy, to provide electric services at discounted energy rates unlike local utilities’ companies. The energy rate will be 30% less than Duke Energy Corporation’s ( DUK - Analyst Report ) regulated price of 8.24 cents per kw hour and offered initially in the southwest territory.

The retail energy market is growing day-by-day. After entering the managed hosting and cloud services business, the telecom industry is now moving to the green energy solution business. The combination of telecom and energy services comes as the biggest opportunity for both companies.

Cincinnati Bell is the first telecom provider to offer energy services to its customers. The company has a well known brand and reputation for high quality service. Cincinnati Bell provides energy services along with the bundled wireline, wireless, data center colocation and managed IT solutions.

The company’s Data Center Colocation and IT Services and Hardware segments are doing well while Wireline and Wireless segments are the underperformers. Last year, Cincinnati Bell achieved its first step in becoming the preferred collocation provider to Fortune 1000 by acquiring the data center operator CyrusOne.

We believe Cincinnati Bell remains committed to expand its data center operation and Fioptics platform. Increased smartphone adoptions coupled with 3G services continue to boost data revenue per user.

However, we remain concerned about Cincinnati Bell’s ongoing expansion into new markets and persistent erosion in local access lines. In addition, substantial investments made by the company to keep pace with updated technologies of Tier 1 companies such as AT&T Inc. ( T - Analyst Report ) and Verizon Communications ( VZ - Analyst Report ) as well as cable operators such as Time Warner Cable Inc. ( TWC - Analyst Report ) may limit the upside potential of the stock.

We are currently maintaining our long-term Neutral rating on Cincinnati Bell. The stock retains the Zacks #3 (Hold) Rank.