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Cincinnati Bell Loss Widens in Q4

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Telecom services provider Cincinnati Bell Inc. (CBB - Free Report) reported fourth-quarter 2013 adjusted loss of five cents per share, missing the Zacks Consensus Estimate of a profit of a penny. The results also deteriorated from the year-ago loss of a cent.

In 2013, adjusted earnings per share came at 2 cents, down from 11 cents in 2012.

Revenues declined 18.0% year over year to $308.4 million but surpassed the Zacks Consensus Estimate of $306.0 million. Revenues for the year deteriorated 14.7% year over year to $1,256.9 million.

Adjusted EBITDA (non-GAAP) decreased 28.7% year over year to $90.0 million in the reported quarter. EBITDA margin was 29%, down 500 basis points year over year.

In 2013, adjusted EBITDA (non-GAAP) was $415.6 million, down 1.9% year over year.  EBITDA margin stood at was 22.3%, down 300 basis points year over year.

The year 2013 was transformational for the company as it successfully listed CyrusOne and ended up with more than $100 million in Fioptics revenues. These positives along with Fioptics customer growth pushed the stock price higher by 6.15% on Thursday trade on NYSE, despite the weak results.

Segment Results

Wireline revenue remained flat year over year at $182.1 million owing to 61% growth in entertainment and 4.0% growth in wireline data revenues. The improvement was partially offset by 25%, 11% and 4% declines respectively in other, local service voice and VoIP revenues.

Total local access lines declined 7.5% year over year to 530,700 at the end of the reported quarter and comprised 476,000 in-territory lines and 54,700 out-of-territory lines.

The company added 9,000 high-speed Internet customers (including Fioptics and DSL) during the reported quarter, bringing its total subscriber base to 268,400 (including 188,500 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. Fioptics entertainment subscribers reached 74,200 customers at the end of the fourth quarter from 55,100 in the year-ago quarter.

Wireless revenues declined 17.0% year over year to $47.4 million due to lower service revenues (down 18%) partially offset by Equipment revenues (up 8%).

The company exited the fourth quarter with 339,700 wireless customers, including 197,400 and 142,300 post-paid and prepaid customers, respectively. This compares unfavorably with 397,800 wireless customers in the year-ago quarter and 355,200 in the last quarter.

IT Services and Hardware revenues declined 1% year over year to $86.1 million. Revenues from Managed and Professional services increased 20% while Telecom and IT equipment distribution revenues declined 10%.

CyrusOne Results

CyrusOne reported revenues of $72.0 million in fourth quarter 2013 and $264.0 million for the full year. Cincinnati Bell continues to own 69% of CyrusOne.


Cincinnati Bell ended 2013 with cash and cash equivalents of $4.6 million, down from $23.6 million in the year-ago quarter. Net debt decreased to $2.26 billion from $2.67 billion at the end of 2012.

The company incurred free cash flow of ($55.3) million in 2013 compared with $154.1 million in 2012.


For fiscal 2014, Cincinnati Bell expects revenue and adjusted EBITDA of approximately $1.2 billion and $383 million (plus or minus 2%), respectively.

For fiscal 2014, CyrusOne expects revenues in the range of $305–$315 million and adjusted EBITDA in the range of $160–$165 million.

Based on the continued demand for its strategic products, the company expects to generate positive free cash flow in 2014.

Our Take

Cincinnati Bell’s Wireline segment remains its 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 earnings growth in the future. The company currently carries a Zacks Rank #2 (Buy).

Other Stocks

Other stocks worth considering within this sector are BT Group plc (BT - Free Report) , Level 3 Communications Inc. and Telecom Italia S.p.A (TI - Free Report) . All these stocks currently carry the same Zacks Rank as Cincinnati Bell.

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