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Is a High Churn Rate in the Cards for Cincinnati Bell (CBB)?

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Cincinnati Bell Inc. CBB recently informed customers that that it is on the verge of losing FOX cable channels in 2020 due to an ongoing contract conflict between the cable company and Fox Corporation FOX. The failure to ink a new contract, which expires on Dec 31, is likely to give a massive blow to the local cable provider as it may witness a substantial churn rate if the channel rate negotiation ultimately falls flat.

Per media reports, the rates charged by Fox have surged more than 200% since 2009. The New York-based media company is currently seeking to hike prices by a hefty 20%, which reflects 10X the existing rate of inflation. The regional provider of data and voice communications services voiced concerns that there are more than 700 mid-sized and small cable operators that are negotiating with Fox on channel rates.

In order to seek support against this unfair pricing structure and consumer-targeted propaganda campaigns, the Ohio-based cable provider has resorted to National Cable Television Cooperative (“NCTC”). However, Fox allegedly accused NCTC for prioritizing its business objectives over customer preferences, which has further worsened the scenario. Without any immediate resolution, the Fioptics TV customers are set to lose out on a number of channels, including Fox News and Fox Sports effective Jan 1, 2020.

Current Business Scenario

Cincinnati Bell’s efforts to evolve from a legacy copper-based telecommunications company to an IT firm with contemporary fiber assets, offering seamless network solutions to both consumer and business customers, are remarkable. Its strategic move to prioritize customer satisfaction, followed by the creation of job opportunities augurs well for the region’s economic development.

Notably, the company’s investment in fiber supports the growing IoT trend, which proliferates the usage of broadband connections, along with smart-home devices. Reinforced with the claim of future-proofing 50% of its network services, Cincinnati Bell is undergoing a drastic transformation to upgrade its network infrastructure to the next-gen fiber. This will support the burgeoning demand for data and accelerate 5G mobile-technology growth.

Cincinnati Bell has a long-term earnings growth expectation of 2%. Driven by diligent execution of its operations, the stock has rallied 34.7% against the industry’s decline of 25.8% in the past year.

Zacks Rank & Stocks to Consider

Cincinnati Bell currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader industry are The AES Corporation (AES - Free Report) and Alliant Energy Corporation LNT. While AES sports a Zacks Rank #1 (Strong Buy), Alliant Energy carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AES has a long-term earnings expectation of 9.1%.

Alliant Energy has a long-term earnings expectation of 5.5%.

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