Cincinnati Bell's Q4 wireline revenue gets boost from data center, fiber-based broadband

Cincinnati Bell's (NYSE: CBB) wireline story in the fourth quarter was once again buoyed by growth in its data center business and fiber-based Fioptics service.

The ILEC reported overall revenue of $365 million, versus $363 million in the fourth quarter of 2010, while operating income declined to $9 million from $65 million in the fourth quarter of 2010, due primarily to a $50 million goodwill impairment loss in the fourth quarter.

For the year, company revenue was $1.5 billion, exceeding guidance of $1.4 billion.

"In terms of both revenue and adjusted EBITDA, this has been the company's best year since 2003, and we are particularly pleased with the growth momentum of our data center business and the strong and stable performance of our legacy communications business," said Jack Cassidy, president and chief executive officer of Cincinnati Bell, in the company's earnings release.

Data Center Colocation continued to be the shining star in Cincinnati Bell's service portfolio, generating revenue of $49 million, a 21 percent increase over the last quarter of 2010. To keep up with demand, the service provider's data center unit CyrusOne added 27,000 square feet of data center space and sold 43,000 square feet, increasing the segment's utilization to 88 percent.

In 2011, Cincinnati Bell built out 124,000 square feet of additional data center space, increasing total capacity to 763,000 square feet, and sold 110,000 square feet. The service provider announced this week that it's now considering structural, capital and financial alternatives for the data center business.

Although Cincinnati Bell continues to see traditional voice revenue losses, the increasing demand for its Fioptics product suite helped drive up wireline revenues to $180 million, narrowing losses to one percent year over year. These results enabled the wireline division to achieve adjusted EBITDA margins of 49 percent in both the full year and the fourth quarter of 2011, comparable to the full year in 2010.

During the quarter, the wireline segment passed 19,000 additional homes and businesses with its Fioptics product suite, bringing the total number of premises passed with the service to 134,000. This year the service provider has set a goal of passing another 40,000 new units.

As expected, the growth of Fioptics helped offset its loss of 11,000 traditional DSL subscribers in the quarter. It added 2,000 new Fioptics entertainment subscribers in the quarter, or 12,000 during the year, driving the total base to 40,000 customers. At the end of 2011, Cincinnati Bell had 257,000 high-speed Internet subscribers.

On a yearly basis, wireline revenue declined only one percent to $732 million, while operating income and adjusted EBITDA both decreased by 2 percent to $229 million and $355 million, respectively.

Looking towards the rest of 2012, the telco has forecast $1.5 billion in overall revenue and about $530 million in adjusted EBITDA.February 10, 2012 — 10:57am ET | By Sean Buckley

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