Cincinnati Bell 2007 Annual Report Download - page 101

also began partnering in 2007 with DirecTV©to offer satellite programming to Cincinnati Bell customers at
discounted prices. The Company receives a commission for each subscriber, but is not involved in the delivery of
the satellite television service. At December 31, 2007, the Company had 15,000 customers that were subscribers
to DirecTV©. The Lebanon acquisition and DirecTV©offer mark the Company’s first foray into the
entertainment business.
The Company also signed a definitive agreement to purchase eGIX for approximately $18.0 million and
contingent consideration up to $5.2 million. eGIX is located in Carmel, Indiana and provides advanced data and
voice services to businesses throughout the Midwest. In February 2008, the Company completed this acquisition.
Defend the core franchise against increasing competition
In its traditional operating area, the Company defended its core franchise through bundling, adding 11,000
net subscribers to its Custom ConnectionsSM “Super Bundle” which offers local, long distance, wireless, internet
access, and the Company’s value-added service package, Custom Connections®, at a price lower than the amount
the customer would pay for the services individually. The Company finished the year with approximately
180,000 in-territory Super Bundle subscribers, 7% more than at the end of 2006. Total access lines declined by
6% versus 2006, in line with Company expectations given wireless substitution and other competitive factors.
The Company believes that its Super Bundle customers are less likely to disconnect existing services and change
services to a competitor.
Reduce indebtedness
The Company’s total indebtedness was $2,009.7 million at December 31, 2007 compared to $2,073.2
million at December 31, 2006. In 2007, the Company repaid $184.0 million of the Tranche B Term Loan using
proceeds of $75.0 million from borrowings under the accounts receivables securitization facility (“receivables
facility”) and the remainder from available cash. The Company expects interest savings to be approximately
1% per annum on the $75.0 million borrowed under the receivables facility as compared to interest that would
have been incurred under the Tranche B Term Loan. The Company also purchased and retired $26.4 million of
the 7
1
⁄ 4 % Senior Notes due 2013 and $5.0 million of 8
3
⁄ 8 % Senior Subordinated Notes due 2014. The Company
had borrowings of $55.0 million on its Corporate credit facility at December 31, 2007 to fund short-term working
capital needs.
Results of Operations
Consolidated Overview
The financial results for 2007, 2006, and 2005 referred to in this discussion should be read in conjunction
with the Consolidated Statements of Operations and Note 15 to the Consolidated Financial Statements.
2007 Compared to 2006
Consolidated revenue totaled $1,348.6 million in 2007, an increase of $78.5 million, compared to $1,270.1
million in 2006. The increase was primarily due to the following:
•$41.7 million higher revenues in the Technology Solutions segment primarily due to increased data center
and managed services revenue and telecom and IT equipment revenue; and
•$32.5 million higher revenues in the Wireless segment primarily due to increased postpaid service revenue
from additional subscribers.
Operating income for 2007 was $282.4 million, a decrease of $30.1 million compared to 2006. The decrease
was primarily due to the following:
•$39.3 million decrease in Wireline segment operating income primarily due to 2007 restructuring costs;
•$14.1 million increase in Wireless segment operating income due to higher postpaid revenue partially
offset by higher network costs, selling, general and administrative expenses and depreciation; and
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Form 10-K