Cincinnati Bell 2009 Annual Report Download - page 4

economy, which drove a 7% decline to the Technology
Solutions total revenue compared to 2008, but we
believe this revenue will return as the economy
improves over the next several years. Adjusted EBITDA3
of $43 million and operating income of $22 million
both increased over 20% from a year ago as a result of
the revenue growth in the high-margin data center
operations.
200720062005 2008 2009
Technology Solutions
Adjusted EBITDA
(in millions)
$43
$35
$27
$20
$16
In addition to keeping pace with demand for data
center space, we took important steps in the area of data
center virtualization during 2009. We qualified to
participate as a service provider and reseller of the
Vblock™ ecosystem, which is a virtual data center
offering that combines the best-of-breed virtualization
software from VMware, unified networking, security,
and computing from Cisco, and storage, security and
management technologies from EMC. This package is
an element of the recently announced Virtual
Computing Environment coalition formed by Cisco
and EMC, together with VMware. Now we can help
customers accelerate their plans to implement a private
cloud infrastructure based on industry-leading
technology and take advantage of the critical IT
efficiencies this provides. This is an important step for
the industry and for us, and we believe virtual data
centers, which provide a more efficient and cost-
effective means of computing for customers, will be one
of the next evolutionary steps for the data center
operations industry.
The outsourced data center operations industry is in its
nascency, as only 10% of companies have outsourced
their data center operations. We believe that this
percentage will increase significantly over time given the
cost and capital savings that can be obtained by
companies from outsourcing their data center
operations to an industry expert such as Cincinnati Bell.
We believe our right to win in this space comes from
our history of reliably delivering diverse carrier-grade
network solutions for businesses of all sizes, and the
success and expertise displayed with our organically
grown 271,000 square feet of data center space. We
intend to commit significant resources to expand our
data center operations, including growth of our existing
operations, greenfield construction of new data center
sites in geographic areas outside our current footprint
including international sites, and acquisitions.
Wireless
Focus on Smartphones Sustains High Data Revenues
Particularly in these difficult economic times, we
understand that it is critical to provide the best value for
the customer. To that end, in 2009 we introduced the
Why-Pay-For-Two campaign, which provides a free
smartphone data plan for a customer that uses our DSL
high-speed internet service. We saw strong interest in
this new bundle and other smartphone-oriented
promotions, which almost doubled our smartphone
activations in 2009 and resulted in 83,000 smartphone
subscribers at the end of 2009. These smartphone
subscribers drove a 25% increase in our average revenue
per user (ARPU) for data plans to $10.00 per month for
2009, and allowed our total monthly ARPU to remain
steady compared to 2008 despite a decline in voice
minutes of use. Although we believe these devices have
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