Cincinnati Bell 2009 Annual Report Download - page 98

Other revenue increased $8.7 million in 2009 compared to 2008 primarily due to the introduction of the
Company’s Fioptics fiber-to-the-home suite of products, which includes entertainment and high-speed internet
services. As of December 31, 2009, the Company had 11,100 entertainment and 10,200 high-speed internet
Fioptics customers.
Costs and Expenses
In light of the severe economic downturn that occurred in 2009, the Company implemented several cost
reduction initiatives, which primarily affected the Wireline segment. These initiatives included significant
changes to its management pension and postretirement plans, which froze pension benefits for certain
management employees as well as phasing out the retiree healthcare plan for all management employees and
certain retirees in 10 years, suspending matching contributions to the Company’s defined contribution plan for
2009, outsourcing certain IT functions and headcount reductions. These initiatives reduced costs by
approximately $25 million in 2009, comprised of $14 million in cost of services and products and $11 million in
selling, general and administrative expenses.
Cost of services and products decreased by $11.0 million in 2009 compared to 2008. The decrease in cost of
services and products as a result of the initiatives described above, additional payroll cost decreases related to
initiatives implemented in 2008 and lower operating taxes of $3.4 million were partially offset by an increase in
network costs of $5.6 million, primarily to support the growth in VoIP, broadband and Fioptics services, and
additional pension expense of $7.2 million associated with pension asset losses.
Selling, general and administrative expenses decreased $8.6 million in 2009 versus the prior year. The
decrease resulting from the initiatives as discussed above and additional payroll cost decreases were partially
offset by an increase in pension expense of $3.9 million associated with pension asset losses and a $1.7 million
increase in bad debt expense.
Restructuring charges of $5.0 million for 2009 primarily resulted from the following:
•employee separation obligations of $10.5 million resulting from the Company’s determination of the need
for additional workforce reductions in order to align Wireline costs with expected reductions in future
revenue from access line losses;
•amortization of pension and postretirement special termination benefits of $2.1 million related to the 2007
and 2008 early retirement offers; and
•a curtailment gain of $7.6 million due to changes in the pension and postretirement plans announced in
February 2009.
Restructuring expenses for 2008 resulted from restructuring plans announced in 2007 and the first quarter of
2008 to reduce costs and increase operational efficiencies. See Note 3 to the Consolidated Financial Statements
for further information.
The operating tax settlement for 2008 of $10.2 million resulted from the Company’s resolution of a
contingent liability from prior years related to exposures on past regulatory filing positions.
2008 Compared to 2007
Revenue
Voice revenue decreased in 2008 compared to 2007 primarily as a result of a 7% decrease in access lines.
Access lines within the segment’s ILEC territory decreased by 63,500, or 8%, from 772,000 at December 31,
2007 to 708,500 at December 31, 2008. The Company partially offset its access line loss in its ILEC territory
with increased services to residential and business customers in its CLEC territory. The Company had
approximately 71,200 CLEC access lines at December 31, 2008, which was a 14% increase from December 31,
2007.
Data revenue increased $14.9 million in 2008 compared to 2007 primarily as a result of higher data
transport revenue and DSL revenue. Data transport revenues increased by $10.4 million in 2008 compared to
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