Cincinnati Bell 2011 Annual Report Download - page 167

Form 10-K Part II Cincinnati Bell Inc.
promotional pricing to attract new customers. We expect competition for wireless customers to continue to be
intense in 2012. These factors will likely lead to further subscriber losses in 2012.
Wireless postpaid revenue in the future is likely to be affected by data ARPU increases as more customers
begin using data services and smartphones. Wireless data ARPU has increased from $10.00 in 2009 to $11.69 in
2010 and to $14.54 in 2011. Given the increasing smartphone subscribers, we expect our data ARPU to further
increase in 2012. However, higher data revenues will likely be offset by lower voice revenue from lower usage.
Data Center Colocation
Data Center Colocation is a growth industry due to the increased need for cost-efficient facilities to run
IT-intensive applications to support internet-based services, including cloud computing, hosted software
solutions, and software-as-a-service applications. We expect strong growth in data center revenues in 2012 and
beyond. We expect gross margins to compress in 2012 as we incur start-up costs related to new locations and
invest in additional human resources to support the growth of this business.
In 2012, the Company’s board of directors authorized management to pursue the evaluation of structural,
capital and financial alternatives for its growing Data Center business. Management will consider options that
may include, among others, operating the Data Center business under the current structure with no changes, a
partial separation through a sale, initial public offering, or other transaction, or, depending on the value to
shareholders, a full separation. The evaluation of these alternatives will include an assessment of the structure
that will optimize shareholder value while ultimately leaving the Company with an appropriate level of debt.
This evaluation is expected to take 6 to 12 months.
IT Services and Hardware
In 2010 and 2011, demand for IT equipment was strong compared to the weak demand in prior years. These
customer purchases generally represent large capital purchases that are, to some extent, discretionary and
cyclical. That is, in periods of fiscal restraint, a customer may defer these capital purchases for IT and telephony
equipment and, instead, use its existing equipment for a longer period of time. As such, IT and telephony
equipment sales in 2012 are somewhat dependent on the business economy and outlook in 2012.
Growth in managed services and professional services relates to the level of our investment in these
services. Investment in this segment has been limited as capital has been deployed to support other business
initiatives, such as expansion of our data center business and Fioptics service territory. Therefore, growth is this
segment is expected to be limited in 2012.
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Form 10-K