Cincinnati Bell 2013 Annual Report Download - page 83

Form 10-K Part I Cincinnati Bell Inc.
Part I
Item 1. Business
Overview and Strategy
With headquarters in Cincinnati, Ohio, Cincinnati Bell Inc. and its consolidated subsidiaries (“Cincinnati
Bell”, “we”, “our”, “us” or the “Company”) is a full-service regional provider of entertainment, data and voice
communications services over wireline and wireless networks, a provider of managed and professional
information technology services, and a reseller of information technology (“IT”) and telephony equipment. In
addition, enterprise customers across the United States rely on Cincinnati Bell Technology Solutions Inc.
(“CBTS”), a wholly-owned subsidiary, for efficient, scalable communications systems and end-to-end IT
solutions.
Our goal is to transform Cincinnati Bell into a fiber-based entertainment, communications and IT solutions
company with growing revenue, growing profits and significant cash flows. During 2013, we invested
approximately $123 million in our strategic products, generating an 18% increase in our strategic revenues.
Revenue from these high demand products totaled $370.6 during the year and offset the declines from our legacy
products by 10%.
Wireline strategic revenue totaled $252.5 million, up 22% compared to the prior year, primarily due to
growth in our Fioptics suite of products, which provides entertainment, high-speed internet and voice services
using a combination of fiber to the home and fiber to the node technology. Fioptics revenue totaled $100.8
million, up 48% over the prior year, as we achieved record high net activations for both our entertainment and
high-speed internet products. Strategic revenue from business customers was also up 8% in 2013 due to increased
demand for metro-ethernet and Multi-Protocol Label Switching (“MPLS”) products. The growth and demand for
our strategic products continues to increasingly mitigate revenue declines from our legacy products. In total,
Wireline revenue was down less than 1% in 2013, and we believe our strategic investments will result in full year
2014 Wireline revenue growth.
Our IT Services and Hardware segment revenue totaled $344.1 million, up 9% year over year. Strategic
managed and professional services revenue totaled $118.1 million, up 8% due to increased demand for virtual
data center products and staff augmentation resources. Telecom and IT equipment sales were up 9% year over
year, and remain an important value added product to our existing customer base that requires very little capital.
The Wireless segment continues to be challenged by increased competitive pressures from national carriers.
During the year, our revenues declined by 17% due to continued subscriber losses. We plan to continue to
manage the business for cash flow and profitability as we consider strategic alternatives.
The Company was also able to take advantage of a favorable interest rate environment by amending its
Corporate Credit Agreement to include a $540 million Tranche B Term Loan facility (“Tranche B Term Loan”)
with a 4.0% interest rate at December 31, 2013. The proceeds from the facility were used to redeem all of the
Company’s $500 million 8 1/4% Senior Notes due 2017 (“8 1/4% Senior Notes”) on October 15, 2013 at a
redemption price of 104.125%. It is expected that these refinancing activities will save approximately $20
million of interest payments in 2014.
On January 24, 2013, we completed the initial public offering (“IPO”) of CyrusOne Inc. (“CyrusOne”), a
former subsidiary which owns and operates our former data center colocation business. CyrusOne, which
conducts its data center business through CyrusOne LP, an operating partnership, is a full service provider of data
center colocation services to enterprise customers through its facilities with fully redundant power and cooling
solutions that are currently located in the Midwest, Texas, Arizona, London and Singapore. Cincinnati Bell is the
majority owner of CyrusOne (NASDAQ: CONE), a real estate investment trust (“REIT”), effectively owning
approximately 69% of the economic interests of CyrusOne through the ownership of its common stock and
partnership units of CyrusOne LP. However, effective January 24, 2013, we no longer have control over
CyrusOne’s operations and no longer consolidate CyrusOne in our consolidated financial statements. Our
ownership in CyrusOne is now accounted for as an equity method investment.
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Form 10-K