Cincinnati Bell 2012 Annual Report Download - page 125

Form 10-K Part II Cincinnati Bell Inc.
Demand for IT hardware is cyclical in nature. That is, in periods of fiscal restraint, a customer may defer
these capital purchases and, instead, use its existing equipment for a longer period of time. As such, IT and
telephony equipment sales in 2013 are somewhat dependent on the business economy and outlook in 2013.
In 2013, we plan to integrate our IT Services and Hardware sales, service, marketing and back office
functions into our Wireline business markets operations. We expect the integration of these operations to reduce
costs, improve technical and customer services, and drive back-office efficiencies.
Data Center Colocation
In connection with the formation of CyrusOne, its debt issuance and IPO, CyrusOne and all its subsidiaries
were released from their guarantees of our 8
3
⁄ 8 % Senior Notes due 2020, 8
3
⁄ 4 % Senior Subordinated Notes due
2018, and 8
1
⁄ 4 % Senior Notes due 2017. On January 24, 2013, we completed the IPO of CyrusOne, which owns
and operates our former Data Center Colocation business. We currently own approximately 1.9 million shares, or
8.6%, of CyrusOne’s common stock and are a limited partner in CyrusOne LP, owning approximately
42.6 million, or 66%, of its partnership units. CyrusOne LP units are exchangeable into common stock of
CyrusOne on a one-to-one basis, or cash at the fair value of a share of CyrusOne common stock, at the option of
CyrusOne, commencing on January 17, 2014.
Although we effectively own approximately 69% of the economic interests of CyrusOne through our
ownership of its common stock and partnership units of CyrusOne LP, we no longer control its operations as we
are a limited partner in CyrusOne LP, and own less than 10% of CyrusOne’s common stock. Upon completion of
the IPO, we deconsolidated CyrusOne’s assets and liabilities and recognized our investment in CyrusOne’s
common stock as an available-for-sale security on our balance sheet. Any fair value changes due to CyrusOne’s
stock price will be recognized in other comprehensive income. In addition, our investment in CyrusOne LP was
recorded as an equity method investment, and we will recognize our share of CyrusOne LP’s net income as non-
operating income.
In 2012, CyrusOne experienced strong demand for data center colocation services, and we expect this trend
to continue for the foreseeable future. CyrusOne plans to continue to expand its data center capacity in 2013.
It is management’s intent to sell down the Company’s interests in CyrusOne over time and use such
proceeds to further de-leverage the Company. As of January 24, 2013, the Company’s tax basis in CyrusOne was
approximately $600 million.
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Form 10-K