Bundles strengthen post-Broadwing Cincinnati Bell

In its first full quarter since it sold the assets of Broadwing Communications and reclaimed its former name, Cincinnati Bell focused on bundled service to boost revenue, retain customers and stanch access-line erosion, the company said in an earnings conference call yesterday.

A trend in customers ordering more than one service from Cincinnati Bell helped raise the company’s monthly revenue per household 2% in the third quarter to $74.

Bundles have also helped slow access line erosion, the company said. Its local-exchange subsidiary, Cincinnati Bell Telephone (CBT), lost 20,000 access lines (or 2%) since the third quarter of 2002. The company has seen a 2% line loss in each of the past eight quarters, a rate Cincinnati Bell CEO Jack Cassidy said is, "half that of our peers."

Forty percent of that loss came through cancelled second-lines, some portion of which were for dial-up Internet access. But at the same time, the company gained 22,000 DSL customers, a 31% improvement. The net result, said Cassidy, was a 2,000-line gain year over year. However, with 60,000 second-lines left (about 6% of its access lines), Cincinnati Bell’s senior vice president of finance and accounting Brian Ross admitted, "There’s still a lot of room to lose [lines]," he said.

During the quarter, 11,000 subscribers signed up for CBT’s biggest, bundle, Custom Connections, which includes local and long-distance telephony, wireless service and DSL. It was a 40% sequential jump for the bundle, bringing the total number of Custom Connections customers to 39,000. Since launching the bundle in the first quarter, said Ross, "We’ve seen a dramatic reduction in churn on its component bundled products—in some cases by about half."

Churn within the company’s wireless segment remained at 1.9% for the third quarter, and thanks to the company’s AnyDistance bundle of local and long-distance service, churn within its long-distance segment was 1.9%, which Cassidy called "remarkably low for a long-distance reseller."

"While Cincinnati Bell’s AnyDistance is a consistent source of profitability and cash flow, its greater value may lie in its defensive characteristics," said Cassidy, who took the job in July. "Our strong market shares in long-distance, particularly to the extent that those shares are solidified in bundled offerings, precluded large interexchange carriers from establishing billing relationships in our operating territory. This is in large part why we’ve seen so little competitive resale of our services and to date not a single retail line lost to UNE-P."

Cassidy pointed to bundles that include wireless service in particular as a potent tool in competing with cable telephony providers. "I will use wireless as a tool in the bundle to be both offensive and defensive," he said. "This is a product the cable guys can’t come with."

Cincinnati Bell recently completed a $30 million wireless GSM network and is planning a "hard launch" of its services early next year.

One of the company’s biggest tasks since it sold the assets of wholesale carrier Broadwing to equipment vendor Corvis this summer will be to get rid of the $2.75 billion in debt Cincinnati Bell assumed in order to shed Broadwing. With $2.3 billion in net debt remaining, Cassidy said, "There’s far more opportunity ahead of us than behind us to de-leverage our balance sheet."