On Feb 4, Zacks Investment Research upgraded diversified telecommunications and technology services provider Cincinnati Bell Inc. CBB – which primarily operates in the Greater Cincinnati area – to a Zacks Rank #3 (Hold).
Cincinnati Bell remains focused on transforming the company into a fiber-based communications, entertainment and IT solutions company, with growing revenues, profitability and cash flow. With a well-designed marketing program, popular brand value and a strong reputation of offering high-quality service, the company expects to increase its Entertainment and Communications revenues going ahead.
In the Entertainment and Communications business, the company’s investments in Fioptics products, which provide entertainment, high-speed Internet, and traditional voice via fiber line to the home, are on an upswing. Cincinnati Bell continues to deploy fiber network, which is expected to provide high quality video and Internet service to its residential customers. Moreover, it has introduced its latest MyTV service through its Fioptics high speed Internet service. The service will provide channels and other TV content in leaner and more flexible package options for the customer, in contrast to traditional tiered TV packages that offer a higher number of channels for a fixed monthly fee. We believe the company’s decision to offer smaller, tailored TV channel packages can drive its top line as well as check churn rates vis-à-vis traditional pay-TV competitors.
However, Cincinnati Bell continues to experience erosion in high margin local access lines. With Digital Subscriber Line (DSL) and cable modems gaining widespread acceptance, customers are deactivating the extra phone lines that were used to access the Internet via dial-up modem. In addition, the shift toward wireless services and aggressive rollout of VoIP and long distance services by Tier-1 competitors such as AT&T Inc. T and Verizon Communications Inc. VZ in Cincinnati and Dayton has further contributed to access line erosion.
Also, the company has been witnessing a slower pace of ARPU growth lately. This is mainly because of increased competitive pressure from local cable operators and video streaming service providers like Netflix Inc. NFLX.
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