Cincinnati Bell Jeffries & Company 2007 Communications Conference Brian Ross, CFO September 10, 2007 1
Safe Harbor Certain of the statements and predictions contained in this presentation constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. In particular, any statements, projections or estimates that include or reference the words believes, anticipates, plans, intends, expects, will, or any similar expression fall within the safe harbor for forward-looking statements contained in the Reform Act. Actual results or outcomes may differ materially from those indicated or suggested by any such forward-looking statement for a variety of reasons, including but not limited to, Cincinnati Bell s ability to maintain its market position in communications services, including wireless, wireline and internet services; general economic trends affecting the purchase or supply of communication services; world and national events that may affect the ability to provide services; changes in the regulatory environment; any rulings, orders or decrees that may be issued by any court or arbitrator; restrictions imposed under various credit facilities and debt instruments; work stoppages caused by labor disputes; adjustments resulting from year-end audit procedures; and Cincinnati Bell s ability to develop and launch new products and services. More information on potential risks and uncertainties is available in recent filings with the Securities and Exchange Commission, including Cincinnati Bell s Form 10-K report, Form 10-Q reports and Forms 8-K. The forward-looking statements included in this presentation represent estimates as of the date on the first slide. It is anticipated that subsequent events and developments will cause estimates to change. 2
Table of Contents 1. CBB Overview 2. 2Q07 Summary 3. Segment Overview 4. Outlook & Strategy Overview 3
CBB Overview $1.3B diversified telco Main segments include local, wireless, technology solutions 864k access lines 555k wireless subscriptions 111k square-feet raised floor Local ILEC & CLEC within licensed wireless area 4
Diversified Industry Innovator 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 5
2Q07 Revenue by Market...Increasing business % of total Consumer 44% Business 56% Revenue growth from business customers 56% both 2Q07 and 2Q06 Up 2 pts from 1Q07 Business y/y revenue growth of 2% (before intercompany eliminations) 6
Continued Diversification of Revenue Base (includes Long Distance) Technology Solutions Other Wireline Wireless 17% 22% 9% 18% 19% Wireline Voice - Consumer 15% Wireline Voice - Business Majority of total revenue derived from sources other than traditional consumer wireline voice 82% vs 80% in 2Q06 Wireline Data (before intercompany eliminations) 7
Cincinnati Bell 2Q07 Summary 8
2Q 2007 Accomplishments Year-overyear revenue and EBITDA growth of 2% and free cash flow of $38M Continued growth in Wireless service revenue, margins & subscriber base Double digit growth in Data Center and Managed Services revenue, capacity & utilization On-going DSL subscriber and data transport revenue growth 9
2007 Revenue Growth ($ s in millions) $7 ($6) $4 ($6) $329 13% increase in Wireless service revenue 13% increase in postpaid subs $323 $7 Wireline Data/Other +8% data +9% LD 36% increase in Data Center and Managed Service 2Q06 Revenue Wireless Wireline Data/Other Wireline Voice Data Center and Mgd Svcs Telecom & IT 2Q07 Revenue Partially offset lower Telecom & IT Equipment * May not foot due to rounding 10
Revenue Peer Comparison y/y growth still at the top of the pack VZ 6.5% WIN CBB T 2.0% 2.0% 2.6% -0.3% -0.3% Q CTL -1.5% EQ Source: Company reports pro forma where applicable 11
2007 EBITDA Growth ($ s in millions) $116 ($6) $6 $1 $1 $118 Wireline reduction reflects higher costs associated with expansion markets and business growth Wireless EBITDA grew 48% y/y Sequential as well as y/y improvement 2Q06 EBITDA Wireline Wireless Technology Solutions Broadband 2Q07 EBITDA Technology Solutions 15% increase due to Data Center and Managed Services growth * May not foot due to rounding 12
EBITDA Peer Comparison y/y growth continues T 9% VZ 7% CTL 5% Q 4% CBB 2% -2% WIN -4% -4% CZN EQ Source: Company reports pro forma where applicable 13
$3M CLEC growth offsetting $3M ILEC decline ($ s in millions) CLEC Revenue $5.6 $6.1 $6.6 $7.4 $8.4 2Q06 3Q06 4Q06 1Q07 2Q07 Access Lines DSL Subs 44 56 2 7 2Q06 2Q07 2Q06 2Q07 (units in thousands) 14
2Q07 Product Launch Universal Mobile Access (UMA) product converging wireless and wireline service launched June 18 th First North American wireless carrier to commercially launch the service Ultimate bundle for consumer and business customers Enhanced in-building coverage DSL bundled customer eligible for unlimited calling plan Leverage cost economies of the wireless network 15
Cincinnati Bell Segment Overview 16
Wireline Data Revenue Growth 8% Wireline Data Revenue Year over Year Growth Rates 11% 9% 10% 8% $58.8 $60.7 $62.0 $62.5 $63.5 2Q06 3Q06 4Q06 1Q07 2Q07 20% y/y DSL subscriber growth 1% gross add increase Decreased churn Data Transport revenue also contributed to the growth ($ s in millions) 17
DSL Growth Amongst the Leaders despite leading penetration vs. the large telco s DSL Penetration CTL 2.7% WIN 1.5% CBB 1.0% Q CZN EQ 1.2% 1.1% 0.8% T 1.0% VZ 0.8% 1Q07 2Q07 Net Source: Merrill Lynch: Broadband subs/ilec lines 18
DSL Subscriber Activity 2Q07 DSL Net Adds 1.88% Churn 15,900 (11,700) 4,200 Gross Adds Deacts Net Adds 2Q06 DSL Net Adds 1.94% Churn 15,700 (10,000) 5,700 20% subscriber base growth y/y 212,000 subscribers at 2Q07 4K net adds Down 1.5K vs 2Q06 Gross adds up 1% 6 basis point churn improvement 38% penetration of in-territory consumer primary lines 9 percentage point improvement vs 2Q06 Gross Adds Deacts Net Adds 19
ILEC Access Line Loss Access Line Gross Adds-ILEC 32 32 24 22 21 Total access line loss was 5.4% y/y 7.1% ILEC loss 29% increase in CLEC lines 2Q06 3Q06 4Q06 1Q07 2Q07 Access Line Deactivations-ILEC 2Q06 3Q06 4Q06 1Q07 2Q07 Lower gross adds continue to be the driver of in-territory line loss Developing new strategies (44) (48) (40) (36) (36) Deactivations are decreasing Churn remains below 2% (in thousands) 20
Y/Y Access Line Loss remain near the top of the pack -4.5% -5.2% -5.3% -5.4% -6.0% -6.7% -7.1% -7.8% WIN CTL CZN CBB EQ T Q VZ Source: Merrill Lynch, Company Data 21
Postpaid Wireless Growth Postpaid Service Revenue $48.1 $48.9 $49.6 $49.8 $54.4 2Q06 3Q06 4Q06 1Q07 2Q07 ($ s in millions) Postpaid Subscriber 17% 16% 15% 15% 13% 376 383 350 366 339 2Q06 3Q06 4Q06 1Q07 2Q07 Five consecutive quarters of double digit y/y subscriber growth Driving the 13% y/y postpaid service revenue increase 1.5% churn 14 basis point improvement over 2Q06 Net adds of 7K down 36% y/y Lower consumer gross adds Improved churn but on higher base $48 ARPU 1% v. 2Q06 43% of decline is outcollect due to legacy AT&T wireless (in thousands) 22
Prepaid Wireless Prepaid Service Revenue $11.1 $9.6 $10.8 $11.3 $11.7 2Q06 3Q06 4Q06 1Q07 2Q07 ($ s in millions) Prepaid ARPU $20.87 $19.51 $22.71 $22.42 $22.44 6% growth in prepaid service revenue ARPU up 8% y/y Subscribers essentially flat LEAP launched in Cincinnati on 6/20/06 3K net add loss 2Q seasonally down to 1Q 10k net adds YTD New rate plans continue to drive ARPU and service revenue growth 2Q06 3Q06 4Q06 1Q07 2Q07 23
2007 Wireless Margin Expansion 48% EBITDA growth $3 27% 27% EBITDA margin 7 point margin improvement versus 2Q06 20% $13 2Q06 EBITDA $4 Subscriber Base Acquisition Expense $20 2Q07 EBITDA Expanding service revenue, leveraging network and supply chain efficiencies ($ s in millions) * May not foot due to rounding Continued margin expansion to 30% depends on service revenue growth and cost efficiencies 24
Wireless Growth Favorable to Peers further opportunity for data growth and margin expansion 34% 27% 18% 13% 11% 12% 13% 11% 12% 13% 9% 1% 3% Serv Rev Growth -1% ARPU Growth* * CBB Postpaid only ** as % of total revenue MOU/sub Growth* Subs Growth* Industry CBB Data % of Total ARPU* EBITDA % Capex %** Source: Merrill Lynch, Company Data 25
Technology Solutions... provides outsourced IT and telecommunication infrastructure & services CBTS Revenue Categorization Data Center & Managed Services Professional Services Telecom & IT Equipment Distribution Category Definition Complete management of a customer s data needs including network management, hosting, disaster recovery, storage, security and redundancy. Continue building relationships with customers through IT outsourcing and consulting on an ad hoc or longer term basis. Value added reseller of over 10 branded technology vendors. Implementation and maintenance services of that equipment are also included. Total IT Sourcing for Fortune 500 Customers Migration to Full Managed Sourcing 26
Technology Solutions Revenue Telecom and IT Equipment Overall revenue declined 1% y/y $45.3 $47.8 $42.6 $39.7 $32.4 2Q06 3Q06 4Q06 1Q07 2Q07 Data Center and Managed Services 12% decrease y/y in lower margin telecom and IT equipment revenue Variable in nature: customer projects & budget availability Data Center and Managed Services revenue increased 36% Increased capacity and utilization $11.3 $12.8 $12.7 $14.4 $15.4 Higher product margin growth driving y/y 15% EBITDA growth. 2Q06 3Q06 4Q06 1Q07 2Q07 ($ s in millions) 27
Data Center Build Out Update 91 Estimated Capacity Growth (sq ft) 20 91 11 111 42 122 19 164 1Q07 2Q07 3Q07 4Q07 1Q08 Existing New Capacity (in thousands) by qtr end Construction complete and billing began on 20,000 square feet of capacity at end 2Q07 70,000 sq ft still under construction with 50,000 sq ft expected to be complete by year end An indication of strong demand = currently negotiating terms in agreements for 50,000 expected to complete by year end 28
Cincinnati Bell Outlook & Strategy 29
CBB Strategy Drive Value allocating capital based upon greatest return Grow Data center and enterprise revenues Wireless and wireline interoperability De-lever Transfer value to Shareholders Generate free cash flow Defend Consumers #1 choice for communication needs 30
Return to Equity Holders Each quarter CBB evaluates the De-Lever, Defend and Grow Strategy Considerations CBB indenture restrictions 7.25% restricted payment basket = approx. $100M CBB debt maturities ~ $31M mandatory payments through 2010 Comfort with leverage 4.2x at 6/07; gaining confidence that CBB can operate at those levels Yield on debt repayment Investment opportunities For example, Data Center projects exceeding a 20% return 31
Cincinnati Bell Q & A 32