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  1. 1. Cincinnati Bell 4th Quarter and Full Year 2008 Review February 5, 2009 1
  2. 2. Agenda 1. Performance Highlights 1. Performance Highlights Jack Cassidy, President & CEO Jack Cassidy, President & CEO 2. Operational Overview 2. Operational Overview Brian Ross, Chief Operating Officer Brian Ross, Chief Operating Officer 3. Financial Overview 3. Financial Overview Gary Wojtaszek, Chief Financial Officer Gary Wojtaszek, Chief Financial Officer 4. Q & A 4. Q & A 2
  3. 3. 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 Form 8-K report. The forward-looking statements included in this presentation represent estimates as of February 5, 2009. It is anticipated that subsequent events and developments will cause estimates to change. 3
  4. 4. Performance Highlights Jack Cassidy Jack Cassidy President & CEO President & CEO 4
  5. 5. 2008 Accomplishments Technology Technology Overview Overview Wireless Wireless Wireline Wireline Solutions Solutions • Grew revenue • Increased DC • Grew service • Increased DSL 4% & managed revenue by 9% subs by 5% and services • Improved maintained • Increased revenue by Adjusted churn at 1.9% Adjusted 45% EBITDA 12% EBITDA 2% • Grew wireline • Grew Adjusted • Increased data revenue by • Increased free EBITDA by 32% postpaid 6% cash flow by $105M • Increased data ARPU 5% • Increased long center capacity • Increased distance and • Purchased 8% by 65K sq ft smart phone VoIP revenue by of shares subscribers 24% outstanding • Began billing 50K sq ft new by 59% • Maintained • Retired $108M data center Adjusted of bonds at a space EBITDA margins 14% discount at 47% 5
  6. 6. 2008 Revenue Growth ($’s in millions) 9% increase in Wireless ($6) $1,403 service revenue $37 • +$21M, 10% postpaid • +$3M, 6% prepaid $20 $1,349 $22 Wireline Data/Other ($43) • +6% data growth, due to $25 data transport and DSL subscribers • +24% LD and VoIP growth, mostly due to the eGIX acquisition 22% increase in Technology Solutions • +$20M / 11% Telecom and 2007 Wireline Wireline Wireless Hardware Data Eliminations 2008 IT equipment Voice Other Center/Prof • +$30M / 45% data center Svc and managed services * May not foot due to rounding 6
  7. 7. 2008 Adjusted EBITDA Growth ($’s in millions) +12% Increase in Wireless $8.6 Adjusted EBITDA ($12.4) • Due to +$23M service $480 $2.4 revenue growth $8.6 $473 +32% Increase in Technology Solutions • +$30M data center and managed services revenue growth • 11.1% Adjusted EBITDA margin (.9 pts improvement vs. prior year) -3% Wireline 2007 Wireless Technology Wireline Corp 2008 • Driven by local voice revenue Solutions decline * May not foot due to rounding 7
  8. 8. Met or Exceeded 2008 Guidance 2008 Revenue (in billions) 2008 EBITDA (in millions) 2008 FCF (in millions) $1.4 $1.4 $480 $480 $164 $150 Guidance Actuals Guidance Actuals Guidance Actuals In spite of challenging economic conditions in 2008, Cincinnati Bell met or exceeded the guidance provided during the year. We also took steps to proactively reduce working capital and pay down debt. * May not foot due to rounding 8
  9. 9. Earnings per Share Growth $0.40 $0.40 $0.38 $0.35 Earnings per diluted share up 58% y/y $0.33 $0.30 • Adjusted EBITDA increased $7M • Gains of $14M on debt extinguishment and $0.25 $0.24 $10M on operating tax settlement • Interest expense down $15M; lower rates and debt balances $0.20 • Purchased 21M shares in repurchase authorization program $0.15 • 8% of outstanding shares $0.10 EPS excluding special items up 21% $0.05 $0.00 EPS EPS excl SI (on a diluted basis) 2007 2008 9
  10. 10. Revenue Diversification Continued in 2008 Wireline Voice - Other Wireline Consumer Consumer Wireline (includes Long Distance) Voice -3 pts. to 14% 10% Wireline Data, Wireless Technology 14% Wireline Voice - Solutions & Technology Solutions Business 22% 13% +4 pts. to combined 63% 19% 22% Wireline Data Wireless (before inter-company eliminations) * May not foot due to rounding 10
  11. 11. 2008 Revenue by Market . . .Increasing business % of total Business +3 pts to 59% Business revenue up 9% y/y • 45% Data Center and Consumer Business Managed Services 41% • 10% Wireless 59% (before inter-company eliminations) 11
  12. 12. Data Center Build Out Update (in thousands) 209K sq ft capacity • 7K sq ft new capacity commissioned in Data Center Capacity (sq ft) 4Q08 7 88% utilization • 6K sq ft new billing contracts in the fourth quarter 202 202 202 182 68K sq ft to be commissioned 1Q09 144 • 50K sq ft – new Lebanon facility • 18K sq ft – Downtown Cincinnati W 7th St. • New customers buying Tier III space in two separate facilities for simultaneous data 4Q07 1Q08 2Q08 3Q08 4Q08 replication Existing New Capacity Sales Funnel Strong at quarter end * May not foot due to rounding 12
  13. 13. 2009 Focus Areas De-lever/ De-lever/ Grow Grow Defend Defend Balance Sheet Balance Sheet • Focus on • Solidify • Continue Enterprise/SMB Cincinnati Bell opportunistic market share debt retirement • Grow Wireless revenue, • Continue • Continue share margins, and ongoing cost buyback program subscriber reduction • Continue focus metrics initiatives on working • Achieve high • Strengthen capital utilization rates position as the management on new 2009 data region’s center capacity technology leader with unique products 13
  14. 14. Operational Overview Brian Ross Brian Ross Chief Operating Officer Chief Operating Officer 14
  15. 15. Wireless Revenue and Adjusted EBITDA Total Service Revenue Year-over-Year Growth Rates Service revenue y/y growth 9% 16% 7% 3% 14% equaled 3% • +5% Postpaid ARPU driven by $69.7 $72.0 $72.3 $74.2 $72.0 smart phone and SMS plans Adjusted EBITDA growth 4Q07 1Q08 2Q08 3Q08 4Q08 equaled 2% Total Adjusted EBITDA • $2.5M lower costs Year-over-Year Growth Rates • customer care cost per sub 30% 7% 10% • operating & property taxes 28% 2% • prepaid commission/gross add • G & A expense $19.3 $21.7 $20.9 $20.5 $19.7 • Offset by $1.8M higher handset subsidies, $1.3M higher bad debt and higher network costs 4Q07 1Q08 2Q08 3Q08 4Q08 ($’s in millions) 15
  16. 16. 4Q08 Wireless Adjusted EBITDA Service revenue continues to ($1.7) 25.1% drive subscriber margin 24.9% $2.1 • $2.4M service revenue growth • +$1.3M bad debt $19.3 $19.7 +$1.7M Acquisition cost • Smart phones & deeper discounting 4Q07 Subscriber Acquisition 4Q08 Base Expense 27% EBITDA margin if ($’s in millions) acquisition costs are flat to 4Q07 * May not foot due to rounding 16
  17. 17. Postpaid Wireless Growth Postpaid ARPU +7% postpaid service $8.25 $6.96 $7.56 $7.28 $8.54 revenue • 3% ave subscriber growth $39.18 $39.91 $40.08 $40.57 $39.92 • 5% growth in ARPU • Data ARPU up 23% • SMS/smart phone plans 4Q07 1Q08 2Q08 3Q08 4Q08 Voice Data 10K net subscriber loss Smartphone Penetration • Postpaid churn of 3% • Gross adds down 6% vs 4Q07 11.0% 8.7% 9.4% 7.0% 7.9% Strong smartphone growth • Up 59% from 4Q07, 4Q07 1Q08 2Q08 3Q08 4Q08 • now 11% of subscribers • 172% consumer subscriber growth 17
  18. 18. 4Q08 Churn Analysis 3% Postpaid Churn Postpaid Churn % 3.0% • 2.6% excl. 4k low ARPU, no 0.4% usage, data only subscribers 2.3% +0.4% involuntary (non-pay) 0.7% 1.6% 1.6% 1.7% 0.5% churn to historical trend 0.3% 0.3% 0.3% • May-08 credit model changes 1.9% 1.8% • Almost entire increase from 1.3% 1.3% 1.4% new subs since May-08 • Tightened credit policy in Aug- 08 and again in Jan-09 4Q07 1Q08 2Q08 3Q08 4Q08 • Approx. 90 days to observe Voluntary Involuntary No use, data only impact of a credit change +0.5-0.6% voluntary to trend • Ineffective messaging of the value of the bundle • Limited access to the latest handsets • Will launch Nokia touch screen handset in 2Q09 18
  19. 19. Prepaid Wireless Prepaid Service Revenue 14% reduction in prepaid service revenue • Ave subscribers down 11% y/y $13.2 $13.6 $13.1 $12.6 $11.3 • ARPU down 4% y/y 4Q07 1Q08 2Q08 3Q08 4Q08 Met competition’s Oct-08 ($’s in millions) price decreases • 4Q08 sequential qtr double- digit decline in revenue/MOU Prepaid ARPU Maintaining prepaid share $26.33 • Prepaid porting ratios $26.10 $26.17 $25.75 $25.15 favorable • Some subscriber migration to postpaid 4Q07 1Q08 2Q08 3Q08 4Q08 19
  20. 20. Technology Solutions Revenue Telecom and IT Equipment Segment revenue up 13% y/y • Well below 30% trend growth due to Telecom and IT equipment sales $55.8 $58.3 $49.7 $50.1 $43.1 Telecom and IT equipment +4% y/y 4Q07 1Q08 2Q08 3Q08 4Q08 Data Center and Managed Data Center and Managed Services Services revenue +31% y/y • +6k billing; +7k capacity v 3Q08 • +50k billing; +65k capacity v 4Q07 • 23% organic growth $24.9 $25.6 $25.5 $19.4 $21.7 4Q07 1Q08 2Q08 3Q08 4Q08 ($’s in millions) 20
  21. 21. Technology Solutions Profit Gross Profit Gross profit +$3M • Data center accountable for all profit $19.9 $20.0 $16.7 $16.8 $18.1 increase +3% Adjusted EBITDA y/y 4Q07 1Q08 2Q08 3Q08 4Q08 • + 24% adjusted for large non-recurring items Adjusted EBITDA • $1M favorable 4Q07 benefits expense • ($0.8M) 4Q08 customer credits $9.7 $10.1 $10.0 $8.3 $6.7 4Q07 1Q08 2Q08 3Q08 4Q08 ($’s in millions) 21
  22. 22. Wireline Adjusted EBITDA ($’s in millions) Wireline revenue down 7% • Down 2% when adjusting for $10M 4Q07 low margin wiring project $4 ($11) $4 Data revenue up 4% • 5% DSL subscriber growth $2 • 7% data transport growth $97 $96 LD/VoIP revenue up 17% ($10) $9 • Mostly due to eGIX acquisition Expense down $13M • $9M 4Q07 wire project expense • Non-wire project expense down $4M • ILEC labor and materials 4Q07 Voice/Other Other Exp Data Rev LD/VoIP Non-w ire 4Q08 expense partially offset by EBITDA Rev Rev exp EBITDA volume driven CLEC expenses * May not foot due to rounding 22
  23. 23. DSL Subscriber Activity DSL Gross Adds 5% subscriber base growth y/y 18 • 233,000 subscribers at the end of 17 4Q08 14 16 15 4 6 1 2 2 4Q07 1Q08 2Q08 3Q08 4Q08 2K net adds in 4Q08 Net Adds Gross Adds • Down 2K y/y primarily due to lower (in thousands) gross activations • 6 basis points churn improvement vs DSL Churn % 4Q07 2.0% 1.8% 1.8% 2.0% 1.9% 4Q07 1Q08 2Q08 3Q08 4Q08 23
  24. 24. ILEC Access Line Loss Access Line y/y Loss - ILEC 4Q07 1Q08 2Q08 3Q08 4Q08 Net losses improved 2K y/y -7.7% -8.1% -8.3% -8.3% -8.2% 8.2% ILEC loss 11.1% ILEC primary consumer line loss; compared to 11.5% in 3Q08 Access Line Net Adds -ILEC 4Q07 1Q08 2Q08 3Q08 4Q08 Gross adds down 3K y/y (17) (16) (15) (17) (15) Churn remains well below 2% (in thousands) * May not foot due to rounding 24
  25. 25. Financial Overview Gary Wojtaszek Gary Wojtaszek Chief Financial Officer Chief Financial Officer 25
  26. 26. Q4 ‘08 and ‘07 Financials (Unaudited, $ in millions except per share amounts) Three Months Ended December 31, Change 2008 2007 $ % Revenue $ 356.8 $ 359.9 $ (3.1) (1%) Costs and expenses Cost of services and products 166.2 172.2 (6.0) (3%) Selling, general and administrative * 69.2 69.4 (0.2) 0% Adjusted EBITDA 121.4 118.3 3.1 3% Depreciation and amortization 40.2 40.0 0.2 1% Restructuring, asset impairment, and operating tax and patent lawsuit settlements (7.2) 37.5 (44.7) n/m Operating income 88.4 40.8 47.6 117% Interest expense 33.6 37.8 (4.2) (11%) Gain on extinguishment of debt (11.9) - (11.9) n/m Other expense, net 3.6 (0.4) 4.0 n/m Income before income taxes 63.1 3.4 59.7 n/m Income tax expense 25.6 2.7 22.9 n/m Net income 37.5 0.7 36.8 n/m Preferred stock dividends 2.6 2.6 - 0% Net income applicable to common shareowners $ 34.9 $ (1.9) $ 36.8 n/m Diluted earnings per common share $ 0.15 $ (0.01) * Excludes $2.0 million related to patent legal settlement. * May not foot due to rounding 26
  27. 27. 4Q08 Net Income Net Income excluding $1 special items up $3M y/y +$1M 4Q08 Restructuring ($7) Charge: • related to voluntary early retirement program for union and management employees. -$7M Debt Extinguishment $38 • Gain on repurchase of bonds ($6) -$6M Operating Tax Settlement $1 • Resolution of a contingent liability from prior years $26 +$1M Patent Lawsuit Settlement • Settlement and legal costs 4Q08 NI Restructuring Debt Oper Tax Patent 4Q08 NI related to a patent lawsuit Charge Extinguish Settlem ent Law suit before SI which settled in the qtr Settlem ent ($’s in millions) * May not foot due to rounding 27
  28. 28. 4Q08 Free Cash Flow Growth Free Cash Flow $24 increased $53M y/y +$17M related to operating tax settlement $63 $17 +$24M remaining due to improvement $9 in working capital $3 Driven mostly by change in AR and AP $10 NOL balance as of 4Q07 FCF Adjusted EBITDA CapEx Oper Tax Settlem ent Working Capital 4Q08 FCF 12/31/08 was $439M ($’s in millions) 28
  29. 29. YTD Sources and Uses of Cash Sources: 4Q08 YTD $164M Free Cash Flow Free cash flow $63 $164 • Exceeded annual Increase in credit facility - 18 guidance of approx. Available cash - BOP 8 26 $150M TOTAL $71 $208 Acquisitions closed • eGix in Q1 Uses: • CenturyTel – Dayton fiber Acquisitions $ - ($22) ring in Q2 Stock repurchase (9) (77) 8.375% debt repayment (19) (66) $77M stock repurchase 7.25% debt repayment (22) (25) • 21M shares – 8% of total Decrease in credit facility (7) - shares outstanding Capital lease payments & other (7) (11) Retired $108M of bonds TOTAL ($64) ($201) at $16M discount Cash EOP $ 7 $ 7 ($ in millions) 29
  30. 30. Capital Expenditures Total Capital down $9M vs ($ in millions) 4Q07; down $3M for entire Capital Expenditures (with totals) year $81 $72 Technology Solutions down $33 $61 $56 $22 $11M vs 4Q07 $22 $43 • Slower data center spending y/y $23 $17 $22 $10 $17 $7 $10 $27 $21 $26 $23 $33 Combined Wireline and Wireless spending essentially 4Q07 1Q08 2Q08 3Q08 4Q08 flat y/y Wireline Wireless Technology Solutions * May not foot due to rounding 30
  31. 31. Schedule of Debt Maturities $560 $440 $280 $248 $177 $77 $97 $5 2009 2010 2011 2012 2013 2014 2015 Thereafter Credit Facility Bonds Receivables Purchase Facility ($’s in millions) Excludes debt associated with capital leases and interest rate swaps 31
  32. 32. Ample Liquidity to Manage Operations 12/31/08 Sources of liquidity • Cash on Hand Total Credit Facility Capacity $ 250 • Cash generated by operations Total Credit Facility Outstanding 73 • Excess borrowing capacity Undrawn Credit Facility 177 Revolver is well diversified Less: Letters of Credit 26 • Comprised of 16 banks none of which having more Unused Credit Facility 151 than a 10% funding commitment Plus: Cash 7 Liquidity improved by $7M from 3Q08 Total Liquidity $ 158 ($’s in millions) 32
  33. 33. 2009 Guidance 2008 2009 Actuals Guidance Revenue $1.4B Approx. $1.4B Adjusted EBITDA $480M Approx. $480M* Free Cash Flow $164M Approx. $150M* * Plus or Minus 2 percent 33
  34. 34. Cincinnati Bell 4th Quarter and Full Year 2008 Review February 5, 2009 34
  35. 35. Non-GAAP Reconciliations Non-GAAP Reconciliations (please refer to the Earnings Financials) (please refer to the Earnings Financials) 35

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