Consistent Execution Drives Improved First Quarter Results for Cincinnati Bell; Wireless Subscriber Base Passes 500,000; Data and Technology Operations and Reduced Interest Expense Lead to Strong First Quarter Performance

Business Wire, May 2, 2006

CINCINNATI -- Cincinnati Bell Inc. (NYSE:CBB) today announced improved results for the first quarter driven by continued growth in data and technology operations, strong wireless net additions and lower interest expense. For the quarter, revenue was $298 million with operating income of $71 million and net income of $14 million, or 5 cents per share. Excluding special items, net income was $22 million or 8 cents per share, up $6 million or 3 cents per share from the first quarter of 2005 also excluding special items. Special items in the current quarter include a reserve established in anticipation of settling two previously disclosed shareholder lawsuits and a write-off of state net operating loss carry-forwards.

"Providing a superior local network and outstanding customer service drove reduced churn and helped Cincinnati Bell Wireless surpass 500,000 subscribers for the first time ever," said Jack Cassidy, president and chief executive officer of Cincinnati Bell, Inc. "This milestone is yet another demonstration of our ability to execute our strategy, succeed in a highly competitive market and continue to deliver value to our customers."

First Quarter Highlights

--Net postpaid wireless additions totaled 13,000, the best first-quarter performance since 2001. Meanwhile, postpaid wireless churn improved to 1.4 percent, the lowest level since the third quarter of 2000. Subscriber migration to the GSM network continued with less than 5 percent of total minutes of use now occurring on the TDMA network. The company expects to migrate all remaining customers off of its TDMA network by June 30, 2006.

--Penetration of the company's "Super Bundle" of services climbed to 27 percent of Cincinnati Bell households within its traditional operating area, reflecting the addition of 5,000 subscribers in the quarter. Bundling success drove revenue per household to an all-time high of $81, up 4 percent from a year ago.

--Cincinnati Bell's DSL subscriber base grew to 171,000, a 21 percent increase versus the first quarter of 2005. Penetration of in-territory consumer primary access lines reached 28 percent, representing 150,000 subscribers. Total in-territory access line penetration was 19 percent, a gain of 4 percentage points from a year ago.

--Free cash flow(1) of $30 million in the first quarter of 2006 was a $16 million improvement from the first quarter of 2005 due largely to a reduction in financing fees.

Financial and Operations Review

"Improved performance in the first quarter is the direct result of focused execution of our strategy," said Brian Ross, chief financial officer of Cincinnati Bell. "Cash flow strengthened, wireless growth continued, access line performance remained stable and investments in data center operations provided growing revenue streams from equipment sales and managed services."

Cincinnati Bell recorded quarterly revenue of $298 million, an increase of 3 percent, or $10 million, from the first quarter of 2005. Higher contributions from equipment sales, managed services and data more than offset lower local voice revenue and reduced wireless roaming revenue, a result of the merger of AT&T Wireless and Cingular Wireless. Adjusted EBITDA(2) (earnings before interest, taxes, depreciation and amortization) was $112 million, down $9 million from the first quarter of 2005. The margin associated with lower local voice revenue and increased expenses supporting a 43 percent increase in postpaid gross activations accounted for the majority of the decline.

As reported in a Form 8-K filed with the SEC on May 1, 2006, Cincinnati Bell has entered into a Memorandum of Understanding (MOU) to settle two previously disclosed shareholder lawsuits. The company has reserved $6 million in the first quarter of 2006 to reflect its anticipated contribution to the settlement fund and to cover other settlement-related expenses. Under the terms of the MOU, the total settlement is $36 million, which includes the insurance companies' portion of the settlement. Adjusted EBITDA excludes the charge associated with the litigation settlement.

Local Communications Services

Total access line performance was stable as the rate of loss was 4.1 percent equaling the rate of loss during the fourth quarter of 2005. At the end of the quarter, Cincinnati Bell had 40,000 out-of-territory access lines, up 31 percent from the prior year. Wireless substitution continued to be the primary reason for the loss of in-territory lines, as the impact of cable telephony remained muted; and, in fact, the number of lines lost to cable telephony decreased from the prior quarter.

The Local segment produced quarterly revenue of $186 million, down 2 percent from the first quarter of 2005 as a 17 percent increase in DSL revenue partially offset lower voice revenue. Adjusted EBITDA of $95 million declined 2 percent from the prior year. An 8 percent reduction of selling, general and administrative expense partially offset the impact of lower access lines.

Wireless Services

Accelerated subscriber growth continued in the first quarter with postpaid net activations of 13,000, an increase of 19,000 from a year ago. Gross activations totaled 26,000, up 43 percent from the first quarter of 2005. On a sequential basis, postpaid average revenue per user (ARPU) of $45 was essentially unchanged. Gross activations for prepaid were up 14 percent from a year ago resulting in net activations of 2,000. Prepaid ARPU improved sequentially to $20 reflecting the impact of mobile-to-mobile rate plans introduced in the fourth quarter of 2005.