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Broadband, Wireless Demand Propel Broadwing Growth

04/27/00

CINCINNATI, OHIO, April 27, 2000-- Broadwing Inc. (NYSE:BRW) today reported $470 million in revenues and $85 million in EBITDA - Earnings Before Interest, Taxes, Depreciation and Amortization - for the first quarter of 2000.

Rick Ellenberger, Broadwing's president and CEO, said "These financial results -revenues up 17 percent from first quarter 1999 pro forma and increasing EBITDA even with substantial investments in brand-building - reflect the excellent operating progress we made during the quarter. They also show that we are capturing our full share of the exploding demand for data and Internet-based communications services."

That progress includes:

  • Broadwing Communications leveraged improved billing and provisioning systems and strong demand for data and Internet services across its nationwide fiber-optic network to grow revenues 19 percent;
  • Cincinnati Bell Wireless added more than 37,000 customers and delivered its first-ever positive EBITDA quarter less than two years after launch;
  • 275,000 new Cincinnati Bell Any Distance long-distance customers - 40 percent of Cincinnati households - captured in just 13 weeks through April 15, the fastest gain of residential long distance share in the industry;
  • the best quarterly revenue growth for our local exchange business since 1997, driven by strong data and Internet demand, and its seventh consecutive quarter of EBITDA margin improvement;
  • A 13-week national branding campaign that created unaided awareness of the Broadwing name as strong or stronger than that of any other next-generation communications carrier.

"In our first full quarter as Broadwing," Ellenberger added, "we said we would establish ourselves as a fast and accountable partner to data and Internet-focused businesses, capture synergies from the integration of Broadwing Communications, and energize our wireless and local exchange businesses for even greater performance. Once again, we executed against our commitments."

Broadwing now has four operating segments - Broadband Services, Local Communications Services, Wireless Services and Other Communications Services. Except where noted, first-quarter 2000 results are compared with 1999 pro forma results that assume the combination of Broadwing's current businesses throughout 1999, and are adjusted to reflect the new segment structure.

Broadband Services

Broadwing Communications had a great quarter.

Revenues increased 19 percent to $213 million. About two-thirds of those revenues came from data services as businesses, ISPs, dot-coms and other carriers relied on Broadwing for high-bandwidth transport, business communications solutions and network integration services.

Broadwing Communications continued to focus its network, systems, and sales and marketing efforts on data and Internet growth, which produced first-quarter contract wins with customers such as Western and Southern Life Insurance, Sinclair Broadcast Group, Golfsmith and Widener University.

During the quarter, Broadwing Communications also rolled out new eClass virtual private network services and expanded its relationship with Zeroplus.com for Voice over Internet Protocol (VoIP) services. IT Consulting, which grew 60 percent in the quarter, is being expanded to 20 U.S. locations and is teaming with Compaq to provide more comprehensive e-commerce and data solutions to businesses.

To support its customers' expanding web and applications hosting requirements, Broadwing Communications will sharply increase its data and collocation center space, opening eight new centers in May. Broadwing's strategic partner, Cisco Systems, has agreed to resell a significant portion of that new capacity.

Broadwing Communications also demonstrated the expanding strength and capacity of its back-office systems by provisioning all 275,000 Any Distance customers onto its national fiber network. It also continued to improve billing cycle performance and order intervals during the quarter, paving the way for introduction of a unique installation guarantee.

Development of Broadwing Communications' advanced fiber-optic network will move to a new level through a strategic relationship with Corvis Corporation. Installation of CorWave all-optical network technology that enhances network speed and efficiency is already underway, proof of our commitment to be first with this leading-edge technology that will create a significant attacker's advantage for Broadwing.

Broadband EBITDA was a negative $2 million for the first quarter. That includes the impact of $17 million in stepped-up advertising to build awareness and momentum for Broadwing. Excluding this investment, EBITDA would have been more than double the $6 million pro forma gain in the first quarter of 1999.

Local Communications Services

Broadwing's local-exchange company, Cincinnati Bell Telephone (CBT), grew revenues 8 percent to $193 million in the first quarter. The company also posted its seventh consecutive quarter of EBITDA margin improvement, to 47 percent.

Large businesses and carriers continued to drive up demand for bandwidth. CBT's data and broadband revenues increased 40 percent year over year, providing 66 percent of its first-quarter revenue growth. For example, high-capacity DS-3 facilities increased 36 percent from the first quarter last year, and LAN interconnection facilities increased 60 percent.

Residence and small business customers in Cincinnati maintained their strong appetite for digital subscriber line (DSL) services under the ZoomTown brand. CBT added 6,000 DSL subscribers in the first quarter, for a total of 24,000. To increase the value of the DSL experience for customers in Cincinnati, ZoomTown last week launched new online multimedia services featuring high-quality digital music and fast-paced interactive games, and plans to roll out more entertainment and information services later this year.

Revenues from high-margin value-added services increased 26 percent, representing 30 percent of CBT's first-quarter revenue growth. The company's all-in-one bundle, Complete Connections, gained 39,000 subscribers, up from 24,000 adds in the fourth quarter. Demonstrating once again the power of the bundle, 34 percent of Cincinnati Bell Any Distance customers also have signed up for Complete Connections.

Cincinnati Bell Telephone had $91 million in first-quarter EBITDA, driving its EBITDA margin up 6 points from a year ago and two points from the fourth quarter. Key drivers of that improvement were continued strong growth in high-margin services, coupled with aggressive cost management.

Wireless Services

Cincinnati Bell Wireless generated $37 million in revenues and $2 million in EBITDA, achieving profitability on an EBITDA basis in only its seventh full quarter of operation. It ended the first quarter with nearly 200,000 subscribers, representing 9 percent penetration of covered POPs in its Cincinnati/Dayton region.

Postpaid subscriber growth was more than 20,000. Postpaid generated $66 in average monthly revenue per user (ARPU), essentially unchanged from the first quarter of 1999 despite adding 101,000 subscribers. Churn declined to a record-low 1.1 percent from 1.4 percent a year ago, despite intense competition from six other wireless providers.

Prepaid subscribers grew 17,000 as the company's I-Wireless offer remained the wireless product of choice for teens and preteens in the Cincinnati and Dayton, Ohio, markets. Incremental revenues from I-Wireless require minimal additional network investment and have significantly lower customer acquisition costs than postpaid.

Other Communications Services

This segment includes results of our Any Distance, directory, communications equipment and payphone businesses.

Any Distance exemplifies the aggressive marketing culture at Broadwing, combining the resources of our local and national businesses to achieve rapid capture of household long distance share and more sales of high-margin services without significant incremental fixed cost.

Revenues for this segment increased 10 percent. EBITDA was negative, principally reflecting advertising and other startup costs for Any Distance.

Other non-recurring events in the quarter included:

  • Sale of a portion of Broadwing's equity investment in PurchasePro, which generated about $7 million of additional cash and a gain of 3 cents per share.
  • A March 21 conversion or redemption offer to holders of Broadwing's 7.25% convertible preferred shares. Nearly all of the shares were converted into common on April 6, creating 9.5 million additional common shares and reducing Broadwing's annual dividend requirement by $8 million.

Earnings per diluted share for Broadwing was a negative 28 cents in both the first quarter of 2000 and in the first quarter of 1999 pro forma. On an as-reported basis, Broadwing's first-quarter 2000 revenues increased 94 percent and EBITDA increased 10 percent. Reported earnings per diluted share of negative 28 cents in the first quarter compares with 18 cents positive in the first quarter of 1999.

"I couldn't be more pleased with the progress that Broadwing is making on all fronts as we complete our first quarter as a combined company," Ellenberger said. "As we look ahead, I am optimistic that our strong focus on growth will generate more success in a rapidly growing but extremely competitive market environment."

About Broadwing

Broadwing Inc. (NYSE: BRW) delivers advanced voice, data, and Internet communications solutions to customers nationwide. Focused on customer service, Broadwing's reliable high-bandwidth data and Internet capabilities give businesses a competitive advantage. Broadwing can be found on the World Wide Web at broadwing.com.

Note: Information included in this news release contains forward-looking statements that involve potential risks and uncertainties. Broadwing's future results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, Broadwing's ability to maintain its market position in communications services, and its ability to develop and successfully launch new products and services. More information on potential risks and uncertainties is available in the company's recent filings with the Securities and Exchange Commission, including 1999 Form 10-K reports for Broadwing Inc. and Broadwing Communications.