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Broadwing Announces Record Revenue and EBITDA for Second Quarter

07/25/00
Strength in Broadband, Wireless and Local Markets Drive Better than Expected Results CINCINNATI--July 25, 2000--Broadwing Inc. (NYSE:BRW) today reported record financial performance for the second quarter. Revenues were up 23 percent, growing to $500 million. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased 80 percent, growing to $130 million as compared to second quarter 1999. Broadwing reported a per share loss of 15 cents for the quarter versus a 62 cent loss in the second quarter of the prior year. These results are on a pro forma basis, as if the acquisition of IXC Communications had occurred at the beginning of 1999.

“Broadwing's strong second quarter results highlight the company's success in establishing itself as a creative, innovative and accountable partner to data and Internet-focused businesses,” said Rick Ellenberger, Broadwing's president and chief executive officer. “Transformation and execution are two areas where Broadwing is succeeding while others are still talking. This is a company running on all cylinders – keeping our promises to customers and shareholders, executing on the commitments we make and investing and building momentum for the future.”

Second quarter highlights included:

  • The company's broadband services business, Broadwing Communications, produced record revenue of $241 million, up 37 percent from a year ago;

  • Broadwing Communications delivered EBITDA of $26 million, an increase of $37 million over the same period last year;

  • The company's wireless unit, Cincinnati Bell Wireless, added more than 39,000 customers and delivered its second consecutive quarter of EBITDA profitability;

  • Cincinnati Bell Any Distance captured more than 51 percent of Greater Cincinnati's residential long distance market;

  • The company's local exchange business, Cincinnati Bell Telephone, grew revenues by 8 percent to $197 million, its best quarterly revenue growth since 1997;

  • Cincinnati Bell Telephone reported EBITDA of $97 million and recorded its eighth consecutive quarter of EBITDA margin improvement.

Broadwing's executive vice president and chief financial officer, Kevin Mooney said, “Our outstanding financial performance is driven by our unwavering focus on customers and unrelenting attention to growing revenues while containing costs. We execute financially the same way we execute operationally – with speed and accountability.”

For the six months ending June 30, 2000, revenues were $961 million, up 20 percent from a year ago, and EBITDA was $215 million, up 40 percent from the same period in 1999. These results include the presentation of the Cincinnati Bell Supply Company, which was sold during the quarter, as a discontinued operation for all periods.

Broadband Services

Broadwing Communications had another great quarter. Revenues increased 37 percent to $241 million as Broadwing Communications continued to focus its network, systems, and sales efforts on data and Internet growth. Two-thirds of revenue growth 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. This quarter also included $10 million in revenues related to the field trial of new optical technology.

Broadwing Communications has begun installation of the Corvis CorWave all-optical network technology to enhance network speed and efficiency. This exemplifies the company's commitment to be first to deploy an end-to-end optical network.

To support its customers' expanding web and applications hosting requirements, Broadwing Communications significantly increased its data center space by adding six data centers in the second quarter. The company now has nine operational web hosting and data centers serving customers nationwide. Broadwing Communications' IT consulting business continues to gain momentum as applications integration, network monitoring and systems integration services continue to be in strong demand. During the quarter, more than $15 million in revenue resulted from what was a mere $2 million annualized revenue stream just two years ago.

Beginning June 1, 2000, Broadwing Communications introduced the industry's first suite of Internet protocol-virtual private network (IP-VPN) services that provide customers with quality-of-service routing and one-hop low-latency on the company's award-winning IP backbone.

Broadband EBITDA was $26 million for the second quarter. This represents a $37 million increase over the $11 million loss from a year ago.

Local Communications Services

Broadwing's local-exchange company, Cincinnati Bell Telephone (CBT), posted revenue growth of 8 percent to $197 million with EBITDA of $97 million. This EBITDA margin of 49 percent represents a six point improvement from a year ago, a two point improvement from the last quarter and the eighth consecutive quarter of EBITDA margin improvement. Key drivers were strong growth in high-margin services and aggressive cost management.

Large businesses and carriers continued to drive up demand for bandwidth. Data and broadband revenues from CBT increased 38 percent from a year ago, providing two-thirds of its second-quarter revenue growth. Sales of high-capacity, DS-3 facilities increased 43 percent, and sales of LAN interconnection facilities increased 58 percent. Residential and small business customers in Cincinnati maintained their strong appetite for digital subscriber line (DSL) services under the ZoomTown brand. At the end of the quarter, ZoomTown had 29,000 subscribers.

Revenues from high-margin value-added services increased 19 percent, representing 24 percent of CBT's second-quarter revenue growth. The company's all-in-one bundle of services, Complete Connections, achieved 22 percent residential market penetration.

Wireless Services

Cincinnati Bell Wireless continued its track record as one of the premier PCS businesses in the country, adding more than 39,000 subscribers in the quarter, bringing total subscribers to 239,000. Revenues were $43 million, an increase of 107 percent over the same period last year, and EBITDA was $6 million, the second consecutive quarter of EBITDA profitability. This strong performance was highlighted by an average monthly revenue per subscriber of $70 and an industry low churn rate of 1.3 percent.

Other Communications Services

Other Communications Services revenue accounted for $36 million, an increase of 28 percent over the same quarter a year ago and EBITDA was $1 million.

In less than six months, Cincinnati Bell Any Distance, captured more than 51 percent of the Greater Cincinnati residential long distance market. Any Distance exemplifies the aggressive marketing culture at Broadwing - combining the resources of our local and national businesses to drive sales of high-margin, bundled services without adding significant incremental costs. As an example, 34 percent of these new long-distance customers also subscribe to Complete Connections.

Also during the quarter, Broadwing sold the Cincinnati Bell Supply Company, generating cash proceeds of $11 million.

On an as reported basis, loss per share for the second quarter was 15 cents which compares to earnings per share of 21 cents in the second quarter of 1999.

“Our outstanding financial results demonstrates the earning power of our assets and our leadership team's ability to execute,” said Ellenberger.

About Broadwing

Broadwing Inc. combines unparalleled customer service with the industry's most advanced and flexible 17,000 mile next-generation fiber optic network and award-winning IP backbone, to create data and Internet solutions that are innovative, reliable, and provide businesses a competitive advantage. Broadwing will be the first provider with a fully deployed optical network and sets the standard for customer accountability with the industry's only Installation Guarantee. Headquartered in Cincinnati, Ohio with 6,000 employees in 52 sales and service offices across the country, Broadwing can be found on the Web at www.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 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 for Broadwing Inc. and Broadwing Communications Inc.

Note: Broadwing will hold a conference call to discuss its second quarter results at 1:00 p.m. EDT today. To access, dial 1-800-447-0521. A replay of the call will be available by dialing 1-888-843-8996, access code 2564765#.