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Broadwing Reports Financial Results for 2001

01/31/02
Annual Revenue up 15%; EBITDA up 26% CINCINNATI—January 31, 2002--Broadwing Inc. (NYSE:BRW) today announced its financial results for the fourth quarter and full year 2001. For the year, revenues increased 15 percent to $2.35 billion, while earnings before interest, taxes, depreciation and amortization (EBITDA) grew 26 percent to $626 million.

For the fourth quarter, revenues increased 1 percent to $566 million. EBITDA declined 2 percent to $143 million.

“This has proven to be a challenging time for our economy and particularly for the communications industry,” said Rick Ellenberger, Chairman-elect and CEO, Broadwing Inc. “The actions we have taken to focus our company against the realities of the marketplace, the momentum we have established with enterprise accounts, and the operating efficiencies we have realized place our company in the best position to weather the storm and achieve our free cash flow positive objective.”

Cincinnati-Based Operations

Broadwing's Cincinnati-based businesses grew revenues 12 percent for the year to $1.22 billion. EBITDA increased 24 percent over the previous year to $516 million.

For the quarter, Cincinnati operations recorded revenue growth of 8 percent to $305 million and EBITDA growth of 18 percent year over year to $133 million.

A primary contributor to growth during the year was the company's continued success in selling bundled services. Bundles that combine local, long distance, wireless, internet access, DSL, and value added services on one bill drove increased market share across product lines while keeping churn well below industry averages.

Local Communications Services

Broadwing's local-exchange company, Cincinnati Bell Telephone, produced revenues of $833 million for the year, a 5 percent improvement over the previous year. EBITDA improved 8 percent year over year to $423 million.

In the fourth quarter, CBT delivered revenue growth of 3 percent to $212 million and EBITDA of $107 million, a 3 percent increase. A major source of the company's growth resulted from offering services nationally, through the Broadwing network, to companies headquartered in Cincinnati who previously could purchase only locally based services from Cincinnati Bell.

Cincinnati Bell's ADSL offering continued its steady growth, increasing by 54 percent over the prior year to almost 61,000 total subscribers.

Cincinnati Bell set the standard for customer service and satisfaction in 2001 by becoming the first provider to simultaneously hold the JD Power and Associates award for customer satisfaction in both the Local Residential Service and Residential Long Distance Service categories. This customer-centric focus is a major driver of the company's industry-leading 98 percent residential wireline share retention.

Wireless Services

Cincinnati Bell Wireless increased revenues 38 percent in 2001 over the prior year to $248 million. EBITDA grew 258 percent over full year 2000 to $66 million. In the fourth quarter, revenues increased 23 percent to $64 million and EBITDA improved to $17 million, up 359 percent from the same quarter in 2000.

Cincinnati Bell Wireless continues to be the market leader with over 462,000 subscribers or 29 percent of the Cincinnati market. Average revenue per user and churn continue to compare favorably to industry averages.

Broadband Services

Broadwing Communications, the company's national broadband services business, experienced growth for the first three quarters of 2001, but the effects of the economic slowdown became pronounced in the fourth quarter. For the year, revenues increased 19 percent to $1.2 billion and EBITDA grew 35 percent to $110 million compared to results for full year 2000.

The fourth quarter witnessed a revenue decline of 5 percent over the same quarter in 2000 to $271 million, and EBITDA was $8 million. The revenue softness was primarily due to a contraction in broadband demand in the carrier market.

The year also witnessed several significant accomplishments, as the company completed the industry's first all-optical switched network and established good momentum with Fortune 1000 enterprise accounts.

Broadwing leveraged the flexibility, capacity, and survivability of its all-optical switched network to create new optical services, such as MultiConnect, a scalable, distance-insensitive, recoverable service for connecting multiple locations through a single, secure hub. This unique offering is gaining solid traction, especially with media and financial enterprises.

Other Communications Services

Cincinnati Bell Any Distance, the company's award-winning long distance offering, added market share in every quarter and ended the year with 67 percent of the residential market and 38 percent of the business market.

For the full year, Other Communications Services businesses increased revenue 17 percent over the previous year to $166 million, and generated EBITDA of $27 million. For the fourth quarter, this segment recorded revenues of $43 million and EBITDA of $9 million, increases of 10 percent and 87 percent respectively over the same quarter in 2000.

“During 2001, each of Broadwing's businesses made operational improvements to heighten customer focus and manage costs,” said Kevin Mooney, COO, Broadwing Inc. “In the year ahead, we will continue to leverage our network leadership, optical product advantage, and customer operations focus to deliver unparalleled quality and value across our diverse customer set.”

The company reported a net loss of $1.36 per share for the year. Excluding non-recurring items in both 2000 and 2001, the company's loss of $0.71 per share represents a $0.11 per share improvement over the prior year.

For the quarter, the company reported a net loss of $0.91 per share. The mid-year completion of the all-optical switched network increased depreciation and contributed to the company's loss. Excluding non-recurring items, this loss was $0.29 per share, which compares to a $0.18 per share loss in the fourth quarter of 2000.

As announced in November, the company restructured to consolidate operations, streamline functions, and exit non-strategic activities. Non-recurring losses, including the restructuring charges of $0.69 per share and $0.72 per share for the quarter and the year, respectively, were partially offset by non-recurring investment gains of $0.07 per share in both periods.

For 2001, capital expenditures were $649 million, a 23 percent reduction from full year 2000. In 2001, the company completed several one-time network and systems projects that will not recur in 2002. The completion of these projects consumed almost $300 million in 2001 and will be a major driver in the reduction of the company's capital program.

“We remain focused on managing our capital to invest in success-based opportunities to bring new customers on our network,” said Mary McCann, senior vice president, corporate finance.

2002 Guidance

As previously announced, Broadwing will exit the network construction business. As a result, the company will account for the construction business as a discontinued operation in 2002. Adjusted to reflect discontinued operations, revenue for full year 2001 was $2.26 billion and EBITDA was $601 million.

For 2002, in light of current market and economic conditions, revenues are expected to decline by approximately 1 percent to $2.23 billion. EBITDA is expected to grow by 8 percent to $650 million. A portion of the EBITDA growth can be attributed to the effects of the restructuring activities Broadwing implemented in the fourth quarter of 2001. Capital expenditures for 2002 are expected to be $300 million.

As a result of these actions, Broadwing expects to reach free cash flow positive mid-year 2002.

Conference Call for Investors and Media

Broadwing will host a conference call discussing the fourth quarter and full year results on Thursday, January 31 at 10:00 a.m. EST, which can be accessed by dialing 800-422-9256 (internationally at 847-619-6928) at least fifteen minutes prior to start time. The conference call will also be web-cast on the company's website at www.broadwing.com. A taped replay will be available for one week by calling 888-843-8996 (internationally at 630-652-3044), passcode 5320057.

About Broadwing

Broadwing Inc. (NYSE: BRW) is an integrated communications company. Broadwing leads the industry as the world's first intelligent, all-optical, switched network provider and offers businesses nationwide a competitive advantage by providing data, voice and Internet solutions that are flexible, reliable and innovative on its 18,500-mile optical network and its award-winning IP backbone. Local service subsidiary Cincinnati Bell is one of the nation's most respected and best performing local exchange and wireless providers with a legacy of unparalleled customer service excellence and financial strength. Cincinnati Bell was recently ranked number one in customer satisfaction by J.D. Power and Associates for both local residential telephone service and residential long distance among mainstream users. Cincinnati Bell provides a wide range of telecommunications products and services to residential and business customers in Ohio, Kentucky and Indiana. Broadwing Inc. is headquartered in Cincinnati, Ohio. For more information, visit 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, general economic trends affecting the purchase of telecommunication services, world and national events that may affect the ability to provide 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 the 2000 Form 10-K for Broadwing Inc. and Broadwing Communications Inc.

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