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Cincinnati Bell (CBB) Acquires OnX Enterprise Solutions

Zacks Equity Research
Updated

Regional wireline operator Cincinnati Bell Inc. CBB completed the $201-million acquisition of OnX Enterprise Solutions yesterday. The company took this step to expand its network and enterprise IT services. The takeover will help the company in becoming a hybrid IT solutions provider.

Leigh Fox, president and CEO of Cincinnati Bell, said in a statement, “Cloud migration, the need for fiber infrastructure that supports 5G-ready, high density data transmission and IoT are the key trends that will define telecommunications in the future.”

Additionally, Cincinnati Bell has decided to acquire Hawaiian Telcom Inc. for $650 million. The transaction is expected to be closed in the second half of 2018. The combined entity will have 14,000 route miles of fiber and access to an undersea cable connecting Asia.

The U.S. wireline telecom industry has been witnessing a surge in consolidation among major players due to an intensely competitive environment. Several mergers and acquisitions have been taking place over the last couple of years. In the last decade, U.S. wireline phone companies lost a significant number of customers to wireless service providers and cable multi-service operators.

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In an attempt to tackle this situation, wireline operators have decided to merge in order to attain economies of scale with respect to fiber-optic cable networking and cloud-based network services. Meanwhile, small and medium business (SMB) services have become a high revenue generating segment in the data communications industry.

Fiber-optic cable network is a vital infrastructure to meet the surging demand for cloud-based business data, along with more video streaming services by individuals. Moreover, fiber-optic cable network is vital for backhaul and last mile local loop, which are required by wireless service providers for their upcoming 5G network.

Yesterday, CenturyLink Inc. CTL received a conditional regulatory nod from the U.S. Department of Justice for its proposed acquisition of Level 3 Communications Inc. LVLT. The total deal size is approximately $34 billion, including debt. The equity value of this deal is approximately $25 billion. The deal, which the companies expected to close in mid- to late-October 2017, is awaiting approval from the Federal Communications Commission and the California Public Utilities Commission.

In February 2017, Windstream Holdings, Inc. WIN acquired EarthLink Holdings Corp. The deal witnessed the incorporation of 29,000 fiber-optic route miles from EarthLink, bringing the total to 145,000 route miles. EarthLink Holdings will also bolster Windstream’s SD-WAN suite. In July 2017, Windstream acquired Broadview Networks, a leading provider of cloud-based unified communications solutions to SMBs.

In April 2016, Frontier Communications Corp. FTR completed the purchase of Verizon Communications Inc.’s VZ wireline assets worth $10.5 billion in California, Florida and Texas. Verizon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price Performance of Cincinnati Bell

Cincinnati Bell’s shares have increased 4.11%, outperforming the industry’s gain of 3.33% over the past 90 days. The company currently carries a Zacks Rank #4 (Sell).

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Level 3 Communications, Inc. (LVLT) : Free Stock Analysis Report
 
Cincinnati Bell Inc (CBB) : Free Stock Analysis Report
 
Verizon Communications Inc. (VZ) : Free Stock Analysis Report
 
CenturyLink, Inc. (CTL) : Free Stock Analysis Report
 
Windstream Holdings, Inc. (WIN) : Free Stock Analysis Report
 
Frontier Communications Corporation (FTR) : Free Stock Analysis Report
 
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Zacks Investment Research