<PAGE> 1
Rule 424(b)(5) Prospectus
Registration Nos. 333-65581
333-65581-01
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE WILL DELIVER A FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS TO
PURCHASERS OF THESE SECURITIES. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS ARE NOT AN OFFER TO SELL THESE SECURITIES NOR ARE THEY SEEKING AN
OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED NOVEMBER 19, 1998
PROSPECTUS SUPPLEMENT
(To Prospectus Dated October 13, 1998)
[CBT LOGO]
$150,000,000
CINCINNATI BELL TELEPHONE COMPANY
GUARANTEED % DEBENTURES DUE 20
GUARANTEED ON A SUBORDINATED BASIS BY
CINCINNATI BELL INC.
------------------
The Debentures of Cincinnati Bell Telephone Company will mature on
, 20 . Interest on the Debentures is payable semiannually on
and , commencing
1999. Cincinnati Bell Telephone may redeem or repurchase all or part of the
Debentures at any time. There is no sinking fund.
------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE RELATED PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
<TABLE>
<CAPTION>
PER DEBENTURE TOTAL
------------- ----------------
<S> <C> <C>
Public Offering Price....................................... % $
Underwriting Discounts...................................... % $
Proceeds to Cincinnati Bell Telephone (before expenses)..... % $
</TABLE>
Interest on the Debentures will accrue from , 1998 to
the date of delivery.
------------------
The underwriters are offering the Debentures subject to various conditions.
The underwriters expect to deliver the Debentures to purchasers on or about
, 1998.
------------------
SALOMON SMITH BARNEY
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
, 1998
<PAGE> 2
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN
THE DATE ON THE FRONT OF THOSE DOCUMENTS.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Cincinnati Bell............................................. S-4
Recent Developments......................................... S-4
Use of Proceeds............................................. S-5
Ratio of Earnings to Fixed Charges.......................... S-5
Capitalization.............................................. S-6
Summary Historical and Pro Forma Financial Data............. S-8
Description of Debentures................................... S-17
Underwriting................................................ S-20
Legal Matters............................................... S-21
Where You Can Find More Information......................... S-21
</TABLE>
PROSPECTUS
<TABLE>
<S> <C>
Summary..................................................... 3
Cincinnati Bell............................................. 4
Recent Developments......................................... 9
Ratio of Earnings to Fixed Charges.......................... 10
Description of Securities................................... 10
Plan of Distribution........................................ 18
Legal Matters............................................... 18
Experts..................................................... 18
Where You Can Find More Information......................... 19
</TABLE>
<PAGE> 3
IN CONNECTION WITH ANY UNDERWRITTEN OFFERING, SEC RULES PERMIT THE
UNDERWRITERS TO ENGAGE IN TRANSACTIONS THAT STABILIZE THE PRICE OF THE
SECURITIES. THESE TRANSACTIONS MAY INCLUDE PURCHASES FOR THE PURPOSE OF FIXING
OR MAINTAINING THE PRICE OF THE SECURITIES AT A LEVEL THAT IS HIGHER THAN THE
MARKET WOULD DICTATE IN THE ABSENCE OF SUCH STABILIZING TRANSACTIONS.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 SAFE HARBOR CAUTIONARY
STATEMENT
This Prospectus Supplement, the accompanying Prospectus and the documents
incorporated by reference herein contain "forward-looking" statements, as
defined in the Private Securities Litigation Reform Act of 1995, that are based
on current expectations, estimates and projections. Statements that are not
historical facts, including statements about the beliefs and expectations of
Cincinnati Bell Telephone or Cincinnati Bell, are forward-looking statements.
These statements involve potential risks and uncertainties and, therefore,
actual results may differ materially. You are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date on
which they were made. Neither Cincinnati Bell Telephone nor Cincinnati Bell
undertakes any obligation to update any forward-looking statements, whether as a
result of new information, future events or otherwise.
Important factors that may affect these projections or expectations
include, but are not limited to: changes in the overall economy; changes in
competition in markets in which Cincinnati Bell or Cincinnati Bell Telephone
operates; advances in telecommunications technology; changes in the
telecommunications regulatory environment; changes in the demand for the
services and products of Cincinnati Bell Telephone and Cincinnati Bell; the
ability of Cincinnati Bell Telephone and Cincinnati Bell to introduce new
service and product offerings on a timely and cost effective basis; failure of
Cincinnati Bell Telephone and Cincinnati Bell to achieve Year 2000 compliance;
and start-up of Cincinnati Bell's digital wireless communications services
business.
------------------------
At the date of this Prospectus Supplement, Cincinnati Bell is a diversified
telecommunications company with principal businesses in three industry segments:
communications services (including Cincinnati Bell Telephone), billing and
information services (operated by Convergys Information Management Group Inc.,
formerly known as Cincinnati Bell Information Systems Inc. ("CBIS")) and
customer management solutions (operated by Convergys Customer Management Group
Inc., formerly known as MATRIXX Marketing Inc. ("MATRIXX")). In April 1998,
Cincinnati Bell began taking steps to divest itself of the CBIS and MATRIXX
businesses, as well as its 45% interest in a limited partnership which operates
a cellular telecommunications business in southwestern Ohio and northern
Kentucky (the "Cellular Partnership"). Since Cincinnati Bell expects to complete
the divestiture entirely on December 31, 1998, the description of Cincinnati
Bell's business in this Prospectus Supplement does not include CBIS, MATRIXX or
the Cellular Partnership. Although Cincinnati Bell cannot assure you that the
divestiture will be completed, Cincinnati Bell is not aware at the date of this
Prospectus Supplement of any condition that would prevent it from completing the
divestiture.
For more information about Cincinnati Bell's divestiture plans, see "Recent
Developments." For information regarding Convergys Corporation ("Convergys"), a
newly formed holding company for CBIS and MATRIXX, see the Form S-1 Registration
Statement No. 333-53619, as amended, originally filed by Convergys with the SEC
on May 26, 1998 (the "Convergys S-1"). For information on how to obtain a copy
of the Convergys S-1, see "Where You Can Find More Information."
S-3
<PAGE> 4
CINCINNATI BELL
Cincinnati Bell is a full service telecommunications company that (i)
provides local, long distance, data networking, data transport, Internet and
directory advertising services in the Cincinnati, Ohio metropolitan market area,
(ii) resells long distance service and data services and products to small- and
medium-sized business customers mainly in a five-state Midwestern area, (iii)
manages a digital wireless communications business and (iv) resells
telecommunications and computer equipment in the secondary market. Cincinnati
Bell conducts its business through its subsidiaries, which are Cincinnati Bell
Telephone, Cincinnati Bell Directory Inc., Cincinnati Bell Long Distance Inc.,
Cincinnati Bell Wireless Company and Cincinnati Bell Supply Company.
Cincinnati Bell's competitive strengths include its (i) well-regarded brand
name, (ii) technologically advanced network, (iii) communications industry
focus, knowledge and experience, (iv) reputation for service quality, (v) large
installed telephone customer base and (vi) strategic relationships with targeted
industry leaders, including AT&T Corp. ("AT&T"), Lucent Technologies ("Lucent"),
DIRECTV(R) and United States Satellite Broadcasting Co. ("USSB"). By leveraging
its competitive strengths, Cincinnati Bell believes that it can increase the
market penetration of its existing services, effectively market new services,
establish and deliver its data network solutions and wireless capabilities, and
capture the full benefit of its strategic relationships with these targeted
industry leaders.
Cincinnati Bell Telephone provides telecommunications services to business
and residential customers in the Cincinnati metropolitan market area. On
September 30, 1998, Cincinnati Bell Telephone had approximately 1,032,000
network access lines in service, an increase of 4.0% or 38,000 lines from
September 30, 1997. Approximately 68% of Cincinnati Bell Telephone's network
access lines serve residential customers and 32% serve business customers. For
the nine months ended September 30, 1998, on a pro forma basis giving effect to
the Convergys divestiture, Cincinnati Bell Telephone provided 81% of Cincinnati
Bell's revenue and 80% of its operating income. For additional information, see
the "Cincinnati Bell" section of the accompanying Prospectus.
RECENT DEVELOPMENTS
DIVESTITURE OF CONVERGYS
On November 19, 1998, the Cincinnati Bell Board of Directors authorized
Cincinnati Bell to complete the divestiture of Convergys on December 31, 1998.
On that date, Cincinnati Bell will distribute one share of Convergys for each
share of Cincinnati Bell owned by those persons who are Cincinnati Bell
shareholders of record on December 1, 1998. Subsequent to the divestiture on
December 31, 1998, Cincinnati Bell will have no ownership interest in Convergys.
For additional information about the divestiture of Convergys and Cincinnati
Bell's relationship with Convergys, see the italicized paragraph on page S-3 of
this Prospectus Supplement and the "Recent Developments" section of the
accompanying Prospectus.
CREDIT RATINGS
In connection with the divestiture of Convergys, Moody's Investor Services
Inc., Standard & Poor's Rating Services and Duff & Phelps Credit Rating Co. have
reviewed the credit ratings of Cincinnati Bell Telephone and Cincinnati Bell.
The following table reflects the ratings assigned to the senior unsecured debt
of Cincinnati Bell Telephone and Cincinnati Bell by the indicated rating
agencies:
<TABLE>
<CAPTION>
CINCINNATI BELL TELEPHONE CINCINNATI BELL
------------------------- -------------------------
<S> <C> <C> <C> <C>
Moody's A2 (reaffirmed rating) A3 (upgraded from Baa1)
Standard & Poor's AA- (upgraded from A+) A (upgraded from A-)
Duff & Phelps AA- (reaffirmed rating) A (upgraded from A-)
</TABLE>
No credit rating agency has rated Cincinnati Bell's guarantee of the
Debentures, and Cincinnati Bell's guarantee is subordinated to its senior debt.
S-4
<PAGE> 5
EARLY REDEMPTION OF DEBENTURES
On October 30, 1998, Cincinnati Bell Telephone called for redemption all of
its outstanding ($50 million principal amount) Forty Year 7 3/8% Debentures due
2011 at a redemption price of 101.61% of the principal amount of the debentures.
The call premium, associated call expenses and unamortized debenture issue costs
will be recognized as an extraordinary charge in Cincinnati Bell's consolidated
statement of income for the fourth quarter of 1998. The extraordinary charge
will be approximately $0.6 million (net of income tax benefit). The redemption
will occur on November 30, 1998. Cincinnati Bell Telephone intends to finance
the redemption with the proceeds of this offering.
USE OF PROCEEDS
Cincinnati Bell Telephone estimates that it will receive net proceeds from
the sale of Debentures in this offering of approximately $148.2 million, after
deducting underwriting discounts and expenses. Cincinnati Bell Telephone will
use approximately $51 million of the net proceeds to redeem its Forty Year
7 3/8% Debentures due 2011 and will use the balance of the net proceeds to
reduce its total short-term debt, a portion of which was incurred by Cincinnati
Bell Telephone in 1996 to redeem its $40 million 7.3% Notes due 1996 and its $40
million 8 5/8% Notes due 1999. See "Recent Developments -- Early Redemption of
Debentures." Cincinnati Bell Telephone's outstanding short-term debt currently
bears interest at a rate of approximately 5.6%.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ -------------
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges of
Cincinnati Bell Telephone (1)........... 4.30 3.98 -- 8.15 6.60 6.21
</TABLE>
- ---------------
(1) For these ratios, "earnings" is determined by adding "total fixed charges"
(excluding capitalized interest), income taxes, minority interest and
amortization of capitalized interest to income from continuing operations
after eliminating equity in undistributed earnings. For this purpose, "total
fixed charges" consists of (i) interest on all indebtedness and amortization
of debt discount and expense, (ii) capitalized interest and (iii) the
interest component of rental expense. Cincinnati Bell Telephone's earnings
in 1995 were insufficient to cover fixed charges by $21.4 million.
Cincinnati Bell Telephone's ratio of earnings to fixed charges reflects
special items (credits) of $6.6 million in 1993, $3.6 million in 1994,
$121.7 million in 1995, $(28.6) million in 1996, and $(21.0) million in
1997. Excluding these special items, Cincinnati Bell Telephone's ratio of
earnings to fixed charges would have been 4.55 in 1993, 4.11 in 1994, 4.28
in 1995, 6.71 in 1996 and 5.71 in 1997. Cincinnati Bell Telephone's ratio of
earnings to fixed charges for the nine months ended September 30, 1998 was
not affected by special items.
S-5
<PAGE> 6
CAPITALIZATION
CINCINNATI BELL
The table below shows the capitalization of Cincinnati Bell on a
consolidated basis at September 30, 1998. The table also shows adjustments to
Cincinnati Bell's capitalization to reflect (1) the planned divestiture of
Convergys (the "Convergys Distribution"), (2) this offering of Debentures and
(3) the use of the proceeds of this offering to repay short-term debt and to
finance the early redemption of approximately $50 million of long-term debt. You
should read this table along with the financial information appearing elsewhere
in this Prospectus Supplement under "Summary Historical and Pro Forma Financial
Data." You should also refer to the audited financial statements of Cincinnati
Bell in its most recent Annual Report on Form 10-K and the historical and pro
forma financial information presented in Cincinnati Bell's Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K incorporated by reference in this
Prospectus Supplement. See "Where You Can Find More Information."
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1998
---------------------------------------------------------------------
EARLY
CONVERGYS REDEMPTION
DISTRIBUTION AS AND OFFERING PRO FORMA
HISTORICAL ADJUSTMENTS ADJUSTED ADJUSTMENTS AS ADJUSTED
---------- ------------ -------- ------------ -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents......... $ 1.5 $ (1.4)(a) $ 0.1 $ -- $ 0.1
========= ======= ====== ======= ======
Short-term debt (includes current $ 50.8 (e)
portion of long-term debt)...... $ 619.3 $(478.5)(b) $140.8 (148.2)(f) $ 43.4
Long-term debt (excludes current (49.9)(e)
maturities)..................... 267.8 (0.3)(c) 267.5 150.0 (f) 367.6
Shareowners' equity
Common stock.................... 136.4 -- 136.4 -- 136.4
Additional paid-in capital...... 227.3 (222.3)(d) 5.0 -- 5.0
Retained earnings (deficit)..... 294.3 (294.3)(d) -- (0.6)(e) (0.6)
Other comprehensive income...... (10.8) 2.5 (d) (8.3) -- (8.3)
--------- ------- ------ ------- ------
Total shareowners' equity.... 647.2 (514.1)(d) 133.1 (0.6) 132.5
--------- ------- ------ ------- ------
Total capitalization....... $ 1,534.3 $(992.9) $541.4 $ 2.1 $543.5
========= ======= ====== ======= ======
</TABLE>
- ---------------
(a) Reflects the elimination of Convergys' cash and cash equivalents at
September 30, 1998.
(b) Reflects the allocation of $478.5 million of consolidated Cincinnati Bell
short-term debt outstanding at September 30, 1998 to Convergys.
(c) Reflects the allocation of $0.3 million in consolidated Cincinnati Bell
long-term debt outstanding at September 30, 1998 to Convergys.
(d) Reflects the elimination of the components of Cincinnati Bell consolidated
shareowners' equity at September 30, 1998 that relate to Convergys and the
incurrence of approximately $10 million in non-recurring costs (net of tax
benefit) related to the Convergys Distribution. Included in the elimination
of Convergys shareowners' equity is an estimated amount of approximately $33
million, net of deferred tax benefit, resulting from the allocation of
Cincinnati Bell pension trust assets and obligations to Convergys. The
actual amount of the reduction in shareowners' equity resulting from the
allocation of the Cincinnati Bell pension trust assets will be determined by
calculations performed as of the date of the Convergys Distribution, using a
methodology that has been agreed to by the management of Cincinnati Bell and
Convergys and may differ from the amount reflected. The final allocation may
differ due to the discount rate and other assumptions used in the final
calculation at the time of the Convergys Distribution. In addition, the
final pension asset allocation will be subject to regulatory approval.
S-6
<PAGE> 7
(e) Reflects the early redemption of $50.0 million in long-term notes with a
carrying value of $49.9 million, financed by short-term debt of Cincinnati
Bell to be incurred upon the date of the early redemption, November 30,
1998. The early redemption will result in an extraordinary loss (including a
call premium of $0.8 million) of $0.6 million, net of tax benefit.
(f) Reflects this offering of Debentures and the proceeds, net of the estimated
costs of the offering.
CINCINNATI BELL TELEPHONE
The table below shows the short-term debt and capitalization of Cincinnati
Bell Telephone at September 30, 1998. The table also shows adjustments to
Cincinnati Bell Telephone's short-term debt and capitalization to reflect (1)
this offering of Debentures and (2) the use by Cincinnati Bell Telephone of the
proceeds of this offering to repay notes payable to Cincinnati Bell and to
finance the early redemption of approximately $50 million of long-term debt. You
should read this table along with the financial information appearing elsewhere
in this Prospectus Supplement under "Summary Historical and Pro Forma Financial
Data." You should also refer to the audited financial statements of Cincinnati
Bell in its most recent Annual Report on Form 10-K and the historical and pro
forma financial information presented in Cincinnati Bell's Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K incorporated by reference in this
Prospectus Supplement. See "Where You Can Find More Information."
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1998
---------------------------------------------
EARLY REDEMPTION
AND OFFERING PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ---------------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Cash and cash equivalents............................. $ (3.1) $ -- $ (3.1)
====== ======= ======
$ 50.8 (a)
Notes payable to (receivable from) Cincinnati Bell.... $ 86.2 (148.2)(b) $(11.2)(c)
Short-term debt (includes current portion of long-term
debt)............................................... 3.2 -- 3.2
(49.9)(a)
Long-term debt (excludes current maturities).......... 217.9 150.0 (b) 318.0
Shareowner's equity
Common stock........................................ -- -- --
Additional paid-in capital.......................... 167.1 -- 167.1
Retained earnings (deficit)......................... 80.2 (0.6)(a) 79.6
------ ------- ------
Total shareowner's equity........................ 247.3 (0.6)(a) 246.7
------ ------- ------
Total capitalization........................... $554.6 $ 2.1 $556.7
====== ======= ======
</TABLE>
- ---------------
(a) Reflects the early redemption of $50.0 million in long-term notes with a
carrying value of $49.9 million, financed by notes payable to Cincinnati
Bell to be incurred upon the date of early redemption, November 30, 1998.
The early redemption will result in an extraordinary loss (including a call
premium of $0.8 million) of $0.6 million, net of tax benefit.
(b) Reflects this offering of Debentures and the proceeds, net of the estimated
costs of the offering. Cincinnati Bell Telephone will use part of the net
proceeds to repay notes payable to Cincinnati Bell and will advance the
balance of the net proceeds to Cincinnati Bell.
(c) Cincinnati Bell Telephone will advance the balance of the net proceeds to
Cincinnati Bell, which will use the proceeds to repay short-term debt.
S-7
<PAGE> 8
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
CINCINNATI BELL CONSOLIDATED HISTORICAL FINANCIAL DATA
The following table presents consolidated historical financial data of
Cincinnati Bell. The statement of operations data for each of the three years
ended December 31, 1995, 1996 and 1997 and the balance sheet data at December
31, 1996 and 1997 are taken from and should be read along with the audited
consolidated historical financial statements and the notes thereto of Cincinnati
Bell included in its most recent Annual Report on Form 10-K, incorporated by
reference in this Prospectus Supplement. The statement of operations data for
the nine months ended September 30, 1997 and 1998 and the balance sheet data at
September 30, 1997 and 1998 are taken from and should be read along with the
unaudited consolidated historical financial statements and the notes thereto of
Cincinnati Bell included in the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998, incorporated by reference in this Prospectus
Supplement. The interim financial statements have not been audited, but
management of Cincinnati Bell believes they fairly present its financial
position and results of operations for those periods. See "Where You Can Find
More Information."
Information for the nine months ended September 30, 1998 reflects,
beginning February 28, 1998 (the purchase date), the acquisition by Cincinnati
Bell of American Transtech, Inc. and the assets of AT&T Canada Enterprises,
Inc., AT&T's Canadian customer care business (collectively "Transtech"), from
AT&T (the "Transtech Acquisition").
S-8
<PAGE> 9
CINCINNATI BELL CONSOLIDATED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------- --------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
(IN MILLIONS EXCEPT FOR PER SHARE INFORMATION,
OPERATING DATA AND RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................... $1,336.1 $1,573.7 $1,756.8 $1,295.8 $1,653.7
Costs and expenses:
Costs of providing services and products
sold.................................... 695.1 839.8 937.9 692.2 926.0
Selling, general and administrative....... 253.3 279.3 286.0 212.6 269.3
Depreciation and amortization............. 162.3 172.8 185.4 137.2 154.9
Year 2000 programming costs............... -- -- 14.1 6.9 28.4
Mandated telecommunications costs......... -- -- 6.3 5.0 10.7
Special items (credits) (1)............... 178.7 (24.7) 14.0 (21.0) 42.6
-------- -------- -------- -------- --------
Total costs and expenses........... 1,289.4 1,267.2 1,443.7 1,032.9 1,431.9
Operating income (2)........................ 46.7 306.5 313.1 262.9 221.8
Other income (expense), net (3)............. (13.5) 12.1 19.3 14.3 (3.4)
Interest expense (4)........................ 52.8 33.9 35.5 26.8 44.5
-------- -------- -------- -------- --------
Income (loss) before income taxes........... (19.6) 284.7 296.9 250.4 173.9
Income taxes................................ 5.7 99.7 103.3 87.2 60.2
-------- -------- -------- -------- --------
Income (loss) from continuing operations.... (25.3) 185.0 193.6 163.2 113.7
-------- -------- -------- -------- --------
Extraordinary items (5)..................... (7.0) -- (210.0) -- --
-------- -------- -------- -------- --------
Net income (loss)........................... $ (32.3) $ 185.0 $ (16.4) $ 163.2 $ 113.7
======== ======== ======== ======== ========
Earnings (loss) per common share
From continuing operations
Basic................................... $ (.19) $ 1.38 $ 1.43 $ 1.21 $ .84
Diluted................................. $ (.19) $ 1.35 $ 1.41 $ 1.19 $ .82
Net income (loss)
Basic................................... $ (.24) $ 1.38 $ (.12) $ 1.21 $ .84
Diluted................................. $ (.24) $ 1.35 $ (.12) $ 1.19 $ .82
Weighted average common shares outstanding
including equivalents
Basic..................................... 132.0 133.9 135.2 135.2 135.9
Diluted................................... 132.0 137.2 137.7 137.7 138.3
OTHER FINANCIAL DATA:
Capital additions (including
acquisitions)............................. $ 166.8 $ 220.8 $ 236.1 $ 172.5 $ 846.3
Ratio of earnings to fixed charges (6)...... -- 5.57 5.22 5.71 3.08
OPERATING DATA:
Network access lines (in thousands)......... 906 958 1,005 994 1,032
Employees................................... 15,086 19,741 20,790 19,428 30,840
</TABLE>
S-9
<PAGE> 10
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
-------------------- --------------------
1996 1997 1997 1998
-------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................. $ 2.0 $ 9.9 $ 5.7 $ 1.5
Net property, plant and equipment (7).................. 985.8 703.2 1,020.7 838.9
Total assets........................................... 1,670.9 1,498.7 1,752.1 2,292.4
Debt:
Maturing within one year............................. 224.2 190.6 219.3 619.3
Long-term............................................ 279.5 269.2 269.9 267.8
-------- -------- -------- --------
Total debt......................................... 503.7 459.8 489.2 887.1
Shareowners' equity (7)................................ 634.4 579.7 770.7 647.2
</TABLE>
S-10
<PAGE> 11
NOTES TO CINCINNATI BELL CONSOLIDATED HISTORICAL FINANCIAL DATA
(1) The special items in 1995 were a $131.6 million charge associated with a
restructuring of Cincinnati Bell and Cincinnati Bell Telephone operations, a
$39.6 million goodwill impairment charge at MATRIXX and $7.5 million of
in-process research and development costs, which were expensed in connection
with an acquisition at CBIS. Special items in 1996 were $29.7 million in
pension settlement gains related to the 1995 Cincinnati Bell and Cincinnati
Bell Telephone restructuring plan, net of $5.0 million of in-process
research and development costs, which were expensed in connection with
acquisitions at CBIS and MATRIXX. The special items recorded in 1997 were a
charge of $35.0 million associated with a restructuring of MATRIXX
operations, net of the $21.0 million in pension settlement gains related to
the 1995 Cincinnati Bell Telephone and Cincinnati Bell restructuring plan.
The special credit recorded in the first nine months of 1997 was $21.0
million in non-cash settlement gains resulting from lump-sum pension
distributions pursuant to the 1995 Cincinnati Bell and Cincinnati Bell
Telephone restructuring plan. The special item recorded in the first nine
months of 1998 was $42.6 million of in-process research and development
costs, which were expensed in connection with the Transtech Acquisition.
(2) Operating income includes special items as discussed in Note 1 above.
Excluding special items, operating income would have been $225.4 million in
1995, $281.8 million in 1996, $327.1 million in 1997 and $241.9 million and
$264.4 million for the nine months ended September 30, 1997 and 1998,
respectively.
(3) Other income (expense), net for 1995 includes a charge of $5.0 million to
reduce real estate held for sale to its fair market value and a charge of
$13.3 million resulting from the termination of a currency and interest rate
swap agreement intended to hedge MATRIXX's investment in its operations in
France. Other income (expense), net for the nine months ended September 30,
1998 includes $16.3 million in equity losses from the Cincinnati Bell
Wireless venture with AT&T Wireless PCS, Inc. ("AT&T PCS").
(4) Interest expense for 1996 includes a $2.5 million reversal of accrued
interest related to liabilities to interexchange carriers.
(5) Extraordinary items include a $7.0 million charge, net of tax benefit,
recorded in 1995 for debt extinguishment and a $210.0 million charge, net of
tax benefit, recorded in 1997 resulting from Cincinnati Bell Telephone's
discontinuance of Statement of Financial Accounting Standards ("SFAS") No.
71, "Accounting for the Effects of Certain Types of Regulation."
(6) For these ratios, "earnings" is determined by adding "total fixed charges"
(excluding capitalized interest), income taxes, minority interest and
amortization of capitalized interest to income from continuing operations
after eliminating equity in undistributed earnings. For this purpose, "total
fixed charges" consists of (i) interest on all indebtedness and amortization
of debt discount and expense, (ii) capitalized interest and (iii) the
interest component of rental expense. Cincinnati Bell's earnings in 1995
were insufficient to cover fixed charges by $24.1 million. Cincinnati Bell's
ratio of earnings to fixed charges reflects special items (credits) of
$178.7 million in 1995, $(24.7) million in 1996, $14.0 million in 1997,
$(21.0) million for the first nine months of 1997 and $42.6 million for the
first nine months of 1998. Excluding these special items, Cincinnati Bell's
ratio of earnings to fixed charges would have been 3.04 in 1995, 5.17 in
1996, 5.42 in 1997, 5.30 for the nine months ended September 30, 1997 and
3.63 for the nine months ended September 30, 1998. For information regarding
the ratio of earnings to fixed charges for the years 1993 through 1994, see
the "Ratio of Earnings to Fixed Charges" section of the accompanying
Prospectus.
(7) The extraordinary item in 1997 resulting from Cincinnati Bell Telephone's
discontinuance of SFAS No. 71 resulted in a $327.7 million reduction in
property, plant and equipment and a $210.0 million reduction in shareowners'
equity.
S-11
<PAGE> 12
CINCINNATI BELL CONSOLIDATED PRO FORMA FINANCIAL DATA
The following table presents consolidated pro forma financial data for
Cincinnati Bell, giving effect to the Transtech Acquisition and the Convergys
Distribution. The pro forma statement of operations data for each of the three
years ended December 31, 1995, 1996 and 1997 and the nine months ended September
30, 1997 and 1998 are taken from, or prepared on a basis consistent with, and
should be read along with, the Cincinnati Bell consolidated pro forma financial
statements and the notes thereto included in Cincinnati Bell's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998, and its Current Report on
Form 8-K, date of report October 13, 1998. See "Where You Can Find More
Information."
The consolidated pro forma balance sheet data have been presented as if the
Convergys Distribution had occurred on September 30, 1998. The consolidated pro
forma statement of operations data for the year ended December 31, 1997 and the
nine months ended September 30, 1997 and 1998 have been presented as if the
Transtech Acquisition had occurred on January 1, 1997. The consolidated pro
forma statement of operations data for the years ended December 31, 1995, 1996
and 1997 and the nine months ended September 30, 1997 and 1998 have been
presented as if the Convergys Distribution had occurred on January 1, 1995.
The consolidated pro forma financial data provided below are unaudited, are
presented for informational purposes only and do not necessarily indicate what
the actual results of operations would have been had the Transtech Acquisition
and the Convergys Distribution occurred on the dates assumed, or what the future
operating results or financial position of Cincinnati Bell may be. The data
provided below should be read along with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the consolidated
historical and pro forma financial statements and the notes thereto of
Cincinnati Bell included in the documents incorporated by reference in this
Prospectus Supplement. See "Where You Can Find More Information."
S-12
<PAGE> 13
CINCINNATI BELL CONSOLIDATED PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------- ------------------
1995 1996 1997 1997 1998
------ ------ ------ ------- -------
(IN MILLIONS EXCEPT FOR PER SHARE INFORMATION,
OPERATING DATA AND RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................... $736.0 $779.8 $834.5 $618.0 $658.6
Costs and expenses:
Costs of providing services and products
sold................................... 301.9 321.3 344.6 255.7 279.1
Selling, general and administrative....... 176.7 186.6 184.7 136.5 150.9
Depreciation and amortization............. 116.4 121.0 124.3 92.8 82.4
Year 2000 programming costs............... -- -- 4.2 1.5 7.7
Mandated telecommunications costs......... -- -- 6.3 5.0 10.7
Special items (credits) (1)............... 131.6 (29.7) (21.0) (21.0) --
------ ------ ------ ------ ------
Total costs and expenses.......... 726.6 599.2 643.1 470.5 530.8
Operating income (2)........................ 9.4 180.6 191.4 147.5 127.8
Other income (expense), net (3)............. (9.1) 0.5 (2.7) (2.3) (17.8)
Interest expense (4)........................ 45.4 27.9 30.1 23.1 17.8
------ ------ ------ ------ ------
Income (loss) before income taxes........... (45.1) 153.2 158.6 122.1 92.2
Income taxes................................ (16.0) 53.7 56.3 42.3 32.6
------ ------ ------ ------ ------
Income (loss) from continuing operations
(5)....................................... $(29.1) $ 99.5 $102.3 $ 79.8 $ 59.6
====== ====== ====== ====== ======
Earnings (loss) per common share
Basic..................................... $ (.22) $ .74 $ .76 $ .59 $ .44
Diluted................................... $ (.22) $ .73 $ .74 $ .58 $ .43
Weighted average common shares outstanding
including equivalents
Basic..................................... 132.0 133.9 135.2 135.2 135.9
Diluted................................... 132.0 137.2 137.7 137.7 138.3
OTHER FINANCIAL DATA:
Capital additions (including
acquisitions)............................. $ 92.8 $106.4 $159.6 $127.3 $116.2
Ratio of earnings to fixed charges (6)...... -- 5.96 5.66 5.75 5.41
OPERATING DATA:
Network access lines (in thousands)......... 906 958 1,005 994 1,032
Employees................................... 3,088 3,109 3,318 3,223 3,516
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
1998
-------------
(IN MILLIONS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 0.1
Net property, plant and equipment........................... 609.5
Total assets................................................ 870.2
Debt:
Maturing within one year.................................. 140.8
Long-term................................................. 267.5
------
Total debt............................................. 408.3
Shareowners' equity (7)..................................... 133.1
</TABLE>
S-13
<PAGE> 14
NOTES TO CINCINNATI BELL CONSOLIDATED PRO FORMA FINANCIAL DATA
(1) The special item in 1995 was a $131.6 million charge, net of settlement
gains, associated with a restructuring of Cincinnati Bell and Cincinnati
Bell Telephone operations. The special credits recorded in 1996 and in 1997
were non-cash settlement gains resulting from lump-sum pension distributions
pursuant to the 1995 Cincinnati Bell and Cincinnati Bell Telephone
restructuring plan.
(2) Operating income includes special items as discussed in Note 1 above.
Excluding special items, pro forma operating income would have been $141.0
million in 1995, $150.9 million in 1996, $170.4 million in 1997 and $126.5
million for the nine months ended September 30, 1997. Pro forma operating
income for the nine months ended September 30, 1998 was not affected by
special items.
(3) Other income (expense), net for 1995 includes a charge of $5.0 million to
reduce real estate held for sale to its fair market value. Other income
(expense), net for the nine months ended September 30, 1998 includes $16.3
million in equity losses from the Cincinnati Bell Wireless venture with AT&T
PCS.
(4) Interest expense in 1996 includes a $2.5 million reversal of accrued
interest related to liabilities to interexchange carriers.
(5) Income from continuing operations excludes a $7.0 million extraordinary
charge, net of tax benefit, recorded in 1995 for debt extinguishment and a
non-cash $210.0 million extraordinary charge, net of tax benefit, recorded
in 1997 resulting from Cincinnati Bell Telephone's discontinuance of SFAS
No. 71, "Accounting for the Effects of Certain Types of Regulation."
(6) For these ratios, "earnings" is determined by adding "total fixed charges"
(excluding capitalized interest), income taxes, minority interest and
amortization of capitalized interest to income from continuing operations
after eliminating equity in undistributed earnings. For this purpose, "total
fixed charges" consists of (i) interest on all indebtedness and amortization
of debt discount and expense, (ii) capitalized interest and (iii) the
interest component of rental expense. Cincinnati Bell's earnings in 1995,
pro forma for the Convergys Distribution, were insufficient to cover fixed
charges by $45.1 million. Cincinnati Bell's ratio of earnings to fixed
charges, pro forma for the Convergys Distribution, reflects special items
(credits) of $131.6 million in 1995, $(29.7) million in 1996, and $(21.0)
million in 1997 and $(21.0) million for the first nine months of 1997.
Excluding these special items, Cincinnati Bell's ratio of earnings to fixed
charges, pro forma for the Convergys Distribution, would have been 2.75 in
1995, 5.00 in 1996, 5.05 in 1997 and 4.94 for the nine months ended
September 30, 1997. Cincinnati Bell's ratio of earnings to fixed charges,
pro forma for the Convergys Distribution, for the nine months ended
September 30, 1998 was not affected by special items.
(7) Pro forma shareowners' equity reflects the elimination of Convergys'
shareowners' equity from Cincinnati Bell's historical amounts and the
incurrence of approximately $10 million in nonrecurring costs, net of tax
benefit, related to the Convergys Distribution. Included in the elimination
of Convergys' shareowners' equity is an estimated amount of approximately
$33 million, net of deferred tax benefit, resulting from the allocation of
Cincinnati Bell pension trust assets and obligations to Convergys. The
actual amount of shareowners' equity transferred to Convergys as a result of
the allocation of the Cincinnati Bell pension trust assets will be
determined by calculations agreed to by the management of Cincinnati Bell
and Convergys, and may differ from the amount reflected. The final
allocation may differ due to the discount rates and other assumptions used
in the final calculation at the time of the Convergys Distribution. In
addition, the final pension asset allocation will be subject to regulatory
approval.
S-14
<PAGE> 15
CINCINNATI BELL TELEPHONE HISTORICAL FINANCIAL DATA
The following table presents summary historical financial data of
Cincinnati Bell Telephone. The statement of operations data for each of the
three years ended December 31, 1995, 1996 and 1997 and the balance sheet data at
December 31, 1996 and 1997 are taken from and should be read along with the
audited consolidated financial statements and the notes thereto of Cincinnati
Bell included or incorporated by reference in its most recent Annual Report on
Form 10-K, incorporated by reference in this Prospectus Supplement. The
statement of operations data for the nine months ended September 30, 1997 and
1998 and the balance sheet data at September 30, 1997 and 1998 are taken from
and should be read along with the unaudited financial statements and the notes
thereto of Cincinnati Bell included in its Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998, incorporated by reference in this Prospectus
Supplement. The interim financial statements have not been audited, but
management of Cincinnati Bell believes they fairly present Cincinnati Bell
Telephone's financial position and results of operations for those periods. See
"Where You Can Find More Information."
Cincinnati Bell Telephone is a wholly owned subsidiary of Cincinnati Bell,
and it receives general and administrative services from Cincinnati Bell.
Cincinnati Bell Telephone's cash is managed by Cincinnati Bell and its
operations are partially financed through borrowings of Cincinnati Bell. The
financial data provided below are presented for informational purposes only and
do not necessarily indicate what the results of operations and financial
position of Cincinnati Bell Telephone would have been if Cincinnati Bell
Telephone were not a wholly owned subsidiary of Cincinnati Bell, or what
Cincinnati Bell Telephone's future performance may be.
CINCINNATI BELL TELEPHONE HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ --------------------
1995 1996 1997 1997 1998
------- ------- -------- -------- --------
(IN MILLIONS EXCEPT FOR OPERATING DATA AND RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues...................................... $624.4 $650.8 $ 670.1 $495.0 $532.9
Costs and expenses:
Costs of providing services and products
sold..................................... 253.6 257.7 267.6 197.4 217.8
Selling, general and administrative......... 142.1 149.3 145.6 109.5 115.3
Depreciation and amortization............... 113.0 116.6 120.6 90.3 78.8
Year 2000 programming costs................. -- -- 4.2 1.5 7.8
Mandated telecommunications cost............ -- -- 6.3 5.0 10.7
Special items (credits) (1)................. 121.7 (28.5) (21.0) (21.0) --
------ ------ ------- ------ ------
Total costs and expenses............ 630.4 495.1 523.3 382.7 430.4
Operating income (loss) (2)................... (6.0) 155.7 146.8 112.3 102.5
Other income, net............................. 11.4 3.9 5.7 4.3 --
Interest expense (3).......................... 26.9 17.4 20.4 16.0 14.5
------ ------ ------- ------ ------
Income (loss) before income taxes............. (21.5) 142.2 132.1 100.6 88.0
Income taxes.................................. (10.2) 49.6 46.9 35.7 30.3
------ ------ ------- ------ ------
Income (loss) from continuing operations...... (11.3) 92.6 85.2 64.9 57.7
------ ------ ------- ------ ------
Extraordinary item (4)........................ -- -- (210.0) -- --
------ ------ ------- ------ ------
Net income (loss)............................. $(11.3) $ 92.6 $(124.8) $ 64.9 $ 57.7
====== ====== ======= ====== ======
OTHER FINANCIAL DATA:
Capital additions............................. $ 90.3 $101.4 $ 141.1 $112.2 $105.4
Ratio of earnings to fixed charges (5)........ -- 8.15 6.60 6.53 6.21
OPERATING DATA:
Network access lines (in thousands)........... 906 958 1,005 994 1,032
Employees..................................... 2,732 2,710 2,863 2,810 2,934
</TABLE>
S-15
<PAGE> 16
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
------------------ --------------------
1996 1997 1997 1998
-------- ------ --------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents (6)...................... $ (2.3) $ (3.6) $ (3.7) $ (3.1)
Net property, plant and equipment (4).............. 855.2 550.6 879.1 578.0
Total assets....................................... 1,005.5 706.4 1,037.3 739.2
Notes payable to Cincinnati Bell................... 56.6 63.4 66.7 86.2
Debt maturing within one year...................... 0.8 3.4 3.4 3.2
Long-term debt..................................... 221.5 218.4 218.7 217.9
Shareowner's equity (4)............................ 450.6 240.2 443.2 247.3
</TABLE>
NOTES TO CINCINNATI BELL TELEPHONE HISTORICAL FINANCIAL DATA
(1) The special item in 1995 was a $121.7 million charge, net of settlement
gains, associated with a restructuring of Cincinnati Bell Telephone
operations. The special credits recorded in 1996 and 1997 were non-cash
settlement gains resulting from lump-sum pension distributions pursuant to
the 1995 Cincinnati Bell Telephone restructuring.
(2) Operating income (loss) includes special items as discussed in Note 1 above.
Excluding special items, operating income would have been $115.7 million in
1995, $127.2 million in 1996, $125.8 million in 1997 and $91.3 million for
the nine months ended September 30, 1997. Operating income for the nine
months ended September 30, 1998 was not affected by special items.
(3) Interest expense in 1996 includes a $2.5 million reversal of accrued
interest related to liabilities to interexchange carriers.
(4) The extraordinary item recorded in 1997 was a non-cash charge of $210.0
million, net of tax benefit, resulting from Cincinnati Bell Telephone's
discontinuance of SFAS No. 71, "Accounting for the Effects of Certain Types
of Regulation." The charge resulted in a $327.7 million reduction in
Cincinnati Bell Telephone's property, plant and equipment and a $210.0
million reduction in shareowner's equity.
(5) For these ratios, "earnings" is determined by adding "total fixed charges"
(excluding capitalized interest), income taxes, minority interest and
amortization of capitalized interest to income from continuing operations
after eliminating equity in undistributed earnings. For this purpose, "total
fixed charges" consists of (i) interest on all indebtedness and amortization
of debt discount and expense, (ii) capitalized interest and (iii) the
interest component of rental expense. Cincinnati Bell Telephone's earnings
in 1995 were insufficient to cover fixed charges by $21.4 million.
Cincinnati Bell Telephone's ratio of earnings to fixed charges reflects
special items (credits) of $121.7 million in 1995, $(28.6) million in 1996,
and $(21.0) million in 1997 and $(21.0) million for the first nine months of
1997. Excluding these special items, Cincinnati Bell Telephone's ratio of
earnings to fixed charges would have been 4.28 in 1995, 6.71 in 1996, 5.71
in 1997 and 5.37 for the nine months ended September 30, 1997. Cincinnati
Bell Telephone's ratio of earnings to fixed charges for the nine months
ended September 30, 1998 was not affected by special items.
(6) Cincinnati Bell has historically managed cash on a centralized basis, which
resulted in negative cash balances for Cincinnati Bell Telephone for
financial reporting purposes at the dates presented above.
S-16
<PAGE> 17
DESCRIPTION OF DEBENTURES
The following description of the particular terms of the Debentures
supplements the description of the general terms and provisions of the
Debentures set forth in the accompanying Prospectus (the Debentures are referred
to as the "Securities" or "Guaranteed Debt Securities" in the Prospectus). You
should carefully read the entire Prospectus and Prospectus Supplement to
understand fully the terms of the Debentures. All of the information set forth
below is qualified in its entirety by the more detailed explanation set forth in
the accompanying Prospectus.
GENERAL
The Debentures are a single series of senior debt securities issued by
Cincinnati Bell Telephone. The Debentures are unsecured and will rank equally
with all of Cincinnati Bell Telephone's other senior and unsubordinated debt.
Cincinnati Bell will unconditionally guarantee the due and punctual payment of
principal, premium, if any, and interest payable pursuant to the terms of the
Debentures. However, Cincinnati Bell's guarantee will be subordinated in right
of payment to Cincinnati Bell's senior and unsubordinated debt.
The Indenture pursuant to which the Debentures will be issued does not
limit the amount of Debentures that Cincinnati Bell Telephone may issue or the
amount of debt that Cincinnati Bell Telephone or Cincinnati Bell may incur in
the future. Because Cincinnati Bell is a holding company that conducts all of
its operations through subsidiaries, Cincinnati Bell's guarantee also will be
effectively subordinated to the claims of creditors of Cincinnati Bell's
subsidiaries. As of September 30, 1998, Cincinnati Bell had approximately $887
million of senior debt outstanding, of which $479 million has been allocated to
Convergys and is expected to be repaid by Convergys at the time of the Convergys
Distribution. Cincinnati Bell and its subsidiaries (excluding Convergys) had
approximately $408 million of senior debt outstanding as of September 30, 1998,
of which $221 million was attributable to Cincinnati Bell Telephone.
The maximum principal amount of the Debentures that Cincinnati Bell
Telephone will issue initially is $150,000,000. If the Debentures are issued at
a premium over their principal amount, however, this limit will be based on the
initial offering price of the Debentures. Cincinnati Bell Telephone may at its
option "reopen" the Debentures in the future and issue additional Debentures of
the same series.
The Debentures will mature on , 20 . Cincinnati Bell
Telephone has the option to redeem the Debentures prior to their stated maturity
on the terms described below; holders of the Debentures do not have any similar
option to require Cincinnati Bell Telephone to redeem the Debentures before
their stated maturity. The Debentures will not be entitled to the benefit of any
sinking fund.
Cincinnati Bell Telephone will periodically pay interest on the Debentures
at a rate of % from the date of issuance. Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Interest will be payable
semiannually on each and , beginning
, 1999, to the persons in whose names the Debentures are registered
at the close of business on the preceding or
, respectively, except that any interest payable upon
maturity or earlier redemption of the Debentures will be payable to the person
to whom the principal of the Debenture is payable.
The Debentures will be issued in registered form without coupons, in
multiples of $1,000. The Debentures will be issued in "book entry" form,
represented by a permanent global note registered in the name of The Depository
Trust Company, or its nominee. However, we reserve the right to issue the
Debentures in certificate form registered in the name of the holders of the
Debentures. You should refer to the section "Description of the
Securities -- Book-Entry Notes -- Registration, Transfer and Payment of Interest
and Principal" in the accompanying Prospectus for more information.
CINCINNATI BELL TELEPHONE'S OPTION TO REDEEM DEBENTURES
Cincinnati Bell Telephone may, at its option, redeem all or part of the
Debentures at any time. The redemption price will equal the greater of (1) 100%
of the principal amount of the Debentures to be redeemed and (2) a "make whole"
premium, which will be calculated as described below. At the time of any
S-17
<PAGE> 18
redemption, Cincinnati Bell Telephone will also pay all interest that has
accrued to the redemption date on the redeemed Debentures.
Calculation of Make Whole Premium
The "make whole" premium will equal the sum of the present values of the
Remaining Scheduled Payments (as defined below) discounted, on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months), at a rate
equal to the Treasury Rate (as defined below) plus basis points.
"Remaining Scheduled Payments" means the remaining scheduled payments of
the principal and interest that would be due after the redemption date of a
Debenture if such Debenture were not redeemed. However, if the redemption date
is not a scheduled interest payment date, the amount of the next succeeding
scheduled interest payment on such Debenture will be reduced by the amount of
interest accrued on such Debenture to such redemption date.
"Treasury Rate" means an annual rate equal to the semiannual equivalent
yield to maturity of the Comparable Treasury Issue, assuming a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price (as defined below) for the redemption
date. The semiannual equivalent yield to maturity will be computed as of the
third business day immediately preceding the redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker (as defined below) as having a
maturity comparable to the remaining term of the Debentures that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the Debentures.
"Independent Investment Banker" means Salomon Smith Barney Inc.
"Comparable Treasury Price" means the average of three Reference Treasury
Dealer Quotations (as defined below) obtained by the Trustee for the redemption
date.
"Reference Treasury Dealers" means Salomon Smith Barney Inc. (so long as it
continues to be a primary U.S. Government securities dealer) and any two other
primary U.S. Government securities dealers chosen by Cincinnati Bell Telephone.
If Salomon Smith Barney Inc. ceases to be a primary U.S. Government securities
dealer, Cincinnati Bell Telephone will appoint in its place another nationally
recognized investment banking firm that is a primary U.S. Government securities
dealer.
"Reference Treasury Dealer Quotation" means the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by a Reference Treasury Dealer at 3:30 p.m., New York
City time on the third business day preceding the redemption date.
Redemption Procedures
Cincinnati Bell Telephone will give you at least 30 days (but not more than
60 days) prior notice of any redemption. If less than all of the Debentures are
redeemed, the Trustee will select the Debentures to be redeemed by a method
determined by the Trustee to be fair and appropriate.
On or before the redemption date, Cincinnati Bell Telephone will deposit
with a paying agent (or the Trustee) money sufficient to pay the redemption
price and accrued interest on the Debentures to be redeemed on such date. On and
after the redemption date, interest will cease to accrue on any Debentures that
have been called for redemption (unless Cincinnati Bell Telephone defaults in
the payment of the Redemption Price and accrued interest).
If any redemption date is not a business day, then the redemption price and
all accrued and unpaid interest to the date of redemption will be payable on the
next business day (and without any interest or other
S-18
<PAGE> 19
payment in respect of any such delay). However, if the business day is in the
next calendar year, the redemption amount will be payable on the preceding
business day.
YEAR 2000
As described in the accompanying Prospectus, the Debentures will be issued
in "book-entry" form, represented by a permanent global note registered in the
name of The Depositary Trust Company ("DTC"), or its nominee. The following
information has been provided by DTC.
DTC management is aware that some computer applications and systems for
processing data ("Systems") that are dependent upon calendar dates, including
dates before, on and after January 1, 2000, may encounter "Year 2000 problems."
DTC has informed its participants and other members of the financial community
(the "Industry") that it has developed and is implementing a program so that its
Systems, as the same relate to the timely payment of distributions (including
principal and income payments) to securityholders, book-entry deliveries and
settlement of trades within DTC ("DTC Services"), continue to function
appropriately. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service providers,
among others. DTC has informed the Industry that it is contacting (and will
continue to contact) third party vendors from whom DTC acquires services to: (i)
impress upon them the importance of such services being Year 2000 compliant and
(ii) determine the extent of their efforts for Year 2000 remediation (and, as
appropriate, testing) of their services. In addition, DTC is in the process of
developing such contingency plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the Industry for informational purposes only and is not intended to
serve as a representation, warranty or contract modification of any kind.
S-19
<PAGE> 20
UNDERWRITING
Subject to the terms and conditions stated in an underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and Cincinnati Bell Telephone has agreed to sell to such underwriter,
the principal amount of Debentures set forth opposite the name of such
underwriter.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF DEBENTURES
----------- ----------------
<S> <C>
Salomon Smith Barney Inc....................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated..........
Morgan Stanley & Co. Incorporated...........................
------------
Total............................................. $150,000,000
============
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters to purchase the Debentures included in this offering are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the Debentures if they purchase
any of the Debentures.
The underwriters, for whom Salomon Smith Barney Inc. is acting as
representative, propose to offer some of the Debentures directly to the public
at the public offering price set forth on the cover page of this Prospectus
Supplement and some of the Debentures to certain dealers at the public offering
price less a concession not in excess of % of the principal amount of the
Debentures. The underwriters may allow, and such dealers may reallow, a
concession not in excess of % of the principal amount of the Debentures to
certain other dealers. After the initial offering of the Debentures to the
public, the public offering price and such concessions may be changed by the
representative.
Each of Cincinnati Bell Telephone and Cincinnati Bell has agreed that, for
a period of 90 days from the date of this Prospectus Supplement, it will not,
without the prior written consent of Salomon Smith Barney Inc., offer, sell,
contract to sell, or otherwise dispose of, any debt securities issued or
guaranteed by Cincinnati Bell Telephone or Cincinnati Bell. Salomon Smith Barney
Inc. in its sole discretion may release any of the securities subject to this
lock-up agreement at any time without notice.
Cincinnati Bell Telephone has been advised by the underwriters that they
intend to make a market in the Debentures, but that they are not obligated to do
so and may discontinue making a market at any time without notice. Cincinnati
Bell currently has no intention to list the Debentures on any securities
exchange, and there can be no assurance given as to the liquidity of the trading
market for the Debentures.
The following table shows the underwriting discounts and commissions to be
paid to the underwriters by Cincinnati Bell Telephone in connection with this
offering.
<TABLE>
<CAPTION>
PAID BY
CINCINNATI BELL TELEPHONE
-------------------------
<S> <C>
Per Debenture............................................... $
Total....................................................... $
</TABLE>
In connection with the offering, Salomon Smith Barney Inc., on behalf of
the underwriters, may over allot, or engage in syndicate covering transactions,
stabilizing transactions and penalty bids. Over allotment involves syndicate
sales of Debentures in excess of the principal amount of Debentures to be
purchased by the underwriters in the offering, which creates a syndicate short
position. Syndicate covering transactions involve purchases of the Debentures in
the open market after the distribution has been completed in order to cover
syndicate short positions. Stabilizing transactions consist of certain bids or
purchases of Debentures made for the purpose of preventing or retarding a
decline in the market price of the Debentures while the offering is in progress.
Penalty bids permit the underwriters to reclaim a selling concession from a
syndicate member when Salomon Smith Barney Inc. repurchases Debentures
originally sold by that syndicate member in covering syndicate short positions.
These activities may cause the price of the Debentures to be higher than
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it would otherwise be in the open market in the absence of such transactions.
These transactions may be effected in the over-the-counter market or otherwise
and, if commenced, may be discontinued at any time.
Cincinnati Bell Telephone estimates that its total expenses for this
offering will be approximately $525,000.
The representative has been retained to perform certain investment banking
and advisory services for Cincinnati Bell Telephone and Cincinnati Bell from
time to time for which it has received customary fees and expenses. The
representative may, from time to time, engage in transactions with and perform
services for Cincinnati Bell Telephone and Cincinnati Bell in the ordinary
course of business.
Cincinnati Bell Telephone and Cincinnati Bell have agreed to indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, or to contribute to payments the underwriters may be
required to make in respect of any of those liabilities.
LEGAL MATTERS
Frost & Jacobs LLP, counsel to Cincinnati Bell Telephone and Cincinnati
Bell, is passing upon the legality of the Debentures and Guarantees for
Cincinnati Bell Telephone and Cincinnati Bell.
Cleary, Gottlieb, Steen & Hamilton of New York, New York will issue an
opinion about certain legal matters relating to the Debentures and the
Guarantees for the Underwriters. Cleary, Gottlieb, Steen & Hamilton will rely on
Frost & Jacobs LLP as to matters of Ohio law.
WHERE YOU CAN FIND MORE INFORMATION
Cincinnati Bell Inc. files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document we file at the SEC's public reference rooms in Washington, D.C., New
York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to other documents. The information incorporated by reference is
considered to be part of this Prospectus Supplement, and later information filed
with the SEC will update and supersede this information. We incorporate by
reference the documents listed below and any future filings made with the SEC
under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until we sell all the Debentures.
- Cincinnati Bell Annual Report on Form 10-K for the year ended
December 31, 1997;
- Cincinnati Bell Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1998, June 30, 1998 and September 30, 1998; and
- Cincinnati Bell Current Reports on Form 8-K, dates of report
February 2, 1998, March 3, 1998 (as amended by Form 8-K/A, date of
report March 3, 1998), September 2, 1998 and October 13, 1998.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Investor Relations
Cincinnati Bell Inc.
201 East Fourth Street
Cincinnati, Ohio 45202
(513) 397-9900
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You may also find information about Cincinnati Bell and Cincinnati Bell
Telephone at our web sites. Cincinnati Bell's web site is a
http://www.cinbellinc.com. Cincinnati Bell Telephone's web site is at
http://www.cincinnatibell.com.
You should rely only on the information incorporated by reference or
provided in this Prospectus Supplement or the accompanying Prospectus. We have
not authorized anyone else to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this Prospectus
Supplement or the Prospectus is accurate as of any date other than the date on
the front of those documents.
Convergys has filed the Convergys S-1 with the SEC. In addition, Convergys
Corporation files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document that
Convergys files at the SEC's reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. You may call the SEC at the phone number indicated
above and also obtain the Convergys filings from the SEC website identified
above.
You may request a copy of the Convergys S-1 or any of its other filings, at
no cost, by writing or telephoning Cincinnati Bell at the Investor Relations
address indicated above.
In addition, you may also find information about Convergys at its website
at http://www.convergys.com.
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PROSPECTUS
$350,000,000
CINCINNATI BELL INC.
DEBT SECURITIES
------------------
CINCINNATI BELL TELEPHONE COMPANY
GUARANTEED DEBT SECURITIES
------------------
From time to time, Cincinnati Bell Inc. ("Cincinnati Bell") may offer debt
securities and Cincinnati Bell Telephone Company ("Cincinnati Bell Telephone")
may offer its debt securities guaranteed as to payment of principal, premium, if
any, and interest by Cincinnati Bell (collectively, the "Securities"). The
aggregate initial offering price may not exceed $350,000,000. The Securities may
be offered, separately or together, in one or more separate series, in amounts,
at prices and on terms to be determined at the time of sale and set forth in one
or more supplements to this Prospectus (a "Prospectus Supplement").
We will describe the specific terms of any Securities offered by this
Prospectus in an accompanying Prospectus Supplement. Such terms include, as
applicable, the specific designation, aggregate principal amount, initial public
offering price, maturity, interest rates, interest payment dates, redemption
provisions and any other terms in connection with the offering and sale of the
Securities.
We may sell the Securities to or through underwriters or dealers and also
may sell the Securities directly to other purchasers or through agents. The
accompanying Prospectus Supplement will set forth the names of any underwriters,
dealers or agents involved in the sale of the Securities, the principal amounts,
if any, to be purchased by underwriters and the compensation of such
underwriters, dealers and agents.
------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
------------------
October 13, 1998
<PAGE> 24
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 SAFE HARBOR CAUTIONARY
STATEMENT
This Prospectus and the documents incorporated by reference herein contain
"forward-looking" statements, as defined in the Private Securities Litigation
Reform Act of 1995, that are based on current expectations, estimates and
projections. Statements that are not historical facts, including statements
about the beliefs and expectations of Cincinnati Bell or Cincinnati Bell
Telephone, are forward-looking statements. These statements discuss potential
risks and uncertainties and, therefore, actual results may differ materially.
You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date on which they were made. Neither
Cincinnati Bell nor Cincinnati Bell Telephone undertakes any obligation to
update any forward-looking statements, whether as a result of new information,
future events or otherwise.
Important factors that may affect these projections or expectations
include, but are not limited to: changes in the overall economy; changes in
competition in markets in which Cincinnati Bell operates; advances in
telecommunications technology; changes in the telecommunications regulatory
environment; changes in the demand for Cincinnati Bell's services and products;
Cincinnati Bell's ability to successfully introduce new service and product
offerings on a timely and cost effective basis; failure of Cincinnati Bell to
achieve Year 2000 compliance; and start-up of Cincinnati Bell's digital wireless
communications business.
------------------------
At the date of this Prospectus Cincinnati Bell is a diversified
telecommunications company with principal businesses in three industry segments:
communications services (including Cincinnati Bell Telephone), billing and
information services (operated by Convergys Information Management Group Inc.,
formerly known as Cincinnati Bell Information Systems Inc. ("CBIS")) and
customer management solutions (operated by Convergys Customer Management Group
Inc., formerly known as MATRIXX Marketing Inc. ("MATRIXX")). In April 1998,
Cincinnati Bell began taking steps to divest itself of the CBIS and MATRIXX
businesses. Since Cincinnati Bell expects to complete the divestiture entirely
by December 31, 1998, the description of Cincinnati Bell's business in this
Prospectus does not include CBIS or MATRIXX. The obligations of Cincinnati Bell
and other parties to complete the divestiture are subject to a number of
conditions. Although Cincinnati Bell cannot assure you that the divestiture will
be completed, Cincinnati Bell is not aware at the date of this Prospectus of any
condition that would prevent it from completing the divestiture.
For more information about Cincinnati Bell's divestiture plans, see "Recent
Developments." For information regarding Convergys Corporation ("Convergys"), a
newly formed holding company of CBIS and MATRIXX, see the Form S-1 Registration
Statement No. 333-53619, as amended, originally filed by Convergys with the SEC
on May 26, 1998 (the "Convergys S-1"). For information on how to obtain a copy
of the Convergys S-1, see "Where You Can Find More Information."
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<PAGE> 25
SUMMARY
This summary highlights selected information from this Prospectus and does
not contain all of the information that may be important to you. You should
carefully read this entire Prospectus and the documents incorporated by
reference in this Prospectus. See "Where You Can Find More Information."
CINCINNATI BELL AND CINCINNATI BELL TELEPHONE
Cincinnati Bell is a diversified telecommunications services holding
company that:
- provides local, long distance, data networking, data transport, Internet
and directory advertising services and products;
- resells long distance telecommunications services; and
- resells used telecommunications and computer equipment in the secondary
market.
In addition, Cincinnati Bell is managing a new digital wireless
communications business and intends to acquire an 80% ownership interest in such
business.
Cincinnati Bell Telephone provides telecommunications services to
residential and business customers in the Cincinnati, Ohio, metropolitan market
area.
THE SECURITIES WE MAY OFFER
Cincinnati Bell and Cincinnati Bell Telephone from time to time may offer
any combination of the debt securities and guaranteed debt securities.
MAXIMUM AMOUNT
The aggregate initial offering price may not exceed $350,000,000.
PLAN OF DISTRIBUTION
We may sell the debt securities and guaranteed debt securities to or
through underwriters or dealers or to other purchasers directly or through
agents.
FORM OF DEBT SECURITIES
We may issue the debt securities and guaranteed debt securities in
registered global form or registered certificate form.
TERMS OF DEBT SECURITIES
The specific designation, aggregate principal amount, maturity, rate and
time of payment of interest, initial offering price and other terms of the debt
securities and guaranteed debt securities will be described in a Prospectus
Supplement.
INDENTURE
The debt securities will be issued under an Indenture between Cincinnati
Bell and The Bank of New York, as Trustee. The guaranteed debt securities will
be issued under an Indenture among Cincinnati Bell Telephone, Cincinnati Bell,
as Guarantor, and The Bank of New York, as Trustee.
USE OF PROCEEDS
Unless otherwise indicated in a Prospectus Supplement, Cincinnati Bell and
Cincinnati Bell Telephone intend to use the net proceeds from the sale of the
Securities offered by this Prospectus to repay existing indebtedness and for
general corporate purposes.
WHERE YOU CAN FIND MORE INFORMATION
This Prospectus "incorporates by reference" certain information about
Cincinnati Bell and Cincinnati Bell Telephone from Cincinnati Bell's filings
with the SEC. See "Where You Can Find More Information" for information on how
to obtain copies of such filings.
ADDRESS AND TELEPHONE
The address of Cincinnati Bell and Cincinnati Bell Telephone is 201 East
Fourth Street, Cincinnati, Ohio 45202, and their telephone number is (513)
397-9900.
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CINCINNATI BELL
GENERAL
Cincinnati Bell is a full service telecommunications company that (i)
provides local, long distance, data networking, data transport, Internet and
directory advertising services in the Cincinnati, Ohio metropolitan market area,
(ii) resells long distance service and data services and products to small- and
medium-sized business customers mainly in a five-state Midwestern area, (iii)
manages a digital wireless communications business and (iv) resells
telecommunications and computer equipment in the secondary market. Cincinnati
Bell conducts its business through its subsidiaries, which are Cincinnati Bell
Telephone, Cincinnati Bell Directory Inc., Cincinnati Bell Long Distance Inc.,
Cincinnati Bell Wireless Company and Cincinnati Bell Supply Company.
COMPETITIVE STRENGTHS AND STRATEGY
Cincinnati Bell believes that it is the most recognized single source,
full-service communications provider in the Cincinnati metropolitan market area.
Cincinnati Bell's competitive strengths include its (i) well-regarded brand
name, (ii) technologically advanced network, (iii) communications industry
focus, knowledge and experience, (iv) reputation for service quality, (v) large
installed telephone customer base and (vi) strategic relationships with targeted
industry leaders, including AT&T Corp. ("AT&T"), Lucent Technologies ("Lucent"),
DIRECTV(R) and United States Satellite Broadcasting Co. ("USSB"). By leveraging
its competitive strengths, Cincinnati Bell believes that it can increase the
market penetration of its existing services, effectively market new services,
establish and deliver its data network solutions and wireless capabilities, and
capture the full benefit of its strategic relationships with these targeted
industry leaders.
Cincinnati Bell is exploring growth opportunities on its own and in
partnership with other companies, within and beyond its traditional geographic
market area. Cincinnati Bell's overall strategy is to expand beyond its
traditional telephone business and geographic market, to take advantage of the
expanding growth of the data transport business and to become an integrated
communications provider of end-to-end data and telecommunications solutions to
its customers. Cincinnati Bell has recently formed a network integration
business to offer end-to-end broadband network connectivity and management.
Cincinnati Bell has also entered into various agreements that will allow it to
offer Asynchronous Digital Subscriber Line ("ADSL") technology in the Cincinnati
metropolitan market area and high capacity and dial-up Internet access outside
of Cincinnati. Earlier this year, Cincinnati Bell expanded its product offerings
to include digital wireless communications services through a venture with AT&T
Wireless PCS Inc. Cincinnati Bell believes that, by bundling core and advanced
telecommunication related services on one bill, it achieves a competitive
advantage over current and future competitors.
CINCINNATI BELL TELEPHONE COMPANY
Cincinnati Bell Telephone is the 12th largest local telecommunications
service company in the United States, based on its network access lines in
service at the end of 1997. In 1997, on a pro forma basis giving effect to the
Convergys divestiture, Cincinnati Bell Telephone provided 80% of Cincinnati
Bell's revenue and 74% of its operating income excluding special items.
Cincinnati Bell Telephone provides telecommunications services to business
and residential customers in the Cincinnati metropolitan market area. This
market is 2,400 square miles located approximately within a 25 mile radius of
Cincinnati and includes all or significant parts of four counties of
southwestern Ohio, six counties in northern Kentucky and two counties in
southeastern Indiana. Approximately 1.5 million people lived in this region in
1990, including 656,000 households. Approximately 98% of Cincinnati Bell
Telephone's network access lines are in one local access transport area
("LATA").
Cincinnati Bell Telephone has historically focused on providing
telecommunication services to a single geographic market, which has allowed it
to introduce various innovative new products and services before many other
incumbent local exchange carriers ("ILECs"). To solidify its reputation of being
the most recognized single source, full-service communications provider in the
Cincinnati metropolitan market area,
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Cincinnati Bell Telephone markets the following products and services, on its
own or through strategic relationships with industry leaders. FUSE(SM), an
Internet access service, was launched in early 1997 by Cincinnati Bell Telephone
and has grown to serve approximately 27,000 subscribers as of September 30, 1998
in the Cincinnati metropolitan market area. With this launch, Cincinnati Bell
Telephone became one of the first ILECs in the nation to introduce an Internet
access service for its residential and small-business customers. Through
Cincinnati Bell Network Solutions, Cincinnati Bell Telephone is expanding its
presence in the data network solutions arena, offering project management,
installation, maintenance, monitoring and Internet/intranet solutions to its
customers, as it progresses towards its goal of becoming an end-to-end data
solutions provider. Cincinnati Bell recently expanded the scope of its network
solutions business by acquiring KSM Consulting, a systems and network integrator
located in Indianapolis, Indiana that designs and implements network solutions
for businesses. Additionally, Cincinnati Bell Telephone has recently tested ADSL
technology and is currently performing pre-launch market trials of this
technology. ADSL uses Cincinnati Bell Telephone's existing copper telephone
wiring to access data networks and the Internet to provide enhanced high-speed
data communications. This technology enables a customer to stay connected to the
Internet or other data networks over a dedicated portion of its telephone line
while still being able to make or receive telephone calls on the same line
simultaneously. Cincinnati Bell Telephone serves as the exclusive sales agent
for Lucent in the Cincinnati metropolitan market area, providing a full-service
line of communications equipment to business customers. Cincinnati Bell
Telephone also sells direct broadcast satellite ("DBS") services and installs
equipment under agreements with DIRECTV(R), USSB and certain DBS equipment
vendors. Cincinnati Bell Telephone also owns a 10 Mhz "E block" PCS license
covering the Cincinnati metropolitan market area which it can use for future yet
to be determined wireless services.
Through its long-standing contractual relationships with AT&T, Cincinnati
Bell Telephone provides services to and for AT&T in the Cincinnati metropolitan
market area. As part of this relationship, Cincinnati Bell Telephone is able to
leverage AT&T's size and strength to acquire and deploy technology under
favorable terms.
Cincinnati Bell Telephone's service record is among the best in the
industry. Based on reports to the Federal Communications Commission (the "FCC"),
Cincinnati Bell Telephone receives fewer customer reports of service trouble per
line than do nearly all other large U.S. telecommunications companies reporting
to the FCC. In 1997 (the latest year for which information is available),
Cincinnati Bell Telephone averaged only 1.18 trouble reports per 100 customer
lines per month, while comparable rates for other large reporting companies
ranged from 1.29 to 2.68. Additionally, Cincinnati Bell Telephone was recently
awarded the second highest customer satisfaction ranking by J.D. Power and
Associates as part of a comprehensive survey in 1998 of 14,000 residential
telephone customers of the 14 largest ILECs. In the face of increased access
line growth, Cincinnati Bell Telephone has a superior record for keeping
installation appointments and for completing new service orders within five
days.
As a result of previous investments, Cincinnati Bell Telephone's plant,
equipment and network are modern and capable of handling new service offerings
as they are developed. Of its network access lines, 97% are served by digital
switches, 100% have ISDN capability and 100% have Signaling System 7 capability,
which supports enhanced features such as Caller ID, Call Trace and Call Return.
The network also includes more than 1,200 miles of fiber-optic cable, with seven
rings of cable equipped with SONET technology linking Cincinnati's downtown and
other major business centers. These SONET rings offer increased reliability and
redundancy to Cincinnati Bell Telephone's major business customers.
On June 30, 1998, Cincinnati Bell Telephone had approximately 1,025,000
network access lines in service, an increase of 4.0% or 41,000 lines from June
30, 1997. Approximately 68% of Cincinnati Bell Telephone's network access lines
serve residential customers and 32% serve business customers. These residential
customers are adding lines for Internet access, home offices and increased voice
communications use. In 1997, additional lines accounted for more than 56% of
total access lines added during the year. As of September 30, 1998,
approximately 12% of Cincinnati Bell Telephone's residential customers had
additional access lines.
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Local services generated approximately 58% of Cincinnati Bell Telephone's
revenues in 1997, while the increasingly competitive network access and toll
services generated only 29%. The remainder of Cincinnati Bell Telephone's
revenues come from other communications services including commissioned sales,
maintenance and repair services, as well as billing services.
Regulation
Cincinnati Bell Telephone's local exchange, network access and toll
telephone operations are regulated by the Public Utility Commission of Ohio
("PUCO"), the Public Service Commission of Kentucky ("PSCK") and the FCC with
respect to rates, services and other matters.
Present and future legislative and regulatory initiatives will have an
impact on Cincinnati Bell Telephone and other ILECs, including the Regional Bell
Operating Companies ("RBOCs") and other independent telephone companies. The
extent of that impact will not be known until the initiatives are fully
implemented. These initiatives are designed to encourage and accelerate the
development of competition in the telecommunications industry by removing legal
barriers to competition across major industry segments. Under the initiatives,
companies that were historically limited to providing service within one or more
of those segments, including local exchange, long distance, wireless, cable
television and information services, can enter other segments to compete with
the incumbent providers and other new entrants after meeting certain regulatory
requirements.
In April 1998, the PUCO approved Cincinnati Bell Telephone's "Commitment
2000" alternative regulation plan which provides Cincinnati Bell Telephone
flexibility to price according to the market for competitive services and also
motivates it, by capping certain rates, to reduce costs. The approved rate caps
create a range of pricing flexibility and are not subject to change based on
inflation or productivity improvements. These types of changes have generally
led to some price reductions where they have been implemented for other ILECs.
The "Commitment 2000" plan expires in June 2001, but the Company has the option
to extend the plan for two additional years.
For additional information on laws and regulations affecting Cincinnati
Bell Telephone, see Cincinnati Bell's most recent Form 10-K and any subsequent
Cincinnati Bell Forms 10-Q. For information on how to obtain a copy of these
reports, see "Where You Can Find More Information."
CINCINNATI BELL DIRECTORY INC.
Cincinnati Bell Directory Inc. ("CBD") provides Yellow Pages, other
directory products and related information and advertising services. Its
principal products are a White Pages directory and 14 Yellow Pages directories,
which together reach more than 1.2 million residential and business consumers.
CBD continually evaluates new product offerings in both the print and emerging
electronic categories of distribution.
CBD recently launched new Internet advertising services designed to add
value to the printed directory services it provides and to allow its customers
to better target and update their advertising message. These services include
the development of a community focused Internet site for directory customers,
expanded audiotext services, a regional business-to-business directory and
CD-ROM directory listing services.
CINCINNATI BELL LONG DISTANCE INC.
Cincinnati Bell Long Distance Inc. ("CBLD") is an integrated communications
provider that resells long distance telecommunications services and products as
well as voice mail and paging services mainly in Ohio, Indiana, Michigan,
Kentucky and Pennsylvania. CBLD is licensed, however, as a long distance
provider in every state except Alaska. Its principal market focus is small- and
medium-sized businesses. CBLD augments its high-quality long-distance services
with calling plans, network features and enhanced calling services to create
customized packages of communications services for its clients. CBLD intends to
add new data communications services for business customers, including
high-speed dedicated and dial-up Internet access services and other high-speed
data transport using frame relay technology.
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CINCINNATI BELL SUPPLY COMPANY
Cincinnati Bell Supply Company ("CBS") markets telecommunications and
computer equipment. Its principal market is the secondary market for used
telecommunications systems, including AT&T- and Lucent-branded systems.
CINCINNATI BELL WIRELESS COMPANY
Cincinnati Bell and AT&T Wireless PCS, Inc. ("AT&T PCS"), an indirect
wholly owned subsidiary of AT&T, signed a preliminary agreement in February 1998
to form a joint venture to provide digital wireless communications services in
the Cincinnati and Dayton metropolitan market areas. Cincinnati Bell expects
that it will initially contribute approximately $115 million to the joint
venture and acquire an interest of approximately 80% in return and that AT&T PCS
will contribute a 20 Mhz partitioned PCS license for this geographic region, as
well as network assets and other related assets and liabilities in exchange for
an interest of approximately 20%. Cincinnati Bell will hold its investment in
the venture through Cincinnati Bell Wireless Company ("Cincinnati Bell
Wireless").
The digital wireless services offered by the joint venture, which will be
sold under the Cincinnati Bell Wireless brand name, will operate on AT&T PCS's
national network. Cincinnati Bell Wireless and AT&T PCS are currently finalizing
the details of how the joint venture will operate, but Cincinnati Bell expects
that the joint venture initially will contract with AT&T PCS for a significant
number of operational services, including network management. As time goes on,
the venture itself may choose to perform many of these operational services.
Cincinnati Bell will oversee the joint venture's day-to-day administration of
the wireless business, which includes marketing and retailing, as well as
financial, regulatory and other legal affairs.
The joint venture will not be established until a number of conditions are
satisfied (or waived), including the negotiation of final terms and the
execution of a joint venture agreement and related operating agreements.
Cincinnati Bell and AT&T PCS have each agreed to use commercially reasonable
efforts to satisfy these conditions. Cincinnati Bell believes that the venture
is likely to be established during the fourth quarter of 1998 or the first
quarter of 1999, although there can be no assurance that the venture will be
established at any particular time or at all. If the venture is not established
by December 31, 1998, either Cincinnati Bell or AT&T PCS may terminate the
preliminary agreement.
Cincinnati Bell Wireless and AT&T PCS signed an interim management
agreement, also in February 1998, pursuant to which Cincinnati Bell Wireless
immediately assumed responsibility for the day-to-day administration of the
wireless communications business (under AT&T PCS's overall supervision). Within
the framework of this agreement, Cincinnati Bell Wireless began offering
wireless services under its own brand name in the Cincinnati metropolitan market
area in May 1998 and in the Dayton metropolitan market area in August 1998.
Cincinnati Bell Wireless recently achieved AT&T PCS's most successful digital
wireless communications services launch (based upon new subscriber acquisitions)
by gaining more than 20,000 subscribers in the first three months of operations.
As of September 30, 1998, the business had more than 25,000 subscribers. The
interim management agreement will terminate when the joint venture agreements
are finalized or if the preliminary agreement is terminated. If final agreement
relating to the joint venture is not reached, AT&T PCS will retain its
partitioned PCS license and Cincinnati Bell Wireless will transfer control of
the business and the network assets to AT&T PCS. Cincinnati Bell Wireless may,
however, continue to act as a reseller of the wireless services to select
customers.
In connection with establishing the joint venture, Cincinnati Bell Wireless
will commit to funding its proportional share of certain start-up operating
losses of the venture beginning in February 1998. Cincinnati Bell accordingly is
including these losses in its consolidated financial statements as the losses
are incurred. These losses totaled $8.8 million before taxes as of June 30,
1998, and Cincinnati Bell expects that its share of the losses for all of 1998
will total approximately $30 million before taxes. If Cincinnati Bell's
assumptions prove to be incorrect, actual losses could be significantly higher
or lower. Cincinnati Bell also believes that significant losses associated with
the joint venture will continue for the joint venture's first several years.
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In addition to its initial capital contribution of approximately $115
million, Cincinnati Bell expects to loan (through Cincinnati Bell Wireless)
approximately $50 to $60 million to the venture when it is formed. After
formation, the venture will pay to AT&T PCS approximately $160 million to
acquire the 20 Mhz, partioned PCS license and other assets contributed to the
venture by AT&T PCS and to reimburse AT&T PCS for its start-up costs. Although
it is not obligated to do so, Cincinnati Bell expects to loan (through
Cincinnati Bell Wireless) additional capital to the joint venture from time to
time as needed. Cincinnati Bell expects to fund those contributions and loans to
the joint venture by issuing commercial paper and through long-term debt
financing in the capital markets. There can be no assurance that Cincinnati Bell
will be successful in obtaining the financing necessary for the venture.
COMPETITION
Evolving technology, the preferences of consumers, the legislative and
regulatory initiatives of policy makers and the convergence of other industries
with the telecommunications industry are causes for increasing competition
throughout the telecommunications industry. The range of communications
services, the equipment available to provide and access such services and the
number of competitors offering such services continue to increase. These
initiatives and developments could make it difficult for Cincinnati Bell
Telephone to maintain current revenue and profit levels.
Local exchange telecommunications competitors will include other major
local exchange telecommunications companies, wireless services providers,
interexchange carriers, competitive local exchange carriers and others.
Cincinnati Bell's name and reputation are well regarded as a result of its
having provided telecommunications services to the Cincinnati metropolitan
market area since 1878 and having a record of superior customer service. Thus,
even though Cincinnati Bell Telephone has signed nine interconnection agreements
with competitors since August 1997, as of September 1998, Cincinnati Bell
Telephone has transferred fewer than 1,000 access lines to a total of six
competitors. Cincinnati Bell Telephone does not have any information about how
many potential new customers have been lost to competitors.
Cincinnati Bell's other subsidiaries face intense competition in their
markets, principally from larger companies. These subsidiaries primarily seek to
differentiate themselves by leveraging the strength and recognition of the
Cincinnati Bell brand name, by providing existing customers with superior
service and by focusing on niche markets and opportunities to develop and market
customized packages of services. CBD's competitors are directory services
companies, newspapers and other media advertising services providers in the
Cincinnati metropolitan market area. CBD now competes with its former sales
representative for Yellow Pages directory customers; such competition may affect
CBD's ability to grow or maintain profits and revenues. CBLD's competitors
include interexchange carriers and certain local telecommunications services
companies. CBS's competitors include vendors of new and used communications and
computer equipment, operating regionally and across the nation. Cincinnati Bell
Wireless is one of five active wireless service providers in the Cincinnati and
Dayton metropolitan market areas.
YEAR 2000
Since 1996, Cincinnati Bell has devoted significant time and resources to
achieve Year 2000 compliance. Accordingly, Cincinnati Bell has and will continue
to incur a substantial amount of Year 2000 remediation costs to repair or
replace non-compliant network elements, operations support systems and
application software prior to the new millennium. Cincinnati Bell expects Year
2000 costs in 1998 to be in the range of $10 million to $15 million, with costs
in 1999 estimated in the range of $5 million to $8 million. Cincinnati Bell
Telephone's goal is to have its network, information technology ("IT") and
facilities systems equipped with any required fixes or upgrades and tested by
March 31, 1999. Certain other systems and equipment will be replaced rather than
fixed, and Cincinnati Bell Telephone's goal is to have these replacements
installed and tested within the first six months of 1999. For additional
information on Year 2000 matters, see Cincinnati Bell's Form 8-K, date of report
October 13, 1998. For information on how to obtain a copy of this report, see
"Where You Can Find More Information."
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<PAGE> 31
RECENT DEVELOPMENTS
CONVERGYS
In April 1998, Cincinnati Bell announced its intent to separate its billing
and information services (CBIS) and customer management solutions (MATRIXX)
businesses from its telecommunications businesses. As the initial step of this
separation, Cincinnati Bell established a wholly owned subsidiary, Convergys,
and contributed to it the businesses of CBIS and MATRIXX and a 45% limited
partnership interest in Cincinnati SMSA Limited Partnership (the "Cellular
Partnership") which operates a cellular telecommunications business in
southwestern Ohio and northern Kentucky. Cincinnati Bell's Board of Directors
believes that the separation of the businesses will (1) permit the management of
each business to focus on their respective core businesses without regard to the
corporate objectives and policies of the other businesses and (2) permit the
financial community to focus separately on Cincinnati Bell and Convergys and
their respective business opportunities.
In July 1998, Cincinnati Bell and Convergys executed a Plan of
Reorganization and Distribution Agreement (the "Distribution Agreement") to
implement the separation. In the first step, completed in August 1998, Convergys
sold approximately 10% of its outstanding stock in an initial public offering.
In the second step, Cincinnati Bell will distribute the balance of its shares of
Convergys (approximately 90% of the outstanding stock of Convergys) to
Cincinnati Bell shareholders (the "Convergys Distribution"). Under the terms of
the Distribution Agreement, Cincinnati Bell may set the date of the Convergys
Distribution at any time prior to February 18, 1999, although Cincinnati Bell
currently intends to complete the Convergys Distribution by December 31, 1998.
Cincinnati Bell's obligation to complete the Convergys Distribution is subject
to the satisfaction or waiver by Cincinnati Bell, in its sole discretion, of
certain conditions. These include a condition that no events or developments
shall have occurred that, in the judgment of the Cincinnati Bell Board of
Directors, would result in the Convergys Distribution having a material adverse
effect on Cincinnati Bell or its shareholders. In addition, Cincinnati Bell and
Convergys may terminate the Convergys Distribution by mutual agreement at any
time prior to the date of the Convergys Distribution. At the date of this
Prospectus, Cincinnati Bell is not aware of any condition that would prevent it
from completing the Convergys Distribution.
Prior to the initial public offering of Convergys in August 1998,
Cincinnati Bell provided Convergys with significant management functions and
services. Cincinnati Bell charged and/or allocated approximately $6.1 million,
$6.7 million and $7.7 million to Convergys for such functions and services in
1995, 1996 and 1997, respectively. Cincinnati Bell and Convergys have entered
into or will enter into a number of agreements for the purpose of defining their
continuing relationship. Cincinnati Bell and Convergys intend for these
agreements, taken as a whole, to accommodate both parties' interests fairly,
while continuing certain mutually beneficial arrangements. Due to the complexity
of the various relationships between Cincinnati Bell and Convergys, however,
there can be no assurance that these agreements will be at least as favorable to
Cincinnati Bell as could have been obtained from unaffiliated third parties.
For more information about Convergys, the Convergys Distribution, the
continuing relationship between Cincinnati Bell and Convergys, and the financial
effect of the Convergys Distribution on Cincinnati Bell, you should read
Cincinnati Bell's Current Report on Form 8-K, date of report October 13, 1998
and the Convergys S-1 and exhibits filed with the Convergys S-1. For information
on how to obtain a copy of these documents, see "Where You Can Find More
Information."
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<PAGE> 32
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------ ----------
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges of
Cincinnati Bell (1) (2).................. -- 2.62 -- 5.57 5.22 2.75
</TABLE>
- ---------------
(1) For these ratios, "earnings" is determined by adding "total fixed charges"
(excluding capitalized interest), income taxes, minority interest and
amortization of capitalized interest to income from continuing operations
after eliminating equity in undistributed earnings. For this purpose, "total
fixed charges" consists of (i) interest on all indebtedness and amortization
of debt discount and expense, (ii) capitalized interest and (iii) the
interest component of rental expense. In 1993 and 1995, Cincinnati Bell's
earnings were insufficient to cover fixed charges by $53.8 million and $24.1
million, respectively. Cincinnati Bell's ratio of earnings to fixed charges
reflects special items (credits) of $132.9 million in 1993, $5.7 million in
1994, $178.7 million in 1995, $(24.7) million in 1996, $14.0 million in 1997
and $42.6 million for the first six months of 1998. Excluding these special
items, Cincinnati Bell's ratio of earnings to fixed charges would have been
2.04 in 1993, 2.70 in 1994, 3.04 in 1995, 5.17 in 1996, 5.42 in 1997 and
3.60 for the first six months of 1998.
(2) Cincinnati Bell's ratio of earnings to fixed charges, pro forma for the
Convergys Distribution, would have been 2.61 in 1993, 2.52 in 1994, 5.96 in
1996, 5.66 in 1997 and 5.74 for the first six months of 1998. Cincinnati
Bell's earnings in 1995, pro forma for the Convergys Distribution, were
insufficient to cover fixed charges by $45.1 million. Cincinnati Bell's
ratio of earnings to fixed charges, pro forma for the Convergys
Distribution, reflects special items (credits) of $9.6 million in 1993, $7.7
million in 1994, $131.6 million in 1995, $(29.7) million in 1996 and $(21.0)
million in 1997. Excluding these special items, Cincinnati Bell's ratio of
earnings to fixed charges, pro forma for the Convergys Distribution, would
have been 2.82 in 1993, 2.70 in 1994, 2.75 in 1995, 5.00 in 1996 and 5.05 in
1997. Cincinnati Bell's ratio of earnings to fixed charges, pro forma for
the Convergys Distribution, for the six months ended June 30, 1998 was not
affected by special items.
DESCRIPTION OF SECURITIES
Cincinnati Bell will issue debt securities (the "Debt Securities") under
one or more Indentures between Cincinnati Bell and The Bank of New York, as
Trustee (the "Cincinnati Bell Indenture"). Cincinnati Bell Telephone will issue
guaranteed debt securities (the "Guaranteed Debt Securities") under one or more
Indentures among Cincinnati Bell Telephone, Cincinnati Bell, as Guarantor, and
The Bank of New York, as Trustee (the "Cincinnati Bell Telephone Indenture").
Cincinnati Bell will guarantee on a subordinated basis the Guaranteed Debt
Securities issued by Cincinnati Bell Telephone pursuant to a guarantee contained
in the Cincinnati Bell Telephone Indenture. The Cincinnati Bell Indenture and
the Cincinnati Bell Telephone Indenture are together called the "Indentures."
The Debt Securities and the Guaranteed Debt Securities are together referred to
as the "Securities."
Selected provisions of the Securities and the Indentures are summarized
below. The Indentures are substantially identical, except for the guarantee by
Cincinnati Bell of the Guaranteed Debt Securities issued by Cincinnati Bell
Telephone. The terms of Cincinnati Bell's guarantee are summarized at the end of
this section under the heading "Description of the Guarantee." In the summary,
we have included references to section numbers of the applicable Indentures so
that you can easily locate these provisions.
The summary is not complete. The forms of the Indentures have been filed as
exhibits to the registration statement, and you should read the Indentures for
provisions that may be important to you. See "Where You Can Find More
Information" for information on how to locate the Indentures and any
supplemental indentures that we may file. You may also review the Indentures as
the Trustee's offices at 101 Barclay Street, New York, New York.
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<PAGE> 33
GENERAL
Debt Securities issued by Cincinnati Bell will be unsecured and will rank
equally with all of Cincinnati Bell's other senior and unsubordinated debt. The
Guaranteed Debt Securities issued by Cincinnati Bell Telephone will be unsecured
and will rank equally with all of Cincinnati Bell Telephone's other senior and
unsubordinated debt. Cincinnati Bell will unconditionally guarantee the due and
punctual payment of principal, premium, if any, and interest payable pursuant to
the terms of the Guaranteed Debt Securities. However, the guarantee by
Cincinnati Bell will be subordinated in right of payment to Cincinnati Bell's
other senior and unsubordinated debt, including any Securities issued by
Cincinnati Bell under the Cincinnati Bell Indenture described in this section.
The Indentures do not limit the amount of securities that either Cincinnati
Bell or Cincinnati Bell Telephone may issue or the amount of debt that may be
incurred (or guaranteed) by Cincinnati Bell or Cincinnati Bell Telephone. Since
Cincinnati Bell is a holding company that conducts all of its operations through
its subsidiaries, holders of Debt Securities issued by Cincinnati Bell will
generally have a junior position to claims of creditors of Cincinnati Bell's
subsidiaries, including trade creditors, debtholders, secured creditors, taxing
authorities, guarantee holders and any preferred stockholders. For current
information on the outstanding debt of Cincinnati Bell and Cincinnati Bell
Telephone, see Cincinnati Bell's most recent Forms 10-K and 10-Q. See "Where You
Can Find More Information."
Each series of Securities may have different terms. A Prospectus Supplement
relating to any series of Securities being offered will include specific terms
relating to the offering. These terms will include some or all of the following:
- The title and type of the Securities;
- The total principal amount of the Securities;
- The dates on which the principal of the Securities will be payable;
- The interest rate that the Securities will bear, the interest
payment dates for the Securities and the record date for the
interest payable on any interest payment date;
- Any optional redemption provisions;
- Any sinking fund or other provisions that would obligate us to
repurchase or otherwise redeem the Securities;
- Any changes to or additional Events of Defaults or covenants;
- Any special tax implications of the Securities, including for any
Securities offered with original issue discount; and
- Any other terms of the Securities.
DENOMINATION AND FORM
Unless otherwise specified in the applicable Prospectus Supplement, the
Securities will be issued in registered form without coupons, in multiples of
$1,000. We expect that the Securities will be issued in "book-entry" form,
represented by a permanent global note registered in the name of The Depository
Trust Company, or its nominee. However, we reserve the right to issue notes in
certificate form registered in the names of the holders of the Securities.
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<PAGE> 34
NEGATIVE PLEDGE
Guaranteed Debt Securities
The Cincinnati Bell Telephone Indenture restricts the ability of Cincinnati
Bell Telephone to pledge its assets. If Cincinnati Bell Telephone pledges or
mortgages any of its property to secure any debt or other obligation, then as
long as such debt or other obligation is secured by such property, Cincinnati
Bell Telephone also will pledge or mortgage the same property to the Trustee to
secure the Guaranteed Debt Securities issued by Cincinnati Bell Telephone. This
restriction will not apply to certain pledges or mortgages, including
- pledges of property to secure money borrowed to acquire property
(including capital lease obligations) or pledges existing when the
property was acquired by Cincinnati Bell Telephone,
- deposits or pledges to secure public statutory obligations, or
- deposits or pledges with any governmental body for certain specified
purposes, such as in connection with court proceedings.
In addition, this restriction does not limit the ability of any subsidiary
or other affiliate of Cincinnati Bell Telephone (including Cincinnati Bell) to
pledge or mortgage property of that subsidiary or affiliate, even if the
property was acquired from Cincinnati Bell Telephone. (Section 4.03)
Debt Securities
The Cincinnati Bell Indenture restricts the ability of Cincinnati Bell and
certain of its subsidiaries to pledge their assets. If Cincinnati Bell or any
Restricted Subsidiary (as we define this term below) of Cincinnati Bell pledges
or mortgages any of its property to secure any debt or other obligation, then as
long as such debt or other obligation is secured by such property, Cincinnati
Bell or such Restricted Subsidiary also will pledge or mortgage the same
property to the Trustee to secure the Debt Securities issued by Cincinnati Bell.
(Section 4.03)
This restriction will not apply in certain situations. Cincinnati Bell or
any Restricted Subsidiary may pledge its assets if the pledge is a Permitted
Lien (as we define this term below) without regard to the amount of debt secured
by the pledge. Cincinnati Bell or any Restricted Subsidiary may also pledge its
assets if
- the amount of debt secured by such assets, plus
- the total amount of other secured debt not permitted by this
restriction (other than debt that is secured by a Permitted Lien),
plus
- the total amount of Attributable Debt in respect of all Sale and
Leaseback Transactions does not exceed 10% of the Company's
Consolidated Net Tangible Assets immediately before the new secured
debt is incurred, assumed or guaranteed.
Below are summaries of definitions for terms that we have just used that
begin with capital letters. For the full definition of such terms, you should
refer to the form of the Cincinnati Bell Indenture filed as an exhibit to the
registration statement.
"Attributable Debt" means the amount of rent required to be paid during the
remaining term of a lease (excluding payments for maintenance and repairs,
services, insurance, taxes, assessments, water rates and similar charges and
contingent rent), discounted from the dates on which the rent payments are due
at the weighted average of the rates of interest borne by the Securities then
outstanding under the Cincinnati Bell Indenture, compounded semi-annually.
"Capital Lease Obligations" means debt under a lease that GAAP requires
companies to capitalize for financial reporting purposes.
"Capital Stock" means shares or other equivalents (however designated) of
corporate stock, partnership interest or any other participation, right,
warrant, option or other interest in the nature of an equity interest, but
excluding any debt security convertible or exchangeable into such equity
interest.
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<PAGE> 35
"Consolidated Net Tangible Assets" means the consolidated total assets of
Cincinnati Bell and its Subsidiaries as reflected in Cincinnati Bell's most
recent balance sheet prepared in accordance with GAAP, less (1) current
liabilities (excluding current maturities of long-term debt and Capital Lease
Obligations) and (2) goodwill, trademarks, patents and minority interests of
others.
"GAAP" means United States generally accepted accounting principles.
"Lien" means any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, security interest, lien, charge, easement or
zoning restriction (other than any easement or zoning restriction that does not
materially impair usefulness or marketability), encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind,
including any Capital Lease Obligation, conditional sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing or any Sale and Leaseback Transaction.
"Permitted Liens" mean
(1) Liens existing on the date of the Cincinnati Bell Indenture;
(2) Liens on property existing at the time of acquisition of such property
or to secure the payment of all or any part of the purchase price of such
property or to secure any debt incurred prior to, at the time of or within 270
days after the acquisition of such property for the purpose of financing all or
any part of the purchase price of such property; or Liens securing Capital Lease
Obligations, provided that (a) any such Lien attaches to the property within 270
days after the acquisition of such property and (b) such Lien attaches solely to
the property so acquired;
(3) Liens securing debt owing by a Restricted Subsidiary to Cincinnati Bell
or any wholly owned Subsidiary of Cincinnati Bell;
(4) Liens on property of any entity, or on the stock, debt or other
obligations of such entity, existing at the time (a) such entity becomes a
Restricted Subsidiary, (b) such entity is merged into or consolidated with
Cincinnati Bell or a Restricted Subsidiary or (c) Cincinnati Bell or a
Restricted Subsidiary acquires all or substantially all of the assets of such
entity; provided that no such Lien extends to any other property of Cincinnati
Bell or any other Restricted Subsidiary;
(5) Liens on the property of Cincinnati Bell or any of its Subsidiaries
securing (a) nondelinquent performance of bids or contracts (other than for
borrowed money, obtaining of advances or credit or the securing of debt), (b)
contingent obligations on surety and appeal bonds and (c) other nondelinquent
obligations of a like nature, in each case, incurred in the ordinary course of
business;
(6) pledges or deposits under worker's compensation laws, unemployment
insurance laws or similar legislation;
(7) statutory and tax Liens for sums not yet due or delinquent or which are
being contested or appealed in good faith by appropriate proceedings;
(8) Liens arising solely by operation of law and in the ordinary course of
business, such as mechanics', materialmen's, warehousemen's and carriers' Liens
and Liens of landlords or of mortgages of landlords on fixtures and movable
property located on premises leased in the ordinary course of business;
(9) any renewal, extension or replacement (in whole or in part) for any
Lien permitted pursuant to exceptions (1) through (8) above or of any debt
secured by such Lien, provided that such extension, renewal or replacement Lien
shall be limited to all or any part of the same property that secured the Lien
that was extended, renewed or replaced (plus improvements on such property).
"Restricted Subsidiary" means any Subsidiary of Cincinnati Bell if, at the
end of the most recent fiscal quarter of Cincinnati Bell, the aggregate amount
of (1) securities of, (2) loans and advances to and (3) other investments in
such Subsidiary held by Cincinnati Bell and its other Subsidiaries exceeded 10%
of Cincinnati Bell's Consolidated Net Tangible Assets;
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<PAGE> 36
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with a third party pursuant to which Cincinnati Bell or a Restricted Subsidiary
leases any property that has been or is to be sold or transferred by Cincinnati
Bell or any Restricted Subsidiary to such third party.
"Subsidiary" means (1) a corporation of which at the date of determination
Cincinnati Bell, one or more Subsidiaries or Cincinnati Bell and one or more
Subsidiaries, directly or indirectly, owns a majority of the capital stock with
voting power, under ordinary circumstances, to elect directors or (2) any other
Person (other than a corporation) in which at the date of determination
Cincinnati Bell, one or more Subsidiaries or Cincinnati Bell together with one
or more Subsidiaries, directly or indirectly, has at least a majority ownership
and power to direct the policies, management and affairs of such Person.
(Section 4.03)
CONSOLIDATION, MERGER OR SALE
The Indentures generally permit Cincinnati Bell or Cincinnati Bell
Telephone to consolidate or merge with each other or any other company or to
sell substantially all of its assets to each other or any other company, as long
as the following conditions are met:
- The company surviving the consolidation, merger or sale (if it is
not Cincinnati Bell or Cincinnati Bell Telephone) expressly assumes
all of the obligations of the relevant issuer under all outstanding
Indentures relating to the Securities;
- Immediately after the consolidation, merger or sale of assets, no
Event of Default has occurred or appears likely to occur; and
- The surviving company is organized under the laws of the United
States of America, any U.S. state or the District of Columbia.
The surviving or acquiring corporation will be substituted for Cincinnati
Bell or Cincinnati Bell Telephone in the Indentures with the same effect as if
it had been an original party to the Indentures. (Section 10.02) Thereafter, the
surviving or acquiring corporation may exercise the rights and powers of
Cincinnati Bell or Cincinnati Bell Telephone under the Indentures and the
Securities, and Cincinnati Bell or Cincinnati Bell Telephone will be released
from all of its liabilities and obligations under the Indentures and the
Securities.
Unless otherwise indicated in a Prospectus Supplement, the covenants
contained in the Indentures and the Securities do not afford holders of the
Securities protection in the event of a highly leveraged or other transaction
involving Cincinnati Bell or Cincinnati Bell Telephone that may adversely affect
holders of the Securities.
EVENT OF DEFAULT
"Event of Default" means any of the following:
- failure to pay interest on any Security for 30 days;
- failure to deposit any sinking fund payment when due;
- failure to pay the principal or any premium on any Security when
due;
- failure to perform any other covenant in the Indenture that
continues for 60 days after receiving written notice from the
Trustee or the holders of at least 25% in principal amount of the
outstanding Securities;
- failure to make payments and certain other defaults with respect to
other outstanding debt of $20 million or more;
- certain events in bankruptcy, insolvency or reorganization; or
- any other Event of Default included in any Indenture or Supplemental
Indenture.
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<PAGE> 37
If an Event of Default for any series of Securities occurs and continues,
either the Trustee or the holders of at least 25% in aggregate principal amount
of that series of Securities may declare the entire principal of all Securities
of that series to be due and payable immediately. If this happens, subject to
certain conditions, the holders of a majority of the aggregate principal amount
of that series of Securities can rescind the declaration. (Section 6.01) If an
Event of Default resulting from certain events of bankruptcy, insolvency or
reorganization of Cincinnati Bell or Cincinnati Bell Telephone occurs, the
entire principal of all Securities of all series will become due and payable
immediately without any declaration or any act on the part of the Trustee or the
Securities Holders. (Section 6.02)
An Event of Default for a particular series of Securities does not
necessarily constitute an Event of Default for any other series of Securities
issued under an Indenture. It is possible for an Event of Default to occur with
respect to one or more series of Securities while other series are not affected.
Within 90 days after a default for any series of Securities occurs, the
Trustee must notify the holders of Securities of that series of the default if
it is known to the Trustee and Cincinnati Bell or Cincinnati Bell Telephone has
not remedied it (a default means the events specified above without the grace
periods or notice). The Trustee may withhold notice to the holders of such
Securities of any default (except in the payment of principal or interest) if it
in good faith considers such withholding to be in the best interests of the
holders. Cincinnati Bell and Cincinnati Bell Telephone are required to file an
annual certificate with the Trustee, signed by an officer, about any default by
them under any provisions of the Indentures. (Section 5.03)
Other than its duties in case of a default, a Trustee is not obligated to
exercise any of its rights or powers under any Indenture at the request, order
or direction of any holders, unless the holders offer the Trustee indemnity
satisfactory to the Trustee. (Sections 7.01 and 7.02) If they provide this
indemnification satisfactory to the Trustee, the holders of a majority in
principal amount of any series of Securities may direct the time, method and
place of conducting any proceeding or any remedy available to the Trustee, or
exercising any power conferred upon the Trustee, for any series of Securities.
(Section 6.06)
MODIFICATION OF INDENTURES
The rights and obligations of Cincinnati Bell and Cincinnati Bell Telephone
and the rights of the holders of the Securities under each Indenture may be
modified with the consent of the holders of at least 66 2/3% in principal amount
of the outstanding Securities of each series affected by the modification. No
modification may extend the fixed maturity of any Securities, reduce the
principal amount of the Securities, reduce the rate or extend the time of
payment of interest or reduce any premium payable upon the redemption of the
Securities. Also, the percentage of holders required to consent to a
modification may not be reduced. (Section 9.02)
Unless otherwise specified in the applicable prospectus supplement, the
Indentures may also be modified without the consent of any holders of the
Securities for certain specified purposes, including in order to correct any
ambiguity, defect or inconsistency in the Indentures. (Section 9.01)
BOOK-ENTRY NOTES -- REGISTRATION, TRANSFER AND PAYMENT OF INTEREST AND PRINCIPAL
Book-entry notes of a series will be issued in the form of a global note
that will be deposited with The Depository Trust Company, New York, New York
("DTC"). This means that Cincinnati Bell and Cincinnati Bell Telephone will not
issue certificates to each holder. One global note will be issued to DTC who
will keep a computerized record of its participants (for example, your broker)
whose clients have purchased the notes. The participant will then keep a record
of its clients who purchased the notes. Unless it is exchanged in whole or in
part for a certificate note, a global note may not be transferred; except that
DTC, its nominees, and their successors may transfer a global note as a whole to
one another.
Beneficial interests in global notes will be shown on, and transfers of
global notes will be made only through, records maintained by DTC and its
participants.
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<PAGE> 38
DTC has provided us the following information: DTC is a limited-purpose
trust company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the United States
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered under the
provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds
securities that its participants ("Direct Participants") deposit with DTC. DTC
also records the settlement among Direct Participants of securities
transactions, such as transfers and pledges, in deposited securities through
computerized records for Direct Participant's accounts. This eliminates the need
to exchange certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. DTC's book-entry system is also used by other organizations such
as securities brokers and dealers, banks and trust companies that work through a
Direct Participant. The rules that apply to DTC and its participants are on file
with the SEC.
DTC is owned by a number of its Direct Participants and by the New York
Stock Exchange, Inc., The American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc.
We will wire principal and interest payments to DTC's nominee. We and the
Trustee will treat DTC's nominee as the owner of the global notes for all
purposes. Accordingly, we, the Trustee and any paying agent will have no direct
responsibility or liability to pay amounts due on the global notes to owners of
beneficial interests in the global notes.
It is DTC's current practice, upon receipt of any payment of principal or
interest, to credit Direct Participants' accounts on the payment date according
to their respective holdings of beneficial interests in the global notes as
shown on DTC's records. In addition, it is DTC's current practice to assign any
consenting or voting rights to Direct Participants whose accounts are credited
with notes on a record date, by using an omnibus proxy. Payments by participants
to owners of beneficial interests in the global notes, and voting by
participants, will be governed by the customary practices between the
participants and owners of beneficial interests, as is the case with notes held
for the account of customers registered in "street name." However, payments will
be the responsibility of the participants and not of DTC, the Trustee or us.
Notes represented by a global note will be exchangeable for certificate
notes with the same terms in authorized denominations only if:
- DTC notifies us that it is unwilling or unable to continue as
depositary or if DTC ceases to be a clearing agency registered under
applicable law and a successor depositary is not appointed by us
within 90 days; or
- we determine not to require all of the notes of a series to be
represented by a global note and notify the Trustee of our decision.
Settlement for the Securities will be made by the Underwriters in
immediately available funds. All payments of principal and interest will be made
in immediately available funds, except as otherwise indicated in this section.
CERTIFICATE NOTES -- REGISTRATION, TRANSFER AND PAYMENT OF INTEREST AND
PRINCIPAL
If Cincinnati Bell or Cincinnati Bell Telephone issues certificate notes,
they will be registered in the name of the noteholder. The notes may be
transferred or exchanged, pursuant to administrative procedures in the
Indenture, without the payment of any service charge (other than any tax or
other governmental charge) by contacting the paying agent.
Holders of over $5 million in principal amount of Securities can request
that payment of principal, premium, if any, and interest be wired to them by
contacting the paying agent at least one business day prior to the payment date.
Otherwise, payments will be made by check and sent by first class mail.
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<PAGE> 39
THE PAYING AGENT
Unless otherwise specified in the Prospectus Supplement, the paying agent
will be The Bank of New York, 101 Barclay Street, New York, New York.
DISCHARGE
Cincinnati Bell or Cincinnati Bell Telephone will be discharged from its
obligations on the Securities of any series at any time if it deposits with the
Trustee sufficient cash or government securities to pay the principal, premium,
if any, and interest and any other sums due to the stated maturity date or a
redemption date of the Securities of that series, and if it satisfies certain
other conditions. If this happens, the holders of the Securities of that series
will not be entitled to the benefits of the Indenture except for registration of
transfer and exchange of Securities and replacement of lost, stolen or mutilated
Securities. (Section 11.01) To exercise this option, Cincinnati Bell or
Cincinnati Bell Telephone must provide the Trustee with an opinion of recognized
tax counsel to the effect that, among other things, the deposit and related
discharge would not cause the holders of the Securities of that series to
recognize income, gain or loss for federal income tax purposes.
REPORTS BY CINCINNATI BELL AND CINCINNATI BELL TELEPHONE
Each of Cincinnati Bell and Cincinnati Bell Telephone will provide to the
Trustee (and to holders of the Securities upon request) copies of any annual and
quarterly reports and other information that Cincinnati Bell or Cincinnati Bell
Telephone is required to file with the SEC pursuant to the Securities Exchange
Act of 1934. Even if Cincinnati Bell is not required to file any such reports or
information with the SEC, Cincinnati Bell (but not Cincinnati Bell Telephone)
will continue to provide such information to the Trustee (and to holders of the
Securities upon request), as if Cincinnati Bell were still subject to the SEC's
reporting requirements.
DESCRIPTION OF GUARANTEE
Cincinnati Bell will unconditionally guarantee the due and punctual payment
of the principal of, premium, if any, and interest on the Guaranteed Debt
Securities, whether due and payable at maturity or by declaration of
acceleration, call for redemption or otherwise. The Guarantee will be an
unsecured obligation of Cincinnati Bell and will be subordinated and subject in
right of payment to the prior payment in full of all Senior Debt of Cincinnati
Bell, including any Debt Securities issued by Cincinnati Bell under the
Cincinnati Bell Indenture described in this section. (Articles One and Fourteen)
"Senior Debt" is defined to include the principal of, premium (if any) and
interest on the indebtedness of Cincinnati Bell outstanding on the date that any
series of Securities are issued or on any date after the issue date including
guarantees of, endorsements and other contingent obligations in respect of, or
agreements to purchase or otherwise acquire, the indebtedness of others.
However, Senior Debt does not include any of the following: (1) the Guaranteed
Debt Securities, (2) any obligation of Cincinnati Bell to any of its
subsidiaries, (3) trade payables, (4) indebtedness of Cincinnati Bell that, by
the express terms of the agreement creating it, is subordinate to other
obligations of Cincinnati Bell, (5) any portion of Cincinnati Bell's
indebtedness that is incurred in violation of the Cincinnati Bell Telephone
Indenture or (6) tax liabilities.
The Cincinnati Bell Telephone Indenture does not limit the amount of debt
(including Senior Debt) that Cincinnati Bell may incur or guarantee. Because
Cincinnati Bell is a holding company that conducts all of its operations through
its subsidiaries, claims of holders of Guaranteed Debt Securities against
Cincinnati Bell under the Guarantees will generally have a junior position to
claims of creditors of Cincinnati Bell, including trade creditors, debtholders,
secured creditors, taxing authorities, guarantee holders and any preferred
stockholders.
For current information on the outstanding debt of Cincinnati Bell and
Cincinnati Bell Telephone, see Cincinnati Bell's most recent Forms 10-K and
10-Q. See "Where You Can Find More Information."
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GOVERNING LAW
New York state law will govern the Indentures, Securities and Guarantees,
without regard to conflict of law principles.
PLAN OF DISTRIBUTION
We may sell the Securities (a) directly to one or more purchasers, (b)
through underwriters or dealers, and (c) through agents.
If an underwriter or dealer is used in the sale, the Securities will be
acquired by the underwriters or dealers for their own account. The underwriters
or dealers may resell the Securities in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The obligations of the underwriters or dealers
to purchase the Securities will be subject to certain conditions. The
underwriters or dealers will be obligated to purchase all of the Securities of
the series offered if any of the Securities are purchased.
Securities may be sold directly by us. In this case, no underwriters or
agents would be involved.
Securities may also be sold through agents designated by us. The agents
will agree to use their reasonable best efforts to solicit purchases for the
period of their appointment.
We may effect the distribution of the Securities from time to time in one
or more transactions whether (a) at a fixed price or prices, which may be
changed, (b) at market prices prevailing at the time of sale, (c) at prices
related to such prevailing market prices or (d) at negotiated prices.
Underwriters, dealers and agents that participate in the distribution of
the Securities may be underwriters as defined in the Securities Act of 1933 (the
"Securities Act"), and any discounts or commissions received by them from us and
any profit on the resale of the Securities by them may be treated as
underwriting discounts and commissions under the Securities Act. Any
underwriters or agents will be identified and their compensation described in a
prospectus supplement.
We may have agreements with underwriters, dealers and agents to indemnify
them against certain civil liabilities, including liabilities under the
Securities Act or to contribute with respect to payments which the underwriters,
dealers or agents may be required to make.
Underwriters, dealers and agents may engage in transactions with, or
perform services to, us or our subsidiaries in the ordinary course of business.
LEGAL MATTERS
Frost & Jacobs LLP, counsel of Cincinnati Bell and Cincinnati Bell
Telephone, is passing upon the legality of the Debt Securities for Cincinnati
Bell and the Guaranteed Debt Securities for Cincinnati Bell and Cincinnati Bell
Telephone.
Cleary, Gottlieb, Steen & Hamilton of New York, New York will issue an
opinion about certain legal matters relating to the Securities for the
underwriters. Cleary, Gottlieb, Steen & Hamilton will rely on Frost & Jacobs LLP
as to matters of Ohio law.
EXPERTS
The consolidated balance sheets as of December 31, 1997 and 1996 and the
consolidated statements of income, shareowners' equity, and cash flows for each
of the three years in the period ended December 31, 1997 of Cincinnati Bell Inc.
and Transtech, incorporated by reference in this Prospectus, have been
incorporated herein in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
Cincinnati Bell Inc. files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document we file at the SEC's public reference rooms in Washington, D.C., New
York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to other documents. The information incorporated by reference is
considered to be part of this Prospectus, and later information filed with the
SEC will update and supersede this information. We incorporate by reference the
documents listed below and any future filings made with the SEC under Section
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until we sell
all the debt securities.
- Cincinnati Bell Annual Report on Form 10-K for the year ended December
31, 1997;
- Cincinnati Bell Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1998 and June 30, 1998; and
- Current Reports on Form 8-K, dates of report February 2, 1998, March 3,
1998 (as amended by Form 8-K/A, date of report March 3, 1998), September 2,
1998 and October 13, 1998.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Investor Relations
Cincinnati Bell Inc.
201 East Fourth Street
Cincinnati, Ohio 45202
(513) 397-9900
You may also find information about Cincinnati Bell and Cincinnati Bell
Telephone at their web sites. Cincinnati Bell's web site is a
http://www.cinbellinc.com. Cincinnati Bell Telephone's web site is at
http://www.cincinnatibell.com.
You should rely only on the information incorporated by reference or
provided in this Prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this Prospectus or any Prospectus
Supplement is accurate as of any date other than the date on the front of those
documents.
Convergys has filed the Convergys S-1 with the SEC. In addition, Convergys
Corporation files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document that
Convergys files at the SEC's reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. You may call the SEC at the phone number indicated
above and also obtain the Convergys filings from the SEC website identified
above.
You may request a copy of the Convergys S-1 or any of its other filings, at
no cost, by writing or telephoning Cincinnati Bell at the Investor Relations
address indicated above.
In addition, you may also find information about Convergys at its website
at http://www.convergys.com.
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$150,000,000
CINCINNATI BELL TELEPHONE COMPANY
GUARANTEED % DEBENTURES DUE 20
GUARANTEED ON A SUBORDINATED BASIS BY
CINCINNATI BELL INC.
[CBT LOGO]
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PROSPECTUS SUPPLEMENT
, 1998
(Including Prospectus Dated October 13, 1998)
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SALOMON SMITH BARNEY
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
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