Information included in this Quarterly Report on Form 10-Q contains certain forward-looking statements that involve potential risks and uncertainties. The Company's future results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed herein and those discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2007. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date thereof.

The Company was initially incorporated under the laws of Ohio in 1983 and remains incorporated under the laws of Ohio. It has its principal executive offices at 221 East Fourth Street, Cincinnati, Ohio 45202 (telephone number
(513) 397-9900 and website address http://www.cincinnatibell.com). The Company makes available its reports on Form 10-K, 10-Q, and 8-K (as well as all amendments to these reports) on its website, free of charge, at the Investor Relations section as soon as practicable after they have been electronically filed.

The Company files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC") under the Exchange Act. These reports and other information filed by the Company may be read and copied at the Public Reference Room of the SEC, 100 F Street N.E., Washington, D.C. 20549. Information may be obtained about the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy statements, and other information about issuers, like the Company, which file electronically with the SEC. The address of that site is http://www.sec.gov.

Critical Accounting Policies and Estimates

The preparation of Condensed Consolidated Financial Statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. In the Company's Annual Report on Form 10-K for the year ended December 31, 2007, the Company identified critical accounting policies that affect its more significant estimates and assumptions used in preparing its Condensed Consolidated Financial Statements. These critical accounting policies include revenue recognition, accounting for allowances for uncollectible accounts receivable, reviewing the carrying values of goodwill and indefinite-lived intangible assets, reviewing the carrying values of property, plant and equipment, accounting for business combinations, accounting for taxes, accounting for pension and postretirement expenses, and accounting for termination benefits.

Results of Operations

The financial results for the three and nine months ended September 30, 2008 and 2007 referred to in this discussion should be read in conjunction with the Condensed Consolidated Statements of Operations in this Quarterly Report on Form 10-Q. Results for interim periods may not be indicative of the results for subsequent periods or the full year.

CONSOLIDATED OVERVIEW

Consolidated revenue totaled $346.5 million for the third quarter of 2008, an increase of $2.2 million compared to the third quarter of 2007. The increase was primarily due to the following:

• $5.7 million higher revenues in the Wireless segment primarily due to increased postpaid service revenue from additional subscribers;

• $1.4 million lower revenues in the Wireline segment due to lower voice revenue offset by increased data, long distance and voice over internet protocol ("VoIP") revenue; and

• $0.8 million lower revenues in the Technology Solutions segment primarily due to lower telephony and IT equipment distribution revenue offset by increased data center and managed services revenue.

For the nine months ended September 30, 2008, consolidated revenue increased $57.6 million to $1,046.2 million as compared to $988.6 million for the same period in 2007. The increase was primarily due to the following:

• $46.4 million higher revenues in the Technology Solutions segment primarily due to higher data center and managed services revenue and telephony and IT equipment distribution revenue;

• $20.5 million higher revenues in the Wireless segment primarily due to increased service revenue from additional postpaid subscribers and increased average revenue per user ("ARPU"); and

• $4.1 million lower revenues in the Wireline segment due to lower voice revenue offset by increased data, long distance and VoIP revenue.

Operating income for the third quarter of 2008 was $79.8 million, a decrease of $2.8 million compared to the same period in 2007. The decrease was primarily due to the following:

• $7.4 million decrease in Wireline segment operating income primarily due to lower local voice revenue;

• $2.7 million increase in Wireless segment operating income due primarily to additional subscribers; and

• $1.8 million decrease in corporate expenses primarily due to lower incentive compensation expense.

Operating income for the nine months ended September 30, 2008 was $216.8 million, a decrease of $24.6 million compared to the same period in the prior year. This decrease was primarily due to the following:

• $34.6 million decrease in Wireline segment operating income primarily due to a $25.1 million increase in restructuring costs and asset impairment charge; and

• $9.5 million increase in Wireless segment operating income due to additional subscribers and higher ARPU.

Interest expense was $35.0 million for the third quarter of 2008 and $106.1 million for the nine months ended September 30, 2008 as compared to $38.0 million for the third quarter of 2007 and $117.1 million for the nine months ended September 30, 2007. The decrease compared to last year is primarily attributable to lower interest rates and lower debt balances.

Other income of $2.4 million for the nine months ended September 30, 2008 consisted primarily of gains on the extinguishment of debt related to the purchase and extinguishment of $58.1 million of the 8 3/8% Senior Subordinated Notes due 2014 and 7 1/4 % Senior Notes due 2013. Other income of $2.1 million for the nine months ended September 30, 2007 consisted primarily of a one-time dividend received from a cost investment.

Income tax expense for the third quarter of 2008 was $19.2 million compared to $18.7 million for the third quarter of 2007. Income tax expense for the nine months ended September 30, 2008 was $48.0 million as compared to $54.0 million for the same period in 2007 primarily due to lower pre-tax income.

The Company has certain non-deductible expenses, including interest on securities originally issued to acquire its broadband business (the "Broadband Securities") or securities that the Company has subsequently issued to refinance the Broadband Securities. In periods without tax law changes, the Company expects its effective tax rate to exceed statutory rates primarily due to the non-deductible expenses associated with the Broadband Securities. The Company estimates that its effective income tax rate will be approximately 43% for the full year 2008. However, the Company expects to use federal and state net operating loss carryforwards to substantially defray payment of federal and state tax liabilities in 2008. The Company expects income tax payments for 2008 to be approximately $5 million.

Discussion of Operating Segment Results

WIRELINE



                                                Three Months Ended September 30,                             Nine Months Ended September 30,
(dollars in millions)                    2008         2007         $ Change       % Change           2008         2007         $ Change       % Change
Revenue:
Voice - local service                  $   96.0      $ 105.8      $     (9.8 )          (9 )%       $ 295.9      $ 328.7      $    (32.8 )         (10 )%
Data                                       68.8         65.8             3.0             5 %          204.3        191.8            12.5             7 %
Long distance and VoIP                     24.8         19.8             5.0            25 %           73.7         58.3            15.4            26 %
Other                                      11.0         10.6             0.4             4 %           31.8         31.0             0.8             3 %

Total revenue                             200.6        202.0            (1.4 )          (1 )%         605.7        609.8            (4.1 )          (1 )%

Operating costs and expenses:
Cost of services and products              67.5         66.0             1.5             2 %          201.4        199.0             2.4             1 %
Selling, general and administrative        40.2         37.1             3.1             8 %          118.7        113.5             5.2             5 %
Depreciation                               25.4         26.2            (0.8 )          (3 )%          75.1         78.1            (3.0 )          (4 )%
Amortization                                0.3           -              0.3           n/m              0.8           -              0.8           n/m
Restructuring charges (gains)               1.6         (0.3 )           1.9           n/m             26.0          2.1            23.9           n/m
Asset impairment                             -            -               -            n/m              1.2           -              1.2           n/m

Total operating costs and expenses        135.0        129.0             6.0             5 %          423.2        392.7            30.5             8 %

Operating income                       $   65.6      $  73.0      $     (7.4 )         (10 )%       $ 182.5      $ 217.1      $    (34.6 )         (16 )%

Operating margin                           32.7 %       36.1 %                        (3.4 ) pts       30.1 %       35.6 %                        (5.5 ) pts

Capital expenditures                   $   22.5      $  20.9      $      1.6             8 %        $  68.9      $  69.4      $     (0.5 )          (1 )%

The Wireline segment consists of the operations of Cincinnati Bell Telephone Company LLC, which operates as an Incumbent Local Exchange Carrier ("ILEC") within the Company's traditional territory, Cincinnati Bell Extended Territories LLC, which operates as a Competitive Local Exchange Carrier ("CLEC") in Dayton, Ohio and communities adjacent to the ILEC's northern borders, Cincinnati Bell Any Distance Inc. ("CBAD"), which provides long distance, audio conferencing and VoIP services, Cincinnati Bell Complete Protection Inc., which provides security monitoring services and related surveillance hardware, the Company's payphone business, and its entertainment operations, which currently offers cable television primarily in Lebanon, Ohio and DirecTV on a commission basis to the remainder of its operating territory.

In February 2008, CBAD completed the acquisition of eGIX Inc. ("eGIX"), a CLEC provider of advanced data and voice services to businesses in Indiana and Illinois for $18.1 million and contingent consideration of up to $5.2 million.

In June 2008, the Company purchased the Dayton, Ohio operations of CenturyTel for $1.5 million. The purchase includes access lines to small and medium-size customers and fiber network throughout the Dayton metro area.

Revenue

Voice local service revenue includes local service, value added services, switched access and information services. Voice revenue decreased in both the three and nine months ended September 30, 2008 versus the same periods in 2007 primarily as a result of a 7% decrease in access lines.

Access lines within the segment's ILEC territory decreased by 66,000 or 8%, from 789,000 at September 30, 2007 to 723,000 at September 30, 2008. The access line loss resulted from several factors including customers electing to use wireless communication in lieu of the traditional local service, Company-initiated disconnections of customers with credit problems, and customers electing to use service from other providers. The Company has partially offset its access line loss in its ILEC territory by continuing to target voice services to residential and business customers in its CLEC territory. The Company had approximately 68,000 CLEC access lines at September 30, 2008, which is a 14% increase from September 30, 2007.

Data revenue consists of data transport, high-speed Internet access ("DSL"), dial-up Internet access, digital trunking, and Local Area Network interconnection services. Data revenue increased $3.0 million and $12.5 million for the three and nine months ended September 30, 2008, respectively, compared to the same periods a year ago. The increase primarily resulted from higher DSL and data transport revenue. Data transport revenues increased by $1.9 million and $8.1 million for the three and nine months ended September 30, 2008, respectively, compared to the same periods a year ago primarily due to increased usage by CBW and third party users. Data revenue also increased by an additional $1.3 million and $4.8 million for the three and nine months ended September 30, 2008, respectively, compared to the prior year periods primarily due to an increase in DSL subscribers by 13,000, bringing total DSL subscribers to 231,000 at September 30, 2008.

Long distance and VoIP revenue increased $5.0 million and $15.4 million for the three and nine months ended September 30, 2008, respectively, as compared to the same periods in 2007. The revenue increases primarily resulted from the acquisition of eGIX, which generated revenue of $3.6 million and $9.4 million in the three and nine month periods ended September 30, 2008, respectively. The remaining increase in both periods was primarily due to an increase in minutes of use for long distance, VoIP and new broadband services. The Company had 535,000 subscribed long distance access lines as of September 30, 2008 in the Cincinnati and Dayton, Ohio operating areas compared to 548,000 as of September 30, 2007. The decrease in subscribers was due to a 6% decline in residential lines partially offset by a 7% increase in business subscribers.

Costs and Expenses

Cost of services and products increased by $1.5 million and $2.4 million for the three and nine months ended September 30, 2008, respectively, as compared to the corresponding periods in 2007. The increase in the third quarter was due to increased network costs of $2.0 million related to growth in long distance, VoIP, broadband services and CLEC revenues and an increase of $1.5 million due to the acquisition of eGIX. The increase was partially offset by lower labor costs primarily attributable to the restructuring program announced in the fourth quarter of 2007. Increased costs due to the region's largest-ever power outage from the winds of Hurricane Ike were mostly offset by the contra-expense recorded for the insurance claim receivable. The increase in cost of services and products for the nine months ended September 30, 2008 resulted from an increase of $4.2 million due to the acquisition of eGIX, a $4.8 million increase in network costs for the reasons discussed above, and a $1.3 million increase due to the settlement of an inter-carrier reciprocal compensation claim in 2007. These increases were partially offset by lower labor costs, mainly lower pension and postretirement costs due to plan changes announced in the third quarter of 2007.

Selling, general and administrative expenses increased $3.1 million and $5.2 million for the three and nine months ended September 30, 2008, respectively, versus the prior year. The increase in the quarter expenses was primarily due to the acquisition of eGIX, which had $1.6 million of costs, and an increase in commissions, consulting and insurance costs. The increase for the nine months ended September 30, 2008 was primarily due to the acquisition of eGIX.

Restructuring expenses for the nine months ended September 30, 2008 resulted from an early retirement option offered by the Company and accepted by certain eligible union employees during the first quarter of 2008. See Note 6 to the Condensed Consolidated Financial Statements for further information. Restructuring expenses for the nine months ended September 30, 2007 were primarily due to severance costs associated with the outsourcing of certain accounting functions and the reduction in workforce of various other administrative functions.

The asset impairment charge of $1.2 million expensed during the nine months ended September 30, 2008 related to software that is no longer being used.

WIRELESS



                                                                Three Months Ended September 30,                            Nine Months Ended September 30,
(dollars in millions, except for operating metrics)      2008         2007         $ Change       % Change          2008         2007         $ Change       % Change
Revenue:
Service                                                $   74.2      $  68.2      $      6.0             9 %       $ 218.5      $ 197.9      $     20.6            10 %
Equipment                                                   6.6          6.9            (0.3 )          (4 )%         19.1         19.2            (0.1 )          (1 )%

Total revenue                                              80.8         75.1             5.7             8 %         237.6        217.1            20.5             9 %

Operating costs and expenses:
Cost of services and products                              41.7         39.9             1.8             5 %         122.3        112.0            10.3             9 %
Selling, general and administrative                        18.6         16.6             2.0            12 %          52.2         50.2             2.0             4 %
Depreciation                                                8.2          8.8            (0.6 )          (7 )%         24.7         25.8            (1.1 )          (4 )%
Amortization                                                0.5          0.8            (0.3 )         (38 )%          1.6          2.3            (0.7 )         (30 )%
Restructuring charges                                       0.1           -              0.1           n/m             0.5           -              0.5           n/m

Total operating costs and expenses                         69.1         66.1             3.0             5 %         201.3        190.3            11.0             6 %

Operating income                                       $   11.7      $   9.0      $      2.7            30 %       $  36.3      $  26.8      $      9.5            35 %

Operating margin                                           14.5 %       12.0 %                         2.5  pts       15.3 %       12.3 %                         3.0  pts

Operating metrics
Postpaid ARPU*                                         $  48.82      $ 47.41      $     1.41             3 %       $ 47.91      $ 46.75      $     1.16             2 %
Prepaid ARPU*                                          $  26.33      $ 22.96      $     3.37            15 %       $ 26.92      $ 23.45      $     3.47            15 %

Capital expenditures                                   $    9.7      $  11.0      $     (1.3 )         (12 )%      $  33.7      $  23.8      $      9.9            42 %

* The Company has presented certain information regarding monthly average revenue per user ("ARPU") because the Company believes ARPU provides a useful measure of the operational performance of its Wireless segment. ARPU is calculated by dividing service revenue by the average subscriber base for the period.

Revenue

Service revenue increased by $6.0 million in the third quarter of 2008 as compared to last year primarily due to the following:

• Postpaid service revenue increased $5.1 million due to an increase in subscribers. Postpaid subscribers increased 6% from 391,000 subscribers at September 30, 2007 to 414,000 at September 30, 2008. Net postpaid subscribers of 4,000 were added during the third quarter of 2008 compared to net additions of 8,000 subscribers in the third quarter of 2007. The Company continues to add subscribers due to a combination of attractive rate plans, extensive retail distribution, and network performance. The average monthly churn increased to 2.3% for the third quarter of 2008 compared to 1.7% in the third quarter of 2007. The increase in churn is due to increased competition and Company-initiated disconnections of customers with credit problems.

• Prepaid service revenue increased $0.9 million compared to the same period last year primarily due to the increase in ARPU of $3.37. The number of prepaid subscribers at September 30, 2008 was 153,000, down from 166,000 prepaid subscribers at September 30, 2007. The Company has focused its marketing on higher usage rate plans, which has driven higher ARPU but led to the decrease in the number of prepaid subscribers.

For the nine months ended September 30, 2008, service revenue increased $20.6 million compared to the same period in 2007 primarily due to a $16.0 million increase in postpaid revenue resulting from an increase in both subscribers and ARPU. The ARPU increase includes a 26% increase in data revenue. Prepaid service revenue increased $4.6 million primarily due to higher ARPU.

Equipment revenue was relatively flat for the three and nine months ended September 30, 2008 compared to last year.

Costs and Expenses

Cost of services and products consists largely of network operation costs, interconnection expenses with other telecommunications providers, roaming expense (which is incurred for subscribers to use their handsets in the territories of other wireless service providers), and cost of handsets and accessories sold. These expenses increased $1.8 million during the third quarter of 2008 and $10.3 million for the nine months ended September 30, 2008 versus the prior year periods. The increase for the three month and nine month periods was primarily attributable to a $1.7 million and $8.5 million increase in network costs, respectively, due to a higher number of subscribers and increased usage per subscriber. The remaining cost increase for the nine month period was primarily due to increased handset subsidies related to a higher number of postpaid activations and for retention of existing customers.

Selling, general and administrative expenses increased $2.0 million for both the three and nine months ended September 30, 2008 compared to the same periods in 2007. The increase in the third quarter was primarily due to a $1.0 million increase in bad debt expense and higher commissions as a result of a higher number of activations. Costs for the nine months ended September 30, 2008 increased $2.0 million due to a $1.3 million increase in bad debt expense and an increase in both commissions and consulting fees offset by lower advertising of $0.6 million.

TECHNOLOGY SOLUTIONS



                                                  Three Months Ended September 30,                            Nine Months Ended September 30,
(dollars in millions)                      2008          2007        $ Change       % Change          2008         2007         $ Change       % Change
Revenue:
Telecom and IT equipment distribution    $   43.1       $ 52.9      $     (9.8 )         (19 )%      $ 142.9      $ 125.0      $     17.9            14 %
Data center and managed services             25.6         18.4             7.2            39 %          72.2         48.2            24.0            50 %
Professional services                         4.6          2.8             1.8            64 %          11.4          6.9             4.5            65 %

Total revenue                                73.3         74.1            (0.8 )          (1 )%        226.5        180.1            46.4            26 %

Operating costs and expenses:
Cost of services and products                53.4         59.5            (6.1 )         (10 )%        171.7        143.2            28.5            20 %
Selling, general and administrative           9.8          7.0             2.8            40 %          29.7         20.1             9.6            48 %
Depreciation                                  3.9          1.8             2.1           n/m            10.2          4.3             5.9           n/m
Amortization                                  0.4          0.1             0.3           n/m             1.2          0.3             0.9           n/m
Restructuring                                  -            -               -            n/m             0.4           -              0.4           n/m

Total operating costs and expenses           67.5         68.4            (0.9 )          (1 )%        213.2        167.9            45.3            27 %

Operating income                         $    5.8       $  5.7      $      0.1             2 %       $  13.3      $  12.2      $      1.1             9 %

Operating margin                              7.9 %        7.7 %                         0.2  pts        5.9 %        6.8 %                        (0.9 ) pts

Capital expenditures                     $   23.1       $ 30.2      $     (7.1 )         (24 )%      $  55.7      $  59.2      $     (3.5 )          (6 )%

The Technology Solutions segment consists of Cincinnati Bell Technology Solutions Inc. ("CBTS") and GramTel Inc. ("GramTel"), which was purchased on December 31, 2007.

Revenue

Revenue from telecom and IT equipment distribution represents the sale, installation and maintenance of major, branded IT and telephony equipment. Revenue decreased by $9.8 million in the third quarter of 2008 and increased by $17.9 million for the nine months ended September 30, 2008 as compared to the same periods a year ago. The decrease in the third quarter of 2008 was primarily due to lower telephony and IT equipment sales. The increase for the nine months ending September 30, 2008 was due to increased telephony and IT equipment sales of $18.7 million partially offset by lower installation and maintenance services.

Data center and managed services revenue consists of recurring collocation payments from customers residing in the Company's data centers, managed VoIP solutions, and IT services that include network management, electronic data storage, disaster recovery, and data security management. Revenue increased $7.2 million for the third quarter of 2008 and $24.0 million for the nine months ended September 30, 2008 as compared to the same periods a year ago primarily due to increased product penetration within managed services and increased billable data center space. Data center billed utilization was 88% on approximately 202,000 square feet of data center capacity at September 30, 2008, which includes 22,000 square feet of data center capacity obtained through the acquisition of GramTel, compared to billed utilization of 84% on approximately 135,000 square feet of data center capacity at September 30, 2007. The Company intends to continue to pursue additional customers and growth in its data center business, for which the Company is prepared to commit resources, including capital expenditures and working capital, to support this growth.