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, 2008. 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 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, 2008, 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, 2009 and 2008 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 $337.7 million for the third quarter of 2009, a decrease of $8.8 million compared to the third quarter of 2008. The decrease was primarily due to the following:

• $9.7 million lower revenues in the Wireline segment primarily due to lower voice revenue;

• $3.1 million lower revenues in the Wireless segment primarily due to lower postpaid service revenue; and

• $5.1 million higher revenues in the Technology Solutions segment primarily due to increased data center and managed services revenue and higher telecom and IT equipment distribution revenue.

For the nine months ended September 30, 2009, consolidated revenue decreased $55.4 million to $990.8 million as compared to $1,046.2 million for the same period in 2008. The decrease was primarily due to the following:

• $25.5 million lower revenues in the Wireline segment primarily due to lower voice revenue partially offset by higher data revenue;

• $18.6 million lower revenues in the Technology Solutions segment primarily due to lower telecom and IT equipment distribution revenue partially offset by increased data center and managed services revenue; and

• $7.1 million lower revenues in the Wireless segment primarily due to lower postpaid service revenue and equipment revenue.

Operating income for the third quarter of 2009 was $73.2 million, a decrease of $6.6 million compared to the same period in 2008. The decrease resulted from lower Wireless segment operating income due primarily to a $4.8 million loss on the sale of a wireless spectrum asset and lower postpaid service revenue.

Operating income for the nine months ended September 30, 2009 was $229.1 million, an increase of $12.3 million compared to the same period a year ago. This increase was primarily due to the following:

• $25.2 million increase in Wireline segment operating income primarily due to lower restructuring costs; and

• $12.6 million decrease in Wireless segment operating income due primarily to lower postpaid service revenue and a loss on the sale of a wireless spectrum asset.

Interest expense was $31.5 million for the third quarter of 2009 and $94.6 million for the nine months ended September 30, 2009 as compared to $35.0 million for the third quarter of 2008 and $106.1 million for the nine months ended September 30, 2008. The decrease compared to last year is primarily attributable to lower debt balances due to the purchase and extinguishment of a portion of the Company's corporate bonds and lower short-term interest rates.

Income tax expense for the third quarter of 2009 of $21.7 million and income tax expense for the nine months ended September 30, 2009 of $59.1 million increased by $2.5 million and $11.1 million, respectively, versus the comparable prior year periods primarily due to higher pretax income.

The Company expects its effective tax rate to exceed statutory rates primarily due to the 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. The Company estimates that its effective income tax rate will be approximately 41% for the full year 2009. However, the Company expects to use federal and state net operating loss carryforwards to substantially defray payment of federal and state tax liabilities in 2009. The Company expects income tax payments for the 2009 year to be approximately $7 million.

Discussion of Operating Segment Results

WIRELINE



                                                       Three Months Ended September 30,                           Nine Months Ended September 30,
(dollars in millions)                          2009          2008         Change        % Change          2009          2008         Change        % Change
Revenue:
Voice - local service                         $  83.0       $  96.0       $ (13.0 )          (14 )%      $ 260.8       $ 295.9       $ (35.1 )          (12 )%
Data                                             70.4          68.8           1.6              2 %         211.0         204.3           6.7              3 %
Long distance and VoIP                           24.0          24.8          (0.8 )           (3 )%         72.0          73.7          (1.7 )           (2 )%
Other                                            13.5          11.0           2.5             23 %          36.4          31.8           4.6             14 %

Total revenue                                   190.9         200.6          (9.7 )           (5 )%        580.2         605.7         (25.5 )           (4 )%

Operating costs and expenses:
Cost of services and products                    62.8          67.5          (4.7 )           (7 )%        188.8         201.4         (12.6 )           (6 )%
Selling, general and administrative              35.1          40.2          (5.1 )          (13 )%        111.5         118.7          (7.2 )           (6 )%
Depreciation                                     26.2          25.4           0.8              3 %          76.9          75.1           1.8              2 %
Amortization                                      0.3           0.3            -               0 %           0.8           0.8            -               0 %
Restructuring charges (gains)                     1.0           1.6          (0.6 )          (38 )%         (5.5 )        26.0         (31.5 )          n/m
Asset impairment                                   -             -             -             n/m              -            1.2          (1.2 )          n/m

Total operating costs and expenses              125.4         135.0          (9.6 )           (7 )%        372.5         423.2         (50.7 )          (12 )%

Operating income                              $  65.5       $  65.6       $  (0.1 )            0 %       $ 207.7       $ 182.5       $  25.2             14 %

Operating margin                                 34.3 %        32.7 %                       1.6  pts        35.8 %        30.1 %                       5.7  pts
Metric information:
Local access lines (in thousands)               737.8         791.4         (53.6 )           (7 )%        737.8         791.4         (53.6 )           (7 )%
DSL subscribers (in thousands)                  234.5         231.1           3.4              1 %         234.5         231.1           3.4              1 %
Long distance lines (in thousands)              515.9         534.9         (19.0 )           (4 )%        515.9         534.9         (19.0 )           (4 )%
Capital expenditures                          $  35.4       $  22.5       $  12.9             57 %       $ 101.9       $  68.9       $  33.0             48 %

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, voice over internet protocol ("VoIP") and broadband services including private line and multi protocol label switching, eVolve Business Solutions LLC, which provides 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 television over coaxial cable and fiber optical cable in limited areas and DirecTV on a commission basis to the remainder of its operating territory.

Revenue

Voice local service revenue includes local service, value added services, switched access and information services. Voice revenue decreased for both the three and nine months ended September 30, 2009 versus the same period in 2008 primarily as a result of a 7% decrease in access lines. Access lines within the segment's ILEC territory decreased by 59,000 or 8%, from 723,100 at September 30, 2008 to 664,100 at September 30, 2009. 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 73,700 CLEC access lines at September 30, 2009, which is an 8% increase from September 30, 2008.

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 $1.6 million and $6.7 million for the three and nine months ended September 30, 2009 compared to the same periods a year ago, primarily due to increased data transport usage by third party users.

Long distance and VoIP revenue decreased $0.8 million and $1.7 million for the three and nine months ended September 30, 2009 as compared to the same periods in 2008. The decrease was due to lower minutes of use for long-distance and audio conferencing, which caused a $1.5 million and $6.0 million decrease in revenue for the three and nine months ended September 30, 2009, respectively. The decrease in long distance revenue was due to a 5% decline in residential lines. The revenue decrease from long distance and audio conferencing was partially offset by growth in revenue from VoIP and broadband services.

Costs and Expenses

Cost of services and products decreased by $4.7 million and $12.6 million for the three and nine months ended September 30, 2009 as compared to the corresponding periods in 2008. The decrease in the third quarter was driven by lower benefit costs of $2.8 million primarily due to the pension and postretirement plan changes announced in February 2009, lower operating and property taxes of $1.4 million and lower wages and other costs from operations. These decreases were partially offset by an increase in network costs of $1.0 million to support growth in CLEC and VoIP revenues. The decrease in the nine months ended September 30, 2009 was primarily due to $4.6 million in lower wages due to the Company's restructuring initiatives, $5.9 million in lower benefit costs as discussed above, lower operating and property taxes of $2.4 million and other lower costs from operations including a $0.7 million claim settlement. These decreases were partially offset by an increase in network costs of $2.7 million.

Selling, general and administrative expenses decreased by $5.1 million and $7.2 million for the three and nine months ended September 30, 2009, respectively, versus the comparable periods in 2008. The decrease for the three months ended September 30, 2009 primarily consists of a $1.8 million decrease in costs resulting from lower negotiated rates with third party service providers, lower wages of $1.5 million and lower benefit costs due to the pension and postretirement plan changes announced in February 2009. The decrease for the nine months ended September 30, 2009 was primarily due to a $3.9 million decrease in costs from third party service providers as discussed above, a $1.9 million decrease in wages and a $2.1 million decrease in benefit costs. These decreases were partially offset by an increase in bad debt expense.

The restructuring gain for the nine months ended September 30, 2009 resulted primarily from a curtailment due to changes in the pension and postretirement plans announced in February 2009. Restructuring charges for the nine months ended September 30, 2008 resulted primarily 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.

WIRELESS



                                                             Three Months Ended September 30,                          Nine Months Ended September 30,
(dollars in millions, except for operating metrics)    2009         2008        Change       % Change           2009         2008        Change       % Change
Revenue:
Service                                               $  71.6      $  74.2      $  (2.6 )          (4 )%       $ 214.1      $ 218.5      $  (4.4 )          (2 )%
Equipment                                                 6.1          6.6         (0.5 )          (8 )%          16.4         19.1         (2.7 )         (14 )%

Total revenue                                            77.7         80.8         (3.1 )          (4 )%         230.5        237.6         (7.1 )          (3 )%

Operating costs and expenses:
Cost of services and products                            42.0         41.7          0.3             1 %          121.9        122.3         (0.4 )           0 %
Selling, general and administrative                      16.8         18.6         (1.8 )         (10 )%          50.8         52.2         (1.4 )          (3 )%
Depreciation                                              9.4          8.2          1.2            15 %           28.2         24.7          3.5            14 %
Amortization                                              0.3          0.5         (0.2 )         (40 )%           1.1          1.6         (0.5 )         (31 )%
Restructuring charge                                       -           0.1         (0.1 )         n/m               -           0.5         (0.5 )         n/m
Loss on sale of asset                                     4.8           -           4.8           n/m              4.8           -           4.8           n/m

Total operating costs and expenses                       73.3         69.1          4.2             6 %          206.8        201.3          5.5             3 %

Operating income                                      $   4.4      $  11.7      $  (7.3 )         (62 )%       $  23.7      $  36.3      $ (12.6 )         (35 )%

Operating margin                                          5.7 %       14.5 %                     (8.8 ) pts       10.3 %       15.3 %                     (5.0 ) pts
Metric information:
Postpaid ARPU*                                        $ 49.27      $ 48.82      $  0.45             1 %        $ 48.62      $ 47.91      $  0.71             1 %
Prepaid ARPU*                                         $ 28.70      $ 26.33      $  2.37             9 %        $ 28.43      $ 26.92      $  1.51             6 %
Postpaid subscribers (in thousands)                     383.5        413.6        (30.1 )          (7 )%         383.5        413.6        (30.1 )          (7 )%
Prepaid subscribers (in thousands)                      152.8        153.4         (0.6 )         n/m            152.8        153.4         (0.6 )         n/m
Average postpaid churn                                    2.3 %        2.3 %                     0.0  pts          2.2 %        1.9 %                     0.3  pts
Capital expenditures                                  $   8.1      $   9.7      $  (1.6 )         (16 )%       $  17.9      $  33.7      $ (15.8 )         (47 )%

* 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 decreased by $2.6 million in the third quarter of 2009 as compared to the same period last year due to the following:

• Postpaid service revenue decreased $3.1 million due to a decrease in subscribers partially offset by an increase in ARPU. The Company's loss of postpaid subscribers has been higher than historical levels, in part due to the Company's tightening of credit standards. The ARPU increase was driven by a 23% increase in data ARPU; and

• Prepaid service revenue increased $0.5 million compared to the same period last year primarily due to an increase in ARPU of $2.37 partially offset by a decrease in subscribers.

For the nine months ended September 30, 2009, service revenue decreased $4.4 million compared to the same period in 2008 primarily due to a $3.5 million decrease in postpaid service revenue resulting from the decrease in subscribers as described above partially offset by an increase in ARPU. Prepaid service revenue declined $0.9 million during the nine months ended September 30, 2009 compared to the same period in 2008 primarily from fewer subscribers partially offset by higher ARPU.

Equipment revenue for the three and nine months ended September 30, 2009 decreased by $0.5 million and $2.7 million compared to the same periods in 2008 primarily due to lower prepaid and postpaid subscriber activations partially offset by higher handset revenue per unit.

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 $0.3 million during the third quarter of 2009 and decreased $0.4 million for the nine months ended September 30, 2009 versus the prior year periods. The third quarter increase was primarily attributable to an increase in handset subsidies to attract new customers and retain existing customers. The decrease for the nine months ended September 30, 2009 was primarily due to lower handset equipment costs of $3.1 million and $1.4 million lower operating taxes. These decreases were offset by an increase in handset subsidies to attract new customers and retain existing customers of $3.7 million and higher network costs mostly related to the increased data revenue.

Selling, general and administrative expenses decreased $1.8 million for the third quarter of 2009 primarily due to a decrease in advertising costs, bad debt expense and lower distributor commissions resulting from lower activations. Costs for the nine months ended September 30, 2009 versus the prior year period decreased $1.4 million primarily due to lower distributor commissions resulting from lower activations of $1.9 million as well as lower advertising and other costs offset by an increase in bad debt expense of $1.8 million.

The loss on sale of asset of $4.8 million relates to the wireless spectrum for the Indianapolis, Indiana region that the Company sold for $5.8 million during the three months ended September 30, 2009.

TECHNOLOGY SOLUTIONS



                                                            Three Months Ended September 30,                              Nine Months Ended September 30,
(dollars in millions)                               2009           2008          Change       % Change            2009           2008          Change       % Change
Revenue:
Telecom and IT equipment
distribution                                      $    45.2      $    43.1      $    2.1             5 %        $   109.4      $   142.9      $  (33.5 )         (23 )%
Data center and managed
services                                               28.1           25.6           2.5            10 %             83.4           72.2          11.2            16 %
Professional services                                   5.1            4.6           0.5            11 %             15.1           11.4           3.7            32 %

Total revenue                                          78.4           73.3           5.1             7 %            207.9          226.5         (18.6 )          (8 )%

Operating costs and expenses:
Cost of services and products                          56.7           53.4           3.3             6 %            146.1          171.7         (25.6 )         (15 )%
Selling, general and
administrative                                         10.0            9.8           0.2             2 %             32.6           29.7           2.9            10 %
Depreciation                                            4.6            3.9           0.7            18 %             13.6           10.2           3.4            33 %
Amortization                                            0.4            0.4            -              0 %              1.2            1.2            -              0 %
Restructuring charge                                     -              -             -            n/m                 -             0.4          (0.4 )         n/m

Total operating costs and
expenses                                               71.7           67.5           4.2             6 %            193.5          213.2         (19.7 )          (9 )%

Operating income                                  $     6.7      $     5.8      $    0.9            16 %        $    14.4      $    13.3      $    1.1             8 %

Operating margin                                        8.5 %          7.9 %                      0.6  pts            6.9 %          5.9 %                      1.0  pts
Metric information:
Raised floor (in square feet)                       271,000        202,000        69,000            34 %          271,000        202,000        69,000            34 %
Utilization rate                                         80 %           88 %                        (8 ) pts           80 %           88 %                        (8 ) pts
Capital expenditures                              $     3.9      $    23.1      $  (19.2 )         (83 )%       $    21.5      $    55.7      $  (34.2 )         (61 )%

The Technology Solutions segment consists of CBTS, CBTS Canada Inc., CBTS Software LLC, and GramTel Inc.

Revenue

Revenue from telecom and IT equipment distribution represents the sale, installation and maintenance of major, branded IT and telephony equipment. Revenue increased by $2.1 million in the third quarter of 2009 as customer demand for equipment that had been suppressed by the economy began to be realized in the third quarter. Revenue decreased by $33.5 million for the nine months ended September 30, 2009 as compared to the same periods a year ago as a result of lower capital spending by business customers due to the decline in the economy.

Data center and managed services revenue consists of recurring collocation rents 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 $2.5 million for the third quarter of 2009 and $11.2 million for the nine months ended September 30, 2009 as compared to the same periods a year ago, primarily due to increased billable data center space.

Professional services revenue consists of long-term and short-term IT outsourcing and consulting engagements. Revenue for the three and nine months ended September 30, 2009 increased by $0.5 million and $3.7 million, respectively, compared to the same periods in 2008. The Company continues to expand its team of recruiting and hiring personnel in order to focus on selling these outsourcing and consulting engagements.

Costs and Expenses

Cost of services and products increased by $3.3 million in the third quarter of 2009 and decreased by $25.6 million for the nine months ended September 30, 2009 as compared to the same periods in 2008. The increase in the third quarter primarily resulted from a $3.5 million increase in cost of goods sold related to higher telecom and equipment distribution revenue. The margin on telecom and equipment distribution revenue decreased from the third quarter of 2008 primarily due to the product mix of equipment sold. The decrease for the nine months ended September 30, 2009 was primarily due to a $28.8 million decrease in cost of goods sold related to lower telecom and equipment distribution revenue . . .