Cincinnati Bell Inc. Annual Report 2017

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-K xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017 oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934For the transition period from to Commission File Number 1-8519CINCINNATI BELL INC. Ohio 31-1056105(State of Incorporation) (I.R.S. Employer Identification No.)221 East Fourth Street, Cincinnati, Ohio 45202(Address of principal executive offices) (Zip Code)(513) 397-9900(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registeredCommon Shares (par value $0.01 per share) New York Stock Exchange6 3/4% Convertible Preferred Shares New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No oIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes x No oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files). Yes x No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the bestof registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form10-K. oIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or anemerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company"in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filerx Accelerated filero Non-accelerated filero Smaller reporting companyo Emerging growth companyo If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. oIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No xThe aggregate market value of the voting common shares owned by non-affiliates of the registrant was $0.8 billion, computed by reference to the closing saleprice of the common stock on the New York Stock Exchange on June 30, 2017, the last trading day of the registrant’s most recently completed second fiscalquarter. The Company has no non-voting common shares.At January 31, 2018, there were 42,394,151 common shares outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the definitive proxy statement relating to the Company’s 2018 Annual Meeting of Shareholders are incorporated by reference into Part III of thisreport to the extent described herein. Table of ContentsForm 10-K Part I Cincinnati Bell Inc.TABLE OF CONTENTS PART I PageItem 1.Business4 Item 1A.Risk Factors11 Item 1B.Unresolved Staff Comments25 Item 2.Properties25 Item 3.Legal Proceedings25 Item 4.Mine Safety Disclosures25 PART II Item 5.Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities26 Item 6.Selected Financial Data28 Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations30 Item 7A.Quantitative and Qualitative Disclosure About Market Risk57 Item 8.Financial Statements and Supplementary Data58 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure107 Item 9A.Controls and Procedures107 Item 9B.Other Information107 PART III Item 10.Directors, Executive Officers and Corporate Governance108 Item 11.Executive Compensation109 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters109 Item 13.Certain Relationships and Related Transactions, and Director Independence109 Item 14.Principal Accountant Fees and Services109 PART IV Item 15.Exhibits and Financial Statement Schedules110 Signatures116This report contains trademarks, service marks and registered marks of Cincinnati Bell Inc., as indicated.Table of ContentsForm 10-K Part I Cincinnati Bell Inc.Part IItem 1. BusinessOverview and StrategyCincinnati Bell Inc. and its consolidated subsidiaries ("Cincinnati Bell", "we", "our", "us" or the "Company") provides integrated communications and ITsolutions that keep residential and business customers connected with each other and with the world. Through its Entertainment and Communicationssegment, the Company provides high speed data, video, and voice solutions to consumers and businesses over an expanding fiber network and a legacycopper network. In addition, business customers across the U.S., Canada and Europe rely on the IT Services and Hardware segment for the sale and service ofefficient, end-to-end communications and IT systems and solutions. During 2017, the Company expanded the geographic footprint of its IT Services andHardware segment as a result of the acquisitions of SunTel Services ("SunTel") and OnX Holdings LLC ("OnX"), transforming the segment into a NorthAmerican hybrid-cloud services provider.Our goal is to continue the transformation of Cincinnati Bell from a legacy copper-based telecommunications company into a technology company withstate of the art fiber assets servicing customers with data, video, voice and IT solutions to meet their evolving needs. To this end, we believe that byleveraging our past and future investments we have created a company with a healthy balance sheet, growing revenue, growing profitability and sustainablecash flows.In an effort to achieve our objectives, we continue to focus on the following key initiatives:•expand our fiber network; and•grow our IT Services and Hardware segmentExpand our fiber networkWe invested $158.8 million of capital in strategic products of the Entertainment and Communications segment during 2017. Revenue from these highdemand products totaled $515.0 million, up 15% over the prior year, and more than offset the decline in our legacy products. The primary focus of ourstrategic investments is the expansion of our Fioptics suite of high-speed internet and video products, which are designed to compete directly with the cableMultiple System Operators, such as Charter Communications, serving the Company’s operating territory. In 2017, we invested $124.6 million in Fioptics asdemand for the products remain strong. Year-over-year growth is outlined in the table below: 2017 2016 2015Fioptics revenue (in millions):$309.8 $254.1 $190.8Fioptics subscribers (inthousands): High-speed internet226.6 197.6 153.7Video146.5 137.6 114.4Voice105.9 96.2 77.4During the year we passed an additional 38,800 addresses with Fioptics and, as of December 31, 2017, the Fioptics products are available to approximately572,200 customer locations, or 70% of our operating territory. Our goal is to pass an additional 35,000 addresses during 2018.The capital expenditures related to strategic products included an investment of $34.2 million in fiber and IP-based core network technology. Theseexpenditures position the Company to meet increased business and carrier demand within Greater Cincinnati and in contiguous markets in the Midwestregion for high-bandwidth data transport products, such as metro-ethernet and VoIP. We continue to evolve and optimize network assets to support themigration of legacy products to new technology, and as of December 31, 2017, the Company has:•increased the total number of commercial addresses with fiber-based services (referred to as a lit address) to 22,500 by connecting approximately6,700 additional lit addresses in 2017;•expanded the fiber network to span more than 10,900 route miles; and4Table of ContentsForm 10-K Part I Cincinnati Bell Inc.•provided cell site back-haul services to approximately 70% of the 1,000 cell sites in-market, of which approximately 95% of these sites are lit withfiber.As a result of our strategic investments, we have generated year-over-year Entertainment and Communications revenue growth each year since 2013. TheCompany's expanding fiber assets allow us to support the ever-increasing demand for data, video and internet devices with speed, agility and security. Webelieve our fiber investments are a long-term solution for our customers' bandwidth needs.The Company's initiatives to expand our fiber network extend beyond the Greater Cincinnati area. In July 2017, the Company announced its plans to acquireHawaiian Telcom Holdco, Inc. ("Hawaiian Telcom"). The pending acquisition of Hawaiian Telcom will add operational scale and expand the Company'sfiber-centric footprint and commercial opportunity to Hawaii.Grow our IT Services and Hardware SegmentCincinnati Bell continues to grow the IT Services and Hardware segment by developing new products, as well as expanding its reach to new customers.During 2017, the Company completed the acquisitions of SunTel and OnX, which enabled us to extend our geographic footprint across the U.S., Canada andEurope, diversify our customer base, and expand our product portfolio. The Company continues to develop high-demand products for business customersthrough our investments in fiber and other success-based technology, such as unified communications and cloud services. Our ability to be innovative and toreact to the changing technology demands of our customers is important to the growth of our IT Services and Hardware segment. Our telecom and IT hardwareofferings provide a platform for buyer engagement, and an opportunity for bridging to higher value professional and managed services. As a company with along history of managing customer network and technology needs, we combine the management of the network, whether owned by Cincinnati Bell or leasedfrom other carriers out of territory, with integrated voice and IT offerings. We supply the architecture and integration intelligence, labor and hardware, as wellas any combination of these services. These projects can be established based on hourly billing rates, service-level driven agreements or utility-basedmanaged service models. Customers are attracted to our ability to combine our historic knowledge, unique assets and talented workforce in order to helpthem improve their operational efficiency, mitigate risk and reduce costs.5Table of ContentsForm 10-K Part I Cincinnati Bell Inc.OperationsAs of December 31, 2017, the Company operated two segments: Entertainment and Communications and IT Services and Hardware. We generally classify ourproducts and services into three distinct categories: Strategic, Legacy and Integration. The table below demonstrates how our products and services arecategorized within the Entertainment and Communications and IT Services and Hardware segments: Entertainment and Communications StrategicLegacyIntegrationDataFioptics InternetDSL (< 10 meg) DSL (1) (≥10 meg)DS0 (5), DS1, DS3 EthernetTDM (6) Private Line MPLS (2) SONET (3) Dedicated Internet Access Wavelength Audio Conferencing VoiceFioptics VoiceTraditional Voice VoIP (4)Long Distance Switched Access Digital Trunking VideoFioptics Video Services and OtherWiring ProjectsAdvertisingMaintenance Directory AssistanceInformation Services Wireless Handsets and Accessories (1) Digital Subscriber Line(2) Multi-Protocol Label Switching(3) Synchronous Optical Network(4) Voice over Internet Protocol(5) Digital Signal(6) Time Division MultiplexingIT Services and Hardware StrategicIntegrationProfessional ServicesConsultingInstallation Staff Augmentation Digital Application Solutions Unified CommunicationsVoice MonitoringMaintenance Managed IP Telephony Solutions Cloud ServicesVirtual Data Centers Storage Backup Management and MonitoringNetwork Management/Monitoring Security Telecom & IT Hardware Hardware Software Licenses6Table of ContentsForm 10-K Part I Cincinnati Bell Inc.Entertainment and CommunicationsThe Entertainment and Communications segment provides products and services such as high-speed internet, data transport, local voice, long distance, VoIP,video and other services. CBT, a subsidiary of the Company, is the Incumbent Local Exchange Carrier ("ILEC") for a geography that covers a radius ofapproximately 25 miles around Cincinnati, Ohio, and includes parts of northern Kentucky and southeastern Indiana. CBT has operated in this territory for145 years. The segment also provides voice and data services beyond its ILEC territory, particularly in Dayton and Mason, Ohio, through the operations ofCincinnati Bell Extended Territories LLC ("CBET"), a Competitive Local Exchange Carrier ("CLEC") and subsidiary of CBT. The Entertainment andCommunications segment also provides Long distance and VoIP services, primarily through CBTS Technology Solutions LLC ("CBTS TS"), which wasformerly known as Cincinnati Bell Any Distance Inc. The key products and services provided by the Entertainment and Communications segment includethe following:DataThe Company's data products include high-speed internet access, data transport and interconnection services. Consumer demand for increased internet speedsis accelerating and more customers are opting for higher bandwidth solutions such as Fioptics. To address this demand, we are able to provide internet speedsof 30 megabits or more to approximately 70% of Greater Cincinnati, of which approximately 431,000 addresses are capable of receiving gigabit service.As business customers migrate from legacy products and copper-based technology, our metro-ethernet product becomes the access method of choice due toits ability to support multiple applications on a single physical connection. The Company continues to build out fiber to multi-tenant units ("MTU's") inGreater Cincinnati to meet growing demand for these services. We are also expanding our metro-ethernet platform to deliver services across a widergeography to target business customers beyond our ILEC footprint. The Company’s regional network connects Greater Cincinnati, Columbus, and Dayton,Ohio, as well as Indianapolis, Indiana; Chicago, Illinois; and Louisville, Kentucky.VoiceVoice represents local service, including Fioptics voice lines. It also includes VoIP, long distance, digital trunking, switched access and other value-addedservices such as caller identification, voicemail, call waiting and call return.The Company's voice access lines continue to decrease as our customers have increasingly employed wireless technologies in lieu of wireline voice services("wireless substitution"), or migrated to competitors.Residential and business customers purchasing traditional long distance service can choose from a variety of long distance plans, which include unlimitedlong distance for a flat fee, purchase of minutes at a per-minute-of-use rate, or a fixed number of minutes for a flat fee. The Company's long distance lines andrelated minutes of use have continued to decline as a result of wireless substitution and the migration to VoIP technology. Our VoIP products provide accessto widely disbursed communication platforms and access to our cloud based services and hosted unified communications products for customers rangingfrom small businesses to large enterprise customers.VideoThe Company launched Fioptics in 2009 and initially focused our fiber network investment on densely populated areas, such as apartments andcondominiums. Since that time, Fioptics has been deployed over a much broader base and is now available to approximately 70% of Greater Cincinnati. Asof December 31, 2017, we have 146,500 video subscribers. Our Fioptics customers enjoy access to over 400 entertainment channels including digital music,local, movie and sports programming with over 150 high-definition channels, parental controls, HD DVR and video On-Demand.Services and OtherServices and other revenue consists of revenue generated from wiring projects for business customers, advertising, directory assistance, maintenance andinformation services.7Table of ContentsForm 10-K Part I Cincinnati Bell Inc.IT Services and HardwareThe IT Services and Hardware segment provides a full range of managed IT solutions, including managed infrastructure services, telephony and IT equipmentsales, and professional IT staffing services. These services and products are provided through the Company's subsidiaries in various geographic areasthroughout the U.S., Canada and Europe. By offering a full range of equipment and outsourced services in conjunction with the Company’s fiber and coppernetworks, the IT Services and Hardware segment provides end-to-end IT and telecommunications infrastructure management designed to reduce cost andmitigate risk while optimizing performance for its customers.The key products and services provided by the IT Services and Hardware segment include the following:Professional ServicesThe Company's professional services offerings consist of consulting, staffing, installation and project-based engagements, including engineering andinstallation of voice, connectivity and IT technologies, development of digital application solutions and staff augmentation by highly skilled and industry-certified technical resources. Engagements can be short-term IT implementation and project-based work as well as longer term staffing and permanentplacement assignments. The Company utilizes a team of experienced recruiting and hiring personnel to provide its customers with a wide range of skilled ITprofessionals.Unified CommunicationsThe Company offers a complete portfolio of hosted solutions that include converged IP communications platforms of data, voice, video and mobilityapplications. We offer our customers expert management for all hardware and software components, including maintenance contracts and service levelagreement ("SLA") based services. Fully hosted and managed, these voice platforms and applications can also be delivered as cloud services for a monthlyutility fee.The solutions offered include Unified Communications as a Service ("UCaaS") in a cloud environment. We provide hosted communications and solutionsthat deliver the efficiencies of next-generation VoIP services. Our conferencing solutions offer cloud-based audio, video, and web conferencing servicesaccessible from any connected device. Our cloud call center application offering features speech-enabled Interactive Voice Response ("IVR"), call-backservices, call analytics and surveys. The cloud call recording application features speech analytics, alerts and notification, and improved customersatisfaction and productivity. Additionally, we also manage the maintenance of a large base of local customers with traditional voice systems as well asconverged VoIP systems.Cloud ServicesVirtual data center ("VDC") is a robust and scalable virtual infrastructure consisting of equipment, security, people and processes. This offering is provided inthree different models - private cloud, dedicated cloud or public cloud - and provides customers with either a long-term or a short-term flexible solution thatis fully managed by the Company and monitored around the clock from our Enterprise Network Operations Center ("ENOC").Storage is a flexible, on-demand solution that enables businesses to eliminate capital expenditures and ongoing asset management with SLA-based services.The Company offers Tier I, Tier II and Tier III storage to meet its customers' availability, accessibility, protection, performance and capacity needs.Backup is a scalable solution that allows businesses to eliminate capital outlay and ongoing equipment management with SLA-based services and includesvirtual data center, hardware, software, monitoring and support.Management & MonitoringThe Company provides SLA-based managed services utilizing our Enterprise Network Operations Center ("ENOC"). The ENOC includes highly certifiedengineers and operation experts that proactively monitor and manage our customers’ technology environments and applications. Standalone monitoringservices provide customers with scheduled and automatic checks of customers' servers, routers, switches, load balancers and firewalls. We also providecustomers with advance trouble shooting, repair and changes of customers' servers, routers, switches, load balancers and other network devices from ourENOC. These services can be provided to customers with equipment provided by the Company, or customer-owned equipment, and do not have geographicalconstraints. Services can be purchased individually or bundled by combining multiple products, services, and assets into a utility or service model.8Table of ContentsForm 10-K Part I Cincinnati Bell Inc.Telecom and IT HardwareThe Company maintains premium resale relationships and certifications with a variety of branded technology vendors which allows it to competitively sell,architect and install a wide array of telecommunications and IT infrastructure equipment to meet the needs of its customers.Sales and Distribution ChannelsThe Company’s Entertainment and Communications segment utilizes a number of distribution channels to acquire customers. As of December 31, 2017, theCompany operated eight retail stores in its operating territory to market and distribute our Fioptics suite of products. The Company works to locate retailstores in high traffic but affordable areas, with a distance between each store that considers optimal returns per store and customer convenience. TheCompany also offers fully-automated, end-to-end web-based sales of various other Company services and accessories. In addition, the Company utilizes acall center, as well as a door-to-door sales force, to target the sale of our consumer products to residents.For both operating segments, we utilize a business-to-business sales force and a call center organization to reach business customers in our operating territory.Larger business customers are supported by sales account representatives and solution architects located in our branch offices across the U.S., Canada andEurope that understand the customer's technology needs and recommend Company offered solutions. Smaller business customers are supported through atelemarketing sales force, customer representatives and store locations.Suppliers and Product Supply ChainThe Company generally subjects purchases to competitive bids and selects its vendors based on price, service level, delivery terms, quality of product andterms and conditions.Entertainment and Communications' primary purchases are for video content, network equipment, software, fiber cable and contractors to maintain andsupport the growth of Fioptics. The Company maintains facilities and operations for storing cable and other equipment, product distribution and customerfulfillment.IT Services and Hardware primarily purchases IT and telephony equipment that is either sold to a customer or used to provide service to the customer. TheCompany is a certified distributor of leading technology and software solutions including, but not limited to, Cisco, EMC, Avaya and Oracle. Most of thisequipment is shipped directly to the customer from vendor locations, but the Company does maintain warehouse facilities for replacement parts andequipment testing and staging.In addition, we have long-term commitments to outsource various services, such as certain information technology functions, cash remittance and accountspayable functions, call center operations and maintenance services.CompetitionThe telecommunications industry is very competitive, and the Company competes against larger, well-capitalized national providers.The Entertainment and Communications segment faces competition from other local exchange carriers, wireless service providers, inter-exchange carriers, aswell as cable, broadband, and internet service providers. The Company has lost, and will likely continue to lose access lines as a portion of the customer basemigrates to competitive wireline or wireless providers in lieu of the Company’s services. Wireless providers, particularly those that provide unlimited wirelessservice plans with no additional fees for long distance, offer customers a substitution service for the Company’s local voice and long-distance services. TheCompany believes wireless substitution is the reason for the largest portion of the Company’s access line and long-distance line losses.Our strategic products also face intense competition from cable operators, other telecom companies and niche fiber companies. Many of our competitors havelower operating costs and access to resources that provide economies of scale that allow them to more aggressively price products, as well as provide productson a much broader scale given their expanded geographic operations. Our competitors continuously upgrade their service quality and offerings which couldsubstantially erode the competitive advantage we currently have with our fiber-based products. These competitive factors could limit the Company's abilityto grow revenue and cash flows despite the strategic initiatives implemented.9Table of ContentsForm 10-K Part I Cincinnati Bell Inc.The Fioptics video products also face competition from a number of different sources, including companies that deliver movies, television shows and othervideo programming over broadband Internet connections. Increasingly, content owners are utilizing Internet-based delivery of content directly to consumers,some without charging a fee for access to the content. Furthermore, due to consumer electronics innovations, consumers are able to watch such Internet-delivered content on television sets and mobile devices. Increased customer migration to these non-traditional entertainment products could result inincreased Fioptics churn and decreased penetration for video; however, this trend could also drive increased demand for our high speed internet product.The IT Services and Hardware segment competes against numerous information technology consulting, web-hosting, and computer system integrationcompanies, many of which are larger in scope and well-financed. The Company believes that participants in this market must grow rapidly and achievesignificant scale to compete effectively. Other competitors may consolidate with larger companies or acquire software application vendors or technologyproviders, enabling them to more effectively compete. This consolidation could affect prices and other competitive factors in ways that could impede theability of these businesses to compete successfully in the market. In addition, as more customers work to manage cash flow and migrate to the public cloud,we will see declines in the demand for Telecom and IT hardware. However, this trend can provide an opportunity in the form of professional services as wehave IT professionals that can develop the strategy to guide customers through this migration.CustomersThe following table demonstrates how the Company’s revenue portfolio has changed over the past three years.Percentage of revenue 2017 2016 2015 2017 vs 2016Change 2016 vs 2015Change Strategic 55% 54% 46% 1pts 8ptsLegacy 21% 26% 31% (5) (5) Integration 24% 20% 23% 4 (3) Total 100% 100% 100% Percentage of revenue 2017 2016 2015 2017 vs 2016Change 2016 vs 2015Change Consumer 31% 32% 29% (1)pts 3ptsBusiness 61% 59% 61% 2 (2) Carrier 8% 9% 10% (1) (1) Total 100% 100% 100% For the 2017 year, the Company had no customers whose revenue comprised greater than 10% of the Company's annual revenue. The Company has saleswith one customer, General Electric Company ("GE"), which contributed 12% of the Company’s annual revenue in both 2016 and 2015.EmployeesAt December 31, 2017, the Company had approximately 3,500 employees. Approximately 25% of its employees are covered by collective bargainingagreements with the Communications Workers of America (“CWA”), which is affiliated with the AFL-CIO. Effective dates for the collective bargainingagreements range through May 12, 2018.10Table of ContentsForm 10-K Part I Cincinnati Bell Inc.Website Access and Other InformationThe Company was incorporated under the laws of Ohio in 1983 with its headquarters at 221 East Fourth Street, Cincinnati, Ohio 45202 (telephone number(513) 397-9900 and website address http://www.cincinnatibell.com). The Company files annual, quarterly and current reports, proxy statements and otherinformation with the Securities and Exchange Commission (the "SEC") under the Exchange Act of 1934 (the "Exchange Act"). These reports and otherinformation 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. Informationabout the Public Reference Room may be obtained 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 ishttp://www.sec.gov. The Company makes available its reports on Form 10-K, 10-Q, and 8-K (as well as all amendments to these reports), proxy statements andother information, free of charge, at the Investor Relations section of its website.Executive OfficersRefer to Part III, Item 10. "Directors, Executive Officers and Corporate Governance" of this Annual Report on Form 10-K for information regarding executiveofficers of the registrant.Business Segment InformationThe amounts of revenue, intersegment revenue, operating income, expenditures for long-lived assets, and depreciation and amortization attributable to eachof the Company’s business segments for the years ended December 31, 2017, 2016, and 2015, and assets as of December 31, 2017 and 2016 are set forth inNote 15 to the consolidated financial statements.Item 1A. Risk FactorsIn addition to the other information contained in this Form 10-K, the following risk factors should be considered carefully in evaluating us. Our business,financial condition, liquidity or results of operations could be materially affected by any of these risks.Risk Factors Related to our Business and OperationsThe Company operates in highly competitive industries, and customers may not continue to purchase products or services, which would result in reducedrevenue and loss of market share.The telecommunications industry is very competitive and the Company competes against larger, well-capitalized national providers. Competitors mayreduce pricing, create new bundled offerings, or develop new technologies, products or services. If the Company cannot continue to offer reliable,competitively priced, value-added services, or if the Company does not keep pace with technological advances, competitive forces could adversely affect itthrough a loss of market share or a decrease in revenue and profit margins. The Company has lost access lines, and will likely continue to lose them as part ofthe customer base migrates to competitors.The Entertainment and Communications segment faces competition from other local exchange carriers, wireless service providers, inter-exchange carriers,and cable, broadband and internet service providers. Wireless providers, particularly those that provide unlimited wireless voice and data plans with noadditional fees for long distance, offer customers a substitution for the Company’s services. The Company believes wireless substitution accounts for thelargest portion of its access line losses. Also, cable competitors that have existing service relationships with CBT’s customers offer substitution services, suchas VoIP and long distance voice services in the Company's operating areas. As a result of wireless substitution and increased competition, CBT’s legacy voicelines decreased by 15% and long distance subscribers decreased by 7% in 2017 compared to 2016.Our strategic products also face intense competition from cable operators, other telecom companies and niche fiber companies. Many of our competitors havelower operating costs and access to resources that provide economies of scale that enables them to more aggressively price products. In addition, they are ableto provide products on a much broader scale given their expanded geography of operations. Our competitors are expected to continuously upgrade theirservice quality and offerings, which could substantially erode the competitive advantage we currently have with our fiber-based products. These competitivefactors could limit the Company's ability to grow revenue and cash flows despite the strategic initiatives implemented.11Table of ContentsForm 10-K Part I Cincinnati Bell Inc.The Fioptics suite of products also faces competition from a number of different sources, including companies that deliver movies, television shows and othervideo programming over broadband Internet connections. Increasingly, content owners are utilizing Internet-based delivery of content directly to consumers,some without charging a fee for access to the content. Furthermore, due to consumer electronics innovations, consumers are able to watch such Internet-delivered content on television sets and mobile devices. Increased customer migration to these non-traditional entertainment products could result inincreased Fioptics churn and decreased penetration. If the Company is unable to effectively implement strategies to attract and retain Fioptics video andhigh-speed internet subscribers, retain access lines and long distance subscribers, or replace such customers with other sources of revenue, the Company'sEntertainment and Communications business will be adversely affected.The IT Services and Hardware segment competes against numerous other information technology consulting, web-hosting, and computer system integrationcompanies, many of which are large in scope and well-financed. This market is rapidly evolving and highly competitive. Other competitors may consolidatewith larger companies or acquire software application vendors or technology providers, which may provide competitive advantages. The Company believesthat many of the participants in this market must grow rapidly and achieve significant scale to compete effectively. This consolidation could affect prices andother competitive factors in ways that could impede our ability to compete successfully in the market. The competitive forces described above could have amaterial adverse impact on the Company’s business, financial condition, results of operations and cash flows.The Company may be unable to grow our revenues and cash flows despite the initiatives we have implemented.We must produce adequate revenues and cash flows that, when combined with cash on hand and funds available under our revolving credit facilities, will besufficient to service our debt, fund our capital expenditures, pay our taxes, fund our pension and other employee benefit obligations and pay preferreddividends pursuant to our dividend policy. We have identified some potential areas of opportunity and implemented several growth initiatives, includingincreasing marketing promotions and related expenditures and launching new products and services with a focus on areas that are growing such as Fioptics,other fiber-based service offerings and IT solutions. We cannot be assured that these opportunities will be successful or that these initiatives will improve ourfinancial position or our results of operations.Failure to anticipate the need for and introduce new products and services or to compete with new technologies may compromise the Company’s success inthe telecommunications industry.The Company’s success depends, in part, on being able to anticipate the needs of current and future business, carrier and residential customers. The Companyseeks to meet these needs through new product introductions, service quality and technological improvements. New products and services are important tothe Company’s success because its industry is technologically driven, such that new technologies can offer alternatives to the Company’s existing services.The development of new technologies and products could accelerate the Company’s loss of access lines or limit the growth from its strategic products, whichwould have a material adverse effect on the Company’s revenue, results of operations, financial condition and cash flows.The Company’s access lines, which generate a significant portion of its cash flows and profits, are decreasing in number. If the Company continues toexperience access line losses similar to the past several years, its revenues, earnings and cash flows from operations may be adversely impacted.The Company generates a substantial portion of its revenues by delivering voice and data services over access lines. The Company's localtelecommunications subsidiary, CBT, has experienced substantial access line losses over the past several years due to a number of factors, including wirelessand broadband substitution and increased competition. The Company expects access line losses to continue into the foreseeable future. Failure to retainaccess lines without replacing such losses with an alternative source of revenue would adversely impact the Company's revenues, earnings and cash flow fromoperations.The Company has provided alternative sources of revenue by way of our strategic products; however, these products may generate lower profit margins thanour traditional services. In addition, as a larger portion of our customer base has already migrated to these new product offerings, a decreased growth rate canbe expected. Moreover, we cannot provide assurance that the revenues generated from our new offerings will offset revenue losses from the reduced sales ofour legacy products or that our new strategic offerings will be as successful as anticipated. 12Table of ContentsForm 10-K Part I Cincinnati Bell Inc.Negotiations with the providers of content for our video programming may not be successful, potentially resulting in our inability to carry certainprogramming channels, which could result in the loss of subscribers. In addition, due to the influence of some content providers, we may be forced to payhigher rates for some content, resulting in increased costs. We must negotiate with the content owners of the programming that we carry. These content owners are the exclusive provider of the channels they offer. Ifwe are unable to reach a mutually-agreed upon contract with a content owner, our existing agreements to carry this content may not be renewed, resulting inthe blackout of these channels. The loss of content could result in our loss of customers who place a high value on the particular content that is lost. Inaddition, many content providers own multiple channels. As a result, we typically have to negotiate the pricing for multiple channels rather than one, andcarry and pay for content that customers do not associate much value, in order to have access to other content that customers do associate value. Some of ourcompetitors have materially larger scale than we do, and may, as a result, be better positioned than we are in such negotiations. As a result of these factors,the expense of content may continue to increase, and have a material adverse impact on the Company’s results of operations and cash flows.The Company's failure to meet performance standards under its agreements could result in customers terminating their relationships with the Company orcustomers being entitled to receive financial compensation, which would lead to reduced revenues and/or increased costs.The Company's agreements with its customers contain various requirements regarding performance and levels of service. If the Company fails to provide thelevels of service or performance required by its agreements, customers may be able to receive service credits to their accounts and other financialcompensation, and also may be able to terminate their relationship with the Company. In order to provide these levels of services, the Company is required toprotect against human error, natural disasters, equipment failure, power failure, sabotage and vandalism, and have disaster recovery plans available fordisruption of services. The failure to address these or other events may result in a disruption of services. In addition, any inability to meet service levelcommitments, or other performance standards, could reduce the confidence of customers. Decreased customer confidence could impair the Company's abilityto attract and retain customers, which could adversely affect the Company's ability to generate revenues and operating results.The Company generates a substantial portion of its revenue by serving a limited geographic area.The Company generates a substantial portion of its revenue by serving customers in Greater Cincinnati and Dayton, Ohio. An economic downturn or naturaldisaster occurring in this limited operating territory would have a disproportionate effect on the Company's business, financial condition, results ofoperations and cash flows compared to similar companies of a national scope and similar companies operating in different geographic areas.A large customer accounts for a significant portion of the Company’s revenues and accounts receivable. The loss or significant reduction in business fromthis customer would cause operating revenues to decline and could negatively impact profitability and cash flows.During 2016 and 2015 GE contributed greater than 10% of consolidated revenue. As a result of this concentration, the Company's results of operations andfinancial condition could be materially affected if the Company lost this customer or if services purchased were significantly reduced. If GE were to defaulton its accounts receivable obligations, the Company would be exposed to potentially significant losses in excess of the provisions established. This wouldalso negatively impact the available borrowing capacity under the accounts receivable securitization facility ("Receivables Facility").Maintaining the Company's telecommunications networks requires significant capital expenditures, and the Company's inability or failure to maintain itstelecommunications networks could have a material impact on its market share and ability to generate revenue.Over the past several years, the Company has improved its wireline network through increased capital expenditures for fiber optic cable in areas of itsoperating network. The Company intends to continue its capital expenditures for fiber optic cable.In order to provide appropriate levels of service to the Company's customers, the network infrastructure must be protected against damage from human error,natural disasters, unexpected equipment failure, power loss or telecommunications failures, terrorism, sabotage or other intentional acts of vandalism. TheCompany's networks may not address all of the problems that may be encountered in the event of a disaster or other unanticipated problems, which may resultin disruption of service to customers.13Table of ContentsForm 10-K Part I Cincinnati Bell Inc.The Company may also incur significant additional capital expenditures as a result of unanticipated developments, regulatory changes and other events thatimpact the business.Increases in broadband usage may cause network capacity limitations, resulting in service disruptions or reduced capacity for customers.Video streaming services and peer-to-peer file sharing applications use significantly more bandwidth than traditional Internet activity such as web browsingand email. As utilization rates and availability of these services continue to grow, our high-speed Internet customers may use much more bandwidth than inthe past. If this occurs, we could be required to make significant capital expenditures to increase network capacity in order to avoid service disruptions orreduced capacity for customers.We may not be able to recover the costs of the necessary network investments. This could result in an adverse impact to our results of operations and financialcondition.We may be liable for the material that content providers distribute over our networks.The law relating to the liability of private network operators for information carried on, stored or disseminated through their networks is still unsettled. Assuch, we could be exposed to legal claims relating to content disseminated on our networks. Claims could challenge the accuracy of materials on our networkor could involve matters such as defamation, invasion of privacy or copyright infringement. If we need to take costly measures to reduce our exposure tothese risks or are required to defend ourselves against such claims, our financial results would be negatively affected.Cyber attacks, including on our vendors, or other breaches of network or other information technology security, could have an adverse effect on ourbusiness.Cyber attacks or other breaches of network or information technology security may cause equipment failures or disruptions to our operations. Our inability tooperate our wireline networks as a result of such events, even for a limited period of time, may result in significant expenses and/or loss of market share toother communications providers. In addition, the potential liabilities associated with these events could exceed the insurance coverage we maintain. Cyberattacks, which include the use of malware, computer viruses and other means for disruption or unauthorized access, have increased in frequency, scope andpotential harm in recent years. While, to date, we have not been subject to cyber attacks or other cyber incidents which, individually or in the aggregate, havebeen material to our operations or financial condition, the preventative actions we take to reduce the risk of cyber incidents and protect our informationtechnology and networks may be insufficient to repel a major cyber attack in the future. The costs associated with a major cyber attack could include materialincentives offered to existing customers and business partners to retain their business, increased expenditures on cyber security measures, lost revenues frombusiness interruption, litigation and damage to our reputation. If we fail to prevent the theft of valuable information such as financial data, sensitiveinformation about the Company and intellectual property, or if we fail to protect the privacy of customer and employee confidential data against breaches ofnetwork or information technology security, it could result in damage to our reputation, which could adversely impact customer and investor confidence.Any of these occurrences could result in a material adverse effect on our results of operations and financial condition.Natural disasters, terrorist acts or acts of war could cause damage to our infrastructure and result in significant disruptions to our operations.Our business operations are subject to interruption by natural disasters, power outages, terrorist attacks, other hostile acts and events beyond our control.Such events could cause significant damage to our infrastructure, resulting in degradation or disruption of service to our customers. The potential liabilitiesassociated with these events could exceed the insurance coverage we maintain. Our system redundancy may be ineffective or inadequate and our disasterrecovery planning may not be sufficient for all eventualities. These events could also damage the infrastructure of suppliers that provide us with theequipment and services we need to operate our business and provide products to our customers. A natural disaster or other event causing significant physicaldamage could cause us to experience substantial losses resulting in significant recovery time and expenditures to resume operations. In addition, theseoccurrences could result in lost revenues from business interruption as well as damage to our reputation.14Table of ContentsForm 10-K Part I Cincinnati Bell Inc.The regulation of the Company’s businesses by federal and state authorities may, among other things, place the Company at a competitive disadvantage,restrict its ability to price its products and services, and threaten its operating licenses.Several of the Company’s subsidiaries are subject to regulatory oversight of varying degrees at both the state and federal levels, which may differ from theregulatory scrutiny faced by the Company’s competitors. A significant portion of CBT’s revenue is derived from pricing plans that are subject to regulatoryreview and approval. These regulated pricing plans limit the rates CBT charges for some services while the competition has typically been able to set rates forservices with limited or no restriction. In the future, regulatory initiatives that would put CBT at a competitive disadvantage or mandate lower rates for itsservices would result in lower profitability and cash flows for the Company. In addition, different regulatory interpretations of existing regulations orguidelines may affect the Company’s revenues and expenses in future periods.At the federal level, CBT is subject to the Telecommunications Act of 1996 (the "1996 Act"), including the rules subsequently adopted by the FederalCommunications Commission ("FCC") to implement the 1996 Act, which has impacted CBT’s in-territory local exchange operations in the form of greatercompetition. At the state level, CBT conducts local exchange operations in portions of Ohio, Kentucky, and Indiana, and, consequently, is subject toregulation by the Public Utilities Commissions in those states. Various regulatory decisions or initiatives at the federal or state level may from time to timehave a negative impact on CBT’s ability to compete in its markets.There are currently many regulatory actions under way and being contemplated by federal and state authorities regarding issues that could result insignificant changes to the business conditions in the telecommunications industry. In addition, in connection with our Internet access offerings, we couldbecome subject to laws and regulations as they are adopted or applied to the Internet. There is currently only limited regulation applicable to these services.As the significance of the Internet continues to grow, federal, state and local governments may pass laws and adopt rules and regulations or apply existinglaws and regulations to the Internet (including Internet access services). Related matters are currently under consideration in both federal and state legislativeand regulatory bodies. We cannot provide any assurances that changes in current or future regulations adopted by the FCC or state regulators, or otherlegislative, administrative, or judicial initiatives relating to the telecommunications industry, will not have a material adverse effect on the Company’sbusiness, financial condition, results of operations and cash flows.From time to time, different regulatory agencies conduct audits to ensure that the Company is in compliance with the respective regulations. The Companycould be subject to fines and penalties if found to be out of compliance with these regulations, and these fines and penalties could be material to theCompany’s financial condition.The Company depends on a number of third-party providers, and the loss of, or problems with, one or more of these providers may impede the Company'sgrowth or cause it to lose customers.The Company depends on third-party providers to supply products and services. For example, many of the Company's information technology and call centerfunctions are performed by third-party providers, and network equipment is purchased from and maintained by vendors. The loss of, or problems with, one ormore of these third-party providers may result in an adverse effect on our ability to provide products and services to our customers and on our results ofoperations and financial condition.A failure of back-office information technology systems could adversely affect the Company’s results of operations and financial condition.The efficient operation of the Company’s business depends on back-office information technology systems. The Company relies on back-office informationtechnology systems to effectively manage customer billing, business data, communications, supply chain, order entry and fulfillment and other businessprocesses. A failure of the Company’s information technology systems to perform as anticipated could disrupt the Company’s business and result in a failureto collect accounts receivable, transaction errors, processing inefficiencies, and the loss of sales and customers, causing the Company’s reputation and resultsof operations to suffer. In addition, information technology systems may be vulnerable to damage or interruption from circumstances beyond the Company’scontrol, including fire, natural disasters, systems failures, security breaches and viruses. Any such damage or interruption could have a material adverse effecton the Company’s business.15Table of ContentsForm 10-K Part I Cincinnati Bell Inc.If the Company fails to extend or renegotiate its collective bargaining agreements with its labor union when they expire, or if its unionized employees wereto engage in a strike or other work stoppage, the Company’s business and operating results could be materially harmed.The Company is a party to collective bargaining agreements with its labor union, which represents approximately 25% of its employees. No assurance can begiven that the Company will be able to successfully extend or renegotiate its collective bargaining agreements in the future. If the Company fails to extend orrenegotiate its collective bargaining agreements, if disputes with its union arise, or if its unionized workers engage in a strike or a work stoppage, theCompany could experience a significant disruption of operations or incur higher ongoing labor costs, either of which could have a material adverse effect onthe business.The loss of any of the senior management team or attrition among key sales associates could adversely affect the Company’s business, financial condition,results of operations and cash flows.The Company’s success will continue to depend, to a significant extent, on its senior management team and key sales associates. Senior management hasspecific knowledge relating to the Company and the industry that would be difficult to replace. The loss of key sales associates could hinder the Company’sability to continue to benefit from long-standing relationships with customers. The Company cannot provide any assurance that it will be able to retain thecurrent senior management team or key sales associates. The loss of any of these individuals could adversely affect the Company’s business, financialcondition, results of operations and cash flows.Risks Related to our IndebtednessThe Company’s debt could limit its ability to fund operations, raise additional capital, and fulfill its obligations, which, in turn, would have a materialadverse effect on its businesses and prospects generally.As of December 31, 2017, the Company and its subsidiaries had outstanding indebtedness of $1,747.7 million, on which it incurred $85.2 million of interestexpense in 2017, and had a total shareowners’ deficit of $143.1 million. In October 2017, the Company entered into a new Credit Agreement. The CreditAgreement provides for (i) a five year $200 million senior secured revolving credit facility including both a letter of credit subfacility of up to $30 millionand a swingline loan subfacility of up to $25 million (the "Revolving Credit Facility") and (ii) a seven-year $600 million senior secured term loan facility(the "Tranche B Term Loan due 2024"). At December 31, 2017, the Company and its subsidiaries had $101.0 million of borrowing availability under itsReceivables Facility and had the ability to borrow up to an additional $200.0 million under the Revolving Credit Facility, subject to compliance with certainconditions.The Company’s debt has important consequences, including the following:• the Company is required to use a substantial portion of its cash flow from operations to pay principal and interest on its debt, therebyreducing the availability of cash flow to fund working capital, capital expenditures, strategic acquisitions, investments and alliances,and other general corporate requirements;• there is a variable interest rate on a portion of its debt which will increase if the market interest rates increase;• the Company’s debt increases its vulnerability to adverse changes in the credit markets, which adverse changes could increase theCompany's borrowing costs and limit the availability of financing;• the Company’s debt service obligations limit its flexibility to plan for, or react to, changes in its business and the industries in which itoperates;• the Company’s level of debt and shareowners’ deficit may restrict it from raising additional financing on satisfactory terms to fundworking capital, capital expenditures, strategic acquisitions, investments and alliances, and other general corporate requirements; and• the Company’s debt instruments contains limitations on the Company and require the Company to comply with specified financialratios and other restrictive covenants. Failure to comply with these covenants, if not cured or waived, could limit availability to thecash required to fund the Company's operations and general obligations and could result in the Company’s dissolution, bankruptcy,liquidation or reorganization.The Company’s creditors and preferred stockholders have claims that are superior to claims of the holders of the Company's common stock. Accordingly, inthe event of the Company’s dissolution, bankruptcy, liquidation, or reorganization, payment is first made on the claims of creditors of the Company and itssubsidiaries, then preferred stockholders, and finally, if amounts are available, to holders of the Company's common stock.16Table of ContentsForm 10-K Part I Cincinnati Bell Inc.The Credit Agreement, the indenture governing the Company's notes due 2024, the indenture governing the Company's notes due 2025 and otherindebtedness impose significant restrictions on the Company.The Company’s debt instruments impose, and the terms of any future debt may impose, operating and other restrictions on the Company. These restrictionsaffect, and in many respects limit or prohibit, among other things, the Company’s ability to:• incur additional indebtedness;• create liens;• make investments;• enter into transactions with affiliates;• sell assets;• guarantee indebtedness;• declare or pay dividends or make other distributions to shareholders;• repurchase equity interests;• redeem debt that is junior in right of payment to such indebtedness;• enter into agreements that restrict dividends or other payments from subsidiaries;• issue or sell capital stock of certain of its subsidiaries;• consolidate, merge, or transfer all or substantially all of its assets and the assets of its subsidiaries on a consolidated basis; and• change its fiscal yearIn addition, the Company’s Credit Agreement and debt instruments include restrictive covenants that may materially limit the Company’s ability to prepaydebt and redeem preferred stock. The agreements governing the Credit Agreement also require the Company to achieve and maintain compliance withspecified financial ratios.The restrictions contained in the terms of the Credit Agreement and its other debt instruments could:• limit the Company’s ability to plan for or react to market conditions or meet capital needs or otherwise restrict the Company’sactivities or business plans; and• adversely affect the Company’s ability to finance its operations, strategic acquisitions, investments or alliances, other capital needs, orto engage in other business activities that would be in its interest.A breach of any of the debt's restrictive covenants or the Company’s inability to comply with the required financial ratios would result in a default undersome or all of the debt agreements. During the occurrence and continuance of a default, lenders may elect to declare all outstanding borrowings, together withaccrued interest and other fees, to be immediately due and payable. Additionally, under the Credit Agreement, the lenders may elect not to provide loansunder the Revolving Credit Facility until such default is cured or waived. The Company’s debt instruments also contain cross-acceleration provisions, whichgenerally cause each instrument to be subject to early repayment of outstanding principal and related interest upon a qualifying acceleration of any otherdebt instrument. Failure to comply with these covenants, if not cured or waived, would limit the cash available to the Company required to fund operationsand its general obligations and could result in the Company’s dissolution, bankruptcy, liquidation or reorganization.The Company depends on its Revolving Credit Facility and Receivables Facility to provide for its short-term financing requirements in excess of amountsgenerated by operations, and the availability of those funds may be reduced or limited.The Company depends on the Revolving Credit Facility and its Receivables Facility to provide for short-term financing requirements in excess of amountsgenerated by operations. The Revolving Credit Facility has a maturity date of October 2022. The Receivables Facility has a termination date of May 2019,and is subject to renewal every 364 days, with the next renewal occurring in May 2018.The Company's ability to borrow under its Revolving Credit Facility is subject to the Company's compliance with covenants, including covenants requiringcompliance with specified financial ratios. Failure to satisfy these covenants would constrain or prohibit its ability to borrow under these facilities.17Table of ContentsForm 10-K Part I Cincinnati Bell Inc.As of December 31, 2017, the Company had no outstanding borrowings under the Revolving Credit Facility, leaving $200.0 million in additional borrowingavailability under this facility. The $200.0 million available under the Revolving Credit Facility is funded by various financial institutions. If one or more ofthese banks is not able to fulfill its funding obligations, the Company’s financial condition could be adversely affected.As of December 31, 2017, the Company had a total borrowing capacity of $107.3 million on a maximum borrowing capacity of $120.0 million on itsReceivables Facility. At that date, there were no outstanding borrowings and $6.3 million of outstanding letters of credit. The available borrowing capacity iscalculated monthly based on the amount, and quality, of outstanding accounts receivable, and thus may be lower than the maximum borrowing limit. If thequality of the Company’s accounts receivables deteriorates, this will negatively impact the available capacity under this facility. As of December 31, 2017,the Company had $101.0 million of borrowing capacity remaining under its Receivables Facility.The servicing of the Company’s indebtedness is dependent on its ability to generate cash, which could be impacted by many factors beyond its control.The Company’s ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory, and other factors, many of which arebeyond its control. The Company cannot provide assurance that its business will generate sufficient cash flow from operations, that additional sources of debtfinancing will be available, or that future borrowings will be available under its Revolving Credit Facility Credit or Receivables Facility, in each case, inamounts sufficient to enable the Company to service its indebtedness or to fund other liquidity needs. If the Company cannot service its indebtedness, it willhave to take actions such as reducing or delaying capital expenditures, strategic acquisitions, investments and alliances, selling assets, restructuring orrefinancing indebtedness, or seeking additional equity capital, which may adversely affect its shareholders, debt holders and customers. The Company maynot be able to negotiate remedies on commercially reasonable terms, or at all. In addition, the terms of existing or future debt instruments may restrict theCompany from adopting any of these alternatives. The Company’s inability to generate the necessary cash flows could result in its dissolution, bankruptcy,liquidation or reorganization.The Company depends on the receipt of dividends or other intercompany transfers from its subsidiaries and investments.Virtually all of the Company's operations are conducted through its subsidiaries and most of the Company's debt is held at the parent company. Certain of theCompany's material subsidiaries are subject to regulatory authority which may potentially limit the ability of such subsidiaries to distribute funds or assets. Ifany of the Company's subsidiaries were to be prohibited from paying dividends or making distributions, the Company may not be able to make the scheduledinterest and principal repayments on its debt. This failure would have a material adverse effect on the Company's liquidity and the trading price of theCompany's common stock, preferred stock, and debt instruments, which could result in its dissolution, bankruptcy, liquidation or reorganization.18Table of ContentsForm 10-K Part I Cincinnati Bell Inc.Risks Relating to the Merger with Hawaiian TelcomThe merger (the “merger”) of Hawaiian Telcom Holdco, Inc. (“Hawaiian Telcom”) into a wholly owned subsidiary of the Company is subject to thereceipt of clearances or approvals from various regulatory authorities, which may imposeconditions that could have an adverse effect on the Company following the closing of the merger (the “combined company”) or, if not obtained, couldprevent completion of the merger.Before the merger may be completed, clearances or approvals must be obtained from various regulatory entities, including the FCC, and the Hawaii PublicUtilities Commission. There can be no assurance that all of these required approvals and clearances will be obtained, or will be obtained on a timely basis. Indeciding whether to grant regulatory clearances, the relevant governmental entities will consider, among other things, the effect of the merger on competitionwithin their relevant jurisdiction. The terms and conditions of the approvals that are granted may impose requirements, limitations, incremental cost, or placerestrictions on the conduct of the combined company’s business. The agreement and plan of merger dated July 9, 2017 (the “merger agreement”), amongHawaiian Telcom, the Company and Twin Acquisition Corp. may require the Company and Hawaiian Telcom to comply with conditions imposed byregulatory entities, and neither company is required to take any action with respect to obtaining regulatory approval that, individually or in the aggregate,would be reasonably likely to have a Material Adverse Effect on either Hawaiian Telcom or the Company. There can be no assurance that regulators will notimpose conditions, terms, obligations or restrictions and that such conditions, terms, obligations or restrictions will not have the effect of delayingcompletion of the merger, imposing additional material costs on or materially limiting the revenues of the combined company following the merger orotherwise reduce the anticipated benefits of the merger. In addition, the Company cannot provide assurance that any such conditions, terms, obligations orrestrictions will not result in the delay or abandonment of the merger.The merger is subject to conditions, including certain conditions that may not be satisfied or completed on a timely basis, if at all. Any delay in completingthe merger may reduce or eliminate the benefits expected.In addition to the regulatory clearances and approvals, the merger is subject to certain other conditions beyond the control of the Company that may prevent,delay, or otherwise materially adversely affect completion of the merger. The Company cannot predict whether and when these other conditions will besatisfied. The requirements for satisfying such conditions could delay completion of the merger for a period of time, reducing or eliminating some or allanticipated benefits of the merger, or prevent completion of the merger from occurring at all.The pendency of the merger could materially adversely affect the future business and operations of the Company and/or result in a loss of employees forthe Company.In connection with the pending merger, while it is not expected by the management of the Company, it is possible that some customers, suppliers and otherpersons with whom the Company has a business relationship may delay or defer certain business decisions, which could negatively impact revenues, earningsand cash flows of the Company, as well as the market prices of the Company’s common shares, regardless of whether the merger is completed. Similarly,current and prospective employees of the Company may experience uncertainty about their future roles within the combined company following completionof the merger, which may materially adversely affect the ability of the Company to attract and retain key employees. The pursuit of the merger and the preparation for the integration may place a significant burden on the Company’s management and internal resources. Anysignificant diversion of management attention away from ongoing business and any difficulties encountered in the transition and integration process couldaffect the Company’s financial results.In addition, the merger agreement restricts the Company, on the one hand, and Hawaiian Telcom, on the other, without the other party’s consent, from makingcertain acquisitions and dispositions and taking other specified actions while the merger is pending. These restrictions may prevent the Company frompursuing attractive business opportunities and making other changes to its business prior to completion of the merger or termination of the merger agreement.The Company’s shareholders will be diluted by the merger.The merger will dilute the ownership position of the Company’s current shareholders. Cincinnati Bell will issue approximately 7.9 million of the Company’scommon shares to Hawaiian Telcom stockholders in the merger (including common shares of the Company to be issued in connection with outstandingHawaiian Telcom equity awards). As a result of these issuances, the Company’s current shareholders and Hawaiian Telcom’s stockholders are expected tohold approximately 85% and 15%, respectively, of the Company’s outstanding common shares immediately following completion of the merger.19Table of ContentsForm 10-K Part I Cincinnati Bell Inc.Risks Relating to the Combined Company upon Completion of the Merger with Hawaiian TelcomIf completed, the merger may not achieve its intended results, and the Company and Hawaiian Telcom may be unable to successfully integrate theiroperations.The Company and Hawaiian Telcom entered into the merger agreement with the expectation that the merger will result in various benefits, including, amongother things, expanding the Company’s asset base and creating synergies and opportunities for cost savings. Achieving the anticipated benefits of the mergeris subject to a number of uncertainties, including whether the businesses of the Company and Hawaiian Telcom can be integrated in an efficient and effectivemanner.It is possible that the integration process could take longer than anticipated and could result in the loss of valuable employees, the disruption of eachcompany’s ongoing businesses, processes and systems or inconsistencies in standards, controls, procedures, practices, policies and compensationarrangements, any of which could adversely affect the combined company’s ability to achieve the anticipated benefits of the merger. The combinedcompany’s results of operations could also be adversely affected by any issues attributable to either company’s operations that arise or are based on events oractions that occur prior to the closing of the merger. The companies may have difficulty addressing possible differences in corporate cultures andmanagement philosophies. The integration process is subject to a number of uncertainties, and no assurance can be given that the anticipated benefits will berealized or, if realized, the timing of their realization. Failure to achieve these anticipated benefits could result in increased costs, or a decrease in the amountof expected revenues, and could adversely affect the combined company’s future business, financial condition, operating results and prospects.The combined company is expected to incur expenses related to the integration of the Company and Hawaiian Telcom.The combined company is expected to incur expenses in connection with the integration of the Company and Hawaiian Telcom. There are a number of back-office information technology systems, processes and policies that will need to be addressed during the integration. While the Company and HawaiianTelcom have assumed that a certain level of expenses will be incurred, there are many factors beyond their control that could affect the total amount or thetiming of the integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. Theseintegration expenses likely will result in the combined company taking charges against earnings following the completion of the merger, and the amount andtiming of such charges are uncertain at present.The future results of the combined company will suffer if the combined company does not effectively manage its expanded operations following the merger.Following the merger, the size of the business of the combined company will increase significantly beyond the current size of either the Company’s orHawaiian Telcom’s business. The combined company’s future success depends, in part, upon its ability to manage this expanded business, which could posesubstantial challenges for management. There can be no assurances that the combined company will be successful or that it will realize the expectedoperating efficiencies, cost savings, revenue enhancements and other benefits currently anticipated from the merger.Uncertainties associated with the merger may cause a loss of management personnel and other key employees, which could adversely affect the futurebusiness and operations of the combined company.The Company and Hawaiian Telcom are dependent on the experience and industry knowledge of their officers and other key employees to execute theirbusiness plans. The Company’s success until the merger, and the combined company’s success after the merger, will depend in part upon the ability of theCompany and Hawaiian Telcom to retain key management personnel and other key employees. Current and prospective employees of the Company andHawaiian Telcom may experience uncertainty about their roles within the combined company following the merger, which may have an adverse effect on theability of the Company and Hawaiian Telcom to attract or retain key management and other key personnel. Accordingly, no assurance can be given that thecombined company will be able to attract or retain key management personnel and other key employees of the Company and Hawaiian Telcom to the sameextent that the Company and Hawaiian Telcom have previously been able to attract or retain their own employees.20Table of ContentsForm 10-K Part I Cincinnati Bell Inc.The combined company will have substantial indebtedness following the merger and the credit ratings of the combined company or its subsidiaries may bedifferent from what the companies currently expect.The Company has obtained new credit facilities under the new Credit Agreement and through its wholly-owned subsidiary has issued senior unsecured notes(the proceeds of which have been deposited into an escrow account pending the closing of the merger) in order to provide funds to (i) refinance its existingcredit facilities, (ii) finance in part the cash portion of the merger consideration for the merger with Hawaiian Telcom and fund the purchase price for theacquisition of OnX, (iii) refinance existing indebtedness of Hawaiian Telcom and (iv) pay other costs and expenses incurred in connection with the mergerwith Hawaiian Telcom, the OnX acquisition and related transactions. Following completion of the merger, the combined company will have substantialindebtedness and the credit ratings of the combined company and its subsidiaries may be different from what the companies currently expect.This substantial indebtedness may adversely affect the business, financial condition and operating results of the combined company, including:•making it more difficult for the combined company to satisfy its debt service obligations;•requiring the combined company to dedicate a substantial portion of its cash flows to debt service obligations, thereby potentially reducing theavailability of cash flows to pay cash dividends and to fund working capital, capital expenditures, acquisitions, investments and other generaloperating requirements;•limiting the ability of the combined company to obtain additional financing to fund its working capital requirements, capital expenditures,acquisitions, investments, debt service obligations and other general operating requirements;•restricting the combined company from making strategic acquisitions or taking advantage of favorable business opportunities;•placing the combined company at a relative competitive disadvantage compared to competitors that have less debt;•limiting flexibility to plan for, or react to, changes in the businesses and industries in which the combined company operates, which mayadversely affect the combined company’s operating results and ability to meet its debt service obligations;•increasing the vulnerability of the combined company to adverse general economic and industry conditions, including changes in interestrates; and•limiting the ability of the combined company to refinance its indebtedness or increasing the cost of such indebtedness.If the combined company incurs additional indebtedness following the merger, the risks related to the substantial indebtedness of the combined companymay intensify.The merger may involve unexpected costs, unexpected liabilities or unexpected delays.The Company currently expects to incur substantial costs and expenses relating directly to the merger, including debt financing and refinancing costs, feesand expenses payable to financial advisors, professional fees and expenses, insurance premium costs, fees and costs relating to regulatory filings and notices,SEC filing fees, printing and mailing costs and other transaction-related costs, fees and expenses. In addition, the merger and post-merger integration processmay give rise to unexpected liabilities and costs, including costs associated with the defense and resolution of possible litigation or other claims, which maysignificantly increase the related costs and expenses incurred by the combined company.21Table of ContentsForm 10-K Part I Cincinnati Bell Inc.Risks Related to the Acquisition of OnXThe acquisition of OnX may not achieve its intended results, and the Company may be unable to successfully integrate OnX's operations.The Company completed the acquisition of OnX in October 2017. The Company entered into the merger agreement with OnX with the expectation that theacquisition will result in various benefits, including, among other things, expanding the Company’s asset base and creating synergies and opportunities forcost savings. Achieving the anticipated benefits of the acquisition of OnX is subject to a number of uncertainties, including whether the businesses of theCompany and OnX can be integrated in an efficient and effective manner.It is possible that the integration process could take longer than anticipated and could result in the loss of valuable employees, the disruption of eachcompany’s ongoing businesses, processes and systems or inconsistencies in standards, controls, procedures, practices, policies and compensationarrangements, any of which could adversely affect the Company’s ability to achieve the anticipated benefits of the acquisition of OnX. The Company’sresults of operations could also be adversely affected by any issues attributable to either company’s operations that arose or are based on events or actionsthat occurred prior to the closing of the acquisition. The integration process is subject to a number of uncertainties, and no assurance can be given that theanticipated benefits will be realized or, if realized, the timing of their realization. Failure to achieve these anticipated benefits could result in increased costsor decreases in the amount of expected revenues and could adversely affect the Company’s future business, financial condition, operating results andprospects.Other Risk FactorsThe trading price of the Company's common stock may be volatile, and the value of an investment in the Company's common stock may decline.The market price of the Company's common stock has been volatile and could be subject to wide fluctuations in response to, among other things, the riskfactors described in this report and other factors beyond the Company's control, such as volatility in equity markets and fluctuations in the valuation ofcompanies perceived by investors to be comparable to the Company.Equity markets have experienced price and volume fluctuations that have affected the Company's stock price and the market prices of equity securities ofmany other companies. These broad market and industry fluctuations, as well as general economic, political, and market conditions, may negatively affectthe market price of the Company's stock.Companies that have experienced volatility in the market price of common shares have periodically been subject to securities class action litigation. TheCompany may be the target of this type of litigation in the future. Securities litigation could result in substantial costs and/or damages and divertmanagement's attention from other business concerns.The uncertain economic environment, including uncertainty in the U.S. and world securities markets, could impact the Company's business and financialcondition.The uncertain economic environment could have an adverse effect on the Company's business and financial liquidity. The Company's primary source of cashis customer collections. If economic conditions were to worsen, some customers may cancel services or have difficulty paying their accounts receivable.These conditions would result in lower revenues and increases in the allowance for doubtful accounts, which would negatively affect the results ofoperations. Furthermore, the sales cycle would be further lengthened if business customers slow spending or delay decision-making on the Company'sproducts and services, which would adversely affect revenues. If competitors lower prices as a result of economic conditions, the Company would alsoexperience pricing pressure. If the economies of the U.S. and the world deteriorate, this could have a material adverse effect on the Company's business,financial condition, results of operations and cash flows.22Table of ContentsForm 10-K Part I Cincinnati Bell Inc.The Company’s future cash flows could be adversely affected if it is unable to fully realize its deferred tax assets.As of December 31, 2017, the Company had deferred tax assets of $124.3 million, which are primarily composed of deferred tax assets associated with U.S.federal net operating loss carryforwards of $39.3 million, state and local net operating loss carryforwards of $48.0 million, and foreign net operating losscarryforwards of $1.6 million. The Company has recorded valuation allowances against deferred tax assets related to certain state, local and foreign netoperating losses and other deferred tax assets due to the uncertainty of the Company’s ability to utilize the assets within the statutory expiration period. Theuse of the Company’s deferred tax assets enables it to satisfy current and future tax liabilities without the use of the Company’s cash resources. If theCompany is unable for any reason to generate sufficient taxable income to fully realize its deferred tax assets, or if the use of its net operating losscarryforwards is limited by Internal Revenue Code Section 382 or similar state statute, the Company’s net income, shareowners’ deficit and future cash flowswould be adversely affected.Changes in tax laws and regulations, and actions by federal, state and local taxing authorities related to the interpretation and application of such taxlaws and regulations, could have a negative impact on the Company's financial results and cash flows.The Company calculates, collects and remits various federal, state, and local taxes, surcharges, and regulatory fees to numerous federal, state and localgovernmental authorities, including but not limited to federal Universal Service Fund contributions, sales tax, regulatory fees and use tax on purchases ofgoods and services used in our business. Tax laws are subject to change, and new interpretations of how various statutes and regulations should be adhered toare frequently issued. In many cases, the application of tax laws are uncertain and subject to differing interpretations, especially when evaluated against newtechnologies and telecommunications services, such as broadband internet access and cloud services. In the event that we have incorrectly calculated,assessed, or remitted amounts due to governmental authorities, or if revenue and taxing authorities disagree with positions we have taken, we could besubject to additional taxes, fines, penalties, or other adverse actions. In the event that federal, state, or local municipalities were to significantly increase taxeson good and services used to construct and maintain our network, operations, or provision of services, or seek to impose new taxes, there could be a materialadverse impact on financial results.The Company's interpretation of the Tax Cuts and Jobs Act of 2017 could change, and have an adverse impact on financial results.The Tax Cuts and Jobs Act of 2017 (the "Tax Act") signed into law on December 22, 2017 has resulted in significant changes to the U.S. Corporate incometax system. These changes include a federal statutory rate reduction from 35 percent to 21 percent, limitations on the deductibility of interest expense andexecutive compensation, and elimination of the corporate alternative minimum tax. The final transition impacts of the Tax Act may differ from theCompany's current estimates, possibly materially, due to, among other things, changes in interpretations of the Tax Act, any legislative action taken toaddress questions that arise because of the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the TaxAct, or any updates or changes to estimates the Company has utilized to calculate the transition impacts.Adverse changes in the value of assets or obligations associated with the Company’s employee benefit plans could negatively impact shareowners’ deficitand liquidity.The Company sponsors three noncontributory defined benefit pension plans: one for eligible management employees, one for non-management employees,and one supplemental, nonqualified, unfunded plan for certain former executives. The Company also provides healthcare and group life insurance benefitsfor eligible retirees. The Company’s Consolidated Balance Sheets indirectly reflect the value of all plan assets and benefit obligations under these plans. Theaccounting for employee benefit plans is complex, as is the process of calculating the benefit obligations under the plans. Adverse changes in interest rates ormarket conditions, among other assumptions and factors, could cause a significant increase in the Company’s benefit obligations or a significant decrease ofthe asset values, without necessarily impacting the Company’s net income. In addition, the Company’s benefit obligations could increase significantly if itneeds to unfavorably revise the assumptions used to calculate the obligations. These adverse changes could have a further significant negative impact on theCompany’s shareowners’ deficit. In addition, with respect to the Company’s pension plans, the Company expects to make approximately $10 million ofestimated aggregate cash contributions to its qualified pension plans for the years 2018 to 2023. Additionally, the Company’s postretirement costs areadversely affected by increases in medical and prescription drug costs. Further, if there are adverse changes to plan assets or if medical and prescription drugcosts increase significantly, the Company could be required to contribute additional material amounts of cash to the plans, or could accelerate the timing ofrequired payments.23Table of ContentsForm 10-K Part I Cincinnati Bell Inc.Third parties may claim that the Company is infringing upon their intellectual property, and the Company could suffer significant litigation or licensingexpenses or be prevented from selling products.The Company may be unaware of intellectual property rights of others that may cover some of its technology, products or services. Any litigation growingout of third-party patents or other intellectual property claims could be costly and time-consuming and would divert the Company’s management and keypersonnel from its business operations. The complexity of the technology involved and the uncertainty of intellectual property litigation increase these risks.Resolution of claims of intellectual property infringement might also require the Company to enter into costly license agreements. Likewise, the Companymay not be able to obtain license agreements on acceptable terms. The Company also may be subject to significant damages or injunctions against thedevelopment and sale of certain of its products or services. Further, the Company often relies on licenses of third-party intellectual property for its businesses.The Company cannot ensure these licenses will be available in the future on favorable terms or at all.Third parties may infringe upon the Company’s intellectual property, and the Company may expend significant resources enforcing its rights or suffercompetitive injury.The Company’s success depends in significant part on the competitive advantage it gains from its proprietary technology and other valuable intellectualproperty assets. The Company relies on a combination of patents, copyrights, trademarks and trade secrets protections, confidentiality provisions andlicensing arrangements to establish and protect its intellectual property rights. If the Company fails to successfully enforce its intellectual property rights, itscompetitive position could suffer, which could harm its operating results.The Company may also be required to spend significant resources to monitor and police its intellectual property rights. The Company may not be able todetect third-party infringements and its competitive position may be harmed before the Company does so. In addition, competitors may design around theCompany’s technology or develop competing technologies. Furthermore, some intellectual property rights are licensed to other companies, allowing them tocompete with the Company using that intellectual property.We could be subject to a significant amount of litigation, which could require us to pay significant damages or settlements.Our business faces a substantial risk of litigation, including, from time to time, patent infringement lawsuits, antitrust class actions, securities class actions,wage and hour class actions, personal injury claims and lawsuits relating to our advertising, sales, billing and collection processes. We may incur significantexpenses in defending these lawsuits. In addition, we may be required to pay significant awards and settlements.The Company could incur significant costs resulting from complying with, or potential violations of, environmental, health and human safety laws.The Company’s operations are subject to laws and regulations relating to the protection of the environment, health, and human safety, including thosegoverning the management and disposal of, and exposure to, hazardous materials and the cleanup of contamination, and the emission of radio frequencies.While the Company believes its operations are in substantial compliance with environmental, health, and human safety laws and regulations, as an owner oroperator of property, and in connection with the current and historical use of hazardous materials and other operations at its sites, the Company could incursignificant costs resulting from complying with or violations of such laws, the imposition of cleanup obligations and third-party suits. For instance, a numberof the Company’s sites formerly contained underground storage tanks for the storage of used oil and fuel for back-up generators and vehicles.24Table of ContentsForm 10-K Part I Cincinnati Bell Inc.Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesAs of December 31, 2017, we owned or maintained properties throughout the U.S. and Canada. Principal office locations are in Cincinnati, Ohio.Our properties include copper and fiber plants and associated equipment in our local operating market. Each of the Company’s subsidiaries maintains someinvestment in furniture and office equipment, computer equipment and associated operating system software, application system software, leaseholdimprovements and other assets.With regard to its local Entertainment and Communications operations, the Company owns substantially all of the central office switching stations and theland upon which they are situated. Some business and administrative offices are located in leased facilities, which are recorded as operating leases. TheCompany’s out-of-territory network assets include a fiber network plant, internet protocol and circuit switches and integrated access terminal equipment. Inaddition, as of year-end, we lease eight Company-run retail locations.With regard to the IT Services and Hardware operations, the majority of business and administrative offices are located in leased facilities, which are recordedas both capital and operating leases.For additional information about the Company’s properties, see Note 5 to the consolidated financial statements.Item 3. Legal ProceedingsWe are subject to various lawsuits, actions, proceedings, claims and other matters asserted under laws and regulations in the normal course of business. Webelieve that the liabilities accrued for legal contingencies in our consolidated financial statements, as prescribed by generally accepted accounting principles("GAAP"), are adequate in light of those contingencies that are probable and able to be estimated. However, there can be no assurances that the actualamounts required to satisfy alleged liabilities from various legal proceedings, claims, tax examinations, and other matters, and to comply with applicablelaws and regulations, will not exceed the amounts reflected in our consolidated financial statements. As such, costs, if any, that may be incurred in excess ofthose amounts provided as of December 31, 2017, cannot be reasonably determined.Based on information currently available, consultation with counsel, available insurance coverage and established reserves, management believes theeventual outcome of all outstanding claims will not, individually or in the aggregate, have a material effect on the Company's financial position, results ofoperations or cash flows.Item 4. Mine Safety DisclosuresNot applicable.25Table of ContentsForm 10-K Part II Cincinnati Bell Inc.PART IIItem 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities(a) Market InformationThe Company’s common shares (symbol: CBB) are listed on the New York Stock Exchange. The Company filed an amendment to its Amended and RestatedArticles of Incorporation to affect a one-for-five reverse split of its issued common stock ("the Reverse Split") effective 11:59 p.m. October 4, 2016. Thefollowing table shows the high and low closing sale prices during each quarter for the last two fiscal years after consideration of the Reverse Split: First Second Third Fourth Quarter Quarter Quarter Quarter2017High$24.35 $19.66 $21.85 $22.00 Low$17.60 $16.40 $16.60 $18.752016High$19.45 $23.05 $25.10 $22.75 Low$14.50 $18.00 $19.55 $17.90(b) HoldersAs of January 31, 2018, the Company had 5,895 holders of record of the 42,394,151 common shares outstanding and 155,250 shares outstanding of the 63/4% Cumulative Convertible Preferred Stock.(c) DividendsIn both 2017 and 2016, the Company paid $10.4 million of dividends on its 6 3/4% Cumulative Convertible Preferred Stock. In 2017 and 2016, the Companydid not pay any dividends on its common stock and does not intend to pay any common stock dividends in 2018.26Table of ContentsForm 10-K Part II Cincinnati Bell Inc.(d) Stock PerformanceThe following graph compares Cincinnati Bell Inc.'s cumulative five-year total shareholder return on common stock with the cumulative total returns of theS&P 500 index and the S&P Integrated Telecommunication Services index. The graph tracks the performance of a $100 investment in our common stock andin each index (with the reinvestment of all dividends) from December 31, 2012 to December 31, 2017. Dec-12Dec-13Dec-14Dec-15Dec-16Dec-17Cincinnati Bell Inc.$100$65$58$66$82$76S&P 500$100$132$151$153$171$208S&P Integrated Telecommunication Services$100$111$114$117$146$145Copyright © 2017 Standard & Poor's, a division of S&P Global. All rights reserved.(e) Issuer Purchases of Equity SecuritiesThe following table provides information regarding the Company’s purchases of its common stock during the quarter ended December 31, 2017:Period Total Number of Shares(or Units) Purchased Average Price Paid perShare (or Unit) Total Number of Shares(or Units) Purchased asPart of PubliclyAnnounced Plans orPrograms * Approximate Dollar Valueof Shares that May Yet BePurchased Under PubliclyAnnounced Plans orPrograms (in millions)*10/1/2017 - 12/31/2017 — $— — $124.4*In February 2010, the Board of Directors approved an additional plan for the repurchase of the Company’s outstanding common stock inan amount up to $150.0 million. This repurchase plan does not have a stated maturity.27Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Item 6. Selected Financial DataAs further discussed in Note 16 to our consolidated financial statements, we ceased operations of our wireless business as of March 2015. As a result,wireless financial results are now presented as discontinued operations. Therefore, we have recast the financial information, except as noted, for all periodspresented.All shares of common stock and per share information presented in the following table have been adjusted to reflect the Reverse Split on a retroactive basisfor all periods presented.Accounting Standard Update ("ASU") 2015-03 Simplifying the Presentation of Debt Issuance Costs was adopted effective January 1, 2016. As a result,certain note issuance costs were reclassed from "Other noncurrent assets" to "Long-term debt, less current portion." All periods presented in the followingtable have been recast to present the impact of ASU 2015-03, respectively.ASU 2016-09 Compensation - Stock Compensation was adopted effective January 1, 2017. As a result, cash flows related to excess tax benefits werereclassed from "Cash flows from operating activities" to "Cash flows from financing activities." All periods presented in the following table have beenrecast to present the impact of ASU 2016-09, respectively.28Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The selected financial data should be read in conjunction with the consolidated financial statements and "Management’s Discussion and Analysis ofFinancial Condition and Results of Operations" included in this document.(dollars in millions, except per share amounts) 2017 (g) 2016 2015 2014 2013 (a)Operating Data Revenue $1,288.5 $1,185.8 $1,167.8 $1,161.5 $1,073.4Cost of services and products, selling, general and administrative,depreciation and amortization expense 1,195.2 1,079.8 1,031.3 979.5 877.6Other operating costs and losses (b) 55.2 13.0 8.5 5.1 56.0Operating income 38.1 93.0 128.0 176.9 139.8Interest expense 85.2 75.7 103.1 145.9 176.0Loss on extinguishment of debt, net 3.2 19.0 20.9 19.6 29.6Loss from CyrusOne investment (c) — — 5.1 7.0 10.7Gain on sale of CyrusOne investment (117.7) (157.0) (449.2) (192.8) —Income (loss) from continuing operations 35.1 101.8 290.8 117.7 (64.9)Income (loss) from discontinued operations, net of tax — 0.3 62.9 (42.1) 10.2Net income (loss) 35.1 102.1 353.7 75.6 (54.7)Basic earnings (loss) per common share from continuing operations $0.59 $2.17 $6.69 $2.57 $(1.83)Basic earnings (loss) per common share from discontinued operations $— $0.01 $1.50 $(1.01) $0.25Basic earnings (loss) per common share $0.59 $2.18 $8.19 $1.56 $(1.58)Diluted earnings (loss) per common share from continuing operations $0.58 $2.17 $6.68 $2.56 $(1.83)Diluted earnings (loss) per common share from discontinued operations $— $0.01 $1.49 $(1.00) $0.25Diluted earnings (loss) per common share $0.58 $2.18 $8.17 $1.56 $(1.58)Dividends declared per common share $— $— $— $— $—Weighted-average common shares outstanding Basic 42.2 42.0 41.9 41.7 41.2 Diluted 42.4 42.1 42.0 41.9 41.2 Financial Position Property, plant and equipment, net $1,129.0 $1,085.5 $975.5 $815.4 $756.8Total assets (d) 2,162.4 1,541.0 1,446.4 1,807.0 2,088.2Total long-term obligations (e) 1,948.2 1,429.8 1,485.4 2,044.7 2,509.5 Other Data Cash flow provided by operating activities $203.4 $173.1 $111.0 $175.3 $79.3Cash flow (used in) provided by investing activities (236.8) (95.5) 383.2 392.6 (185.4)Cash flow (used in) provided by financing activities 420.2 (75.3) (544.7) (514.6) 87.1Capital expenditures (f) (210.5) (286.4) (283.6) (182.3) (196.9)(a)During 2013, CyrusOne results are included for the period January 1, 2013 through January 23, 2013. Effective January 24, 2013, the date of theCyrusOne IPO, we no longer include CyrusOne's operating results in our consolidated financial statements. See Note 1 to the consolidatedfinancial statements.29Table of ContentsForm 10-K Part II Cincinnati Bell Inc.(b)Other operating costs and losses consist of restructuring and severance related charges (reversals), transaction-related compensation, curtailmentand settlement loss (gain), loss (gain) on disposal of assets - net, impairment of assets and transaction and integration costs. (c)Losses represent our equity method share of CyrusOne's losses from the date of the IPO through December 31, 2015. Effective January 1, 2016, ourownership in CyrusOne is no longer accounted for using the equity method. (d)Total assets include current and noncurrent assets from discontinued operations. (e)Total long-term obligations are comprised of long-term debt less current portion, deferred income tax liabilities, pension and postretirementbenefit obligations, other noncurrent liabilities and noncurrent liabilities from discontinued operations. See Notes 7, 8, 10 and 16 to theconsolidated financial statements for discussions related to 2017 and 2016. (f)Capital expenditures include capital expenditures from discontinued operations. (g)Operating data includes OnX results as of the date of acquisition in October 2017.Item 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsThis Annual Report on Form 10-K and the documents incorporated by reference herein contain forward-looking statements regarding future events andresults that are subject to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements ofhistorical facts, are statements that could be deemed forward-looking statements. See "Private Securities Litigation Reform Act of 1995 Safe HarborCautionary Statement" for further information on forward-looking statements.Executive SummarySegment results described in the Executive Summary and Consolidated Results of Operations section are net of intercompany and intersegmenteliminations.Consolidated revenue totaling $1,288.5 million for the year ended December 31, 2017 increased $102.7 million compared to the prior year as growth instrategic revenue, and revenue of $172.8 million contributed from acquisitions in 2017, more than offset declines from legacy and integration products.Revenue from our strategic products totaled $705.0 million in 2017, up 11% compared to 2016.Operating income in 2017 was $38.1 million, down $54.9 million from the prior year due in large part to higher restructuring and severance related charges asthe Company initiated reorganizations within both segments of the business resulting in headcount reductions. These reorganizations are intended to moreappropriately align the Company for future growth and to reduce field and network costs within our legacy copper network. In addition, transaction andintegration costs of $18.5 million were incurred in 2017 relating to merger and acquisition activity. Depreciation expense increased in conjunction with theincrease in property, plant, and equipment as a result of acquisitions, as well as the continued build out of our fiber network. Income from continuingoperations totaled $35.1 million for the year ended December 31, 2017, which included a $117.7 million gain on the sale of a portion of our CyrusOneinvestment.The Company sold 2.8 million CyrusOne Inc. common shares for cash totaling $140 million during 2017. The cash generated from this transaction was usedto pay down the Receivables Facility and partially fund the merger and acquisition activity that closed during 2017. In the fourth quarter of 2017, theCompany issued the $600.0 million Tranche B Term Loan due 2024. The proceeds of the debt were primarily used to repay the remaining $315.8 million ofoutstanding principal of its Tranche B Term Loan, accrued and unpaid interest, and to fund the acquisition of OnX. Additionally in the fourth quarter of2017, the Company issued $350.0 million of 8% Senior Notes due 2025 at par. The offering of the 8% Senior Notes is part of the financing of the cashportion of the merger consideration for the previously announced merger with Hawaiian Telcom by the Company (the “HCOM Acquisition”).30Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Consolidated Results of OperationsRevenue $ Change % Change $ Change % Change (dollars in millions)2017 2016 2017 vs.2016 2017 vs. 2016 2015 2016 vs.2015 2016 vs. 2015 Service revenue Entertainment and Communications$785.1 $763.0 $22.1 3% $735.0 $28.0 4% IT Services and Hardware221.0 215.7 5.3 2% 198.0 17.7 9% Total service revenue$1,006.1 $978.7 $27.4 3% $933.0 $45.7 5% Entertainment and Communications revenue increased as the growth in Fioptics and other strategic services offset the declines in legacy revenue. Fiopticsrevenue totaled $309.8 million, $254.1 million and $190.8 million for the years ended December 31, 2017, 2016 and 2015, respectively, up 22% in 2017and up 33% in 2016 from the comparable prior year.IT Services and Hardware revenue increased $5.3 million in 2017 compared to 2016 as the contribution of $40.1 million of revenue from the acquisitions ofSunTel and OnX were able to offset losses related to decreases in billable headcount as a key customer pursued cost saving initiatives by in-sourcing ITprofessionals. $ Change % Change $ Change % Change (dollars in millions)2017 2016 2017 vs.2016 2017 vs. 2016 2015 2016 vs.2015 2016 vs. 2015 Product revenue Entertainment and Communications$3.1 $4.5 $(1.4) (31)% $7.4 $(2.9) (39)% IT Services and Hardware279.3 202.6 76.7 38 % 227.4 (24.8) (11)% Total product revenue$282.4 $207.1 $75.3 36 % $234.8 $(27.7) (12)% Product revenue in Entertainment and Communications decreased by $2.9 million in 2016 compared to 2015. In 2015, we sold Verizon wireless handsets andaccessories at our retail locations generating revenue of $3.1 million. In 2016 and 2017, the Entertainment and Communications segment is no longer sellingVerizon wireless handsets at our retail locations.Product revenue in IT Services and Hardware is primarily driven by the volume of Telecom and IT hardware sales, reflecting the cyclical fluctuation in capitalspending by our enterprise customers. IT Services and Hardware revenue increased $76.7 million in 2017 versus 2016. During 2017 the IT Services andHardware segment acquired SunTel and OnX. These acquisitions contributed $132.7 million of product revenue during 2017, offsetting declines experiencedby customers cutting back on capital expenditures.Operating costs $ Change % Change $ Change % Change (dollars in millions)2017 2016 2017 vs.2016 2017 vs. 2016 2015 2016 vs.2015 2016 vs. 2015 Cost of services Entertainment and Communications$365.9 $344.7 $21.2 6% $319.9 $24.8 8% IT Services and Hardware166.2 161.7 4.5 3% 152.6 9.1 6% Total cost of services$532.1 $506.4 $25.7 5% $472.5 $33.9 7% Cost of services increased in both periods due to growth in our strategic products. The increase in Entertainment and Communications costs primarily relateto programming costs associated with our growing Fioptics video subscriber base and rising programming rates. IT Services and Hardware costs primarilyrelate to the increase in professional services revenue.31Table of ContentsForm 10-K Part II Cincinnati Bell Inc. $ Change % Change $ Change % Change (dollars in millions)2017 2016 2017 vs.2016 2017 vs. 2016 2015 2016 vs.2015 2016 vs. 2015 Cost of products Entertainment and Communications$2.7 $2.5 $0.2 8% $6.3 $(3.8) (60)% IT Services and Hardware226.5 170.0 56.5 33% 191.8 (21.8) (11)% Total cost of products$229.2 $172.5 $56.7 33% $198.1 $(25.6) (13)% Cost of products are primarily impacted by changes in Telecom and IT hardware sales. Entertainment and Communications cost of products decreased from2015 to 2016 primarily due to lower sales of Verizon handsets at our retail locations. $ Change % Change $ Change % Change (dollars in millions)2017 2016 2017 vs.2016 2017 vs. 2016 2015 2016 vs.2015 2016 vs. 2015 Selling, general, and administrative Entertainment and Communications$138.5 $141.5 $(3.0) (2)% $146.2 $(4.7) (3)% IT Services and Hardware83.7 57.5 26.2 46 % 53.5 4.0 7 % Corporate18.7 19.7 (1.0) (5)% 19.4 0.3 2 % Total selling, general and administrative$240.9 $218.7 $22.2 10 % $219.1 $(0.4) 0 % Entertainment and Communications selling, general, and administrative ("SG&A") expenses were down in 2017 versus 2016 due to lower payroll costsrelated to reduced headcount in addition to reductions in bad debt, reflecting changes to our credit policies. Entertainment and Communications SG&A costswere down in 2016 compared to 2015 due to a one-time pension charge of $3.8 million incurred in the second quarter of 2015 related to our excess benefitplan. IT Services and Hardware SG&A costs were up in 2017 primarily due to incremental headcount associated with the acquisitions of SunTel and OnX inaddition to incremental headcount at branch office locations to support the expansion of our national footprint. Corporate SG&A costs decreased in 2017driven largely by additional stock-based compensation expense recorded in 2016 as a result of changes in our stock price. $ Change % Change $ Change % Change (dollars in millions)2017 2016 2017 vs.2016 2017 vs. 2016 2015 2016 vs.2015 2016 vs. 2015 Depreciation and amortization expense Entertainment and Communications$174.7 $168.6 $6.1 4% $129.2 $39.4 30% IT Services and Hardware18.1 13.5 4.6 34% 12.3 1.2 10% Corporate0.2 0.1 0.1 100% 0.1 — 0% Total depreciation and amortization expense$193.0 $182.2 $10.8 6% $141.6 $40.6 29% The increase in Entertainment and Communications depreciation and amortization expense in 2017 versus 2016 is a result of expanding our fiber-basednetwork. The increase in depreciation expense in 2016 versus 2015 is due to reducing the estimated useful life of certain set-top boxes, as well as the relatedsoftware, as we upgraded customers to new technology. We also reduced the estimated useful life of our copper assets in the fourth quarter of 2015.The increase in IT Services and Hardware depreciation and amortization expense in 2017 as compared to 2016 is primarily related to the amortization ofintangible assets acquired as part of the SunTel and OnX acquisitions, as well as depreciation expense related to acquired property, plant and equipment.32Table of ContentsForm 10-K Part II Cincinnati Bell Inc. $ Change % Change $ Change % Change (dollars in millions)2017 2016 2017 vs.2016 2017 vs. 2016 2015 2016 vs.2015 2016 vs. 2015 Restructuring and severance related charges Entertainment and Communications$27.9 $7.7 $20.2 n/m $1.6 $6.1 n/m IT Services and Hardware4.8 3.3 1.5 45% 2.8 0.5 18 % Corporate— 0.9 (0.9) n/m 1.6 (0.7) (44)% Total restructuring and severance relatedcharges (reversals)$32.7 $11.9 $20.8 n/m $6.0 $5.9 98 % In 2017, restructuring and severance related charges were associated with the Company initiated reorganizations within both segments of the business thatresulted in headcount reductions. The reorganizations are intended to more appropriately align the Company for future growth and reduce field and networkcosts within our legacy copper network.In 2016, restructuring and severance related charges were associated with headcount reductions that resulted due to increased in-sourcing of IT professionalsby a significant customer, as well as initiatives to reduce costs associated with our legacy copper network group, including a voluntary severance program forcertain management employees.In 2015, restructuring charges represented severance associated with employee separations, consulting fees related to a workforce optimization initiative, andlease abandonments.Other operating costs $ Change % Change $ Change % Change (dollars in millions)2017 2016 2017 vs.2016 2017 vs. 2016 2015 2016 vs.2015 2016 vs. 2015 Other operating costs Transaction and integration costs$18.5 $— $18.5 100% $1.4 $(1.4) n/m Curtailment loss— — — n/m 0.3 (0.3) n/m Pension settlement charges4.0 — 4.0 100% — — n/m Loss on sale of disposal of assets, net— 1.1 (1.1) n/m 0.8 0.3 38 % Total other operating costs$22.5 $1.1 $21.4 n/m $2.5 $(1.4) (56)% Transaction and integration costs incurred in 2017, recorded in the Corporate segment, are due to the acquisition of SunTel in the first quarter of 2017, theacquisition of OnX that closed in the fourth quarter of 2017, and the pending merger agreement with Hawaiian Telcom. The merger with Hawaiian Telcom isexpected to close in the second half of 2018. Transaction and integration costs incurred in 2015 primarily represent fees for exploring opportunities toincrease the scale of our IT Services and Hardware Segment.In 2017, the Company recorded a $4.0 million pension settlement charge for the Cincinnati Bell Pension Plan ("CBPP") as the lump sum payments to CBPPplan participants exceeded the sum of the service cost and interest cost component of net pension cost for the year.33Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Non-operating expenses (income) $ Change % Change $ Change % Change (dollars in millions)2017 2016 2017 vs.2016 2017 vs. 2016 2015 2016 vs.2015 2016 vs. 2015 Non-operating costs Interest expense$85.2 $75.7 $9.5 13 % $103.1 $(27.4) (27)% Loss on extinguishment of debt, net3.2 19.0 (15.8) (83)% 20.9 (1.9) (9)% Gain on Sale of CyrusOne investment(117.7) (157.0) 39.3 (25)% (449.2) 292.2 (65)% Other expense (income), net1.4 (7.6) 9.0 n/m 2.6 (10.2) n/m Income tax expense30.9 61.1 (30.2) (49)% 159.8 (98.7) (62)% Income (loss) from discontinued operations, netof tax— 0.3 (0.3) n/m 62.9 (62.6) n/m Interest expense increased in 2017 compared to 2016 due to the Company entering into the $600.0 million Tranche B Term Loan 2024 and issuing $350.0million 8% Senior Notes in the fourth quarter of 2017. The Company repaid the remaining $315.8 million Tranche B Term Loan due 2020 outstanding underits old Corporate Credit Agreement with the proceeds from the $600.0 million Tranche B Term Loan due 2024. In addition, the increase in interest expense in2017 is attributable to a full year of expense on the 7.0% Senior Notes due 2024 that were issued in the third quarter of 2016. Interest expense decreased in2016 compared to 2015 due to the Company using proceeds from the sale of a portion of its CyrusOne investment to repay debt. During 2017, we increasedour total debt by $541.1 million. During 2016 and 2015, we reduced our total debt by $31.0 million and $449.7 million, respectively. Certain debtrepayments in each period resulted in a loss on extinguishment of debt.In 2017, the Company recognized a gain of $117.7 million on the sale of 2.8 million CyrusOne common shares. In 2016, the Company recognized a gain of$157.0 million on the sale of 4.1 million CyrusOne common shares. In 2015, the Company recognized a gain of $412.9 million on the sale of 20.3 millionCyrusOne LP partnership units and a gain of $36.3 million on the sale of 1.4 million CyrusOne common shares. At December 31, 2017, we no longer own anyshares of CyrusOne.Dividends declared by CyrusOne in 2016 totaled $6.4 million and were included in Other (income) expense, net. For 2015, Other (income) expense, netincludes the Company's share of CyrusOne's net loss recorded under the equity method of accounting totaling $5.1 million.Income tax expense fluctuates accordingly based on changes in income from continuing operations before income taxes, as well as rate changes. TheCompany uses federal and state net operating loss carryforwards to defray payment of federal and state tax liabilities. The Company also had significantAlternative Minimum Tax (“AMT”) refundable tax credit carryforwards available to offset future income tax liabilities. The Company made an election onthe 2016 income tax return to claim the available portion of these credits in lieu of claiming bonus depreciation. As a result, the Company had cash incometax refunds (net of payments), totaling $12.9 million in 2017. The company plans to make the same election to accelerate AMT refundable tax credits on the2017 tax return and, as a result, reclassed $14.8 million of AMT refundable tax credits from “Deferred income taxes, net” to “Receivables” as these credits areexpected to be received during 2018.In periods without tax law changes, the Company expects its effective tax rate to exceed statutory rates due to non-deductible expenses. Non-deductiblesexpenses during 2017 were higher than in recent prior years due to $10.4 million of non-deductible acquisition related expenses incurred during the year.On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the "Tax Act") was signed in to law. The Tax Act significantly revised the U.S. Corporate income taxregime by, among other things, lowering the U.S. corporate tax rate from 35 percent to 21 percent. In addition, effective January 1, 2018, there are limitationson the deductibility of interest and executive compensation and the corporate alternative minimum tax (AMT) is eliminated. As a result of the Tax Act, theCompany recorded a tax expense of $6.8 million due to a remeasurement of deferred tax assets and liabilities.Effective March 31, 2015, we discontinued operating our wireless business as there were no subscribers remaining on the network. As a result, we no longerrequired the use of the spectrum being leased. Therefore, the $112.6 million gain on sale of wireless spectrum licenses, which had previously been deferred,was recognized during the three months ended March 31, 2015. On April 1, 2015, we transferred certain other wireless assets to the purchaser, includingleases to certain wireless towers and related equipment and other assets, which resulted in a gain of $15.9 million in the second quarter of 2015. These gainswere partially offset by operating losses as we continued to incur costs during the wind down of the wireless business.34Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Discussion of Operating Segment ResultsThe Company manages its business based upon product and service offerings. For the years ended December 31, 2017, 2016, and 2015, we operated twobusiness segments: Entertainment and Communications and IT Services and Hardware. The closing of our wireless operations, effective March 31, 2015,represented a strategic shift in our business. Therefore, certain wireless assets, liabilities and results of operations are reported as discontinued operations inour financial statements. For further details of Discontinued Operations, see Note 1 and Note 16 of Notes to Consolidated Financial Statements.Certain corporate administrative expenses have been allocated to our business segments based upon the nature of the expense and the relative size of thesegment. Intercompany transactions between segments have been eliminated.Entertainment and CommunicationsThe Entertainment and Communications segment provides products and services such as data transport, high-speed internet, video, local voice, longdistance, VoIP and other services. CBT, a subsidiary of the Company, is the ILEC for a geography that covers a radius of approximately 25 miles aroundCincinnati, Ohio, and includes parts of northern Kentucky and southeastern Indiana. CBT has operated in this territory for over 140 years. Voice and dataservices beyond its ILEC territory, particularly in Dayton and Mason, Ohio, are provided through the operations of CBET, a CLEC and subsidiary of CBT.The Entertainment and Communications segment provides Long distance and VoIP services primarily through CBTS Technology Solutions LLC, which wasformerly known as Cincinnati Bell Any Distance Inc.35Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Entertainment and Communications, continued $ Change % Change $ Change % Change (dollars in millions)2017 2016 2017 vs.2016 2017 vs. 2016 2015 2016 vs.2015 2016 vs. 2015 Revenue: Data$351.6 $344.8 $6.8 2 % $322.8 $22.0 7 % Voice267.3 275.0 (7.7) (3)% 291.9 (16.9) (6)% Video149.2 125.7 23.5 19 % 96.6 29.1 30 % Services and Other21.8 23.3 (1.5) (6)% 32.4 (9.1) (28)% Total revenue789.9 768.8 21.1 3 % 743.7 25.1 3 % Operating costs and expenses: Cost of services and products379.3 359.5 19.8 6 % 331.5 28.0 8 % Selling, general and administrative138.7 141.6 (2.9) (2)% 150.9 (9.3) (6)% Depreciation and amortization174.7 168.6 6.1 4 % 129.2 39.4 30 % Restructuring and severance charges27.9 7.7 20.2 n/m 1.6 6.1 n/m Other4.0 0.8 3.2 n/m 0.6 0.2 33 % Total operating costs and expenses724.6 678.2 46.4 7 % 613.8 64.4 10 % Operating income$65.3 $90.6 $(25.3) (28)% $129.9 $(39.3) (30)% Operating margin8.3% 11.8% (3.5) 17.5% (5.7) Capital expenditures$196.4 $272.5 $(76.1) (28)% $269.5 $3.0 1 % Metrics (in thousands): Fioptics units passed572.2 533.4 38.8 7 % 432.0 101.4 23 % Internet subscribers: DSL82.1 105.6 (23.5) (22)% 133.7 (28.1) (21)% Fioptics226.6 197.6 29.0 15 % 153.7 43.9 29 % Total internet subscribers308.7 303.2 5.5 2 % 287.4 15.8 5 % Fioptics video subscribers146.5 137.6 8.9 6 % 114.4 23.2 20 % Residential voice lines: Legacy94.9 117.5 (22.6) (19)%146.4(28.9)(20)%Fioptics88.8 83.8 5.0 6 % 71.4 12.4 17 % Total residential voice lines183.7201.3(17.6)(9)%217.8(16.5)(8)% Business voice lines: Legacy167.1 190.7 (23.6) (12)% 215.4 (24.7) (11)% VoIP*166.0 131.7 34.3 26 % 89.5 42.2 47 % Total business voice lines333.1 322.4 10.7 3 % 304.9 17.5 6 % Total voice lines516.8523.7(6.9)(1)% 522.7 1.0 0 % Long distance lines: Residential175.8 187.6 (11.8) (6)% 199.4 (11.8) (6)% Business117.8 129.7 (11.9) (9)% 140.3 (10.6) (8)% Total long distance lines:293.6 317.3 (23.7) (7)% 339.7 (22.4) (7)% * VoIP lines include Fioptics voice lines36Table of ContentsForm 10-K Part II Cincinnati Bell Inc.RevenueThe following table illustrates our revenue by market: Consumer, Business and Carrier. Our products within each market have been classified as eitherStrategic, Legacy or Integration. Year ended December 31,(dollars in millions)2017 2016 2015Revenue: Consumer Strategic Data$125.8 $103.0 $72.7 Voice24.4 21.7 19.7 Video146.7 123.6 94.8 Services and other1.6 3.4 3.7 298.5 251.7 190.9 Legacy Data34.9 44.2 49.5 Voice66.3 73.8 86.1 Services and other3.3 4.1 6.7 104.5 122.1 142.3 Integration Services and other0.7 3.9 7.7 Total consumer revenue$403.7 $377.7 $340.9 Business Strategic Data$100.5 $96.5 $89.6 Voice63.3 51.7 42.5 Video2.5 2.1 1.8 Services and other2.0 2.5 3.2 168.3 152.8 137.1 Legacy Data17.1 20.3 23.2 Voice97.9 111.5 123.6 Services and other1.1 1.3 1.3 116.1 133.1 148.1 Integration Services and other1.5 1.8 2.6 Total business revenue$285.9 $287.7 $287.8 Carrier Strategic Data$42.8 $45.0 $37.7 Services and Other5.4 — — 48.2 45.0 37.7 Legacy Data30.5 35.8 50.1 Voice15.4 16.3 20.0 Services and other6.2 6.3 7.2 52.1 58.4 77.3 Total carrier revenue$100.3 $103.4 $115.0 Total Entertainment and Communications revenue$789.9 $768.8 $743.737Table of ContentsForm 10-K Part II Cincinnati Bell Inc.ConsumerConsumer market revenue has increased each of the previous two years due to Fioptics growth offsetting legacy access line and DSL subscriber losses. OurFioptics internet subscriber base increased 14% and average revenue per user ("ARPU") was up 4% in 2017. During 2016, the Fioptics internet subscriberbase increased 27% with ARPU growing 9%. Fioptics video subscribers increased 8% and 21% in 2017 and 2016, respectively, in addition to a 4% increasein ARPU in each year. Video ARPU growth rates increased in both 2017 and 2016 as a result of price increases. In 2017, price increases were partially offsetby competition in the market putting pressure on prices. In 2016, price increases were partially offset by the popularity of MyTV, which was not the focus ofour advertising campaign during 2017.The Company continues to lose access and long distance lines as a result of, among other factors, customers electing to solely use wireless service in lieu oftraditional local wireline service, or electing to move to other service providers. The Company also continues to experience DSL subscriber loss because ofcustomers migrating to Fioptics, or an alternative internet provider, particularly in areas not upgraded to Fioptics.Higher Integration revenue in 2015 is primarily due to $3.1 million of revenue generated through an agreement to sell Verizon wireless products and servicesat our retail locations. We discontinued the sale of Verizon handsets at our retail locations effective January 31, 2016.BusinessBusiness market revenue in 2017 is down slightly from the prior year as the growth in strategic revenue continues to partially offset declines by our legacyand integration products and services. Legacy data revenue from our business customers has decreased by $3.2 million in 2017, while strategic data revenuehas increased by $4.0 million as customers migrate from our legacy product offerings to higher bandwidth fiber solutions. Voice revenue declined $2.0million in 2017 and $2.9 million in 2016 as the growth in VoIP lines continues to mitigate legacy voice line loss and the migration of certain customers tonational providers. In total, business voice lines increased 3% during 2017 in comparison to an increase of 6% in 2016. However, the revenue impact of theincrease in voice lines was more than offset by the fact that VoIP lines have a lower ARPU than legacy access lines. In addition, service and other revenue hasdeclined each year primarily due to lower maintenance and service center revenue.CarrierOverall Carrier revenue was down $3.1 million in 2017 compared to 2016. Carrier Data revenue declined by $7.5 million in 2017 compared to prior year asnational carriers increased their focus on improving network efficiencies. Strategic services and other revenue offset this decline as it increased $5.4 milliondue to a one time project that was completed in the second quarter of 2017.Data revenue declined by $7.0 million in 2016 compared to 2015 because we no longer provide backhaul services to our discontinued wireless operationseffective March 31, 2015.Voice revenue declines in 2017 and 2016 are primarily due to Federal Communications Commission ("FCC") mandated reductions of terminating switchedaccess rates. Reductions have occurred over a six-year period and will conclude in 2018.Operating costs and expensesCost of services and products has increased for the past two years primarily due to higher programming costs of $16.6 million and $17.9 million in 2017 and2016, respectively. These increases are the result of the growing number of Fioptics video subscribers combined with rising programming rates. In addition toprogramming costs, growth in VoIP and MPLS revenue in both 2017 and 2016 led to higher costs of services and products. Network and materials costsincreased in both 2017 and 2016 as we continue to build out our fiber investment. Furthermore, the amortization of the prior service benefit related to thepostretirement plans produced a smaller benefit in 2017 as compared to 2016, causing an increase in cost of services and products. In 2016, the increase incosts of services and products can also be attributed to increased payroll related costs driven by increased headcount and overtime to support the growth ofour fiber-based network.SG&A expenses were down in 2017 compared to the prior year primarily due to lower payroll related charges. These decreases were partially offset by $1.7million of increased advertising costs for Fioptics during 2017. SG&A expenses were down in 2016 compared to 2015 primarily due to lower payroll relatedcharges as well as a one-time charge related to our excess pension benefit plan totaling $3.8 million incurred during 2015. These decreases were partiallyoffset by $1.5 million of increased advertising costs for Fioptics during 2016.38Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Depreciation and amortization expenses were up in 2017 compared to the prior year primarily due to assets placed in service in connection with theexpansion of our fiber network. Depreciation expense was up in 2016 compared to 2015 due to reducing the estimated useful life of certain set-top boxes, aswell as the related software, as we upgraded customers to new technology in 2016. In addition, we reduced the useful life of our copper assets in the fourthquarter of 2015.Restructuring and severance related charges in 2017 were primarily related to a voluntary severance program for certain bargained employees to reduce fieldand network costs associated with our legacy copper network. Restructuring and severance related charges in 2016 were primarily related to a voluntaryseverance program to reduce costs associated with our legacy copper network. Restructuring and severance related charges in 2015 were primarily related toemployee severance as we identified opportunities to integrate the business markets within each of our segments.Other operating costs and expenses includes a pension settlement charge of $4.0 million in 2017 as the lump sum payments to Cincinnati Bell Pension Planparticipants exceeded the sum of the service cost and interest cost component of net pension cost for the year.Capital Expenditures(dollars in millions) 2017 2016 2015Fioptics capital expenditures Construction $53.8 $89.8 $86.5 Installation 55.1 68.7 50.2 Other 15.7 21.8 42.8Total Fioptics 124.6 180.3 179.5 Other strategic 34.2 50.3 44.4Other 37.6 41.9 45.6Total capital expenditures $196.4 $272.5 $269.5Capital expenditures are incurred to expand our Fioptics product suite, upgrade and increase capacity for our networks, and to maintain our fiber and coppernetworks. During 2017, 2016 and 2015, we passed 38,800, 101,400 and 97,000 addresses with Fioptics, respectively. The decrease in construction costs in2017 is a result of the Company passing fewer doors in 2017 relative to 2016 and 2015. Fioptics installation costs also decreased in 2017 as there were feweractivations due to fewer doors being passed. As of December 31, 2017, the Company is able to provide its Fioptics services to 572,200 residential andbusiness addresses, or 70% of our operating territory. Fioptics installation costs increased in 2016 compared to 2015 due to increased Fioptics internet andvideo activations combined with upgrading set-top boxes and wireless modems. Other Fioptics related investments include costs to expand core networkcapacity and enhancements to the customer experience.Other strategic capital expenditures are for success-based fiber builds for business and carrier projects, including related equipment, to provide ethernet andother data transport services.IT Services and HardwareThe IT Services and Hardware segment provides a full range of managed IT solutions, including managed infrastructure services, telephony and IT equipmentsales, and professional IT staffing services. These services and products are provided through the Company's subsidiaries in various geographic areasthroughout the U.S., Canada and Europe. By offering a full range of equipment and outsourced services in conjunction with the Company’s fiber and coppernetworks, the IT Services and Hardware segment provides end-to-end IT and telecommunications infrastructure management designed to reduce cost andmitigate risk while optimizing performance for its customers.39Table of ContentsForm 10-K Part II Cincinnati Bell Inc. $ Change % Change $ Change % Change (dollars in millions)2017 2016 2017 vs.2016 2017 vs. 2016 2015 2016 vs.2015 2016 vs. 2015 Revenue: Professional Services$114.6 $106.7 $7.9 7 % $105.5 $1.2 1 % Management and Monitoring21.1 32.0 (10.9) (34)% 31.0 1.0 3 % Unified Communications42.3 39.8 2.5 6 % 37.8 2.0 5 % Cloud Services53.5 46.5 7.0 15 % 30.9 15.6 50 % Telecom and IT hardware280.3 205.7 74.6 36 % 230.2 (24.5) (11)% Total revenue511.8 430.7 81.1 19 % 435.4 (4.7) (1)% Operating costs and expenses: Cost of services and products394.6 332.4 62.2 19 % 345.2 (12.8) (4)% Selling, general and administrative83.7 58.0 25.7 44 % 54.0 4.0 7 % Depreciation and amortization18.1 13.5 4.6 34 % 12.3 1.2 10 % Restructuring and severance relatedcharges4.8 3.3 1.5 45 % 2.8 0.5 18 % Other— 0.3 (0.3) n/m 0.5 (0.2) (40)% Total operating costs and expenses501.2 407.5 93.7 23 % 414.8 (7.3) (2)% Operating income$10.6 $23.2 $(12.6) (54)% $20.6 $2.6 13 % Operating margin2.1% 5.4% (3.3)pts4.7% 0.7ptsCapital expenditures$14.1 $13.7 $0.4 3 % $14.0 $(0.3) (2)% RevenueThe following IT services and hardware products have been classified as either strategic or integration: Year Ended December 31,(dollars in millions) 2017 2016 2015Strategic business revenue Professional services $95.5 $89.2 $90.4 Management and monitoring 21.1 32.0 31.0 Unified communications 29.1 29.4 27.1 Cloud services 53.5 46.5 30.9Total strategic business revenue 199.2 197.1 179.4 Integration business revenue Professional services 19.1 17.5 15.1 Unified communications 13.2 10.4 10.7 Telecom and IT hardware 280.3 205.7 230.2Total integration business revenue 312.6 233.6 256.0Total IT Services and Hardware revenue $511.8 $430.7 $435.440Table of ContentsForm 10-K Part II Cincinnati Bell Inc.In 2017, the IT Services and Hardware segment acquired SunTel and OnX. These acquisitions contributed $172.8 million in revenue with significantcontributions from Professional services in the amount of $29.6 million, Telecom and IT hardware in the amount of $132.7 million, and Cloud services in theamount of $6.8 million. These contributions helped to offset other declines experienced in these product categories as a result of reduced spending by ourenterprise customers, resulting in net growth of Professional services revenue of $7.9 million and Telecom and IT hardware revenue of $74.6 million.Telecom and IT hardware revenue reflects the cyclical fluctuation in capital spending by our customers, which may be influenced by many factors, includingthe timing of customers' capital spend, the size of their capital budgets and general economic conditions. Fluctuations in Telecom and IT hardware revenuealso impacts Professional services revenue as the sale of hardware typically drives associated revenue from professional services engagements.Management and monitoring revenue declined in 2017 compared to 2016 by $10.9 million as one our significant customers pursued cost cutting initiativesby in-sourcing IT professionals.Cloud services revenue grew $7.0 million in 2017 compared to 2016 primarily due to the acquisition of OnX. Cloud services revenue grew $15.6 million in2016 compared to 2015 due to a new end user support project as well as growth in the number of virtual machines within our current customer base.Operating Costs and ExpensesCost of services and products is primarily impacted by changes in Telecom and IT hardware sales and severance related charges. Costs of Telecom and IThardware sales increased $60.9 million and decreased $21.8 million in 2017 and 2016, respectively, compared to the prior year. In addition, during 2017,increases in payroll related costs due to increases in professional services revenue were offset by decreases in payroll related costs associated with therestructuring. In 2016, there was an increase in payroll related costs related to headcount to support the growth of Cloud services.Selling, general and administrative expenses increased by $25.7 million in 2017 as compared to 2016, primarily due to the acquisitions of SunTel and OnX.The increase in 2016 is related to increased payroll and headcount related costs incurred in order to support strategic revenue growth.Depreciation and amortization expense increased $4.6 million in 2017 due to the increase in property, plant and equipment, as well as intangibles, as part ofthe SunTel and OnX acquisitions.Restructuring and severance related charges incurred in 2017 related to the reorganization initiated by the Company to better align the segment for futuregrowth. Restructuring and severance related charges in 2016 were primarily related to increased in-sourcing of IT professionals by our customers. In 2015,restructuring charges consisted of employee severance and project related costs for the integration of each segment's business markets and thediscontinuation of our advanced cyber-security product offering in the first quarter of 2015. We also abandoned office space in Canada that is no longer inuse.Capital ExpendituresThe variance in capital expenditures is driven by the nature of customer related projects and spending on equipment to support the growth of our strategicproducts.CorporateCorporate is comprised primarily of general and administrative costs that have not been allocated to the business segments. Corporate costs totaled $37.8million in 2017, $20.8 million in 2016 and $22.5 million in 2015.Corporate costs increased by $17.0 million in 2017 compared to 2016 primarily due to higher transaction and integration costs of $18.5 million. Corporatecosts decreased by $1.7 million in 2016 compared to 2015, driven largely by lower transaction costs of $1.4 million.41Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Financial Condition, Liquidity, and Capital ResourcesCapital Investment, Resources and LiquidityShort-term viewOur primary source of cash is generated by operations. In 2017, 2016 and 2015, we generated $203.4 million, $173.1 million and $111.0 million,respectively, of cash flows from operations. In 2017, 2016 and 2015, proceeds from the monetization of our CyrusOne investment totaled $140.7 million,$189.7 million and $643.9 million, respectively. Dividends of $1.1 million, $7.4 million and $22.2 million were received from our investment in CyrusOnein 2017, 2016 and 2015, respectively.Our primary uses of cash are capital expenditures and debt service. In 2017, 2016 and 2015, capital expenditures were $210.5 million, $286.4 million and$283.6 million, respectively. Capital expenditures decreased in 2017 compared to 2016 and 2015 primarily due to passing fewer addresses with Fioptics.Based on the continued demand for fiber-based products and IT solutions, we expect 2018 total capital expenditures to range between $190 million - $210million. In 2017, 2016 and 2015, debt repayments were $403.0 million, $759.3 million and $531.7 million, respectively. In the fourth quarter of 2017, netproceeds totaling $577.0 million related to the issuance of the Tranche B Term Loan due 2024 were used to repay the remaining $315.8 million outstandingprincipal amount of the Tranche B Term Loan due 2020 and related accrued and unpaid interest. The remaining proceeds of the Tranche B Term Loan due2024 were used to fund the purchase price, including $77.6 million for outstanding debt, and associated transaction costs of the acquisition of OnX thatclosed on October 2, 2017. Net proceeds received from the offering of $350 million 8% Senior Notes in the fourth quarter of 2017 will be utilized to financein part the cash portion of the merger consideration for the proposed acquisition of Hawaiian Telcom expected to close in the second half of 2018. Interest payments were $65.7 million, $71.1 million and $108.5 million in 2017, 2016 and 2015, respectively. Interest payments have declined each year aswe have primarily used cash proceeds from the monetization of our CyrusOne investment and sale of wireless spectrum licenses in 2014 to repay debt. Ourcontractual debt maturities in 2018, including capital lease obligations, are $18.4 million and associated contractual interest payments are expected to beapproximately $120 million.To a lesser extent, cash is also used to fund our pension obligations, pay preferred stock dividends, and repurchase shares of common stock when the stockprice offers an attractive valuation. Cash contributions to our qualified pension plans were $2.3 million, $3.1 million and $10.3 million in 2017, 2016 and2015, respectively. Cash contributions for our qualified pension plans are expected to be approximately $4.0 million in 2018. Dividends paid on preferredstock were $10.4 million in each of 2017, 2016 and 2015. We do not currently pay dividends on our common shares, nor do we plan to pay dividends onsuch shares in 2018. In 2016, the Company repurchased 0.2 million common shares for $4.8 million, with no common shares repurchased in 2017 or 2015. Asof December 31, 2017, management has authority to repurchase additional common shares with a value of up to $124.4 million under the most recent planapproved by the Board of Directors. This plan does not have a stated maturity date. Management may purchase additional shares in the future to the extentthat the purchase is not limited by restrictions in the Credit Agreement, cash is available, and management believes the share price offers an attractive value.As of December 31, 2017, we had $318.8 million of short-term liquidity, comprised of $17.8 million of cash and cash equivalents, $200.0 million of undrawncapacity on our Revolving Credit Facility and $101.0 million available under the Receivables Facility. The Company expects to use a portion of thisliquidity to fund part of the cash consideration for the Hawaiian Telcom merger. The Receivables Facility permits maximum borrowings of up to $120.0million and is subject to annual renewal. As of December 31, 2017, the Company had no borrowings and $6.3 million of letters of credit outstanding underthe Receivables Facility on a borrowing capacity of $107.3 million. While we expect to continue to renew this facility, we would be required to use cash, ourRevolving Credit Facility, or other sources to repay any outstanding balance on the Receivables Facility if it was not renewed.The Company believes that its cash on hand, cash generated from operations and available funding under its credit facilities will be adequate to meet its cashrequirements for the next 12 months.42Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Long-term view, including debt covenantsAs of December 31, 2017, the Company had $1.7 billion of outstanding indebtedness and an accumulated deficit of $2.7 billion. In addition to the uses ofcash described in the Short-term view section above, the Company has to satisfy its long-term debt obligations. The Company has no significant debtmaturities until 2024. Contractual debt maturities, including capital leases, are $18.4 million in 2018, $18.0 million in 2019, $15.4 million in 2020, $12.5million in 2021, $10.9 million in 2022 and $1,692.9 million thereafter. In addition, we have ongoing obligations to fund our qualified pension plans. Basedon current legislation and current actuarial assumptions, we are required to make approximately $4.0 million in contributions to our qualified pension plansin 2018. Funding requirements for subsequent years are uncertain and will significantly depend on future actuarial assumption changes. It is also possiblethat we will use a portion of our cash flows generated from operations for common share repurchases or de-leveraging in the future, including discretionary,opportunistic repurchases of debt prior to the scheduled maturities.In the fourth quarter of 2017, the Company entered into a new Credit Agreement (the "Credit Agreement") and terminated the existing Corporate CreditAgreement. The Credit Agreement provides for (i) a five-year $200 million senior secured revolving credit facility including both a letter of credit subfacilityof up to $30 million and a swingline loan subfacility of up to $25 million) (the “Revolving Credit Facility”) and (ii) a seven-year $600 million senior securedterm loan facility (the “Tranche B Term Loan due 2024”). The Revolving Credit Facility expires in October 2022 and the Tranche B Term Loan due 2024expires in October 2024. Borrowings under the Revolving Credit Facility will be used to provide ongoing working capital as well as other general corporatecash flow needs of the Company. At December 31, 2017, there were no outstanding borrowings under the Revolving Credit Facility, leaving $200.0 millionavailable.The Credit Agreement has financial covenants that require the Company to maintain certain leverage and interest coverage ratios. As of December 31, 2017,these ratios and limitations include a maximum consolidated secured total leverage ratio of 3.50 to 1.00 and a minimum consolidated interest coverage ratioof 1.50 to 1.00. In addition, the Credit Agreement contains customary affirmative and negative covenants, but not limited to, restrictions on Company'sability to incur additional indebtedness, create liens, pay dividends, make certain investments, and prepay other indebtedness, sell, transfer, lease, or disposeof assets and enter into, or undertake, certain liquidations, mergers, consolidations or acquisitions.The Credit Agreement contains customary events of default (which are in some cases subject to certain exceptions, thresholds and grace periods), including,but not limited to, nonpayment of principal or interest, failure to perform or observe covenants, breaches of representations and warranties, cross-defaults withcertain other indebtedness, certain bankruptcy-related events or proceedings, final monetary judgments or orders, ERISA defaults, invalidity of loandocuments or guarantees, and certain change of control events. If the Company were to violate any of its covenants and were unable to obtain a waiver, itwould be considered a default. If the Company were in default under the Credit Agreement, no additional borrowings under this facility would be availableuntil the default was waived or cured.The Tranche B Term Loan due 2024 is subject to the same affirmative and negative covenants and events of default as the Revolving Credit Facility, exceptthat a breach of the financial covenants will not result in an event of default under the Tranche B Term Loan due 2024 unless and until the agent or amajority in interest of the lenders under the Revolving Credit Facility have terminated their commitments under the Revolving Credit Facility andaccelerated the loans then outstanding under the Revolving Credit Facility in response to such breach in accordance with the terms and conditions of theCredit Agreement.As of December 31, 2017, the Company was in compliance with the Credit Agreement covenants and ratios.IndenturesThe Company’s Senior Notes are governed by indentures which contain covenants that, among other things, limit the Company’s ability to incur additionaldebt or liens, pay dividends or make other restricted payments, sell, transfer, lease, or dispose of assets and make investments or merge with another company.The Company is in compliance with all of its debt indentures as of December 31, 2017.Management believes that cash on hand, operating cash flows, its Revolving Credit Facility and its Receivables Facility, and the expectation that theCompany will continue to have access to capital markets to refinance debt and other obligations as they mature and come due, should allow the Company tomeet its cash requirements for the foreseeable future.43Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Cash FlowsCash flows from operating activitiesCash provided by operating activities during 2017 was $203.4 million, an increase of $30.3 million compared to 2016. The increase is primarily due toincreased restructuring and severance related payments of $29.4 million and increased payments for transaction and integration costs of $16.1 million beingmore than offset by favorable changes in working capital as well as $13.0 million of operating cash flow generated by the OnX acquisition, which closed onOctober 2, 2017.Cash provided by operating activities during 2016 was $173.1 million, an increase of $62.1 million compared to 2015. The increase is primarily due to $37.4million of lower interest payments and a decline in pension and postretirement payments of $7.3 million. In addition, the Company's discontinued wirelessoperations used $28.0 million of cash in 2015, compared to $5.1 million used in 2016. These improvements to cash flow were partially offset by higher usageof working capital in 2016, primarily associated with the growth of our strategic products.Cash flows from investing activitiesCash used by investing activities totaled $236.8 million in 2017, an increase of $141.3 million compared to the prior year, primarily due to the acquisitionsof OnX and SunTel. In addition, during the first quarter of 2017, we sold our remaining 2.8 million shares of CyrusOne Inc. common stock for net proceedstotaling $140.7 million. In 2016, proceeds from the sale of our investment in CyrusOne totaled $189.7 million. These increases in cash used by investingactivities were partially offset by a $75.9 million decrease in capital expenditures as a result of passing fewer doors with Fioptics in 2017 as compared to theprior year.Cash used by investing activities totaled $95.5 million in 2016, compared to $383.2 million provided by investing activities in 2015. The decrease isprimarily driven by the year-over-year decrease in proceeds received on the sale of the Company's CyrusOne investment. In addition, CyrusOne dividendsclassified as investing activities decreased by $20.1 million and capital expenditures increased by $2.8 million during 2016.Other cash used by investing activities includes contributions to equity method investments totaling $0.9 million and $0.3 million in 2016 and 2015,respectively. In 2015, the contributions were more than offset by proceeds from the sale of assets totaling $1.0 million.Cash flows from financing activitiesCash provided by financing activities was $420.2 million in 2017. In the fourth quarter of 2017, the Company terminated its existing Corporate CreditAgreement and entered into a new Credit Agreement (the "Credit Agreement") that provides for a seven-year $600 million Tranche B Term Loan due 2024with proceeds totaling $593 million, net of discounts, and a $200 million Revolving Credit Facility. Also in the fourth quarter of 2017, CB Escrow Corp. (the“Issuer”), an Ohio corporation and wholly owned subsidiary of Cincinnati Bell Inc., closed the private offering of $350 million aggregate principal amount of8% Senior Notes at par. The proceeds of the note issuance have been deposited into an escrow account pending closing of the proposed acquisition ofHawaiian Telcom. Debt repayments totaling $403.0 million were due to the repayment of the remaining $315.8 million outstanding principal amount of theTranche B Term Loan due 2020, including the related accrued and unpaid interest, as well as $77.6 million paid for OnX outstanding debt at the time ofacquisition. Debt issuance costs paid totaled $19.1 million for the year. In addition, the Company repaid $89.5 million on the Receivables Facility in 2017.Cash used by financing activities were $75.3 million in 2016. The Company issued $625.0 million of 7% Senior Notes at a $10.0 million premium. Debtrepayments totaling $759.3 million were primarily due to the repayment of $478.5 million of the outstanding 8 3/8% Senior Notes due 2020 at an averagerate of 103.328%, $212.1 million of the outstanding Tranche B Term Loan, $40.8 million of the outstanding Cincinnati Bell Telephone Notes at an averagerate of 92.232% and $4.0 million of the outstanding 7 1/4% Senior Notes due 2023 at an average rate of 100.750%. In 2016, the Company repurchased 0.2million common shares for $4.8 million. Debt issuance costs totaled $11.1 million for the year. In addition, the Company borrowed $71.9 million on theReceivables Facility in 2016 and proceeds from the exercise of options totaled $3.8 million.44Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Cash used by financing activities were $544.7 million in 2015. Debt repayments totaling $531.7 million were primarily due to the redemption of $300.0million of the outstanding 8 3/4% Senior Subordinated Notes due 2018 at 102.188%, $182.7 million of the outstanding 8 3/8% Senior Notes due 2020 at anaverage rate of 105.543%, $13.7 million of the outstanding7 1/4% Notes due 2023 at 99.853% and $5.8 million of the outstanding CBT Notes at an average rate of 90.840%. In 2015, we repaid $1.6 million of theoutstanding balances on the Revolving Credit Facility.Dividends paid on preferred stock totaled $10.4 million in each of 2017, 2016 and 2015.Future Operating TrendsEntertainment and CommunicationsWe continue to generate year-over-year Entertainment and Communications revenue growth as demand for Fioptics and fiber-based products more thanoffsets revenue declines from our legacy products. During 2017, we invested $158.8 million in our strategic Entertainment and Communications products.Revenue from these products increased 15%, totaling $515.0 million for the year.The Company's primary strategic product for residential customers is Fioptics, which as of December 31, 2017 is available to 572,200 residential andbusiness addresses, or approximately 70% of Greater Cincinnati. In 2017, we invested $53.8 million to pass 38,800 addresses with Fioptics and capitalexpenditures related to customer installations totaled $55.1 million. In addition, we invested $15.7 million on various IT projects to allow us to operate moreefficiently. Fioptics revenue totaled $309.8 million in 2017, up 22% compared to the prior year as demand for the product remains strong. Our Fioptics high-speed internet subscribers increased by 15% from a year ago, totaling 226,600 as of December 31, 2017. Fioptics video subscribers totaled 146,500 at year-end, up 6% from 2016.During 2018, we expect continued competition for consumer data, voice and video services as the cable competitor in our market continues to target areaswhere we have copper. In 2018, we plan to invest between $95 million and $110 million for Fioptics, including construction, installation and value-addedservices. Our goal is to pass an additional 35,000 addresses during the year. We expect that consumer Fioptics revenue growth will continue to offsetconsumer legacy revenue declines.For our business and carrier customers, strategic products include: high-speed internet and data transport, conferencing, as well as VoIP and other broadbandservices, including private line and MPLS. In 2017, we invested $34.2 million in capital expenditures for fiber builds, which bring measurable deal drivenreturns from our business customers. The Company connected approximately 6,700 commercial addresses with fiber based services in 2017 (also referred toas a lit address), increasing the total number of lit addresses to 22,500 (included in Fioptics addresses) expanding the fiber network to more than 10,900 routemiles. We also provide cell site back-haul services to approximately 70% of the 1,000 cell sites in-market, of which approximately 95% of these sites are litwith fiber. We expect to continue to light additional commercial addresses and grow our share of cell site back-haul services to approximately 90% of themacro tower sites in our market over the next year.Strategic revenue from business customers totaled $168.3 million (including $21.7 million from Fioptics), up 10% from a year ago. Total business revenuewas consistent with the prior year, and we expect this trend to continue as we transition customers off the legacy copper network and onto fiber-basedsolutions. Strategic revenue from carrier customers totaled $48.2 million, up 7% compared to the prior year. Carrier voice and data revenue experienceddeclines in both 2017 and 2016 due to on-going FCC mandated switched access rate reductions in combination with national carriers increased focus onimproving network efficiencies in our market. We expect similar trends to continue in 2018 as we position ourselves to be the preferred wholesale fiberinfrastructure provider for small cell, 5G, and all other technologies.In 2018, including our Fioptics capital expenditures, we expect to invest approximately $150 million to $170 million in our strategic products. We believethe growth in our strategic product revenue will continue to offset the decline from our legacy products, which include local voice, DSL, long distance andlow-bandwidth data transport services. Revenue from legacy products totaled $272.7 million in 2017, down 13% compared to the prior year due to a 15%loss of legacy voice lines and a 7% loss of long distance lines as wireless substitution continues. DSL subscribers also decreased 22% in 2017; however, totalinternet subscribers grew 2% as we migrated customers to our higher speed Fioptics product. We expect this trend to continue as we continue to expand ourfiber network.45Table of ContentsForm 10-K Part II Cincinnati Bell Inc.In July 2017, the Company announced its plans to acquire Hawaiian Telcom through merger with a subsidiary of the Company. The merger with HawaiianTelcom is an important step toward building scale and is expected to close in the second half of 2018. Upon completion, the acquisition will allow access toboth Honolulu, a well-developed, fiber-rich city, and the growing neighbor islands. The acquisition will provide Hawaiian Telcom with expanded liquidityand capital flexibility to continue to expand its next generation fiber networks to enable growth and better serve its customer base statewide.IT Services and HardwareThe Company's strategy for future growth is to diversify the geographies in which it operates. As a part of executing this strategy, in February 2017 theCompany completed the acquisition of SunTel, a regional provider of network security, data connectivity, and unified communications solutions based inTroy, Michigan, and in October 2017 completed the acquisition of OnX, with locations throughout the U.S., Canada and Europe. The expectation is thatthese acquisitions will provide future growth opportunities in the IT Services and Hardware segment by providing additional geographies to operate within,and an expanded customer base in which to sell our products and services. In addition, the acquisitions can create synergies and opportunities for costsavings.Revenue for strategic IT services was $199.2 million in 2017, down 1% due to cost cutting efforts by our largest customer, particularly in ProfessionalServices and Management and Monitoring. These losses were partially offset by revenue contributions from our recent acquisitions of SunTel and OnX. Weexpect budget constraints by our customers in Greater Cincinnati will continue to put pressure on our revenue in the future, increasing the need to diversifyinto other territories. In addition, as more customers work to manage cash flow and migrate to the public cloud, we will see declines in the demand forTelecom and IT hardware. However, this trend can provide an opportunity in the form of professional services as we have IT professionals that can developthe strategy to guide customers through this migration.Contractual ObligationsThe following table summarizes our contractual obligations as of December 31, 2017: Payments due by Period(dollars in millions) Total < 1 Year 1-3 Years 3-5 Years ThereafterLong-term debt, excluding capital leases (1) $1,685.2 $6.0 $12.0 $12.0 $1,655.2Capital leases (2) 82.9 12.4 21.4 11.4 37.7Interest payments on long-term debt and capital leases (3) 841.0 115.2 227.3 225.5 273.0Non-cancellable operating lease obligations 41.4 7.0 10.7 5.4 18.3Purchase obligations (4) 205.4 205.0 0.4 — —Pension and postretirement benefits obligations (5) 38.5 17.3 9.0 3.8 8.4Unrecognized tax benefits (6) 22.2 — — — 22.2Other liabilities (7) 34.5 19.7 4.5 0.9 9.4Total $2,951.1 $382.6 $285.3 $259.0 $2,024.2(1)Excludes net unamortized discounts and premiums. In the event that the HCOM Acquisition has not occurred on or prior toJanuary 9, 2019, the Issuer will be required to redeem all of the 8% Senior Notes at a redemption price equal to 100% of theinitial issue price, plus accrued and unpaid interest to, but excluding, the redemption date. See Note 7 of the Notes toConsolidated Financial Statements. (2)Includes capital lease obligations primarily related to vehicles and network equipment used in the deployment of our fibernetwork and wireless towers assumed from our discontinued operations. (3)Assumes no early payment of debt in future periods. The interest rate applied on variable rate borrowings is the rate in effect asof December 31, 2017. (4)Includes amounts under open purchase orders and open blanket purchase orders for purchases of network, IT and telephonyequipment, and other goods; contractual obligations for services such as software maintenance and outsourced services; andother purchase commitments. 46Table of ContentsForm 10-K Part II Cincinnati Bell Inc.(5)Includes payments for postretirement benefits, qualified pension plans, non-qualified pension plan and other employeeretirement agreements. Amounts for 2018 include approximately $10.5 million expected to be contributed for postretirementbenefits. Although the Company expects to continue operating the plans past 2018, its contractual obligation related topostretirement obligations only extends through 2018. Amounts for 2018 through 2023 include approximately $10 million ofestimated cash contributions to its qualified pension plans. Expected qualified pension plan contributions are based on currentplan design, legislation and current actuarial assumptions. Any changes in plan design, legislation or actuarial assumptionsmay also affect the expected contribution amount. (6)Includes the portion of liabilities related to unrecognized tax benefits. If the timing of payments cannot be reasonablyestimated for unrecognized tax benefits, these liabilities are included in the "Thereafter" column of the table above. (7)Includes contractual obligations primarily related to restructuring and employee severance reserves, asset removal obligations,long-term disability obligations, workers compensation liabilities, long-term incentive plan obligations and a deferred vendorrebate.The contractual obligations table is presented as of December 31, 2017. The amount of these obligations can be expected to change over time as newcontracts are initiated and existing contracts are completed, terminated, or modified.ContingenciesWe are subject to various lawsuits, actions, proceedings, claims and other matters asserted under laws and regulations in the normal course of business. Webelieve that the amounts provided in our consolidated financial statements, as prescribed by generally accepted accounting principles are adequate in lightof the those contingencies that are probable and able to be estimated. However, there can be no assurances that the actual amounts required to satisfy allegedliabilities from various legal proceedings, claims, tax examinations, and other matters, including the matters discussed below, and to comply with applicablelaws and regulations, will not exceed the amounts reflected in our consolidated financial statements. As such, costs, if any, that may be incurred in excess ofthose amounts provided as of December 31, 2017, cannot be reasonably determined.Based on information currently available, consultation with counsel, available insurance coverage and established reserves, management believes that theeventual outcome of all outstanding claims will not, individually or in the aggregate, have a material effect on the Company's financial position, results ofoperations or cash flows.Off-Balance Sheet ArrangementsIndemnificationsDuring the normal course of business, the Company makes certain indemnities, commitments, and guarantees under which it may be required to makepayments in relation to certain transactions. These include: (a) intellectual property indemnities to customers in connection with the use, sale, and/or licenseof products and services, (b) indemnities to customers in connection with losses incurred while performing services on their premises, (c) indemnities tovendors and service providers pertaining to claims based on negligence or willful misconduct, (d) indemnities involving the representations and warranties incertain contracts, and (e) outstanding letters of credit which totaled $6.3 million as of December 31, 2017. In addition, the Company has made contractualcommitments to several employees providing for payments upon the occurrence of certain prescribed events. The majority of these indemnities,commitments, and guarantees do not provide for any limitation on the maximum potential for future payments.Critical Accounting Policies and EstimatesOur consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. Application of theseprinciples requires management to make estimates or judgments that affect the amounts reported in the financial statements and accompanying notes. Theseestimates are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statementscould reflect different estimates or judgments. Certain accounting policies inherently have a greater reliance on the use of estimates, and, as such, have agreater possibility of producing results that could be materially different than originally reported.47Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Our most significant accounting policies are presented in Note 1 to the consolidated financial statements. Management views critical accounting policies tobe those policies that are highly dependent on subjective or complex judgments, estimates or assumptions, and where changes in those estimates andassumptions could have a significant impact on the consolidated financial statements. We have discussed our most critical accounting policies, judgmentsand estimates with our Audit and Finance Committee.The discussion below addresses major judgments used in:• revenue recognition; • business combinations; • reviewing the carrying values of goodwill; • reviewing the carrying values of long-lived assets; • accounting for income taxes; and • accounting for pension and postretirement expenses. Revenue Recognition — The Company adheres to revenue recognition principles described in Financial Accounting Standards Board (“FASB”) AccountingStandards Codification Topic ("ASC") 605, “Revenue Recognition.” Under ASC 605, revenue is recognized when there is persuasive evidence of a salearrangement, delivery has occurred or services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured.With respect to arrangements with multiple deliverables, management determines whether more than one unit of accounting exists in an arrangement. To theextent that the deliverables are separable into multiple units of accounting, total consideration is allocated to the individual units of accounting based ontheir relative fair value, determined by the price of each deliverable when it is regularly sold on a stand-alone basis. Revenue is recognized for each unit ofaccounting as delivered, or as service is performed, depending on the nature of the deliverable comprising the unit of accounting.Entertainment and Communications — Revenues from local telephone, special access, internet product and video services, which are billed monthly prior toperformance of service, are not recognized upon billing or cash receipt but rather are deferred until the service is provided. Long distance, switched accessand other usage based charges are billed monthly in arrears. Entertainment and Communications bills service revenue in regular monthly cycles, which arespread throughout the days of the month. As the last day of each billing cycle rarely coincides with the end of the reporting period for usage-based servicessuch as long distance and switched access, we must estimate service revenues earned but not yet billed. These estimates are based upon historical usage, andwe adjust these estimates during the period in which actual usage is determinable, typically in the following reporting period.Pricing of local voice services is generally subject to oversight by both state and federal regulatory commissions. Such regulation also covers services,competition, and other public policy issues. Various regulatory rulings and interpretations could result in increases or decreases to revenue in future periods.IT Services and Hardware — Revenue is generally recognized as the service is provided. Maintenance on telephony equipment is deferred and recognizedratably over the term of the underlying customer contract, generally one to three years.Equipment revenue is recognized upon the completion of our contractual obligations, such as shipment, delivery, or customer acceptance. Installationservice revenue is generally recognized when installation is complete. We sell equipment and installation services on both a combined and standalone basis.The Company is a reseller of IT and telephony equipment. For these transactions, we consider the gross versus net revenue recording criteria of ASC 605.Based on this criteria, these equipment revenues and associated costs have generally been recorded on a gross basis rather than recording the revenues net ofthe associated costs. Vendor rebates are earned on certain equipment sales. When the rebate is earned and the amount is determinable, we recognize the rebateas an offset to cost of products sold.48Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Business Combinations — In accounting for business combinations, we apply the accounting requirements of FASB ASC 805, “Business Combinations,”which requires the recording of net assets of acquired businesses at fair value. The Company utilizes management estimates and an independent third-partyvaluation firm to assist in determining the fair values of acquired assets and assumed liabilities. In developing estimates of the fair value of net assets, theCompany analyzes a variety of factors including market data, estimated future cash flows of the acquired operations, industry growth rates, currentreplacement cost for fixed assets, and market rate assumptions for contractual obligations. Such a valuation requires management to make significantestimates and assumptions, particularly with respect to the intangible assets. The Company reports in its consolidated financial statements provisionalamounts for the items for which accounting is incomplete. Goodwill is adjusted for any changes to provisional amounts made within the measurement period.Reviewing the Carrying Values of Goodwill — The Company adheres to the guidance under ASC 350-20 in testing goodwill for impairment. Under thisguidance, the Company has the option of performing a qualitative assessment for impairment prior to performing the quantitative tests. A qualitative analysiswas performed in 2017 and a quantitative analysis was performed in 2016. The Company performs impairment testing of goodwill on an annual basis or whenevents or changes in circumstances indicate that an asset may be impaired. We perform our annual impairment tests in the fourth quarter when our five-yearplan is updated.Management estimates the fair value of each reporting unit using a combination of valuation methods, including both income-based and market-basedmethods. The income-based approach utilizes a discounted cash flow model using projected cash flows derived from the five-year plan, adjusted to reflectmarket participants' assumptions. Expected future cash flows are discounted at the weighted average cost of capital applying a market participant approach.The market-based approach utilizes earnings multiples from comparable publicly-traded companies. No goodwill impairment losses were recognized in 2017,2016 or 2015.Changes in certain assumptions could have a significant impact on the impairment tests for goodwill. The most critical assumptions are projected futuregrowth rates, operating margins, capital expenditures, terminal values, and discount rate selection. These assumptions are subject to change as the Company'slong-term plans and strategies are updated each year.Reviewing the Carrying Values of Long-Lived Assets — Depreciation of our Entertainment and Communications telephone plant is determined on astraight-line basis using the group depreciation method. Depreciation of other property, except for leasehold improvements, is based on the straight-linemethod over the estimated economic useful life. Depreciation of leasehold improvements is based on a straight-line method over the lesser of the economicuseful life or term of the lease, including option renewal periods if renewal of the lease is reasonably assured. Repair and maintenance expense items arecharged to expense as incurred.The useful lives of plant and equipment are estimated in order to determine the amount of depreciation expense to be recorded during any reporting period.The majority of Entertainment and Communications' plant and equipment is depreciated using the group method, which develops a depreciation rateannually based on the average useful life of a specific group of assets rather than for each individual asset as would be utilized under the unit method. Suchestimated life of the group is based on historical experience with similar assets, as well as taking into account anticipated technological or other changes.If technological changes were to occur more rapidly than anticipated, the useful lives assigned to these assets may need to be shortened, resulting in therecognition of increased depreciation expense in future periods. Likewise, if the anticipated technological or other changes occur more slowly than expected,the life of the group could be extended based on the life assigned to new assets added to the group. This could result in a reduction of depreciation expensein future periods. Competition from new or more cost effective technologies could affect our ability to generate cash flow from our network-based services.This competition could ultimately result in an impairment of certain of our tangible or intangible assets and have a substantial impact on our future operatingresults. A one-year change in the useful life of these assets would increase or decrease annual depreciation expense by approximately $39.0 million.In 2016, we reduced the estimated useful life of certain set-top boxes and the related software as we upgraded to new technology. In the fourth quarter of2015, we reduced the estimated remaining useful life of our copper plant from 15 years to 7 years as customers are increasingly migrating to fiber-basedservice offerings from those previously provided by our copper network.Management reviews the carrying value of long-lived assets when events or changes in circumstances indicate that the carrying amount of the assets may notbe recoverable. An impairment loss is recognized when the estimated future undiscounted cash flows expected to result from the use of an asset (or group ofassets) and its eventual disposition is less than its carrying amount. An impairment loss is measured as the amount by which the asset’s carrying valueexceeds its estimated fair value. Long-lived intangible assets are amortized based on the estimated economic value generated by the asset in future years.49Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Accounting for Income Taxes — The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction as well as various foreign, state andlocal jurisdictions. The Company’s previous tax filings are subject to normal reviews by regulatory agencies until the related statute of limitations expires.With a few exceptions, the Company is no longer subject to U.S. federal, state or local examinations for years prior to 2014.The Company has net operating loss carryforwards at the federal, state, local and foreign levels. Federal tax loss carryforwards are available to offset taxableincome in current and future periods. Approximately $130.0 million of these tax loss carryforwards will expire in 2023 and are not currently limited underU.S. tax laws. The ultimate realization of the deferred income tax assets depends upon our ability to generate future taxable income during the periods inwhich basis differences and other deductions become deductible and prior to the expiration of the net operating loss carryforwards. Based on current incomelevels and anticipated future reversal of existing temporary differences, management expects to fully utilize its federal net operating loss carryforwards withintheir expiration periods. However, realization of certain state, local and foreign net operating losses, as well as other deferred tax assets, is not certain.A valuation allowance of $45.5 million and $54.4 million has been recognized as of December 31, 2017 and 2016, respectively. While the valuationallowance is primarily against state, local, and foreign net operating losses, it also includes $4.3 million of allowances against Texas margin credits which areunlikely to be realized before their expiration date.As of December 31, 2017 and 2016, the liability for unrecognized tax benefits was $22.2 million and $31.4 million, respectively. As of December 31, 2017,the amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $22.0 million. Accrued interest related to unrecognized taxbenefits is recognized in interest expense.Accounting for Pension and Postretirement Expenses — In accounting for pension and postretirement expenses, we apply ASC 715, "Compensation —Retirement Benefits." A liability has been recognized on the Consolidated Balance Sheets for the unfunded status of the pension and postretirement plans.Actuarial gains (losses) and prior service costs (benefits) that arise during the period are recognized as a component of "Accumulated other comprehensiveloss" on the Consolidated Balance Sheets.The Company sponsors three noncontributory defined benefit pension plans: one for eligible management employees, one for non-management employees,and one supplemental, nonqualified, unfunded plan for certain former senior executives. We also provide healthcare and group life insurance benefits foreligible retirees. The measurement date for our pension and postretirement obligations is as of December 31. When changes to the plans occur during interimperiods, management reviews the changes and determines if a remeasurement is necessary.No amendments to the plan were entered in 2017 and 2016. During the second quarter of 2015, the bargained pension plan was amended to eliminate allfuture pension credits and transition benefits. As a result, the Company recognized a curtailment loss of $0.3 million during 2015 and remeasured theassociated pension obligation. This remeasurement resulted in a decrease of the pension liability by $1.7 million.The measurement of our pension and postretirement projected benefit obligations involves significant assumptions and estimates. Each time we remeasureour projected benefit obligations, we reassess the significant assumptions and estimates. The actuarial assumptions attempt to anticipate future events and areused in calculating the expenses and liabilities related to these plans. The most significant of these numerous assumptions, which are reviewed annually,include the discount rate and healthcare cost trend rates.Discount rateA discount rate is used to measure the present value of projected benefit obligations. The discount rate for each plan is individually calculated based uponthe timing of expected future benefit payments. Our discount rates are derived based upon a yield curve developed to reflect yields available on high-qualitycorporate bonds as of the measurement date. As of December 31, 2017 and 2016, the average discount rate used to value the pension plans was 3.60% and4.00%, respectively, while the average discount rate used to value the postretirement plans was 3.60% and 4.00%, respectively. Higher rates of interestavailable on high-quality corporate bonds drove the decrease in the discount rates in 2017.50Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Expected rate of returnThe expected long-term rate of return on plan assets, developed using the building block approach, is based on the mix of investments held directly by theplans and the current view of expected future returns, which is influenced by historical averages. The required use of an expected versus actual long-term rateof return on plan assets may result in recognized pension expense or income that is greater or less than the actual returns of those plan assets in any givenyear. Over time, however, the expected long-term returns are designed to approximate the actual long-term returns. As of December 31, 2017 and 2016, theestimated long-term rate of return on pension plan assets was 7.25% and 7.50%, respectively. The long-term rate of return on post-retirement plan assets wasestimated to be zero in both periods as these plans have minimal assets with a low rate of return. Actual asset returns for the pension trusts were gains of 20%in 2017 and 9% in 2016. In our pension calculations, we utilized the market-related value of plan assets, which is a calculated asset value that recognizeschanges in asset fair values in a systematic and consistent manner. Differences between actual and expected returns are recognized in the market-related valueof plan assets over five years.Healthcare cost trendOur healthcare cost trend rate is developed based on historical cost data, the near-term outlook and an assessment of likely long-term trends. As of bothDecember 31, 2017 and 2016, the healthcare cost trend rate used to measure the postretirement health benefit obligation was 6.5%. As of December 31, 2017,the healthcare cost trend rate is assumed to decrease gradually to 4.5% by the year 2022.The actuarial assumptions used may differ materially from actual results due to the changing market and economic conditions and other changes. Revisionsto and variations from these estimates would impact liabilities, equity, cash flow, costs of services and products and selling, general and administrativeexpenses.The following table represents the sensitivity of changes in certain assumptions related to the pension and postretirement plans as of December 31, 2017: Pension Benefits Postretirement and Other Benefits (Decrease)/ (Decrease)/ (Decrease)/ (Decrease)/ % Point Increase in Increase in Increase in Increase in(dollars in millions) Change Obligation Expense Obligation ExpenseDiscount rate +/- 0.5% ($28.1)/$28.1 ($1.5)/$1.5 ($4.3)/$4.7 ($0.1)/$0.1Expected return on assets +/- 0.5% n/a $1.8/($1.8) n/a $0/($0)Healthcare cost trend rate +/- 1.0% n/a n/a $3.2/($2.9) $0.2/($0.1)At December 31, 2017 and 2016, unrecognized actuarial net losses were $248.1 million and $277.9 million, respectively. The unrecognized net losses havebeen primarily generated by differences between assumed and actual rates of return on invested assets, changes in discount rates and healthcare costs.Because gains and losses reflect refinements in estimates, as well as real changes in economic values, and because some gains in one period may be offset bylosses in another or vice versa, we are not required to recognize these gains and losses in the periods that they occur. Instead, if the gains and losses exceed a10% corridor defined in the accounting literature, we amortize the excess over the average expected future working lifetime of active plan participants for thepension and bargained postretirement plans (approximately 8-12 years) and average life expectancy of retirees for the management postretirement plan(approximately 15 years).Regulatory Matters and Competitive TrendsFederal - The Telecommunications Act of 1996 (the "1996 Act") was enacted with the goal of establishing a pro-competitive, deregulatory framework topromote competition and investment in advanced telecommunications facilities and services to all Americans. From 1996 to 2008, federal regulatorsconsidered a multitude of proceedings aimed at promoting competition and deregulation. Although the 1996 Act called for a deregulatory framework, theFCC continued to maintain significant regulatory restraints on the traditional ILECs while increasing opportunities for new competitive entrants and newservices by applying minimal regulation. Since 2009 federal regulators have devoted considerable attention to initiatives aimed at promoting investment in,and adoption of, advanced telecommunications services, particularly broadband Internet access services. Simultaneously, the FCC has been adoptingmeasures it believes would promote competition, protect consumers, reform universal service, and enhance public safety and national security. Since January2017 the FCC has focused on eliminating burdensome and unnecessary regulations that impede broadband investment. We expect this trend to continue andwe will monitor the changing regulatory environment for any potential impacts, particularly on the following proceedings.51Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Universal ServiceThe federal Universal Service Fund ("USF") is funded via an assessment on the interstate end-user revenue of all telecommunications carriers andinterconnected VoIP providers. The assessment is used to support high cost, low income, rural healthcare, and schools and libraries programs.In October 2011, the FCC adopted new rules aimed at controlling the size of the high-cost portion of the fund and transitioning it from supporting legacycircuit-switched networks to broadband. These rules capped the high-cost fund and established a framework for transitioning support to the new ConnectAmerica Fund ("CAF") to bring broadband to unserved areas. Phase I reforms froze existing high-cost support and provided a mechanism for distributingadditional support for qualifying price cap companies. Under Phase II, $1.8 billion of annual support was made available to expand broadband in unservedareas served by price cap ILECs. In August 2015, price cap ILECs, which had the right of first refusal, accepted over $1.5 billion of the annual Phase IIsupport which was available to them. Carriers accepting the Phase II support commitment have the funds available for a six-year period. CBT acceptedapproximately $2 million in annual Phase II support beginning in 2015 in exchange for a commitment to expand broadband to 6,339 Kentucky locationsand 745 Ohio locations by the end of 2020. A separate funding mechanism for rate-of-return companies was finalized in 2016. In 2018, an auction will beheld to award up to $2 billion in additional support over the next ten years for broadband deployment in unserved areas throughout 48 states. The funds willbe distributed to companies participating in the auction that can deploy broadband at the lowest cost in the eligible unserved areas. The Company isevaluating whether it will participate in the auction.During 2014, the FCC adopted two orders reforming the Schools and Libraries component of the Universal Service Fund. The first order adopted a plan forphasing out support for voice services and allotted $1 billion per year through 2016 for funding Wi-Fi and other services to provide connectivity withinschools and libraries. The second order, adopted in late 2014, increased the cap on the Schools and Libraries fund to $3.9 billion per year. These decisionsmay have changed the mix of services schools and libraries purchase from the Company and the USF assessment on carriers to pay for the increased fundinglevels, however, because the assessments are generally fully passed on to consumers, any increased assessment is neutral for the Company.During 2016, the FCC adopted a comprehensive reform of the Lifeline program, which included among other things classifying broadband as a Lifelineeligible service and phasing out support for voice service. Additional reforms adopted in 2017 were aimed at eliminating waste, fraud and abuse of theprogram and further changes are being considered to limit participation in the program to facilities-based providers. Although CBT remains a Lifelineprovider, its Lifeline subscriber base has dropped to fewer than 3,000 due to stricter recertification requirements adopted in 2013 and customer migration towireless Lifeline providers. The inclusion of broadband in the program has not changed CBT's downward enrollment trend and the Company expects thetrend to continue.Intercarrier CompensationIn October 2011, in conjunction with its reform of the USF high cost support program, the FCC adopted comprehensive reforms to the switched access andreciprocal compensation rules which govern the means by which carriers compensate one another for use of their networks. The end point of the reforms is abill-and-keep system under which all per-minute intercarrier charges are eliminated.Terminating switched access and reciprocal compensation rates are being phased out over a six-year period concluding in 2018 for CBT and other price capcarriers. The plan contains a mechanism that enables ILECs to recover some of the lost revenue from increased end-user charges. The transition and recoverymechanism for originating access and transport rates has not yet been established by the FCC. The impact of these reforms for the Company primarily falls onCBT and increases each year during the six-year transition to bill-and-keep. The Company's terminating switched access and reciprocal compensationrevenue subject to these rules was estimated to be less than $7 million in total at the beginning of the transition and will be phased out to zero at the end ofthe transition. The potential to offset these losses via increased end-user charges primarily depends on competitive conditions in the ILEC operating area.Special Access/Business Data ServicesIn 2005, the FCC opened a proceeding to review the current Special Access (aka Business Data Services or "BDS") pricing rules. Under the rules in effect atthat time, special access services were subject to price cap regulation with no earnings cap, and ILECs had pricing flexibility in certain metropolitanstatistical areas served by a sufficient number of competitors. During 2012, the FCC suspended the grant of any new pricing flexibility requests and issued amandatory data request. Responses to the data request were provided in the first quarter of 2015.52Table of ContentsForm 10-K Part II Cincinnati Bell Inc.In April 2017, the FCC adopted a Report and Order finding that the market for all packet-based services, Ethernet services, TDM services above the DS3level, and DS1 and DS3 transport services is competitive in all geographic markets and should no longer be subject to price regulation. Price regulation ofTDM services of DS3 or below terminating to end users depends upon the competitive status of the county in which the service is provided. The FCCdesignated counties as competitive or non-competitive for these TDM end user services based upon historical data submitted by providers and purchasers ofBDS in response to a mandatory data request issued in 2012 and supplemented with cable broadband deployment data submitted by providers in the FCC’ssemi-annual broadband deployment report. Price regulation will be eliminated for these TDM end user services in competitive counties. In non-competitivecounties price regulation will continue, although carriers are permitted to offer contract tariffs and volume and term discounts. The list of competitive andnon-competitive counties released by the FCC in May 2017 designated all but two of the counties in the Company’s ILEC territory as competitive. Nearly allof the Company’s current special access revenue is derived from the competitive counties. The Company will continue to evaluate the impact to the businessas these changes are implemented over the next several years.IP TransitionIn late 2013, the FCC opened a proceeding to explore how to transition from the legacy circuit-switched Time-division Multiplexing (“TDM”) networks toInternet Protocol (“IP”) networks. Examination of the myriad of technical, legal and policy issues surrounding the IP transition moved to the forefront during2014, and during 2015 and 2016 the FCC adopted several orders imposing additional requirements on service providers seeking to transition their networksfrom copper to fiber. However, during the second quarter of 2017, the FCC opened several proceedings aimed at removing barriers to wireline and wirelessbroadband deployment and proposed reversing several of the additional requirements imposed in 2015 and 2016. Following this review, in November 2017the FCC revised its rules to streamline the ILEC copper retirement process and the approval process for discontinuing legacy TDM service to speed thetransition from legacy copper-based TDM services to IP services. It also reformed the pole attachment rules to make it easier for providers to attach equipmentnecessary for next-generation networks and is considering additional changes aimed at streamlining the pole attachment rules.Broadband Internet Access/Net NeutralityIn an order adopted in 2005, the FCC provided wireline carriers the option of offering broadband Internet access as a non-regulated information service(comparable treatment to cable modem Internet access at that time) or as a regulated telecommunications service. In 2007, CBT elected the non-regulatedinformation service designation for its broadband Internet access service. The FCC also ruled that wireless broadband service was a non-regulatedinformation service, placing it on the same regulatory footing as other broadband services such as cable modem service and wireline DSL service.In conjunction with the adoption of the 2005 wireline broadband Internet access order, the FCC adopted a policy statement intended to ensure thatbroadband networks are widely deployed, open, affordable, and accessible to all consumers. In April 2010, the D.C. Circuit Court of Appeals issued anopinion finding that an FCC enforcement action regarding Comcast's network management practices exceeded the FCC's authority, causing the FCC toreassess its approach to crafting net neutrality rules. In December 2010, the FCC adopted net neutrality rules that required broadband providers to publiclydisclose network management practices, restricted them from blocking Internet content and applications, and prohibited fixed broadband providers fromengaging in unreasonable discrimination in transmitting traffic. In January 2014, the D.C. Circuit Court of Appeals vacated the net neutrality order’s anti-blocking and anti-discrimination requirements finding that they were akin to common carrier regulation. However, the Court upheld the transparency anddisclosure requirements and found that the FCC has general authority under Section 706 of the Communications Act to promulgate rules to encouragebroadband deployment. In response to the Court’s decision, the FCC adopted new rules in February 2015 under which it reclassified broadband Internetaccess as a telecommunications service under Title II of the Communications Act. These new rules were appealed by numerous parties, but in June 2016 theD.C. Circuit Court of Appeals upheld the FCC’s new rules in their entirety. In November 2016 the FCC adopted an order establishing broadband privacy andsecurity requirements for Internet service providers using its authority under Title II. The restrictive new privacy rules diverged from the Federal TradeCommission framework that had for years set the standard for protecting Internet users’ privacy.In March 2017, Congress adopted a resolution under the Congressional Review Act to invalidate the new broadband privacy and security rules approved bythe FCC in November 2016. In December 2017, the FCC issued a Declaratory Ruling restoring the information service classification of broadband Internetaccess service that existed prior to 2015 and affirmed that broadband consumer protection authority resides with the Federal Trade Commission. Anaccompanying Report and Order requires that Internet service providers disclose information about their practices relative to blocking, throttling, paidprioritization, or affiliated prioritization. The impact of this decision is neutral for the Company.53Table of ContentsForm 10-K Part II Cincinnati Bell Inc.State - CBT has operated under alternative regulation plans for its local services since 1994. These plans restrict the ability to increase the price of basic localservice and related services but, in return, prevent CBT from being subject to an earnings cap. Under alternative regulation, price increases and enhancedflexibility for some services partially offset the effect of fixed pricing for basic local service and reduced pricing for other, primarily wholesale services.In September 2010, the Ohio General Assembly enacted Substitute Senate Bill 162, which revised state policy concerning the provision oftelecommunications service, repealed Ohio's existing alternative regulation legislation, and authorized pricing flexibility for ILEC basic local exchangeservice upon a competitive showing by the ILEC. In December 2010, CBT filed an application with the Public Utilities Commission of Ohio ("PUCO") underthe new rules to receive pricing flexibility in its four Ohio exchanges that did not have pricing flexibility under alternative regulation. The application wasapproved in January 2011. Furthermore, the legislation provided cost savings and revenue opportunities resulting from revision of the PUCO's retail rules andservice standards that were effective in January 2011. On June 30, 2015, state budget bill HB 64 was signed. HB 64 included provisions that could relieveILECs from their carrier of last resort obligations, pending the outcome of the FCC’s IP Transition proceeding. As part of the provisions of HB 64, the PUCOis currently conducting a process that would assist in the identification of Basic Local Exchange Service ("BLES") customers that might not have acompetitive alternative should the ILEC withdraw BLES as part of its transitioning from a circuit-switched TDM network to an IP Network. The new ruleshave the potential to provide CBT with substantial regulatory relief in Ohio in the future; however, there is no impact in the near-term.CBT entered into its existing alternative regulation plan in Kentucky in July 2006 under terms established by the Kentucky General Assembly in House BillNo. 337. Under this plan, basic local exchange service prices were capped in exchange for earning freedom and pricing flexibility on other retail services. Thecaps on basic local exchange service prices expired in July 2011 providing CBT with flexibility to increase rates for basic local exchange service. In March2015, the General Assembly passed HB 152, which removed the Public Service Commission's authority to regulate terms, conditions, rates or availability ofany retail service in urban exchanges (greater than 15,000 Households) for a modifying utility. In March 2017, the General Assembly passed SB 10 whichextended the same privileges as HB 152 to all exchanges.Ohio, Kentucky and Indiana Cable FranchisesThe states of Ohio and Indiana permit statewide video service authorization. The Company is now authorized by Ohio and Indiana to provide service in ourself-described territory with only 10-day notification to the local government entity and other providers. The authorization can be amended to includeadditional territory upon notification to the state. A franchise agreement with each local franchising authority is required in Kentucky. The Company hasagreements with fifty-two franchising authorities in Kentucky.Recently Issued Accounting StandardsRefer to Note 2 of the consolidated financial statements for further information on recently issued accounting standards.Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary StatementThis Form 10-K contains "forward-looking" statements, as defined in federal securities laws including the Private Securities Litigation Reform Act of 1995,which are based on our current expectations, estimates, forecasts and projections. Statements that are not historical facts, including statements about thebeliefs, expectations and future plans and strategies of the Company, are forward-looking statements. Actual results may differ materially from thoseexpressed in any forward-looking statements. The following important factors, among other things, could cause or contribute to actual results beingmaterially and adversely different from those described or implied by such forward-looking statements including, but not limited to:•the Company operates in highly competitive industries, and customers may not continue to purchase products or services, which would result inreduced revenue and loss of market share; •the Company may be unable to grow our revenues and cash flows despite the initiatives we have implemented;•failure to anticipate the need for and introduce new products and services or to compete with new technologies may compromise the Company’ssuccess in the telecommunications industry; •the Company’s access lines, which generate a significant portion of its cash flows and profits, are decreasing in number. If the Company continues toexperience access line losses similar to the past several years, its revenues, earnings and cash flows from operations may be adversely impacted; 54Table of ContentsForm 10-K Part II Cincinnati Bell Inc.•negotiations with the providers of content for our video programming may not be successful, potentially resulting in our inability to carry certainprogramming channels, which could result in the loss of subscribers. In addition, due to the influence of some content providers, we may be forced topay higher rates for some content, resulting in increased costs; •the Company's failure to meet performance standards under its agreements could result in customers terminating their relationships with the Companyor customers being entitled to receive financial compensation, which would lead to reduced revenues and/or increased costs; •the Company generates a substantial portion of its revenue by serving a limited geographic area; •a large customer accounts for a significant portion of the Company’s revenues and accounts receivable. The loss or significant reduction in businessfrom this customer would cause operating revenues to decline and could negatively impact profitability and cash flows; •maintaining the Company's telecommunications networks requires significant capital expenditures, and the Company's inability or failure to maintainits telecommunications networks could have a material impact on its market share and ability to generate revenue; •increases in broadband usage may cause network capacity limitations, resulting in service disruptions or reduced capacity for customers; •we may be liable for the material that content providers distribute over our networks; •cyber attacks, including on our vendors, or other breaches of network or other information technology security could have an adverse effect on ourbusiness; •natural disasters, terrorist acts or acts of war could cause damage to our infrastructure and result in significant disruptions to our operations; •the regulation of the Company’s businesses by federal and state authorities may, among other things, place the Company at a competitivedisadvantage, restrict its ability to price its products and services, and threaten its operating licenses; •the Company depends on a number of third-party providers, and the loss of, or problems with, one or more of these providers may impede theCompany's growth or cause it to lose customers; •a failure of back-office information technology systems could adversely affect the Company’s results of operations and financial condition; •if the Company fails to extend or renegotiate its collective bargaining agreements with its labor union when they expire, or if its unionized employeeswere to engage in a strike or other work stoppage, the Company’s business and operating results could be materially harmed; •the loss of any of the senior management team or attrition among key sales associates could adversely affect the Company’s business, financialcondition, results of operations and cash flows; •the Company’s debt could limit its ability to fund operations, raise additional capital, and fulfill its obligations, which, in turn, would have a materialadverse effect on its businesses and prospects generally; •the Credit Agreement, the indenture governing the Company's notes due 2024, the indenture governing the Company's notes due 2025 and otherindebtedness impose significant restrictions on the Company; •the Company depends on its Credit Agreement and Receivables Facility to provide for its short-term financing requirements in excess of amountsgenerated by operations, and the availability of those funds may be reduced or limited; •the servicing of the Company’s indebtedness is dependent on its ability to generate cash, which could be impacted by many factors beyond itscontrol; •the Company depends on the receipt of dividends or other intercompany transfers from its subsidiaries and investments; •the merger (the “merger”) of Hawaiian Telcom Holdco, Inc. (“Hawaiian Telcom”) into a wholly owned subsidiary of the Company is subject to thereceipt of clearances or approvals from various regulatory authorities, which may impose conditions that could have an adverse effect on the Companyfollowing the closing of the merger (the “combined company”) or, if not obtained, could prevent completion of the merger; •the merger is subject to conditions, including certain conditions that may not be satisfied or completed on a timely basis, if at all, and any delay incompleting the merger may reduce or eliminate the benefits expected; •the pendency of the merger could materially adversely affect the future business and operations of the Company and/or result in a loss of employeesfor the Company; 55Table of ContentsForm 10-K Part II Cincinnati Bell Inc.•the Company’s shareholders will be diluted by the merger; •if completed, the merger may not achieve its intended results, and the Company and Hawaiian Telcom may be unable to successfully integrate theiroperations; •the combined company is expected to incur expenses related to the integration of the Company and Hawaiian Telcom; •the future results of the combined company will suffer if the combined company does not effectively manage its expanded operations following themerger; •uncertainties associated with the merger may cause a loss of management personnel and other key employees, which could adversely affect the futurebusiness and operations of the combined company; •the combined company will have substantial indebtedness following the merger and the credit ratings of the combined company or its subsidiariesmay be different from what the companies currently expect; •the merger may involve unexpected costs, unexpected liabilities or unexpected delays; •the acquisition of OnX may not achieve its intended results, and the Company may be unable to successfully integrate OnX's operations; •the trading price of the Company's common stock may be volatile, and the value of an investment in the Company's common stock may decline; •the uncertain economic environment, including uncertainty in the U.S. and world securities markets, could impact the Company's business andfinancial condition; •the Company’s future cash flows could be adversely affected if it is unable to fully realize its deferred tax assets; •changes in tax laws and regulations, and actions by federal, state and local taxing authorities related to the interpretation and application of such taxlaws and regulations, could have a negative impact on the Company's financial results and cash flows; •the Company's interpretation of the Tax Cuts and Jobs Act of 2017 could change, and have an adverse impact on financial results; •adverse changes in the value of assets or obligations associated with the Company’s employee benefit plans could negatively impact shareowners’deficit and liquidity; •third parties may claim that the Company is infringing upon their intellectual property, and the Company could suffer significant litigation orlicensing expenses or be prevented from selling products; •third parties may infringe upon the Company’s intellectual property, and the Company may expend significant resources enforcing its rights or suffercompetitive injury; •we could be subject to a significant amount of litigation, which could require us to pay significant damages or settlements; and •the Company could incur significant costs resulting from complying with, or potential violations of, environmental, health and human safety laws.Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. The Company does notundertake any obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.56Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Item 7A. Quantitative and Qualitative Disclosures about Market RiskInterest Rate RiskThe Company has exposure to interest rate risk, primarily in the form of variable-rate borrowings from its Credit Agreement and Receivables Facility, as wellas changes in current rates compared to that of its fixed rate debt. The Company's management periodically employs derivative financial instruments tomanage exposure to interest rate risk. At December 31, 2017 and 2016, the Company held no derivative financial instruments. As of December 31, 2017, theCompany had variable-rate borrowings of $600.0 million under the Tranche B Term Loan due 2024, no borrowings under the Receivables Facility, and noborrowings under the Credit Agreement's Revolving Credit Facility. The interest on these debt arrangements varies with changes in the LIBOR rate. Ahypothetical increase or decrease of one percentage point in the LIBOR rate would increase or decrease our annual interest expense on these variable-rateborrowings by $6.0 million, assuming no additional borrowings or repayments are made under these agreements.The following table sets forth the face amounts, maturity dates, and average interest rates at December 31, 2017 for our fixed and variable-rate debt,excluding capital leases and other debt, and unamortized discounts:(dollars in millions) 2018 2019 2020 2021 2022 Thereafter Total Fair ValueFixed-rate debt: $— $— $— $— $— $1,085.2 $1,085.2 $1,081.5Weighted average interest rate on fixed-rate debt — — — — — 7.3% 7.3% Variable-rate debt: $6.0 $6.0 $6.0 $6.0 $6.0 $570.0 $600.0 $606.0Average interest rate on variable-rate debt 5.1% 5.1% 5.1% 5.1% 5.1% 5.1% 5.1% At December 31, 2016, the carrying value and fair value of fixed-rate debt was $735.2 million and $772.0 million, respectively.Foreign Currency RiskDue to the timing of the acquisition of OnX in the fourth quarter of 2017, the Company's foreign denominated transactions were deemed immaterial. OnXcurrently has business operations in Canada, the U.K. and India, and foreign currency risk might arise in the future. We do not currently employ forwardcontracts or other financial instruments to mitigate foreign currency risk.Commodity Price RiskCertain of our operating costs are subject to price fluctuations caused by the volatility of the underlying commodity prices, such as gas utilized primarily byour field operations group, and network and building materials, such as steel, fiber and copper, used in the construction of our networks.57Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial StatementsPage Consolidated Financial Statements: Management’s Report on Internal Control over Financial Reporting59 Reports of Independent Registered Public Accounting Firm60 Consolidated Balance Sheets62 Consolidated Statements of Operations63 Consolidated Statements of Comprehensive Income64 Consolidated Statements of Shareowners’ Deficit65 Consolidated Statements of Cash Flows66 Notes to Consolidated Financial Statements67 Financial Statement Schedule: For each of the three years in the period ended December 31, 2017: II — Valuation and Qualifying Accounts115 Financial statement schedules other than those listed above have been omitted because the required information is contained in the financial statements andnotes thereto, or because such schedules are not required or applicable.58Table of ContentsForm 10-K Part II Cincinnati Bell Inc.MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTINGThe management of Cincinnati Bell Inc. and its subsidiaries (the "Company") is responsible for establishing and maintaining adequate internal control overfinancial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The Company’s internal control system is designed to producereliable financial statements in conformity with accounting principles generally accepted in the United States.Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017. In making this assessment,management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control —Integrated Framework (2013). Based on this assessment, management has concluded that, as of December 31, 2017, the Company’s internal control overfinancial reporting is effective based on those criteria. Management’s assessment of and conclusion on the effectiveness of internal control over financialreporting did not include an assessment of certain elements of internal controls over financial reporting of OnX Holdings LLC acquired on October 2, 2017,which is included in the consolidated financial statements of the Company for the year ended December 31, 2017. OnX Holdings LLC accounts for 17.0% oftotal assets and 11.6% of revenues of the consolidated financial statement amounts as of and for the year ended December 31, 2017.The effectiveness of the Company’s internal control over financial reporting has been audited by Deloitte & Touche LLP, an independent registered publicaccounting firm, as stated in their report included herein.February 26, 2018/s/ Leigh R. Fox Leigh R. Fox Chief Executive Officer /s/ Andrew R. Kaiser Andrew R. Kaiser Chief Financial Officer 59Table of ContentsForm 10-K Part II Cincinnati Bell Inc.REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareowners and Board of Directors of Cincinnati Bell Inc.Opinion on Internal Control over Financial ReportingWe have audited the internal control over financial reporting of Cincinnati Bell Inc. and subsidiaries (the “Company”) as of December 31, 2017, based oncriteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission(COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, basedon criteria established in Internal Control - Integrated Framework (2013) issued by COSO.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidatedfinancial statements and financial statement schedule as of and for the year ended December 31, 2017, of the Company and our report dated February 26,2018, expressed an unqualified opinion on those financial statements.As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control overfinancial reporting at OnX Holdings LLC, which was acquired on October 2, 2017 and whose financial statements constitute 17.0% of total assets and 11.6%of revenues of the consolidated financial statement amounts as of and for the year ended December 31, 2017. Accordingly, our audit did not include theinternal control over financial reporting at OnX Holdings LLC.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining anunderstanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. Webelieve that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/ Deloitte & Touche LLPCincinnati, OhioFebruary 26, 201860Table of ContentsForm 10-K Part II Cincinnati Bell Inc.REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareowners and Board of Directors of Cincinnati Bell Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cincinnati Bell Inc. and subsidiaries (the "Company") as of December 31, 2017 and 2016,the related consolidated statements of operations, comprehensive income, shareowners’ deficit and cash flows, for each of the three years in the period endedDecember 31, 2017, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In ouropinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and theresults of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principlesgenerally accepted in the United States of America.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company'sinternal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued bythe Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2018, expressed an unqualified opinion on theCompany's internal control over financial reporting.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Companyin accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing proceduresto assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also includedevaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financialstatements. We believe that our audits provide a reasonable basis for our opinion./s/ Deloitte & Touche LLPCincinnati, OhioFebruary 26, 2018We have served as the Company's auditor since 2005.61Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Cincinnati Bell Inc.CONSOLIDATED BALANCE SHEETS(Dollars in millions, except share amounts) December 31, 2017 December 31, 2016Assets Current assets Cash and cash equivalents$17.8 $9.7Restricted cash378.7 —Receivables, less allowances of $10.4 and $9.9239.8 178.6Inventory, materials and supplies44.3 22.7Prepaid expenses22.2 15.0Other current assets7.6 3.9Total current assets710.4 229.9Property, plant and equipment, net1,129.0 1,085.5Investment in CyrusOne— 128.0Goodwill151.0 14.3Intangible assets, net132.3 —Deferred income tax assets19.3 64.5Other noncurrent assets20.4 18.8Total assets$2,162.4 $1,541.0Liabilities and Shareowners’ Deficit Current liabilities Current portion of long-term debt$18.4 $7.5Accounts payable185.6 105.9Unearned revenue and customer deposits36.3 36.3Accrued taxes21.2 12.9Accrued interest29.9 12.7Accrued payroll and benefits28.7 25.7Other current liabilities37.2 31.9Total current liabilities357.3 232.9Long-term debt, less current portion1,729.3 1,199.1Pension and postretirement benefit obligations177.5 197.7Deferred income tax liabilities11.2 —Other noncurrent liabilities30.2 33.0Total liabilities2,305.5 1,662.7Shareowners’ deficit Preferred stock, 2,357,299 shares authorized; 155,250 shares (3,105,000 depositary shares) of 63/4% Cumulative Convertible Preferred Stock issued and outstanding at December 31, 2017 and2016; liquidation preference $1,000 per share ($50 per depositary share)129.4 129.4Common shares, $.01 par value; 96,000,000 shares authorized; 42,197,965 and 42,056,237shares issued and outstanding at December 31, 2017 and 2016, respectively0.4 0.4Additional paid-in capital2,565.6 2,570.9Accumulated deficit(2,664.8) (2,732.1)Accumulated other comprehensive loss(173.7) (90.3)Total shareowners’ deficit(143.1) (121.7)Total liabilities and shareowners’ deficit$2,162.4 $1,541.0The accompanying notes are an integral part of the consolidated financial statements.62Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Cincinnati Bell Inc.CONSOLIDATED STATEMENTS OF OPERATIONS(Dollars in millions, except per share amounts) Year Ended December 31, 2017 2016 2015Revenue Services$1,006.1 $978.7 $933.0Products282.4 207.1 234.8Total revenue1,288.5 1,185.8 1,167.8Costs and expenses Cost of services, excluding items below532.1 506.4 472.5Cost of products sold, excluding items below229.2 172.5 198.1Selling, general and administrative240.9 218.7 219.1Depreciation and amortization193.0 182.2 141.6Restructuring and severance related charges32.7 11.9 6.0Transaction and integration costs18.5 — 1.4Other4.0 1.1 1.1Total operating costs and expenses1,250.41,092.81,039.8Operating income38.193.0 128.0Interest expense85.2 75.7 103.1Loss on extinguishment of debt, net3.2 19.0 20.9Gain on sale of CyrusOne investment(117.7) (157.0) (449.2)Other expense (income), net1.4 (7.6) 2.6Income from continuing operations before income taxes66.0162.9450.6Income tax expense30.9 61.1 159.8Income from continuing operations35.1101.8290.8Income from discontinued operations, net of tax— 0.3 62.9Net income35.1102.1353.7Preferred stock dividends10.4 10.4 10.4Net income applicable to common shareowners$24.7$91.7$343.3Basic net earnings per common share Basic earnings per common share from continuing operations$0.59 $2.17 $6.69Basic earnings per common share from discontinued operations$— $0.01 $1.50Basic net earnings per common share$0.59 $2.18$8.19Diluted net earnings per common share Diluted earnings per common share from continuing operations$0.58 $2.17 $6.68Diluted earnings per common share from discontinued operations$— $0.01 $1.49Diluted net earnings per common share$0.58 $2.18 $8.17 Weighted-average common shares outstanding (millions) Basic42.2 42.0 41.9Diluted42.4 42.1 42.0The accompanying notes are an integral part of the consolidated financial statements.63Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Cincinnati Bell Inc.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Dollars in millions) Year Ended December 31, 2017 2016 2015Net income$35.1 $102.1 $353.7Other comprehensive income (loss), net of tax: Unrealized gains on Investment in CyrusOne, net of tax of $4.4, $36.98.3 68.1 —Reclassification adjustment for gain on sale of Investment in CyrusOneincluded in net income, net of tax of ($41.3)(76.4) — —Foreign currency translation gain (loss)0.2 (0.1) (0.4)Defined benefit plans: Net gain (loss) arising from remeasurement during the period, net of tax of $0.8,$3.6, ($3.4)2.8 6.6 (6.6)Amortization of prior service benefits included in net income, net of tax of($1.6), ($5.2), ($5.5)(2.9) (9.4) (9.8)Amortization of net actuarial loss included in net income, net of tax of $7.9,$8.5, $10.814.3 15.5 19.5Reclassification adjustment for pension settlement charges included in netincome, net of tax of $1.52.5 — —Reclassification adjustment for curtailment loss included in net income, net oftax of $0.1— — 0.2Total other comprehensive (loss) income, net of tax(51.2)80.7 2.9Total comprehensive (loss) income$(16.1)$182.8 $356.6The accompanying notes are an integral part of the consolidated financial statements.64Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Cincinnati Bell Inc.CONSOLIDATED STATEMENTS OF SHAREOWNERS' DEFICIT(in millions) 6 3/4% CumulativeConvertiblePreferred Shares Common Shares AdditionalPaid-inCapital AccumulatedDeficit Accumulated OtherComprehensive Loss Treasury Shares Shares Amount Shares Amount Shares Amount TotalBalance at December 31,20143.1 $129.4 41.9 $0.4 $2,584.6 $(3,187.9) $(173.9) (0.1) $(1.1) $(648.5)Net income — — — — — 353.7 — — — 353.7Other comprehensiveincome — — — — — — 2.9 — — 2.9Shares issued underemployee plans — — 0.1 — 0.1 — — — — 0.1Shares purchased underemployee plans andother — — — — (0.7) — — — 0.6 (0.1)Stock-basedcompensation — — — — 4.1 — — — — 4.1Dividends on preferredstock — — — — (10.4) — — — — (10.4)Balance at December 31,20153.1 129.4 42.0 0.4 2,577.7 (2,834.2) (171.0) (0.1) (0.5) (298.2)Net income — — — — — 102.1 — — — 102.1Other comprehensiveincome — — — — — — 80.7 — — 80.7Shares issued underemployee plans — — 0.3 — 3.6 — — — — 3.6Shares purchased underemployee plans and other — — — — (0.3) — — 0.1 0.5 0.2Stock-basedcompensation — — — — 5.1 — — — — 5.1Repurchase andretirement of shares — — (0.2) — (4.8) — — — — (4.8)Dividends on preferredstock — — — — (10.4) — — — — (10.4)Balance at December 31,20163.1 129.4 42.1 0.4 2,570.9 (2,732.1) (90.3) — — (121.7)Net income — — — — — 35.1 — — — 35.1Reclassificationadjustment toaccumulated deficit forstranded othercomprehensive incometaxes arising from taxreform (a) — — — — — 32.2 (32.2) — — —Other comprehensiveloss, excludingreclassificationadjustment toaccumulated deficit forstranded othercomprehensive incometaxes arising from taxreform — — — — — — (51.2) — — (51.2)Shares issued underemployee plans — — 0.1 — 0.5 — — — — 0.5Shares purchased underemployee plans andother — — — — (1.3) — — — — (1.3)Stock-basedcompensation — — — — 5.9 — — — — 5.9Dividends on preferredstock — — — — (10.4) — — — — (10.4)Balance at December 31,20173.1 $129.4 42.2 $0.4 $2,565.6 $(2,664.8) $(173.7) — $— $(143.1)(a) Per ASU 2018-02, entities can elect to make a one-time reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting fromnewly enacted corporate tax rates under the Tax Cuts and Jobs Act. The Company recorded a provisional amount in 2017.The accompanying notes are an integral part of the consolidated financial statements.65Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Cincinnati Bell Inc.CONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in millions) Year Ended December 31, 2017 2016 2015Cash flows from operating activities Net income$35.1 $102.1 $353.7Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization193.0 182.2 170.2Loss on extinguishment of debt3.2 19.0 20.9Gain on sale of CyrusOne investment(117.7) (157.0) (449.2)Provision for loss on receivables6.9 9.4 8.5Noncash portion of interest expense2.8 3.3 4.6Deferred income taxes30.5 59.4 184.5Pension and other postretirement payments less than (in excess of) expense6.4 (8.3) (11.5)Deferred gain on sale of wireless spectrum licenses - discontinued operations— — (112.6)Amortization of deferred gain - discontinued operations— — (6.5)Stock-based compensation5.9 5.1 4.1Gain on transfer of lease obligations - discontinued operations— — (15.9)Other, net2.5 (3.8) 3.2Changes in operating assets and liabilities: Decrease (increase) in receivables21.3 (18.3) (1.9)(Increase) decrease in inventory, materials, supplies, prepaid expenses and other current assets(16.6) (6.2) 3.6Increase (decrease) in accounts payable22.4 (13.1) (17.0)Increase (decrease) in accrued and other current liabilities16.2 (3.0) (30.6)Decrease (increase) in other noncurrent assets2.1 (1.3) 1.5(Decrease) increase in other noncurrent liabilities(10.6) 3.6 1.4Net cash provided by operating activities203.4 173.1 111.0Cash flows from investing activities Capital expenditures(210.5) (286.4) (283.6)Proceeds from sale of Investment in CyrusOne140.7 189.7 643.9Acquisitions of businesses, net of cash acquired(167.0) — —Dividends received from Investment in CyrusOne (equity method investment)— 2.1 22.2Other, net— (0.9) 0.7Net cash (used in) provided by investing activities(236.8) (95.5) 383.2Cash flows from financing activities Proceeds from issuance of long-term debt943.0 635.0 —Net (decrease) increase in corporate credit and receivables facilities with initial maturities less than 90 days(89.5) 71.9 (1.6)Repayment of debt(403.0) (759.3) (531.7)Debt issuance costs(19.1) (11.1) (0.4)Dividends paid on preferred stock(10.4) (10.4) (10.4)Common stock repurchase— (4.8) —Other, net(0.8) 3.4 (0.6)Net cash provided by (used in) financing activities420.2 (75.3) (544.7)Net increase (decrease) in cash, cash equivalents and restricted cash386.8 2.3 (50.5)Cash, cash equivalents and restricted cash at beginning of year9.7 7.4 57.9Cash, cash equivalents and restricted cash at end of year$396.5 $9.7 $7.4The accompanying notes are an integral part of the consolidated financial statements. 66Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Cincinnati Bell Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1.Description of Business and Accounting PoliciesDescription of Business — Cincinnati Bell Inc. and its consolidated subsidiaries ("Cincinnati Bell," "we," "our," "us" or the "Company") provides diversifiedtelecommunications and technology services. The Company generates a large portion of its revenue by serving customers in the Greater Cincinnati andDayton, Ohio areas. An economic downturn or natural disaster occurring in this, or a portion of this, limited operating territory could have a disproportionateeffect on our business, financial condition, results of operations and cash flows compared to similar companies of a national scope and similar companiesoperating in different geographic areas.As of December 31, 2017, we operate our business through the following segments: Entertainment and Communications and IT Services and Hardware.The company has approximately 3,500 employees as of December 31, 2017, and approximately 25% of its employees are covered by collective bargainingagreements with Communications Workers of America (“CWA”) that include effective dates through May 12, 2018.Basis of Presentation — The consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the U.S.Securities and Exchange Commission ("SEC") and, in the opinion of management, include all adjustments necessary for a fair presentation of the results ofoperations, comprehensive income, financial position and cash flows for each period presented.On October 4, 2016, the Company filed an amendment to its Amended and Restated Articles of Incorporation to affect a one-for-five reverse split of its issuedcommon stock (the “Reverse Split”) which had the effect of reducing the number of issued shares of common stock from 210,275,005 to 42,055,001, effectiveas of 11:59 pm on October 4, 2016. Any fractional shares of common stock resulting from the Reverse Split were settled in cash equal to the fraction of ashare to which the holder was entitled. As a result of the Reverse Split, the Company reduced total par value from common stock by $1.7 million andincreased the additional paid-in capital by the same amount for the reporting periods.All shares of common stock, stock options, the conversion rate of preferred stock and per share information presented in the consolidated financial statementshave been adjusted to reflect the Reverse Split on a retroactive basis for all periods presented and all share information is rounded down to the nearest wholeshare after reflecting the Reverse Split.Basis of Consolidation — The consolidated financial statements include the consolidated accounts of Cincinnati Bell Inc. and its majority-ownedsubsidiaries over which it exercises control. Intercompany accounts and transactions have been eliminated in the consolidated financial statements.Investments over which the Company exercises significant influence are recorded under the equity method.Recast of Financial Information for Discontinued Operations — In the second quarter of 2014, we entered into agreements to sell our wireless spectrumlicenses and certain other assets related to our wireless business. The agreement to sell our wireless spectrum licenses closed on September 30, 2014, for cashproceeds of $194.4 million. Simultaneously, we entered into a separate agreement to use certain spectrum licenses for $8.00 until we no longer providedwireless service. Effective March 31, 2015, all wireless subscribers were migrated off our network and we ceased providing wireless services and operations.Certain wireless tower lease obligations and other assets were transferred to the acquiring company on April 1, 2015.The closing of our wireless operations represented a strategic shift in our business. Therefore, certain wireless assets, liabilities and results of operations werereported as discontinued operations in our financial statements. Accordingly, the Company recast 2015 results with the exception of the ConsolidatedStatements of Comprehensive Income, Consolidated Statements of Shareowners' Deficit and Consolidated Statements of Cash Flows. See Note 16 for allrequired disclosures.67Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Use of Estimates — The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") requires management tomake estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates. Significant items subject to such estimatesand judgments include: the carrying value of property, plant and equipment; the valuation of insurance and claims liabilities; the valuation of allowances forreceivables and deferred income taxes; reserves recorded for income tax exposures; the valuation of asset retirement obligations; assets and liabilities relatedto employee benefits; and the valuation of intangible assets and goodwill. In the normal course of business, the Company is also subject to various regulatoryand tax proceedings, lawsuits, claims and other matters. The Company believes adequate provision has been made for all such asserted and unasserted claimsin accordance with GAAP. Such matters are subject to many uncertainties and outcomes that are not predictable with assurance.Cash, Cash Equivalents and Restricted Cash — Cash consists of funds held in bank accounts. Cash equivalents consist of short-term, highly liquidinvestments with original maturities of three months or less. Restricted cash represents the proceeds from the issuance of the 8% Senior Notes due 2025 (the“8% Senior Notes”) that closed on October 6, 2017. Proceeds were placed into an escrow account along with Company cash that will be sufficient to pay allinterest that would accrue on the 8% Senior Notes up to, but not including, October 9, 2018. The amounts held in escrow are contractually restricted as totheir withdrawal or use and will be used to fund the cash portion of the merger with Hawaiian Telcom expected to close in the second half of 2018, and tofund semi-annual interest payments associated with this debt. The amounts held in escrow are classified as "Restricted cash" in the Consolidated BalanceSheets as of December 31, 2017. "Cash, cash equivalents and restricted cash at end of year", as presented in our Consolidated Statements of Cash Flows,include cash and cash equivalents of $17.8 million and restricted cash of $378.7 million. "Cash, cash equivalents and restricted cash at beginning of year" aspresented in our Consolidated Statements of Cash Flows include cash and cash equivalents of $9.7 million.Receivables — Receivables consist principally of trade receivables from customers and are generally unsecured and due within 21 - 90 days. The Companyhas receivables with one customer, General Electric Company ("GE"), which made up 10% and 21% of the outstanding accounts receivable balance atDecember 31, 2017 and 2016, respectively. Unbilled receivables arise from services rendered but not yet billed. As of December 31, 2017 and 2016, unbilledreceivables totaled $14.2 million and $14.5 million, respectively. Expected credit losses related to trade receivables are recorded as an allowance foruncollectible accounts in the Consolidated Balance Sheets. The Company establishes the allowances for uncollectible accounts using percentages of agedaccounts receivable balances to reflect the historical average of credit losses as well as specific provisions for certain identifiable, potentially uncollectiblebalances. When internal collection efforts on accounts have been exhausted, the accounts are written off and the associated allowance for uncollectibleaccounts is reduced.Factoring Arrangements — In the fourth quarter of 2017 the Company utilized a factoring arrangement at OnX with a third-party financial institution to sellcertain accounts receivable on a non-recourse basis. The terms of the factoring arrangement provides for the factoring of certain U.S. Dollar-denominatedreceivables, which are purchased at the face amount of the receivable discounted at the annual rate of LIBOR plus a bank determined spread on the purchasedate. Such sales of accounts receivable are reflected as a reduction of "Receivables, less allowances" in the Consolidated Balance Sheets as they meet theapplicable criteria in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic ("ASC") 860, "Transfers and Servicing." Thefees paid in relation to such sales of accounts receivable were $0.5 million in 2017 and are included in "Selling, general, and administrative" in theConsolidated Statements of Operations. Approximately $92.1 million of receivables were sold under the terms of the factoring agreement in 2017.Inventory, Materials and Supplies — Inventory, materials and supplies consists of network components, various telephony and IT equipment to be sold tocustomers, maintenance inventories, and other materials and supplies, which are carried at the lower of average cost or market.Property, Plant and Equipment — Property, plant and equipment is stated at original cost and presented net of accumulated depreciation and impairmentlosses. Maintenance and repairs are charged to expense as incurred while improvements, which extend an asset's useful life or increase its functionality, arecapitalized and depreciated over the asset's remaining life. The majority of the Entertainment and Communications network property, plant and equipmentused to generate its voice and data revenue is depreciated using the group method, which develops a depreciation rate annually based on the average usefullife of a specific group of assets rather than for each individual asset as would be utilized under the unit method. Provision for depreciation of other property,plant and equipment, except for leasehold improvements, is based on the straight-line method over the estimated economic useful life. Depreciation ofleasehold improvements is based on a straight-line method over the lesser of the economic useful life of the asset or the term of the lease, including optionalrenewal periods if renewal of the lease is reasonably assured.68Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Additions and improvements, including interest and certain labor costs incurred during the construction period, are capitalized. The Company records the fairvalue of a legal liability for an asset retirement obligation in the period it is incurred. The estimated removal cost is initially capitalized and depreciated overthe remaining life of the underlying asset. The associated liability is accreted to its present value each period. Once the obligation is ultimately settled, anydifference between the final cost and the recorded liability is recognized as gain or loss on disposition.Goodwill — Goodwill represents the excess of the purchase price consideration over the fair value of net assets acquired and recorded in connection withbusiness acquisitions. Goodwill is generally allocated to reporting units one level below business segments. Goodwill is tested for impairment on an annualbasis or when events or changes in circumstances indicate that such assets may be impaired. If the net book value of the reporting unit exceeds its fair value,an impairment loss may be recognized. An impairment loss is measured as the excess of the carrying value of goodwill of a reporting unit over its implied fairvalue. The implied fair value of goodwill represents the difference between the fair value of the reporting unit and the fair value of all the assets and liabilitiesof that unit, including any unrecognized intangible assets.Long-Lived Assets — Management reviews the carrying value of property, plant and equipment and other long-lived assets, including intangible assets withdefinite lives, when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment loss isrecognized when the estimated future undiscounted cash flows expected to result from the use of an asset (or group of assets) and its eventual disposition isless than its carrying amount. An impairment loss is measured as the amount by which the asset’s carrying value exceeds its estimated fair value. Long-livedintangible assets are amortized based on the estimated economic value generated by the asset in future years.Investment in CyrusOne — On January 24, 2013, we completed the initial public offering ("IPO") of CyrusOne Inc. ("CyrusOne"), which owns and operatesour former Data Center Colocation business. CyrusOne conducts its data center business through CyrusOne LP, an operating partnership. Effective with theIPO, we retained ownership of approximately 1.9 million shares, or 8.6%, of CyrusOne's common stock and were a limited partner in CyrusOne LP, owningapproximately 42.6 million, or 66%, of its partnership units. We effectively owned 69% of CyrusOne and continued to have significant influence over theentity, but we did not control its operations. Therefore, effective January 24, 2013, we no longer included the accounts of CyrusOne in our consolidatedfinancial statements, but accounted for our ownership in CyrusOne as an equity method investment. From the date of IPO, we recognized our proportionateshare of CyrusOne's net income or loss as non-operating income or expense in our Consolidated Statement of Operations through December 31, 2015.On December 31, 2015, we exchanged our remaining 6.3 million operating partnership units in CyrusOne LP for an equal number of newly issued shares ofcommon stock of CyrusOne Inc. As a result, our 9.5% ownership in CyrusOne, which consisted of 6.9 million common shares, no longer constitutedsignificant influence over the entity. Effective January 1, 2016, our investment in CyrusOne was no longer accounted for using the equity method. Dividendsdeclared by CyrusOne in 2016 totaled $6.4 million and were included in "Other (income) expense, net" in the Consolidated Statement of Operations. As ofDecember 31, 2016, we held 2.8 million shares of CyrusOne Inc. common stock valued at $128.0 million which are accounted for as available-for-salesecurities.As of December 31, 2016, "Investment in CyrusOne" in the Consolidated Balance Sheets was recorded at fair value, which was determined based on closingmarket price of CyrusOne at December 31, 2016. This investment is classified as Level 1 in the fair value hierarchy. Unrealized gains and losses on ourinvestment in CyrusOne are included in "Accumulated other comprehensive loss", net of taxes in the Consolidated Balance Sheets. At December 31, 2016,gross unrealized gains totaled $105.0 million. When evaluating the investments for other-than-temporary impairment, the Company reviews such factors asthe financial condition of the issuer, severity and duration of the fair value decline and evaluation of factors that could cause the investment to have an other-than-temporary decline in fair value. During the year ended December 31, 2016 and 2017, the Company did not recognize any impairment charges related toInvestment in CyrusOne.In 2016, we sold 4.1 million shares of CyrusOne's common stock for net proceeds totaling $189.7 million that resulted in a gain of $157.0 million. In the firstquarter of 2017, we sold our remaining 2.8 million shares of CyrusOne Inc. common stock for net proceeds totaling $140.7 million that resulted in a realizedgain of $117.7 million. As of December 31, 2017, we no longer have an investment in CyrusOne Inc.Equity Method Investments — The Company records equity method investments at carrying value within “Other noncurrent assets” in the ConsolidatedBalance Sheets. The Company's proportionate share of the investments’ net loss had a minimal impact on our Consolidated Statements of Operations in 2015,2016 and 2017. Equity method investments are tested for impairment on an annual basis or when events or changes in circumstances indicate that such assetsmay be impaired. In the third quarter of 2017, the entire carrying value of $4.7 million of an equity method investment was impaired and recorded to "Otherexpense (income), net" in the Consolidated Statements of Operations.69Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Cost Method Investments — Certain of our cost method investments do not have readily determinable fair values. The carrying value of these investmentswas $3.8 million and $3.4 million as of December 31, 2017 and 2016, respectively, and was included in "Other noncurrent assets" in the ConsolidatedBalance Sheets. Investments are reviewed annually for impairment, or sooner if changes in circumstances indicate the carrying value may not be recoverable.If the carrying value of the investment exceeds its estimated fair value and the decline in value is determined to be other-than-temporary, an impairment lossis recognized for the difference. The Company estimates fair value using external information and discounted cash flow analysis.Leases — Certain property and equipment are leased. At lease inception, the lease terms are assessed to determine if the transaction should be classified as acapital or operating lease.Treasury Shares — The repurchase of common shares is recorded at purchase cost as treasury shares. Our policy is to retire, either formally or constructively,treasury shares that management anticipates will not be reissued. Upon retirement, the purchase cost of the treasury shares that exceeds par value is recordedas a reduction to “Additional paid-in capital” in the Consolidated Balance Sheets.Revenue Recognition — We apply the revenue recognition principles described in Financial Accounting Standards Board (“FASB”) Accounting StandardsCodification Topic ("ASC") 605, “Revenue Recognition.” Under ASC 605, revenue is recognized when there is persuasive evidence of a sale arrangement,delivery has occurred or services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured.With respect to arrangements with multiple deliverables, management determines whether more than one unit of accounting exists in an arrangement. To theextent that the deliverables are separable into multiple units of accounting, total consideration is allocated to the individual units of accounting based ontheir relative fair value, determined by the price of each deliverable when it is regularly sold on a stand-alone basis. Revenue is recognized for each unit ofaccounting as delivered, or as service is performed, depending on the nature of the deliverable comprising the unit of accounting.The Company had no customers whose revenue comprised greater than 10% of total revenue in 2017. The Company had sales with one customer, GE, whichcontributed 12% to total revenue in both 2016 and 2015. Revenue derived from foreign operations is approximately 3% of consolidated revenue in 2017.Entertainment and Communications — Revenues from local telephone, special access, internet product and video services, which are billed monthly prior toperformance of service, are not recognized upon billing or cash receipt but rather are deferred until the service is provided. Long distance, switched accessand other usage based charges are billed monthly in arrears. Entertainment and Communications bills service revenue in regular monthly cycles, which arespread throughout the days of the month. As the last day of each billing cycle rarely coincides with the end of the reporting period for usage-based servicessuch as long distance and switched access, we must estimate service revenues earned but not yet billed. These estimates are based upon historical usage, andwe adjust these estimates during the period in which actual usage is determinable, typically in the following reporting period.Pricing of local voice services is generally subject to oversight by both state and federal regulatory commissions. Such regulation also covers services,competition, and other public policy issues. Various regulatory rulings and interpretations could result in increases or decreases to revenue in future periods.IT Services and Hardware — Services are generally recognized as the service is provided. Maintenance on telephony equipment is deferred and recognizedratably over the term of the underlying customer contract, generally one to three years.Telecom and IT hardware revenue is recognized upon the completion of our contractual obligations, such as shipment, delivery, or customer acceptance.Installation service revenue is generally recognized when installation is complete. We sell equipment and installation services on both a combined andstandalone basis.The Company is a reseller of IT and telephony equipment. For these transactions, we consider the gross versus net revenue recording criteria of ASC 605.Based on this criteria, these equipment revenues and associated costs have generally been recorded on a gross basis rather than recording the revenues net ofthe associated costs. Vendor rebates are earned on certain equipment sales. When the rebate is earned and the amount is determinable, we recognize the rebateas an offset to cost of products sold.Advertising Expenses — Costs related to advertising are expensed as incurred. Advertising costs were $13.5 million, $9.5 million, and $8.3 million in 2017,2016, and 2015, respectively.70Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Legal Expenses — In the normal course of business, the Company is involved in various claims and legal proceedings. Legal costs incurred in connectionwith loss contingencies are expensed as incurred. Legal claim accruals are recorded once determined to be both probable and estimable.Income, Operating, and Regulatory TaxesIncome taxes — The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction as well as various foreign, state and localjurisdictions. The provision for income taxes is based upon income in the consolidated financial statements, rather than amounts reported on the income taxreturn. The income tax provision consists of an amount for taxes currently payable and an amount for tax consequences deferred to future periods. Deferredinvestment tax credits are amortized as a reduction of the provision for income taxes over the estimated useful lives of the related property, plant andequipment. Deferred income taxes are provided for temporary differences between financial statement and income tax assets and liabilities. Deferred incometaxes are recalculated annually at rates then in effect. Valuation allowances are recorded to reduce deferred tax assets to amounts that are more likely than notto be realized. The ultimate realization of the deferred income tax assets depends upon the ability to generate future taxable income during the periods inwhich basis differences and other deductions become deductible and prior to the expiration of the net operating loss carryforwards.Previous tax filings are subject to normal reviews by regulatory agencies until the related statute of limitations expires.Operating taxes — Certain operating taxes such as property, sales, use, and gross receipts taxes are reported as expenses in operating income primarily withincost of services. These taxes are not included in income tax expense because the amounts to be paid are not dependent on our level of income. Liabilities foraudit exposures are established based on management's assessment of the probability of payment. The provision for such liabilities is recognized as eitherproperty, plant and equipment, operating tax expense, or depreciation expense depending on the nature of the audit exposure. Upon resolution of an audit,any remaining liability not paid is released against the account in which it was originally recorded.Regulatory taxes — The Company incurs federal and state regulatory taxes on certain revenue producing transactions. We are permitted to recover certain ofthese taxes by billing the customer; however, collections cannot exceed the amount due to the federal regulatory agency. These federal regulatory taxes arepresented in sales and cost of services on a gross basis because, while the Company is required to pay the tax, it is not required to collect the tax fromcustomers and, in fact, does not collect the tax from customers in certain instances. The amounts recorded as revenue for 2017, 2016, and 2015 were $16.8million, $16.3 million and $15.5 million, respectively. The amounts reported as expense for 2017, 2016 and 2015 were $17.7 million, $17.5 million, and$17.9 million, respectively. We record all other federal taxes collected from customers on a net basis.Stock-Based Compensation — Compensation cost is recognized for all share-based awards to employees and non-employee directors. We value all share-based awards to employees at fair value on the date of grant and expense this amount over the required service period, generally defined as the applicablevesting period. For awards which contain a performance condition, compensation expense is recognized over the service period, when achievement of theperformance condition is deemed probable. The fair value of stock options and stock appreciation rights is determined using the Black-Scholes option-pricing model using assumptions such as volatility, risk-free interest rate, holding period and dividends. The fair value of stock awards is based on theCompany’s closing share price on the date of grant. For all share-based payments, the Company made a policy election concurrent with the adoption of ASU2016-09 to account for forfeitures as they occur. The new standard was adopted effective January 1, 2017. Actual forfeiture activity reduces the total fairvalue of the awards to be recognized as compensation expense. When an award is granted to an employee who is retirement eligible, the compensation cost isrecognized over the service period up to the date that the employee first becomes eligible to retire.Pension and Postretirement Benefit Plans — The Company maintains qualified and non-qualified defined benefit pension plans, and also providespostretirement healthcare and life insurance benefits for eligible employees. We recognize the overfunded or underfunded status of the defined benefitpension and other postretirement benefit plans as either an asset or liability. Changes in the funded status of these plans are recognized as a component ofcomprehensive income (loss) in the year they occur. Pension and postretirement healthcare and life insurance benefits earned during the year and interest onthe projected benefit obligations are accrued and recognized currently in net periodic benefit cost. Prior service costs and credits are amortized over theaverage life expectancy of participants or remaining service period, based upon whether plan participants are mostly retirees or active employees. Net gainsor losses resulting from differences between actuarial estimates or from changes in actuarial assumptions are recognized as a component of annual netperiodic benefit cost. Unrecognized actuarial gains or losses that exceed 10% of the projected benefit obligation are amortized on a straight-line basis overthe average remaining service life of active employees for the pension and bargained postretirement plans (approximately 8-12 years) and average lifeexpectancy of retirees for the management postretirement plan (approximately 15 years).71Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Business Combinations — In accounting for business combinations, we apply the accounting requirements of FASB ASC 805, “Business Combinations,”which requires the recording of net assets of acquired businesses at fair value. The Company utilizes management estimates and an independent third-partyvaluation firm to assist in determining the fair values of acquired assets and assumed liabilities. In developing estimates of the fair value of net assets, theCompany analyzes a variety of factors including market data, estimated future cash flows of the acquired operations, industry growth rates, currentreplacement cost for fixed assets, and market rate assumptions for contractual obligations. Such a valuation requires management to make significantestimates and assumptions, particularly with respect to the intangible assets. The Company reports in its consolidated financial statements provisionalamounts for the items for which accounting is incomplete. Goodwill is adjusted for any changes to provisional amounts made within the measurement period.Fair Value Measurements — Fair value of financial and non-financial assets and liabilities is defined as the price representing the amount that would bereceived to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value is utilized to measure certaininvestments on a recurring basis. Fair value measurements are also utilized to determine the initial value of assets and liabilities acquired in a businesscombination, to perform impairment tests, and for disclosure purposes.Management uses quoted market prices and observable inputs to the maximum extent possible when measuring fair value. In the absence of quoted marketprices or observable inputs, fair value is determined using valuation models that incorporate assumptions that a market participant would use in pricing theasset or liability.Fair value measurements are classified within one of three levels, which prioritize the inputs used in the methodologies of measuring fair value for assets andliabilities, as follows:Level 1 — Quoted market prices for identical instruments in an active market;Level 2 — Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets thatare not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that arederived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs); andLevel 3 — Unobservable inputs that reflect management's determination of assumptions that market participants would use in pricing the asset orliability. These inputs are developed based on the best information available, including our own data.Foreign Currency Translation and Transactions — The financial position of foreign subsidiaries is translated at the exchange rates in effect at the end ofthe period, while revenues and expenses are translated at average rates of exchange during the period. Gains or losses from translation of foreign operationswhere the local currency is the functional currency are included as components of accumulated other comprehensive income. Gains and losses arising fromforeign currency transactions are recorded in other income (expense) in the period incurred.2. Recently Issued Accounting StandardsIn May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. The standard’s core principle is that a company will recognizerevenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled inexchange for those goods or services. This standard also includes expanded disclosure requirements that result in an entity providing users of financialstatements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity’s contractswith customers. In August 2015, ASU 2015-14 was issued deferring the effective date of ASU 2014-09 to annual reporting periods beginning after December15, 2017 with an optional early application date for annual reporting periods beginning after December 15, 2016. The Company adopted the standard and allsubsequent amendments on January 1, 2018.The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively withthe cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). We adoptedthe standard using the full retrospective method to restate each prior reporting period presented.72Table of ContentsForm 10-K Part II Cincinnati Bell Inc.We have reached conclusions on our key accounting assessments related to the standard and have finalized our accounting policies. Based on ourassessment, we believe the timing of revenue recognition for our Entertainment and Communications segment, and certain revenue streams within our ITServices and Hardware segment, will not materially change. However, the impact of the standard on the treatment of Telecom and IT hardware revenue willchange our current practice of recording hardware revenue as a principal (gross) versus agent (net). Based on our assessment of ASU 2016-08, Revenue fromContracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net), issued by the FASB in March 2016, the Companyacts as an agent and as such will record Telecom and IT hardware net of the related cost of products. ASU 2016-08 clarifies the implementation guidance onprincipal versus agent considerations focusing on a control model rather than a risk and reward model. This adoption of this guidance is expected to changerevenue and cost of products. Revenue and cost of products in 2016 and 2017 is expected to decrease by approximately $170 million and $224 million,respectively. We are continuing to finalize the analysis of hardware sales related to our fourth quarter acquisition of OnX. We do not expect that changes inaccounting policies related to variable consideration or rebates will have a material effect on the financial statements. Fulfillment and acquisition costs areexpected to decrease expense in both 2016 and 2017 by approximately $1 million each year. An asset related to fulfillment and acquisition costs ofapproximately $30 million is expected to be recorded on the balance sheet upon adoption. We are still assessing the full impact of disclosure requirements;however, upon adopting FASB ASC Topic 606, we will provide additional disclosures in the notes to the consolidated financial statements related todisaggregated revenue, contract asset balances and performance obligations.In preparation for adoption of the standard, we have implemented internal controls, new system functionality and revised business processes to preparefinancial information in accordance with the standard. These new processes and procedures ensure data utilized for financial reporting is complete andaccurate and is assessed in accordance with the guidelines of the standard. We are implementing new internal controls to address risks associated withapplying the five-step model, as well as monitoring controls to identify new sales arrangements or changes in our business environment that will affect ourcurrent accounting assessment.In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which amends the guidance inGAAP on the classification and measurement of financial instruments. The amended guidance requires entities to carry all investments in equity securities atfair value and changes in fair value shall be recognized through net income unless the entity has elected the practicability exception to fair valuemeasurement. This standard will be effective for the fiscal year ending December 31, 2018 and will require a cumulative-effect adjustment to beginningretained earnings on this date. The Company adopted the standard effective January 1, 2018. The Company does not hold any equity securities as ofDecember 31, 2017 and therefore no adjustment will be required upon adoption.In February 2016, the FASB issued ASU 2016-02, Leases, which represents a wholesale change to lease accounting. The standard introduces a lessee modelthat brings most leases on the balance sheet as well as aligns certain underlying principles of the new lessor model with those in ASC 606. The new standardis effective for public entities for fiscal years beginning after December 15, 2018, and lessees and lessors are required to use a modified retrospectivetransition method for existing leases. The Company is in the process of evaluating the impact of adoption of this ASU on the Company’s consolidatedfinancial statements.In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation, which simplifies various aspects related to how share-based paymentsare accounted for and presented in the financial statements. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the incomestatement when the awards vest or are settled. In addition, cash flows related to excess tax benefits will no longer be separately classified as a financingactivity apart from other income tax cash flows. The standard also allows us to repurchase more of an employee’s shares for tax withholding purposes withouttriggering liability accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activityon our cash flows statement, and provides an accounting policy election to account for forfeitures as they occur. The new standard was adopted effectiveJanuary 1, 2017.The primary impact of adopting ASU 2016-09 is the recognition of excess tax benefits in our provision for income taxes rather than paid-in capital starting inthe first quarter of fiscal year 2017. Additional amendments to the accounting for income taxes and minimum statutory withholding tax requirements had noimpact to retained earnings as of the date of adoption. Effective January 1, 2017, we adopted a prospective company-wide policy change due to the change inaccounting principle and now record forfeitures as they are incurred on a go-forward basis. As a result of the change in accounting principle, the cumulative-effect adjustment to retained earnings to account for the accounting policy election was immaterial to the financial statements.73Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The presentation requirements under ASU 2016-09 for cash flows related to excess tax benefits were applied retrospectively to all periods presented and didnot result in a material impact to prior period net cash provided by operations and net cash used in financing. The presentation requirements for cash flowsrelated to employee taxes paid for withheld shares had no impact to any of the periods presented in our consolidated cash flows statements since such cashflows have historically been presented as a financing activity.In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flow - Classification of Certain Cash Receipts and Cash Payments, which amends ASC230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The FASB issued the ASU with theintent of reducing diversity in practice. The new standard is effective for public entities for annual reporting periods beginning after December 15, 2017,including interim periods within those fiscal years. The impact of adopting this standard effective January 1, 2018 will not have a material effect on theCompany’s consolidated statement of cash flows.In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flow - Restricted Cash, which amends ASC 230 to require that a statement of cashflows explain the change during the period in total cash, cash equivalents and amounts described as restricted cash. As a result, amounts classified asrestricted cash will now be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on thestatement of cash flows. The new standard is effective for public entities for annual reporting periods beginning after December 15, 2017, including interimperiods within those fiscal years. Early adoption is permitted. The Company adopted the standard effective December 31, 2017. The adoption of this standarddid not result in a prior period adjustment for the twelve months ended December 31, 2016 and 2015.In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which eliminates Step 2 from the goodwill impairment test.Under the amended guidance, the Company shall now recognize an impairment charge for the amount by which the carrying value exceeds the reportingunit's fair value. The new standard is effective for public entities for annual reporting periods beginning after December 15, 2020, including interim periodswithin those fiscal years. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. TheCompany early adopted the amended guidance effective January 1, 2017 and applied the guidance to the annual impairment test performed in the fourthquarter of 2017.In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Period Pension Cost and Net Periodic Postretirement Benefit Cost, whichamends the requirements in ASC 715 related to the income statement presentation of the components of net periodic benefit cost for an entity’s sponsoreddefined benefit pension and other postretirement plans. The ASU requires entities to disaggregate the current service cost component from the othercomponents of net benefit cost (the “other components”) and present it with other current compensation costs for related employees in the income statement.The other components shall be presented elsewhere in the income statement and outside of income from operations, if such a subtotal is presented, on aretrospective basis as of the date of adoption. In addition, only the service cost component of net benefit cost is eligible for capitalization on a prospectivebasis. The ASU is effective for public business entities for annual periods beginning after December 15, 2017. The Company plans to adopt the standardeffective January 1, 2018, and will be applied retrospectively for prior periods. The Company estimates approximately $2 million and $1 million of othercomponents of net benefit cost will be re-classed from "Cost of Services" and "Selling, general and administrative," respectively, to a new line belowOperating income, "Other components of pension and postretirement benefit plans expense," on the Consolidated Statements of Operations in the first quarterof 2018.In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation, which amends the scope of modification accounting for share-basedpayment arrangements. The ASU is effective for public business entities for annual periods beginning after December 15, 2017. The Company plans toprospectively adopt the standard effective January 1, 2018 and will apply the amended guidance to any awards modified on or after this date.In February 2018, the FASB issued ASU 2018-02 which allows entities to elect to make a one-time reclassification from accumulated other comprehensiveincome to retained earnings for stranded tax effects resulting from newly enacted corporate tax rates. The guidance is effective for public entities for annualreporting periods beginning after December 15, 2018, and for interim periods within those fiscal years. Early adoption is permitted. The Company earlyadopted the guidance effective December 31, 2017, resulting in a provisional reclassification adjustment of $32.2 million to "Accumulated deficit" from"Other comprehensive loss" on the Consolidated Balance Sheets. The amount of the reclassification is calculated on the basis of the difference between thehistorical and newly enacted tax rates on deferred taxes related to our pension and postretirement benefit plans.74Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future dateare not expected to have a material impact on the Company’s consolidated financial statements upon adoption.3. Mergers and AcquisitionsAcquisition of OnX Holdings LLCOn October 2, 2017, the Company acquired 100% of OnX Holdings LLC ("OnX"), a privately held company that provides technology services and solutionsto enterprise customers in the U.S., Canada and the U.K. The acquisition extends the IT Services and Hardware segment's geographic footprint and acceleratesits initiatives in IT cloud migration.The purchase price for OnX consisted of the following:(dollars in millions) Cash consideration$241.2Debt repayment(77.6)Estimated working capital adjustment2.6Total estimated purchase price$166.2The cash consideration for the acquisition as of December 31, 2017 was $241.2 million and was funded through borrowings under the Credit Agreement (seeNote 7). The cash consideration includes $77.6 million related to existing debt that was repaid in conjunction with the close of the acquisition. In addition,an estimated working capital adjustment of $2.6 million was recorded in "Accounts payable" in the Consolidated Balance Sheets. The Company spent $8.1million in transaction costs related to the OnX acquisition, which were recorded in "Transaction and integration costs" in the Consolidated Statements ofOperations.75Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Purchase Price Allocation and Other ItemsThe determination of the final purchase price allocation to specific assets acquired and liabilities assumed is incomplete for OnX. The purchase priceallocations may change in future periods as customary post-closing reviews are concluded during the measurement period, and the fair value estimates ofassets and liabilities and certain tax aspects of the transaction are finalized.Based on fair value estimates, the purchase price for OnX has been allocated to individual assets acquired and liabilities assumed as follows:(dollars in millions) Assets acquired Cash$6.5 Receivables69.9 Prepaid expenses and other current assets11.8 Property, plant and equipment11.6 Goodwill132.4 Intangible assets134.0 Other noncurrent assets3.2Total assets acquired369.4Liabilities assumed Accounts payable63.6Current portion of long-term debt1.3 Accrued expenses and other current liabilities18.3 Deferred income tax liabilities42.2Long-term debt, less current portion76.7 Other noncurrent liabilities1.1Total liabilities assumed203.2Net assets acquired$166.2The estimated fair value of identifiable intangible assets and their estimated useful lives are as follows:(dollars in millions)Fair Value Useful LivesCustomer relationships$108.0 15 yearsTrade name16.0 10 yearsTechnology10.0 10 yearsTotal identifiable intangible assets$134.0 Identifiable intangible assets are amortized over their useful lives based on a number of assumptions including the estimated period of economic benefit andutilization. The weighted-average amortization period for identifiable intangible assets acquired in the OnX acquisition is 14 years.The goodwill for OnX is attributable to increased access to a diversified customer base and acquired workforce in the U.S., Canada and the U.K. The amountof goodwill related to OnX that is expected to be deductible for income tax purposes is $2.3 million.The revenues and net income of OnX included in the consolidated statement of income from the acquisition date through December 31, 2017 was $150.0million and $11.5 million, respectively.76Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Pro Forma Information (Unaudited)The following table provides the unaudited pro forma results of operations for the years ended December 31, 2017 and 2016 as if OnX had been acquired asof the beginning of fiscal year 2016. These results include adjustments related to the financing of the acquisition, to increase depreciation and amortizationassociated with the higher values of property, plant and equipment and intangible assets, to increase interest expense for the additional debt incurred tocomplete the acquisition, and to reflect the related income tax effect and change in tax status. The pro forma information does not necessarily reflect theactual results of operations had the acquisition been consummated at the beginning of the annual reporting period indicated nor is it necessarily indicative offuture operating results. The pro forma information does not include any (i) potential revenue enhancements, cost synergies or other operating efficienciesthat could result from the acquisition or (ii) transaction or integration costs relating to the acquisition. Year Ended December 31,(dollars in millions, except per share amounts)2017 2016Revenue$1,718.6 $1,767.5Net income applicable to common shareholders23.6 91.7Earnings per share: Basic earnings per common share0.56 2.18 Diluted earnings per common share0.56 2.18Other Acquisition ActivityOn February 28, 2017, the Company acquired 100% of SunTel, a private company that provides network security, data connectivity, and unifiedcommunications solutions to commercial and enterprise customers across multiple sectors throughout Michigan for cash consideration of $10.0 million.Based on final fair value assessment and the finalization of the working capital adjustment, the acquired assets and liabilities assumed consisted primarily ofproperty, plant and equipment of $0.4 million, customer relationship intangible assets of $1.2 million, working capital of $4.1 million and goodwill of $4.6million. These assets and liabilities are included in the IT Services and Hardware segment.4. Earnings Per Common ShareBasic earnings per common share ("EPS") is based upon the weighted-average number of common shares outstanding during the period. Diluted EPS reflectsthe potential dilution that would occur upon issuance of common shares for awards under stock-based compensation plans, or conversion of preferred stock,but only to the extent that they are considered dilutive.The following table shows the computation of basic and diluted EPS after consideration of the 1-for-5 reverse stock split that became effective 11:59 p.m.October 4, 2016: Year Ended December 31, 2017(in millions, except per share amounts)ContinuingOperations DiscontinuedOperations TotalNumerator: Net income$35.1 $— $35.1Preferred stock dividends10.4 — 10.4Net income applicable to common shareowners - basic and diluted$24.7 $— $24.7Denominator: Weighted-average common shares outstanding - basic42.2 — 42.2Stock-based compensation arrangements0.2 — 0.2Weighted-average common shares outstanding - diluted42.4 — 42.4Basic earnings per common share$0.59 $— $0.59Diluted earnings per common share$0.58 $— $0.5877Table of ContentsForm 10-K Part I Cincinnati Bell Inc. Year Ended December 31, 2016(in millions, except per share amounts)ContinuingOperations DiscontinuedOperations TotalNumerator: Net income$101.8 $0.3 $102.1Preferred stock dividends10.4 — 10.4Net income applicable to common shareowners - basic and diluted$91.4 $0.3 $91.7Denominator: Weighted-average common shares outstanding - basic42.0 42.0 42.0Stock-based compensation arrangements0.1 0.1 0.1Weighted-average common shares outstanding - diluted42.1 42.1 42.1Basic and diluted earnings per common share$2.17 $0.01 $2.18 Year Ended December 31, 2015(in millions, except per share amounts)ContinuingOperations DiscontinuedOperations TotalNumerator: Net income$290.8 $62.9 $353.7Preferred stock dividends10.4 — 10.4Net income applicable to common shareowners - basic and diluted$280.4 $62.9 $343.3Denominator: Weighted-average common shares outstanding - basic41.9 41.9 41.9Stock-based compensation arrangements0.1 0.1 0.1Weighted-average common shares outstanding - diluted42.0 42.0 42.0Basic earnings per common share$6.69 $1.50 $8.19Diluted earnings per common share$6.68 $1.49 $8.17For the years ended December 31, 2017, 2016 and 2015, awards under the Company’s stock-based compensation plans for common shares of 0.2 million, 0.4million and 0.7 million, respectively, were excluded from the computation of diluted EPS as their inclusion would have been anti-dilutive. For all periodspresented, preferred stock convertible into 0.9 million common shares was excluded as it was anti-dilutive.5. Property, Plant and EquipmentProperty, plant and equipment is comprised of the following: December 31, DepreciableLives (Years)(dollars in millions)2017 2016 Land and rights-of-way$4.3 $4.3 20-IndefiniteBuildings and leasehold improvements179.1 173.7 3-40Network equipment3,339.4 3,165.7 2-50Office software, furniture, fixtures and vehicles162.5 150.6 2-14Construction in process14.7 17.0 n/a Gross value3,700.0 3,511.3 Accumulated depreciation(2,571.0) (2,425.8) Property, plant and equipment, net$1,129.0 $1,085.5 78Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Depreciation expense on property, plant and equipment totaled $190.4 million in 2017, $182.0 million in 2016 and $141.3 million in 2015. The portion ofdepreciation expense associated with cost of providing services was 84%, 85% and 79% in 2017, 2016 and 2015, respectively. There are numerous assetsincluded within network equipment resulting in a range of depreciable lives between 2 and 50 years, the majority of which fall within the range of 7 to 22years. In 2016, we reduced the estimated useful life of certain set-top boxes, as well as the related software, as we upgraded to new technology. In the fourthquarter of 2015, we reduced the useful life of our copper assets from 15 years to 7 years as customers have continued to migrate to services provided by ourfiber network.No asset impairment losses were recognized in 2017, 2016 or 2015 on property, plant and equipment.As of December 31, 2017 and 2016, the Company had $112.0 million and $96.8 million, respectively, of assets accounted for as capital leases includingnetwork equipment, office software, furniture, fixtures and vehicles. Concurrent with the shut-down of our wireless network as of March 31, 2015, $57.7million of fully depreciated capital lease assets were transferred to continuing operations as these assets were retained by the Company. These leases werepreviously reported in discontinued operations as they were still being utilized in our wireless operations. Depreciation of capital lease assets is included in"Depreciation and amortization" in the Consolidated Statements of Operations.6. Goodwill and Intangible AssetsGoodwillThe changes in the Company's goodwill consisted of the following: IT Services and Hardware Entertainment and Communications Total Company December 31,2017 December 31,2016 December 31,2017 December 31,2016 December 31,2017 December 31,2016(dollars in millions) Goodwill, beginning balance $2.4 $2.4 $11.9 $11.9 $14.3 $14.3Activity during the year Acquisitions 137.0 — — — 137.0 —Currency translations (0.3) — — — (0.3) —Goodwill, ending balance $139.1 $2.4 $11.9 $11.9 $151.0 $14.3During 2017, goodwill increased by $4.6 million and $132.4 million for the IT Services and Hardware segment related to the acquisitions of SunTel andOnX, respectively. For further information related to these acquisitions see Note 3.No impairment losses were recognized in goodwill for the years ended December 31, 2017 or 2016.Intangible AssetsThe Company’s intangible assets consisted of the following: December 31, 2017 December 31, 2016 Gross Carrying Accumulated Gross Carrying Accumulated(dollars in millions) Amount Amortization Amount AmortizationCustomer relationships $116.0 $(8.9) $7.0 $(7.0)Trade names 15.9 (0.4) — —Technology 9.9 (0.2) — —Total $141.8 $(9.5) $7.0 $(7.0)The intangible assets were established in connection with completed acquisitions. They are amortized over their useful lives based on a number ofassumptions including the estimated period of economic benefit and utilization. The weighted-average amortization period for intangible assets acquired in2017 is 14 years.The amortization expense for intangible assets was $2.5 million and $0.2 million in 2017 and 2016, respectively. No impairment losses were recognized onintangible assets for the years ended December 31, 2017 and 2016.79Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The estimated useful lives for each intangible asset class are as follows:Customer relationships 8to15yearsTrade names 10yearsTechnology 10yearsThe annual estimated amortization expense for future years is as follows:(dollars in millions) 2018 $10.02019 10.02020 10.02021 10.02022 10.0Thereafter 82.3Total $132.37. Debt and Other Financing ArrangementsThe Company’s debt consists of the following: December 31,(dollars in millions)2017 2016Current portion of long-term debt: Credit Agreement - Tranche B Term Loan due 2024$6.0 $—Capital lease obligations and other debt12.4 7.5Current portion of long-term debt18.4 7.5Long-term debt, less current portion: Receivables Facility— 89.5Corporate Credit Agreement - Tranche B Term Loan due 2020— 315.8Credit Agreement - Tranche B Term Loan due 2024594.0 —7 1/4% Senior Notes due 202322.3 22.37% Senior Notes due 2024625.0 625.08% Senior Notes due 2025350.0 —Various Cincinnati Bell Telephone notes87.9 87.9Capital lease obligations and other debt70.5 62.0 1,749.7 1,202.5Net unamortized premium1.9 8.5Unamortized note issuance costs(22.3) (11.9) Long-term debt, less current portion1,729.3 1,199.1Total debt$1,747.7 $1,206.6Credit Agreement (effective 2017)In the fourth quarter of 2017, the Company entered into a new Credit Agreement (the "Credit Agreement") and terminated the existing Corporate CreditAgreement. The Credit Agreement provides for (i) a five-year $200 million senior secured revolving credit facility including both a letter of credit subfacilityof up to $30 million and a swingline loan subfacility of up to $25 million) (the “Revolving Credit Facility”) and (ii) a seven-year $600 million senior securedterm loan facility (the “Tranche B Term Loan due 2024”). The Revolving Credit Facility expires in October 2022 and the Tranche B Term Loan due 2024expires in October 2024. Borrowings under the Credit Agreement's Revolving Credit Facility will be used to provide ongoing working capital as well asother general corporate cash flow needs of the Company.80Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Borrowings under the Credit Agreement bear interest, at the Company's election, at a rate per annum equal to (i) LIBOR plus the applicable margin or (ii) thebase rate plus the applicable margin. The LIBOR applicable margin for advances under the Revolving Credit Facility and Tranche B Term Loan due 2024 is3.75%. The base rate applicable margin for advances under the Revolving Credit Facility and Tranche B Term Loan due 2024 is 2.75%. Base rate is thehigher of (i) the bank prime rate, (ii) the one-month LIBOR rate plus 1.00% and (iii) the federal funds rate plus 0.5%. In the case of the Tranche B Term Loandue 2024, the LIBOR rate may not fall below 1.00%. In addition, the Company will be required to pay a commitment fee on any unused portion of theRevolving Credit Facility at a rate of 0.50% per annum, or, if the consolidated total leverage ratio of the Company and its restricted subsidiaries is equal to orless than 3.25 to 1.00, 0.375% per annum. The Company will also pay customary letter of credit fees, including a fronting fee equal to 0.125% per annum ofthe dollar equivalent of the maximum amount available to be drawn under all outstanding letters of credit, as well as customary issuance and administrationfees. At December 31, 2017, there were no outstanding borrowings under the Credit Agreement's Revolving Credit Facility, leaving$200.0 million available.The Revolving Credit Facility requires maintenance of a maximum consolidated secured leverage ratio of 3.50 to1.00 and a minimum consolidated interestcoverage ratio of 1.50 to 1.00. The Company may voluntarily repay and reborrow outstanding loans under the Revolving Credit Facility at any time withouta premium or a penalty, other than customary “breakage” costs with respect to LIBOR revolving loans.On October 2, 2017, the Credit Facilities net proceeds of $577.0 million were used to repay the remaining $315.8 million outstanding principal amount ofthe Tranche B Term Loan due 2020 and related accrued and unpaid interest. The remaining proceeds of the Tranche B Term Loan due 2024 were used to fundthe purchase price and associated transaction costs of the acquisition of OnX that closed on October 2, 2017.Guarantors and Security Interests, Credit AgreementAll existing and future subsidiaries of the Company (other than Cincinnati Bell Funding LLC (and any other similar special purpose receivables financingsubsidiary), CB Escrow Corp., the Company's joint ventures, subsidiaries prohibited by applicable law from becoming guarantors, unrestricted subsidiariesand foreign subsidiaries) are required to guarantee borrowings under the Credit Agreement. Debt outstanding under the Credit Agreement is secured byperfected first priority pledges of and security interests in (i) substantially all of the equity interests of the Company's U.S. subsidiaries (other thansubsidiaries of non-guarantors of the Credit Agreement) and 66% of the equity interests in certain first-tier foreign subsidiaries held by the Company and theguarantors under the Credit Agreement and (ii) certain personal property and intellectual property of the Company and its subsidiaries (other than that ofnon-guarantors of the Credit Agreement and certain other excluded property).Corporate Credit Agreement (2012 through 2017)Revolving Credit FacilityIn the fourth quarter of 2012 the Company entered into a credit agreement ("Corporate Credit Agreement") that remained in place until it was refinanced inOctober 2017 with the new Credit Agreement. The Corporate Credit Agreement provided for a revolving credit facility, and in 2013 was amended to includethe $540 million Tranche B Term Loan due 2020. The Revolving Credit Facility had a sublimit of $30.0 million for letters of credit and a $25.0 millionsublimit for swingline loans. Borrowings under the Revolving Credit Facility were used to provide ongoing working capital as well as other generalcorporate cash flow needs of the Company. The Corporate Credit Agreement was amended several times since its inception. In 2016, an amendment of theCorporate Credit Agreement provided for a $150.0 million revolving credit facility. As a result of the amendment, the Company recorded a $1.7 million losson extinguishment of debt in the second quarter of 2016.Borrowings under the Corporate Credit Agreement's Revolving Credit Facility bear interest, at the Company's election, at a rate per annum equal to (i) LIBORplus the applicable margin or (ii) the base rate plus the applicable margin. The applicable margin for advances under the revolving facility is based on certainfinancial ratios and ranges between 3.00% and 3.50% for LIBOR rate advances and 2.00% and 2.50% for base rate advances. As of December 31, 2016, theapplicable margin was 3.50% for LIBOR rate advances and 2.50% for base rate advances. Base rate is the higher of (i) the bank prime rate, (ii) the one-monthLIBOR rate plus 1.00% and (iii) the federal funds rate plus 0.5%.In 2013, the Tranche B Term Loan due 2020 provided $529.8 million in net proceeds after deducting the 0.75% original issue discount, fees and expenses.Loans under the Tranche B Term Loan due 2020 bear interest, at the Company's election, at a rate per annum equal to (i) LIBOR (subject to a 1.00% floor)plus 3.00% or (ii) the base rate plus 2.00%. Base rate is the greatest of (a) the bank prime rate, (b) the one-month LIBOR rate plus 1.00% and (c) the federalfunds rate plus 0.5%.81Table of ContentsForm 10-K Part II Cincinnati Bell Inc.In the fourth quarter of 2016, the Company repaid $208.0 million of its outstanding Tranche B Term Loan due 2020 which resulted in a loss on debtextinguishment of $2.2 million.As a result of the Company entering into the Credit Agreement in October 2017, certain previously deferred costs and unamortized discount associated withthe Corporate Credit Agreement's Revolving Credit Facility and Tranche B Term Loan due 2020 were written off in the fourth quarter of 2017. The loss onextinguishment of debt associated with the transaction was $3.2 million.Accounts Receivable Securitization FacilityCincinnati Bell Inc. and certain of its subsidiaries have an accounts receivable securitization facility ("Receivables Facility"), which permits maximumborrowings of up to $120.0 million. CBT, CBET, and CBTS TS all participate in this facility. The available borrowing capacity is calculated monthly basedon the quantity and quality of outstanding accounts receivable and thus may be lower than the maximum borrowing limit. At December 31, 2017, theavailable borrowing capacity was $107.3 million.Of the total borrowing capacity of $107.3 million at December 31, 2017, there were no outstanding borrowings and $6.3 million of outstanding letters ofcredit, leaving $101.0 million available as of December 31, 2017. Interest on the Receivables Facility is based on the LIBOR rate plus 1.1%. The averageinterest rate on the Receivables Facility was 1.8% in 2017. The Company pays letter of credit fees on the securitization facility and also pays commitmentfees on the unused portion of the total facility.The transferors sell their respective trade receivables on a continuous basis to Cincinnati Bell Funding LLC ("CBF"), a wholly-owned limited liabilitycompany. In turn, CBF grants, without recourse, a senior undivided interest in the pooled receivables to various purchasers, including commercial paperconduits, in exchange for cash while maintaining a subordinated undivided interest in the form of over-collateralization in the pooled receivables. Thetransferors have agreed to continue servicing the receivables for CBF at market rates; accordingly, no servicing asset or liability has been recorded. In thesecond quarter of 2017, the Company executed an amendment of its Receivables Facility, which replaced, amended and added certain provisions anddefinitions to increase the credit availability and renew the facility, which is subject to renewal every 364 days, with the next renewal occurring in May 2018.The Receivables Facility has a termination date of May 2019.Although CBF is a wholly-owned consolidated subsidiary of the Company, CBF is legally separate from the Company and each of the Company’s othersubsidiaries. Upon and after the sale or contribution of the accounts receivable to CBF, such accounts receivable are legally assets of CBF, and, as such, arenot available to creditors of other subsidiaries or the parent company.For the purposes of consolidated financial reporting, the Receivables Facility is accounted for as secured financing. Because CBF has the ability to prepaythe Receivables Facility at any time by making a cash payment and effectively repurchasing the receivables transferred pursuant to the facility, the transfersdo not qualify for "sale" treatment on a consolidated basis under ASC 860, "Transfers and Servicing."7 1/4% Notes due 2023In 1993, the Company issued $50.0 million of 7 1/4% Notes due 2023 ("7 1/4% Notes"). The indenture related to the 7 1/4% Notes does not subject theCompany to restrictive financial covenants, but it does contain a covenant providing that if the Company incurs certain liens on its property or assets, theCompany must secure the outstanding 7 1/4% Notes equally and ratably with the indebtedness or obligations secured by such liens. The liens under theCredit Agreement have resulted in the debt outstanding under the 7 1/4% Notes being secured equally and ratably with the obligations secured under theCredit Agreement. Interest on the 7 1/4% Notes is payable semi-annually on June 15 and December 15. The Company may not call the 7 1/4% Notes prior tomaturity. The indenture governing the 7 1/4% Notes provides for customary events of default, including for failure to make any payment when due and forone or more defaults of any other existing debt instruments that exceeds $20.0 million, in the aggregate.During 2015, the Company redeemed $13.7 million of its outstanding 7 1/4% Notes at an average redemption price of 99.853% which resulted in a loss onextinguishment of debt of $0.1 million. The Company also repaid $4.0 million of its 7 1/4% Notes at a redemption price of 100.750% which resulted in a $0.1million loss on extinguishment of debt during 2016.82Table of ContentsForm 10-K Part II Cincinnati Bell Inc.7% Senior Notes due 2024In the third quarter of 2016, the Company issued in a private offering $425.0 million aggregate principal amount of 7% Senior Notes due 2024 ("7% SeniorNotes") at par. The Company issued an additional $200.0 million aggregate principal amount of 7% Senior Notes at a price of 105.000% in the fourth quarterof 2016. The 7% Senior Notes are senior unsecured obligations of the Company, which rank equally in right of payment with all existing and futureunsecured senior debt of the Company. The 7% Senior Notes will be effectively subordinated to all existing and future secured indebtedness of the Companyto the extent of the value of the assets securing such indebtedness. The 7% Senior Notes are guaranteed on a joint and several basis by certain of theCompany’s existing and future domestic subsidiaries. Each such guarantee is a senior unsecured obligation of the applicable guarantor, ranking equally withall existing and future unsecured senior debt of such guarantor and effectively subordinated to all existing and future secured indebtedness of such guarantorto the extent of the value of the assets securing that indebtedness. The 7% Senior Notes are structurally subordinated to all liabilities (including tradepayables) of each subsidiary of the Company that does not guarantee the 7% Senior Notes.The 7% Senior Notes bear interest at a rate of 7% per annum, payable semi-annually on January 15 and July 15 of each year, beginning on January 15, 2017,to persons who are registered holders of the 7% Senior Notes on the immediately preceding January 1 and July 1, respectively.The 7% Senior Notes will mature on July 15, 2024. However, prior to September 15, 2019, the Company may, at its option, redeem some or all of the 7%Senior Notes at a redemption price equal to 100% of the principal amount of the 7% Senior Notes, together with accrued and unpaid interest, if any, plus a“make-whole” premium. On or after September 15, 2019, the Company may, at its option, redeem some or all of the 7% Senior Notes at any time at decliningredemption prices equal to (i) 105.250% beginning on September 15, 2019, (ii) 103.500% beginning on September 15, 2020, (iii) 101.750% beginning onSeptember 15, 2021 and (iv) 100.000% beginning on September 15, 2022 and thereafter, plus, in each case, accrued and unpaid interest, if any, to theapplicable redemption date. In addition, before September 15, 2019, and subject to certain conditions, the Company may, at its option, redeem up to 40% ofthe aggregate principal amount of 7% Senior Notes with the net proceeds of certain equity offerings at 107.000% of the principal amount thereof, plusaccrued and unpaid interest, if any, to the date of redemption; provided that (i) at least 60% of the aggregate principal amount of 7% Senior Notes remainsoutstanding and (ii) the redemption occurs within 180 days of the closing of any such equity offering.The indenture governing the 7% Senior Notes contains covenants including but not limited to the following: limitations on dividends to shareowners andother restricted payments; dividend and other payment restrictions affecting the Company’s subsidiaries such that the subsidiaries are generally not permittedto enter into an agreement that would limit their ability to make dividend payments to the parent; issuance of indebtedness; asset dispositions; transactionswith affiliates; liens; investments; issuances and sales of capital stock of subsidiaries; and redemption of debt that is junior in right of payment. The indenturegoverning the 7% Senior Notes provides for customary events of default, including a cross-default provision for both nonpayment at final maturity oracceleration due to a default of any other existing debt instrument that equals or exceeds $35 million.8% Senior Notes due 2025In the fourth quarter of 2017, CB Escrow Corp. (the “Issuer”), an Ohio corporation and wholly owned subsidiary of Cincinnati Bell Inc., closed the privateoffering of $350 million aggregate principal amount of 8% Senior Notes at par. The 8% Senior Notes were issued pursuant to an indenture, dated as ofOctober 6, 2017 (the “Indenture”), between the Issuer and Regions Bank, as trustee.Concurrently with the closing of the offering, the Issuer entered into an escrow agreement (the “Escrow Agreement”) pursuant to which the initial purchasersof the 8% Senior Notes on behalf (and at the direction) of the Issuer, deposited the gross proceeds of the offering into an escrow account. The Issuer depositedinto the escrow account an additional amount of cash that will be sufficient to pay all interest that would accrue on the 8% Senior Notes up to, but notincluding, October 9, 2018.83Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The offering of the 8% Senior Notes was part of the financing of the cash portion of the merger consideration for the previously announced acquisition ofHawaiian Telcom Holdco, Inc. (“Hawaiian Telcom”) by the Company (the “HCOM Acquisition”). At the closing of the HCOM Acquisition, the Issuer willmerge with and into the Company (the “Escrow Merger”), with the Company continuing as the surviving corporation. At the time of the Escrow Merger, theCompany will assume the obligations of the Issuer under the 8% Senior Notes and the Indenture (the “Assumption”) and, subject to the satisfaction of certainother conditions, the proceeds from the offering will be released from the escrow account to the Company. In the event that the HCOM Acquisition has notoccurred on or prior to January 9, 2019, the Issuer has notified the escrow agent that the HCOM Acquisition will not be consummated, the Agreement andPlan of Merger, dated as of July 9, 2017, among Hawaiian Telcom, the Company and Twin Acquisition Corp. has been terminated or the Issuer fails, afterreceiving written notice from the escrow agent of the Issuer’s failure to timely deposit cash into the escrow account equal to 30 days of interest that wouldaccrue on the 8% Senior Notes to deposit such amount of cash within five business days after receipt of such notice, the Issuer will be required to redeem allof the 8% Senior Notes at a redemption price equal to 100% of the initial issue price, plus accrued and unpaid interest to, but excluding, the redemption date.The 8% Senior Notes bear interest at a rate of 8.00% per annum, payable semi-annually on April 15 and October 15 of each year, beginning on April 15,2018, to persons who are registered holders of the 8% Senior Notes on the immediately preceding April 1 and October 1, respectively.The 8% Senior Notes will mature on October 15, 2025. However, prior to October 15, 2020, the Company may, at its option, redeem some or all of the Notesat a redemption price equal to 100% of the principal amount of the Notes, together with accrued and unpaid interest, if any, plus a “make-whole” premium.On or after October 15, 2020, the Company may, at its option, redeem some or all of the Notes at any time at declining redemption prices equal to (i)106.000% beginning on October 15, 2020, (ii) 104.000% beginning on October 15, 2021, (iii) 102.000% beginning on October 15, 2022 and (iv) 100.000%beginning on October 15, 2023 and thereafter, plus, in each case, accrued and unpaid interest, if any, to the applicable redemption date. In addition, beforeOctober 15, 2020, and subject to certain conditions, the Company may, at its option, redeem up to 40% of the aggregate principal amount of Notes with thenet proceeds of certain equity offerings at 108.000% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption;provided that (i) at least 60% of the aggregate principal amount of Notes remains outstanding after such redemption and (ii) the redemption occurs within180 days of the closing of any such equity offering.Cincinnati Bell Telephone NotesIn 1998, CBT's predecessor issued $150.0 million in aggregate principal of 6.30% unsecured senior notes due 2028 (the "CBT Notes"), which are guaranteedon a subordinated basis by the Company but not its subsidiaries. The indenture related to the CBT Notes does not subject the Company or CBT to restrictivefinancial covenants, but it does contain a covenant providing that if CBT incurs certain liens on its property or assets, CBT must secure the outstanding CBTNotes equally and ratably with the indebtedness or obligations secured by such liens. In 2017, CBT pledged its assets in support of the Company's debtincurred under the Credit Agreement, and as a result, the CBT Notes became equally and ratably secured. The maturity date of the CBT notes is in 2028, andthe CBT Notes may be redeemed at any time at a redemption price equal to the greater of 100% of the principal amount of the CBT Notes to be redeemed orthe sum of the present values of the remaining scheduled payments of principal and interest to maturity, plus accrued interest to the redemption date. Theindenture governing the CBT Notes provides for customary events of default, including for failure to make any payment when due and for one or moredefaults of any other existing debt instruments of the Company or CBT that exceeds $20.0 million, in the aggregate.During 2015, the Company redeemed $5.8 million of its outstanding CBT Notes at an average redemption price of 90.840% which resulted in a gain onextinguishment of debt of $0.5 million. During 2016, the Company redeemed $40.8 million of its CBT Notes at an average redemption price of 92.232%which resulted in a gain on extinguishment of debt of $2.8 million.Capital Lease ObligationsCapital lease obligations represent our obligation for certain leased assets, including vehicles and various equipment. These leases generally contain renewalor buyout options.84Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Debt Maturity ScheduleThe following table summarizes our annual principal maturities of debt and capital leases for the five years subsequent to December 31, 2017, and thereafter: Capital Total(dollars in millions)Debt Leases DebtYear ended December 31, 2018$6.0 $12.4 $18.420196.0 12.0 18.020206.0 9.4 15.420216.0 6.5 12.520226.0 4.9 10.9Thereafter1,655.2 37.7 1,692.9 1,685.2 82.9 1,768.1Net unamortized premium1.9 — 1.9Unamortized note issuance costs(22.3) — (22.3) Total debt$1,664.8 $82.9 $1,747.7Total capital lease payments including interest are expected to be $17.4 million for 2018, $16.4 million for 2019, $13.2 million for 2020, $9.9 million for2021, $7.8 million for 2022 and $49.0 million thereafter.As of March 31, 2015, $54.5 million of capital lease obligations were retained by the Company in conjunction with discontinuing wireless operations.Deferred Financing CostsDeferred financing costs are costs incurred in connection with obtaining long-term financing and renewing revolving credit agreements. Deferred financingcosts are amortized on the effective interest method. The Company incurred deferred financing costs of $12.9 million related to the issuance of the Tranche BTerm Loan due 2024 and $1.4 million related to the issuance of 8% Senior Notes due 2025. Approximately $8 million of additional costs are expected to beincurred upon the closing of Hawaiian Telcom when the 8% Senior Notes will be assumed by the Company. In 2017 and 2016, deferred financing costsincurred for amending and renewing revolving credit agreements were $4.6 million and $2.0 million, respectively. The Company wrote-off deferred financingcosts associated with the extinguishment of debt of $2.1 million, $5.9 million and $3.7 million in 2017, 2016 and 2015, respectively.The Company retrospectively adopted ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, effective January 1, 2016. At the time of adoptionthe Company made a one-time policy election to record costs incurred in connection with obtaining revolving credit agreements as an asset. As ofDecember 31, 2017 and 2016, deferred financing costs recorded to "Other non-current assets" totaled $5.1 million and $2.1 million, respectively.Amortization of deferred financing costs, included in "Interest expense" in the Consolidated Statements of Operations, totaled $3.4 million in 2017, $3.0million in 2016, and $4.1 million in 2015.Debt CovenantsCredit AgreementThe Credit Agreement has financial covenants that require the Company to maintain certain leverage and interest coverage ratios. As of December 31, 2017,these ratios and limitations include a maximum secured consolidated total leverage ratio of 3.50 to 1.00 and a minimum consolidated interest coverage ratioof 1.50 to 1.00. In addition, the Credit Agreement contains customary affirmative and negative covenants, but not limited to, restrictions on Company'sability to incur additional indebtedness, create liens, pay dividends, make certain investments, and prepay other indebtedness, sell, transfer, lease, or disposeof assets and enter into, or undertake, certain liquidations, mergers, consolidations or acquisitions.85Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The Credit Agreement contains customary events of default (which are in some cases subject to certain exceptions, thresholds and grace periods), including,but not limited to, nonpayment of principal or interest, failure to perform or observe covenants, breaches of representations and warranties, cross-defaults withcertain other indebtedness, certain bankruptcy-related events or proceedings, final monetary judgments or orders, ERISA defaults, invalidity of loandocuments or guarantees, and certain change of control events. If the Company were to violate any of its covenants and were unable to obtain a waiver, itwould be considered a default. If the Company were in default under the Credit Agreement, no additional borrowings under this facility would be availableuntil the default was waived or cured.The Tranche B Term Loan due 2024 is subject to the same affirmative and negative covenants and events of default as the Revolving Credit Facility, exceptthat a breach of the financial covenants will not result in an event of default under the Tranche B Term Loan due 2024 unless and until the agent or amajority in interest of the lenders under the Revolving Credit Facility have terminated their commitments under the Revolving Credit Facility andaccelerated the loans then outstanding under the Revolving Credit Facility in response to such breach in accordance with the terms and conditions of theCredit Agreement.Extinguished NotesDuring 2015, the Company purchased $182.7 million of its outstanding 8 3/8% Senior Notes at an average redemption price of 105.543% which resulted inrecording a loss on extinguishment of debt of $10.9 million. During 2016, the Company repaid the remaining $478.5 million outstanding on the 8 3/8%Senior Notes at an average price of 103.328%, resulting in a $17.8 million loss on extinguishment of debt.In 2015, the Company redeemed the remaining $300.0 million of outstanding 8 ¾% Senior Subordinated Notes due 2018 at a redemption rate of 102.188%.As a result, the Company recorded a loss on extinguishment of debt of $10.4 million.In 2015, the Company redeemed $13.7 million of its outstanding 7 1/4% Notes at an average redemption price of 99.853% which resulted in a loss onextinguishment of debt of $0.1 million. The Company also repaid $4.0 million of its 7 1/4% Notes at a redemption price of 100.750% which resulted in a $0.1million loss on extinguishment of debt during 2016.In the fourth quarter of 2017, the Company repaid the remaining $315.8 million outstanding principal amount of its Tranche B Term Loan due 2020 andrelated accrued and unpaid interest. As a result, a loss on extinguishment of debt is recorded in the fourth quarter of 2017 of $2.6 million.8. Commitments and ContingenciesOperating Lease CommitmentsThe Company leases certain circuits, facilities, and equipment used in its operations. Operating lease expense was $10.7 million, $9.6 million and $10.1million in 2017, 2016 and 2015, respectively. In 2015, our retail stores, which were previously used to support our wireless operations, were re-branded tosupport the growth of our Fioptics suite of products. Rent expense associated with our retail locations totaled $0.6 million in both 2017 and 2016. Certainfacility leases provide for renewal options with fixed rent escalations beyond the initial lease term.At December 31, 2017, future minimum lease payments required under operating leases having initial or remaining non-cancellable lease terms for the nextfive years are as follows:(dollars in millions) 2018$7.020196.020204.720212.820222.6Thereafter18.3Total$41.486Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Asset Retirement ObligationsAsset retirement obligations exist for certain other assets. In conjunction with the OnX acquisition on October 2, 2017, the Company recognized certain assetretirement obligations related to data center leases which are recorded in "Accounts payable" in the Consolidated Balance Sheets. As of March 31, 2015,certain asset retirement obligations related to our wireless towers were reclassified to continuing operations as the obligations relate to tower leases retainedby the Company. These obligations are recorded in "Other noncurrent liabilities" in the Consolidated Balance Sheets. The following table presents theactivity for the Company’s asset retirement obligations: December 31,(dollars in millions)2017 2016Balance, beginning of period$1.8 $4.8Liabilities incurred0.4 —Liabilities settled— (2.0)Revision to estimated cash flow— (1.1)Accretion expense0.1 0.1Balance, end of period$2.3 $1.8IndemnificationsDuring the normal course of business, the Company makes certain indemnities, commitments, and guarantees under which it may be required to makepayments in relation to certain transactions. These include (a) intellectual property indemnities to customers in connection with the use, sale, and/or licenseof products and services, (b) indemnities to customers in connection with losses incurred while performing services on their premises, (c) indemnities tovendors and service providers pertaining to claims based on negligence or willful misconduct of the Company, (d) indemnities involving the representationsand warranties in certain contracts, and (e) outstanding letters of credit which totaled $6.3 million as of December 31, 2017. In addition, the Company hasmade contractual commitments to several employees providing for payments upon the occurrence of certain prescribed events. The majority of theseindemnities, commitments, and guarantees do not provide for any limitation on the maximum potential for future payments that the Company could beobligated to make.As permitted under Ohio law, the Company has agreements whereby the Company indemnifies its officers and directors for certain events or occurrenceswhile the officer or director is, or was, serving at the Company's request in such capacity. The term of the indemnification period is for the lifetime of theofficer or director. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements isunlimited; however, the Company has a director and officer insurance policy that limits the Company's exposure and enables the Company to recover aportion of any future amounts paid. As a result of the Company's insurance policy coverage, the Company believes the estimated fair value of theseindemnification agreements is minimal. The Company has no liabilities recorded for these agreements as of December 31, 2017 or 2016.Purchase CommitmentsThe Company has noncancellable purchase commitments related to certain goods and services. These agreements typically range from one to three years. Asof December 31, 2017 and 2016, the minimum commitments for these arrangements were approximately $205 million and $191 million, respectively. TheCompany generally has the right to cancel open purchase orders prior to delivery and to terminate the contracts without cause.LitigationCincinnati Bell and its subsidiaries are subject to various lawsuits, actions, proceedings, claims and other matters asserted under laws and regulations in thenormal course of business. We believe the liabilities accrued for legal contingencies in our consolidated financial statements, as prescribed by GAAP, areadequate in light of the probable and estimable contingencies. However, there can be no assurances that the actual amounts required to satisfy allegedliabilities from various legal proceedings, claims, tax examinations, and other matters, and to comply with applicable laws and regulations, will not exceedthe amounts reflected in our consolidated financial statements. As such, costs, if any, that may be incurred in excess of those amounts provided as ofDecember 31, 2017, cannot be reasonably determined.87Table of ContentsForm 10-K Part II Cincinnati Bell Inc.9. Financial Instruments and Fair Value MeasurementsFair Value of Financial InstrumentsThe carrying values of our financial instruments do not materially differ from the estimated fair values as of December 31, 2017 and 2016, except for theCompany's long-term debt.The carrying value and fair value of the Company’s long-term debt is as follows: December 31, 2017 December 31, 2016(dollars in millions)Carrying Value Fair Value Carrying Value Fair ValueLong-term debt, including current portion*$1,687.1 $1,687.5 $1,149.2 $1,177.9 *Excludes capital leases and note issuance costs. The fair value of debt instruments was based on closing or estimated market prices of the Company’s debt at December 31, 2017 and 2016, which isconsidered Level 2 of the fair value hierarchy.Non-Recurring Fair Value MeasurementsCertain long-lived assets, intangibles, and goodwill are required to be measured at fair value on a non-recurring basis subsequent to their initial measurement.These non-recurring fair value measurements generally occur when evidence of impairment has occurred. In 2016 and 2015, no assets were remeasured at fairvalue. During 2017, the following assets were remeasured at fair value in connection with impairment tests: Fair Value Measurements Using (dollars in millions)Year EndedDecember 31,2017 Quoted Prices inActive Markets forIdentical Assets(Level 1) Significant OtherObservable Inputs(Level 2) SignificantUnobservableInputs (Level 3) Impairment LossesEquity method investment: Equity method investment— — — — $(4.7) Impairment of equity method investment $(4.7)In the third quarter of 2017, an equity method investment recorded within “Other noncurrent assets” in the Consolidated Balance Sheets was remeasured atfair value due to a triggering event identified by management. As a result of the fair value analysis, the entire carrying value of $4.7 million was impaired andrecorded to "Other expense (income), net" on the Consolidated Statements of Operations. This fair value measurement is considered a Level 3 measurementdue to the significance of its unobservable inputs.10. Pension and Postretirement PlansSavings PlansThe Company sponsors several defined contribution plans covering substantially all employees. The Company's contributions to the plans are based onmatching a portion of the employee contributions. Both employer and employee contributions are invested in various investment funds at the direction ofthe employee. Employer contributions to the defined contribution plans were $8.2 million, $8.4 million, and $7.0 million in 2017, 2016, and 2015,respectively.88Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Pension and Postretirement PlansThe Company sponsors three noncontributory defined benefit pension plans: one for eligible management employees, one for non-management employees,and one supplemental, nonqualified, unfunded plan for certain former senior executives. The management pension plan is a cash balance plan in which thepension benefit is determined by a combination of compensation-based credits and annual guaranteed interest credits. The non-management pension plan isalso a cash balance plan in which the combination of service and job-classification-based credits and annual interest credits determine the pension benefit.During 2017, the non-management pension plan made lump sum payments of $11.0 million resulting in a reduction of the plan benefit obligation of $11.3million. The Company recorded a pension settlement cost of $4.0 million as a result of the lump sum payments to the plan participants exceeding the sum ofthe service cost and the interest cost component of the net pension cost. During the second quarter of 2015, the non-management pension plan was amendedto eliminate all future pension credits and transition benefits. As a result, we recognized a curtailment loss of $0.3 million and a $1.7 million reduction to theassociated pension obligations. Benefits for the supplemental plan are based on eligible pay, adjusted for age and service upon retirement. We fund both themanagement and non-management plans in an irrevocable trust through contributions, which are determined using the traditional unit credit cost method.We also use the traditional unit credit cost method for determining pension cost for financial reporting purposes.The Company also provides healthcare and group life insurance benefits for eligible retirees. We fund healthcare benefits and other group life insurancebenefits using Voluntary Employee Benefit Association ("VEBA") trusts. It is our practice to fund amounts as deemed appropriate from time to time.Contributions are subject to Internal Revenue Service ("IRS") limitations developed using the traditional unit credit cost method. The actuarial expensecalculation for our postretirement health plan is based on numerous assumptions, estimates, and judgments including healthcare cost trend rates and costsharing with retirees. Retiree healthcare benefits are being phased out for both management and certain retirees. During 2017, the Company reviewed theemployees with special death benefits only within the defined benefit pension plans and determined that the liabilities associated with the special deathbenefits would be better associated with the postretirement health plans. As a result, the Company eliminated the liability associated with the special deathbenefits in the defined benefit pension plans, and recorded a liability of $14.0 million in the postretirement health plans in 2017.Components of Net Periodic CostThe following information relates to noncontributory defined benefit pension plans, postretirement healthcare plans, and life insurance benefit plans.Approximately 13% in 2017, 13% in 2016, and 12% in 2015 of these costs were capitalized to property, plant and equipment related to network constructionin the Entertainment and Communications segment. Pension and postretirement benefit costs for these plans were comprised of: Pension Benefits Postretirement and Other Benefits(dollars in millions)2017 2016 2015 2017 2016 2015Service cost$— $— $0.3 $0.2 $0.3 $0.3Interest cost on projected benefit obligation19.4 19.3 19.0 3.2 3.3 3.3Expected return on plan assets(26.0) (27.3) (29.2) — — —Amortization of: Prior service cost (benefit)— 0.1 0.1 (4.5) (14.7) (15.4)Actuarial loss17.5 19.1 24.9 4.7 4.9 5.4Pension settlement charges4.0 — — — — —Curtailment loss— — 0.3 — — —Pension/postretirement cost (benefit)$14.9 $11.2 $15.4 $3.6 $(6.2) $(6.4)89Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The following are the weighted-average assumptions used in measuring the net periodic cost of the pension and postretirement benefits: Pension Benefits Postretirement and Other Benefits 2017 2016 2015 2017 2016 2015 Discount rate4.10% 3.80% 3.40%* 4.00% 3.70% 3.40% Expected long-term rate of return7.25% 7.50% 7.75% — — — Future compensation growth rate— — — — — — * Discount rate used for the remeasurement of the non-management pension plan in April 2015 was consistent with the discount rate previously established.The expected long-term rate of return on plan assets, developed using the building block approach, is based on the mix of investments held directly by theplans and the current view of expected future returns, which is influenced by historical averages. Changes in actual asset return experience and discount rateassumptions can impact the Company’s operating results, financial position and cash flows.Benefit Obligation and Funded StatusChanges in the plans' benefit obligations and funded status are as follows: Postretirement and OtherBenefits Pension Benefits (dollars in millions)2017 2016 2017 2016Change in benefit obligation: Benefit obligation at January 1,$505.6 $530.5 $82.6 $93.1Service cost— — 0.2 0.3Interest cost19.4 19.3 3.2 3.3Actuarial loss (gain)28.1 (2.7) 7.6 (4.7)Benefits paid(38.6) (41.5) (11.6) (13.1)Retiree drug subsidy received— — 0.2 0.6Transfer of special death benefit(14.0) — 14.0 —Settlements(11.3) — — —Other— — 2.4 3.1Benefit obligation at December 31,$489.2 $505.6 $98.6 $82.6 Change in plan assets: Fair value of plan assets at January 1,$372.3 $378.1 $8.7 $10.3Actual return (loss) on plan assets64.8 30.3 0.2 0.3Employer contributions4.6 5.4 10.0 10.6Retiree drug subsidy received— — 0.2 0.6Benefits paid(38.6) (41.5) (11.6) (13.1)Settlements(11.0) — — — Fair value of plan assets at December 31,392.1 372.3 7.5 8.7Unfunded status$(97.1) $(133.3)$(91.1)$(73.9)90Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The following are the weighted-average assumptions used in accounting for and measuring the projected benefit obligations: Pension Benefits Postretirement and OtherBenefits December 31, December 31, 2017 2016 2017 2016Discount rate3.60% 4.00% 3.60% 4.00%Future compensation growth rate— — — —The assumed healthcare cost trend rate used to measure the postretirement health benefit obligation is shown below: December 31, 2017 2016Healthcare cost trend6.5% 6.5%Rate to which the cost trend is assumed to decline (ultimate trend rate)4.5% 4.5%Year the rates reach the ultimate trend rate2022 2021A one-percentage point change in assumed healthcare cost trend rates would have the following effect on the postretirement benefit costs and obligation:(dollars in millions)1% Increase 1% DecreaseService and interest costs for 2017$0.2 $(0.1)Postretirement benefit obligation at December 31, 20173.2 (2.9)The projected benefit obligation is recognized in the Consolidated Balance Sheets as follows: Pension Benefits Postretirement and OtherBenefits December 31, December 31,(dollars in millions)2017 2016 2017 2016Accrued payroll and benefits (current liability)$2.1 $2.1 $10.5 $9.4Pension and postretirement benefit obligations (noncurrent liability)95.0 131.2 80.6 64.5Total$97.1 $133.3 $91.1 $73.9Amounts recognized in "Accumulated other comprehensive loss" in the Consolidated Balance Sheets which have not yet been recognized in net pensioncosts consisted of the following: Postretirement and OtherBenefits Pension Benefits December 31, December 31,(dollars in millions)2017 2016 2017 2016Prior service (cost) benefit, net of tax of ($0.1), ($0.1), $5.3, $10.6$(0.1) $(0.1) $19.9 $19.1Actuarial loss, net of tax of ($42.5), ($81.6), ($12.7), ($19.7)(148.4) (141.8) (44.5) (34.8)Total$(148.5) $(141.9) $(24.6) $(15.7)91Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Amounts recognized in "Accumulated other comprehensive loss" on the Consolidated Statements of Shareowners’ Deficit and the Consolidated Statements ofComprehensive Income are shown below: Pension Benefits Postretirement and OtherBenefits(dollars in millions)2017 2016 2017 2016Prior service cost recognized: Reclassification adjustments$— $0.1 $(4.5) $(14.7)Actuarial (loss) gain recognized: Reclassification adjustments21.5 19.1 4.7 4.9 Actuarial gain (loss) arising during the period11.0 5.7 (7.4) 4.5The following amounts currently included in "Accumulated other comprehensive loss" are expected to be recognized in 2018 as a component of net periodicpension and postretirement cost: Pension Benefits Postretirement andOther Benefits(dollars in millions) Prior service benefit$— $(3.1)Actuarial loss17.6 4.6Total$17.6 $1.5Plan Assets, Investment Policies and StrategiesThe primary investment objective for the trusts holding the assets of the pension and postretirement plans is preservation of capital with a reasonable amountof long-term growth and income without undue exposure to risk. This is provided by a balanced strategy using fixed income and equity securities. The targetallocations for the pension plan assets are 65% equity securities and 35% investment grade fixed income securities. Equity securities are primarily held in theform of passively managed funds that seek to track the performance of a benchmark index. Equity securities include investments in growth and valuecommon stocks of companies located in the United States, which represents approximately 60% of the equity securities held by the pension plans atDecember 31, 2017, as well as stock of international companies located in both developed and emerging markets around the world. Fixed income securitiesprimarily include holdings of funds, which generally invest in a variety of intermediate and long-term investment grade corporate bonds from diversifiedindustries. The postretirement plan assets are currently invested in a group insurance contract.The fair values of the pension plan assets at December 31, 2017 and 2016 by asset category are as follows:(dollars in millions)December 31, 2017 Quoted Pricesin activemarketsLevel 1 SignificantobservableinputsLevel 2 SignificantunobservableinputsLevel 3Mutual funds U.S. equity index funds$151.0 $151.0 $— $—International equity index funds101.3 101.3 — —Fixed income bond funds136.1 136.1 — —Fixed income short-term money market funds3.7 3.7 — —Group insurance contract7.5 — — —Total$399.6 $392.1 $— $—92Table of ContentsForm 10-K Part II Cincinnati Bell Inc.(dollars in millions) December 31, 2016 Quoted Pricesin activemarketsLevel 1 SignificantobservableinputsLevel 2 SignificantunobservableinputsLevel 3Mutual funds U.S. equity index funds $142.7 $142.7 $— $—International equity index funds 95.6 95.6 — —Fixed income bond funds 123.9 123.9 — —Fixed income short-term money market funds 10.1 10.1 — —Group insurance contract 8.7 — — —Total $381.0 $372.3 $— $—The fair values of Level 1 investments are based on quoted prices in active markets.The group insurance contract is valued at contract value plus accrued interest and has not been included in the fair value hierarchy, but is included in thetotals above.Contributions to our qualified pension plans were $2.3 million in 2017, $3.1 million in 2016, and $10.3 million in 2015. Contributions to our non-qualifiedpension plan were $2.3 million in 2017, $2.3 million in 2016, and $2.2 million in 2015.Based on current assumptions, contributions to qualified and non-qualified pension plans in 2018 are expected to be approximately $4 million and $3million, respectively. Management expects to make cash payments of approximately $9 million related to its postretirement health plans in 2018.Estimated Future Benefit PaymentsThe following benefit payments, which reflect expected future service, as appropriate, are expected to be paid over the next ten years:(dollars in millions)PensionBenefits Postretirementand OtherBenefits MedicareSubsidyReceipts2018$39.8 $11.0 $(0.5)201938.1 9.5 (0.4)202038.6 8.4 (0.4)202137.1 8.1 (0.4)202235.6 7.7 (0.3)Years 2023 - 2027155.9 32.0 (1.2)11. Shareowners’ DeficitCommon SharesThe par value of the Company’s common shares is $0.01 per share. At December 31, 2017 and 2016, common shares outstanding were 42,197,965 and42,056,237, respectively.In 2010, the Board of Directors approved a plan for repurchase of up to $150.0 million of the Company's common shares. In 2016, the Company repurchasedand retired approximately 0.2 million shares of its common stock for $4.8 million at an average price of $19.67 per share. In 2017 and 2015, no shares wererepurchased or retired under this plan. As of December 31, 2017, the Company had the authority to repurchase $124.4 million of its common stock.The Company previously had a deferred compensation plan for certain executives of the Company. The executive deferred compensation plan wasterminated in the fourth quarter of 2015. At December 31, 2015, treasury shares of common stock held under the plan were nominal, with a total cost of $0.5million. In the fourth quarter of 2016, all amounts due under the plan were distributed to plan participants. 93Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Preferred SharesThe Company is authorized to issue 1,357,299 shares of voting preferred stock without par value and 1,000,000 shares of nonvoting preferred stock withoutpar value. The Company issued 155,250 voting shares of 6 3/4% cumulative convertible preferred stock at stated value. These shares were subsequentlydeposited into a trust in which the underlying 155,250 shares are equivalent to 3,105,000 depositary shares. Shares of this preferred stock can be converted atany time at the option of the holder into common stock of the Company at a conversion rate of 5.7676 shares of the Company common stock per one share of6 3/4% cumulative convertible preferred stock. Annual dividends of $67.50 per share (or $3.3752 per depositary share) on the outstanding 6 3/4% convertiblepreferred stock are payable quarterly in arrears in cash, or in common stock in certain circumstances if cash payment is not legally permitted. The liquidationpreference on the 6 3/4% cumulative convertible preferred stock is $1,000 per share (or $50 per depositary share). The Company paid $10.4 million inpreferred stock dividends in each of 2017, 2016, and 2015.Accumulated Other Comprehensive LossShareowners’ deficit includes an accumulated other comprehensive loss that is comprised of pension and postretirement unrecognized prior service cost andunrecognized actuarial losses, unrealized gains on Investment in CyrusOne and foreign currency translation losses.For the years ended December 31, 2017 and 2016, the changes in accumulated other comprehensive loss by component were as follows:(dollars in millions)Unrecognized NetPeriodic Pension andPostretirementBenefit Cost Unrealized gainon Investmentin CyrusOne ForeignCurrencyTranslationLoss TotalBalance as of December 31, 2015$(170.3) $— $(0.7) $(171.0)Remeasurement of benefit obligations6.6 — — 6.6Reclassifications, net6.1(a)— — 6.1Unrealized gain on Investment in CyrusOne, net— 68.1(b)— 68.1Foreign currency loss— — (0.1) (0.1)Balance as of December 31, 2016(157.6) 68.1 (0.8) (90.3)Remeasurement of benefit obligations2.8 — — 2.8Unrealized gain on Investment in CyrusOne, net— 8.3(c)— 8.3Reclassifications, net13.9(a)(76.4)(d)— (62.5)Reclassification adjustment to accumulateddeficit for stranded other comprehensive incometaxes arising from tax reform(32.2)(e)— — (32.2)Foreign currency gain— — 0.2 0.2Balance as of December 31, 2017$(173.1) $— $(0.6) $(173.7)(a) These reclassifications are included in the components of net period pension and postretirement benefit costs (see Note 10 for additional details).The components of net period pension and postretirement benefit cost are reported within "Cost of services", "Cost of products sold", and"Selling, general and administrative" expenses on the Consolidated Statements of Operations, with the exception of pension settlement charges,which are reported within "Other" on the Consolidated Statements of Operations.(b) The unrealized gain on the investment in CyrusOne was recorded in 2016 as the investment is no longer accounted for using the equity-methodand is recorded as an available-for-sale security on the Consolidated Balance Sheets at fair value.(c)The unrealized gain on Investment in CyrusOne, net of tax, represents changes in the fair value of CyrusOne shares of common stock owned bythe Company during the period, before any subsequent sales of those shares.(d)These reclassifications are reported within "Gain on sale of CyrusOne investment" on the Consolidated Statements of Operations.94Table of ContentsForm 10-K Part II Cincinnati Bell Inc.(e)This provisional reclassification adjustment resulted from a change in the corporate tax rate arising from tax legislation enacted in December2017, commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). In February 2018, the FASB issued ASU 2018-02 which allows entitiesto make a one-time reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting fromnewly enacted corporate tax rates. The Company early adopted the guidance effective December 31, 2017. The amount of the reclassification iscalculated on the basis of the difference between the historical and newly enacted tax rates on deferred taxes related to our pension andpostretirement benefit plans.12. Income TaxesIncome tax expense for continuing operations consisted of the following: Year Ended December 31,(dollars in millions)2017 2016 2015Current: Federal$(14.8) $(14.0) $9.2 State and local1.0 0.5 1.7 Total current(13.8) (13.5) 10.9Investment tax credits(0.1) (0.1) (0.2)Deferred: Federal51.7 72.6 149.4 State and local2.3 5.7 5.2 Total deferred54.0 78.3 154.6Valuation allowance(9.2) (3.6) (5.5)Total$30.9 $61.1 $159.8The following is a reconciliation of the statutory federal income tax rate with the effective tax rate for each year: Year Ended December 31, 2017 2016 2015U.S. federal statutory rate35.0 % 35.0 % 35.0 %State and local income taxes, net of federal income tax0.7 0.2 0.7Change in valuation allowance, net of federal income tax(9.1) (1.4) (0.8)State net operating loss adjustments2.0 0.9 0.3Transaction Costs5.5 — —Unrecognized tax benefit changes1.4 2.3 0.2Federal Rate Change10.3 — —Other differences, net1.0 0.5 0.1Effective tax rate46.8 % 37.5 % 35.5 %The income tax provision (benefit) was charged to continuing operations, discontinued operations, accumulated other comprehensive income or additionalpaid-in capital as follows: Year Ended December 31,(dollars in millions)2017 2016 2015Income tax provision (benefit) related to: Continuing operations$30.9 $61.1 $159.8Discontinued operations— — 34.8Accumulated other comprehensive income (loss)(28.3) 43.8 2.0Excess tax benefits on stock option exercises— 0.1 (0.1)95Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The components of our deferred tax assets and liabilities were as follows: December 31,(dollars in millions)2017 2016Deferred tax assets: Net operating loss carryforwards$88.9 $125.2Pension and postretirement benefits46.1 78.7Employee benefits7.9 12.2AMT Credit Carryforward1.5 17.4Texas Margin Credit10.5 10.7Other14.9 19.1Total deferred tax assets169.8 263.3 Valuation allowance(45.5) (54.4)Total deferred tax assets, net of valuation allowance$124.3 $208.9Deferred tax liabilities: Property, plant and equipment$115.9 $135.0Investment in CyrusOne— 9.1Other0.3 0.3Total deferred tax liabilities116.2 144.4 Net deferred tax assets$8.1 $64.5As of December 31, 2017, the Company had $187.5 million of federal tax operating loss carryforwards with a deferred tax asset value of $39.3 million,alternative minimum tax credit carryforwards of $1.5 million, $1.6 million foreign deferred tax assets related to NOLs, state tax credits of $10.5 million, and$48.0 million in deferred tax assets related to state and local tax operating loss carryforwards. Approximately $130.0 million of the remaining federal tax losscarryforwards will expire in 2023. U.S. tax laws limit the annual utilization of tax loss carryforwards of acquired entities. These limitations should notmaterially impact the utilization of the tax carryforwards.The ultimate realization of the deferred income tax assets depends upon the Company’s ability to generate future taxable income during the periods in whichbasis differences and other deductions become deductible, and prior to the expiration of the net operating loss carryforwards. Due to its historical and futureprojected taxable income, management believes it will utilize future federal deductions and available net operating loss carryforwards prior to theirexpiration. Management also concluded that it was more likely than not that certain state and foreign tax loss carryforwards would not be realized basedupon the analysis described above and therefore provided a valuation allowance.The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $22.0 million and $31.0 million at December 31,2017 and December 31, 2016, respectively. Accrued interest and penalties on income tax uncertainties were immaterial as of December 31, 2017 and2016. A reconciliation of the unrecognized tax benefits is as follows: Year Ended December 31,(dollars in millions)2017 2016 2015Balance, beginning of year$31.4 $27.6 $27.1Change in tax positions for the current year1.0 1.2 0.5Change in tax positions for prior years0.3 2.6 —Change related to decrease in federal tax rate(10.5) — —Balance, end of year$22.2 $31.4 $27.6The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various foreign, state and local jurisdictions. With a fewexceptions, the Company is no longer subject to U.S. federal, state or local examinations for years before 2014.96Table of ContentsForm 10-K Part II Cincinnati Bell Inc.On December 22, 2017, the U.S. Government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). TheTax Act makes broad and complex changes to the U.S. tax code including, but not limited to, reducing the U.S. federal corporate tax rate from 35 percent to21 percent, limiting the deductibility of interest and executive compensation and eliminating the corporate alternative minimum tax (AMT). GenerallyAccepted Accounting Principles requires that the impact of tax legislation be recognized in the period in which the law was enacted. In addition, there arecertain transitional impacts of the Tax Act. The reduction of the U.S. corporate tax rate caused the Company to adjust our U.S. deferred tax assets andliabilities to the lower federal base rate of 21 percent. The Company was able to make a reasonable estimate of the impact; therefore, recorded a provisionalnet charge of $6.8 million for the quarter ended December 31, 2017. This $6.8 million provisional net charge included a reduction of our uncertain taxpositions of $10.5 million.The Company considers the provisional amount recorded to be a reasonable estimate as of December 31, 2017; however, this amount could be affected byadditional information and other analysis related to the Tax Act. The final transition impacts of the Tax Act may differ from the above estimate, possiblymaterially, due to several different reasons. The estimate could be impacted by changes in interpretation of the Tax Act, any legislative action taken toaddress questions that arise because of the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the TaxAct, or any updates or changes to estimates the Company has utilized to calculate the transition impacts. Changes to the estimates the Company has utilizedto calculate the transition impact may include impacts from changes to current year earnings estimates, as well as foreign exchange rates of foreignsubsidiaries. The Securities Exchange Commission has issued rules that would allow for a measurement period of up to one year after the enactment date ofthe Tax Act to finalize the recording of the related tax impacts. As a result, the provisional amount of $6.8 million could be adjusted during the measurementperiod ending December 31, 2018.U.S. income and foreign withholding taxes have not been recognized on the excess of the amount for financial reporting over the tax basis of investments inforeign subsidiaries that is indefinitely reinvested outside the United States. The Company intends to permanently reinvest the undistributed earnings ofthese foreign subsidiaries in its operations outside the United States to support its international growth. Determination of the amount of any unrecognizeddeferred income tax liability on this temporary difference is not practicable because of the complexities of the hypothetical calculation. 13. Stock-Based and Deferred Compensation PlansThe Company may grant stock options, stock appreciation rights, performance-based awards, restricted stock units, and time-based restricted shares to officersand key employees under the 2017 Long-Term Incentive Plan and stock options, restricted shares, and restricted stock units to directors under the 2017 StockPlan for Non-Employee Directors. The maximum number of shares authorized and available for award under the 2017 plans at December 31, 2017 was 3.1million.On May 2, 2017, the 2007 Long Term Incentive Plan and 2007 Stock Option Plan for Non-Employee Directors both expired. Under the 2007 Long TermIncentive Plan, the Company granted stock options, stock appreciation rights, performance-based awards, and time-based restricted shares to officers and keyemployees. Under the 2007 Stock Option Plan for Non-Employee Directors, the Company granted stock options, restricted shares, and restricted stock unitsto directors. The Company no longer grants shares under the 2007 plans as of May 2, 2017.97Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Stock Options and Stock Appreciation RightsGenerally, the awards of stock options and stock appreciation rights fully vest three years from grant date and expire ten years from grant date. Beginning in2012, some of the stock options vested over a three year period based on the achievement of certain performance objectives. The Company generally issuesnew shares when options to purchase common shares or stock appreciation rights are exercised. The following table summarizes stock options and stockappreciation rights activity: 2017 2016 2015 Weighted-AverageExercisePrice PerShare Weighted-AverageExercisePrice PerShare Weighted-AverageExercisePrice PerShare(in thousands, except per share amounts)Shares Shares Shares Outstanding at January 1,390 $20.00 776 $19.27 1,045 $19.27Exercised(35) 15.76 (236) 16.12 (7) 9.15Forfeited(35) 21.58 (11) 16.16 (100) 18.71Expired(139) 24.55 (139) 22.79 (162) 20.05Outstanding at December 31,181 $17.10 390 $20.00 776 $19.27Expected to vest at December 31,181 $17.10 390 $20.00 776 $19.27Exercisable at December 31,181 $17.10 330 $20.56 635 $19.65 (dollars in millions) Compensation expense for the year$0.2 $0.4 $— Tax benefit related to compensation expense$(0.1) $(0.1) $— Intrinsic value of awards exercised$0.2 $1.8 $0.1 Cash received from awards exercised$0.5 $3.8 $0.1 Grant date fair value of awards vested$0.3 $0.5 $0.7 The following table summarizes our outstanding and exercisable awards at December 31, 2017: Outstanding Exercisable Weighted-AverageExercisePrice PerShare Weighted-AverageExercisePrice PerShare(in thousands, except per share amounts)Shares Shares Range of Grant Price $8.3520 $8.35 20 $8.35$14.55 to $17.05133 17.04 133 17.04$23.75 to $26.0528 23.83 28 23.83Total181 $17.10 181 $17.10As of December 31, 2017, the aggregate intrinsic value for awards outstanding and exercisable was $0.8 million. The weighted-average remaining contractuallife for awards outstanding and exercisable is approximately six years. As of December 31, 2017, there was no remaining unrecognized stock compensationexpense related to stock options or stock appreciation rights.Performance-Based Restricted AwardsAwards granted generally vest over three years and upon the achievement of certain performance-based objectives. Performance-based awards are expensedbased on their grant date fair value if it is probable that the performance conditions will be achieved.98Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The following table summarizes our outstanding performance-based restricted award activity: 2017 2016 2015 Weighted-AverageExercisePrice PerShare Weighted-AverageExercisePrice PerShare Weighted-AverageExercisePrice PerShare(in thousands, except per share amounts)Shares Shares Shares Non-vested at January 1,954 $15.89 721 $16.77 349 $19.28Granted*245 22.03 307 15.45 538 15.46Vested(229) 16.74 (51) 22.75 (89) 19.00Forfeited(99) 16.62 (23) 22.35 (77) 16.44Non-vested at December 31,871 $17.30 954 $15.89 721 $16.77 (dollars in millions) Compensation expense for the year$3.9 $3.6 $3.1 Tax benefit related to compensation expense$(1.4) $(1.3) $(1.1) Grant date fair value of awards vested$3.8 $1.2 $1.7 * Assumes the maximum number of awards that can be earned if the performance conditions are achieved.As of December 31, 2017, unrecognized compensation expense related to performance-based awards was $7.6 million, which is expected to be recognizedover a weighted-average period of approximately one year.Time-Based Restricted AwardsAwards granted to employees in 2017 and 2016 vest at the end of a three year period. Awards granted to employees prior to 2016 generally vest in one-thirdincrements over a period of three years. Awards granted to directors in 2017, 2016 and 2015 vest on the first anniversary of the grant date.The following table summarizes our time-based restricted award activity: 2017 2016 2015 Weighted-AverageExercisePrice PerShare Weighted-AverageExercisePrice PerShare Weighted-AverageExercisePrice PerShare(in thousands, except per share amounts)Shares Shares Shares Non-vested at January 1,106 $16.75 47 $19.59 137 $18.44Granted96 20.78 106 16.75 36 17.35Vested(38) 19.10 (47) 19.59 (126) 17.70Non-vested at December 31,164 $18.57 106 $16.75 47 $19.59 (dollars in millions) Compensation expense for the year$1.8 $1.1 $1.0 Tax benefit related to compensation expense$(0.6) $(0.4) $(0.3) Grant date fair value of awards vested$0.7 $0.9 $2.2 As of December 31, 2017, there was $1.1 million of unrecognized compensation expense related to these restricted stock awards, which is expected to berecognized over a weighted-average period of approximately two years.99Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Cash-Settled and Other AwardsThe Company grants cash-settled stock appreciation rights and performance awards. Beginning in 2012, some of the stock appreciation rights vested over athree year period based on the achievement of certain performance objectives. The final payments of these awards will be indexed to the percentage changein the Company’s stock price from the date of grant. No cash-payment awards were issued in 2017, 2016 or 2015. For the year ended December 31, 2017, expense incurred for cash-payment awards was nominal.For the years ended December 31, 2016 and 2015, expense incurred for cash-payment awards was $2.2 million and $0.6 million, respectively. At December 31, 2017, there was no remaining unrecognized compensation expense for cash-settled and other awards. The aggregate intrinsic value ofoutstanding and exercisable cash-settled stock appreciation rights at December 31, 2017 was nominal. Deferred Compensation PlansThe Company currently has a deferred compensation plan for the Board of Directors. Under the directors deferred compensation plan, each director can deferreceipt of all or a part of their director fees and annual retainers, which can be invested in various investment funds including the Company’s common stock.In years prior to 2012, the Company granted 1,200 phantom shares to each non-employee director on the first business day of each year, which are fullyvested once a director has five years of service. No phantom shares were granted to non-employee directors in 2017. Distributions to the directors aregenerally in the form of cash.The Company previously had a deferred compensation plan for certain executives of the Company. The executive deferred compensation plan wasterminated in the fourth quarter of 2015. In the fourth quarter of 2016, all amounts due under the plan were distributed to plan participants. At December 31, 2017 and 2016, the number of director deferred common shares was nominal. As these awards can be settled in cash, compensation costseach period are based on the change in the Company’s stock price. Compensation expense recognized during 2017 was nominal. In 2016 and 2015, theCompany recognized compensation expense of $0.1 million and $0.2 million, respectively.14. Restructuring and SeveranceLiabilities have been established for employee separations, lease abandonment and contract terminations. A summary of activity in the restructuring andseverance liability is shown below:(dollars in millions)EmployeeSeparation LeaseAbandonment Other TotalBalance as of December 31, 2014$3.0 $1.8 $0.1 $4.9Charges3.3 0.3 2.4 6.0Utilizations(6.1) (1.3) (2.4) (9.8)Balance as of December 31, 20150.2 0.8 0.1 1.1Charges/(Reversals)12.5 (0.5) (0.1) 11.9Utilizations(1.7) (0.1) — (1.8)Balance as of December 31, 201611.0 0.2 — 11.2Charges32.7 — — 32.7Utilizations(29.3) (0.1) — (29.4)Balance as of December 31, 2017$14.4 $0.1 $— $14.5100Table of ContentsForm 10-K Part II Cincinnati Bell Inc.In 2017, the Company initiated reorganizations within both segments of the business in order to more appropriately align the Company for future growth. Inaddition, during 2017 the Company finalized a voluntary severance program for certain bargained employees related to an initiative to reduce field andnetwork costs within our legacy copper network which resulted in headcount reductions. In 2016, employee severance costs were associated with initiativesto reduce costs associated with our legacy copper network, including a voluntary severance program for certain management employees. Employee severancecosts were also incurred as a result of increased in-sourcing of IT professionals by our customers which resulted in headcount reductions in our IT Servicesand Hardware segment. In 2015, employee severance charges were associated with discontinuing our cyber-security product offering and integrating each ofour segments' business markets.Lease abandonment costs represent future minimum lease obligations, net of expected sublease income, for abandoned facilities. Lease payments onabandoned facilities will continue through 2019.Other charges in 2015 represent project related expenses as we identified opportunities to integrate the business markets within our Entertainment andCommunications and IT Services & Hardware segments.A summary of restructuring activity by business segment is presented below:(dollars in millions)Entertainment andCommunications IT Services andHardware Corporate TotalBalance as of December 31, 2014$3.9 $0.3 $0.7 $4.9Charges1.6 2.8 1.6 6.0Utilizations(4.7) (2.8) (2.3) (9.8)Balance as of December 31, 20150.8 0.3 — 1.1Charges7.7 3.3 0.9 11.9Utilizations(1.0) (0.6) (0.2) (1.8)Balance as of December 31, 20167.5 3.0 0.7 11.2Charges27.9 4.8 — 32.7Utilizations(23.1) (5.6) (0.7) (29.4)Balance as of December 31, 2017$12.3 $2.2 $— $14.5At December 31, 2017 and 2016, $12.0 million and $7.4 million, respectively, of the restructuring liabilities were included in “Other current liabilities.” AtDecember 31, 2017 and 2016, $2.5 million and $3.8 million was included in "Other noncurrent liabilities," respectively.15. Business Segment InformationFor the years ended December 31, 2017, 2016, and 2015, we operated two business segments: Entertainment and Communications and IT Services andHardware. The closing of our wireless operations, effective March 31, 2015, represented a strategic shift in our business. Therefore, certain wireless assets,liabilities and results of operations are reported as discontinued operations in our financial statements. For further details of Discontinued Operations, seeNotes 1 and 16 of Notes to Consolidated Financial Statements.The Entertainment and Communications segment provides data, video, voice and other services. These services are primarily provided to customers insouthwestern Ohio, northern Kentucky and southeastern Indiana. Data includes products such as high-speed internet access, digital subscriber lines, privateline, multi-protocol label switching, SONET, dedicated internet access, wavelength, audio conferencing and digital signal. These products are used totransport large amounts of data over private networks. Video services provide our Fioptics customers access to over 400 entertainment channels, over 140high-definition channels, parental controls, HD DVR, video On-Demand and access to a Fioptics live TV streaming application. Voice represents localservice, including Fioptics voice lines. It also includes VoIP, long distance, digital trunking, switched access and other value-added services such as calleridentification, voicemail, call waiting, and call return. VoIP products provide our customers access to widely disbursed communication platforms and accessto cloud based services and hosted unified communications products. Other services consists of revenue generated from wiring projects for businesscustomers, advertising, directory assistance, maintenance and information services.101Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Entertainment and Communications revenue increased during 2017 and 2016 due to the demand for strategic fiber products more than offsetting legacycopper declines. Cost of services and product grew during 2017 and 2016 due to the increase in revenue and related primarily to video, VOIP and MPLS.Programming costs increased both due to an increase in the number of subscribers, as well as rising rates charged by content providers. Furthermore, networkand materials costs increased in 2017 as we continue to build out our fiber investment. Operating income for Entertainment and Communications for 2017was down compared to a year ago due in large part to restructuring and severance charges of $27.9 million incurred related to a voluntary severance programto reduce costs associated with our legacy copper network. Operating income decreased during 2016 compared to 2015 primarily due to increaseddepreciation expense associated with the impact of accelerating construction of our fiber network and reducing the estimated useful life of certain set-topboxes, as well as the related software, as we upgrade to new technology. We also reduced the useful life of our copper assets in the fourth quarter of 2015.Entertainment and Communications recognized restructuring and severance related charges of $7.7 million in 2016 and reversed restructuring and severancerelated charges of $1.6 million in 2015. There were no impairment charges recorded in 2017, 2016 or 2015. Capital expenditures are incurred to expand ourFioptics product suite, upgrade and increase capacity for our internet and data networks, and to maintain our wireline network.The IT Services and Hardware segment provides a full range of managed IT solutions, including managed infrastructureservices, telephony and IT equipment sales, and professional IT staffing services. In 2017, the IT Services and Hardware segment acquired SunTel and OnX.These acquisitions contributed $172.8 million in revenue with significant contributions from Professional services in the amount of $29.6 million, Telecomand IT hardware of $132.7 million and Cloud services of $6.8 million. These contributions helped to offset other declines experienced in these productcategories as a result of reduced capital spending by our enterprise customers in Greater Cincinnati, resulting in net growth of IT Services and Hardwarerevenue of $81.1 million. Selling, general and administrative expenses as well as depreciation and amortization expenses increased in 2017 primarily due tothe acquisitions of SunTel and OnX. IT Services and Hardware revenue decreased $4.7 million in 2016 compared to 2015 as a result of an increase in strategicrevenue of $17.7 million in 2016 which was more than offset by the $24.5 million decrease in telecom and IT hardware sales in 2016. Restructuring andseverance related charges of $4.8 million were recognized in 2017 primarily related to the Company initiated reorganization to better align the segment forfuture growth. Restructuring and severance related charges of $3.3 million were recognized in 2016 primarily related to a reduction in force as customersbegan to in-source IT staff, therefore reducing the need for our professional services.Total assets for the Company increased $621.4 million as of December 31, 2017 as compared to December 31, 2016. IT Services and Hardware assetsincreased $384.0 million primarily due to net assets acquired with OnX and SunTel. See Note 3. Corporate assets increased $213.1 million primarily due toproceeds from the 8% Notes, as well as the first year of interest, that is held as restricted cash totaling $378.7 million. The increase in restricted cash is offsetby decreases in the investment in CyrusOne and the deferred tax asset. As of December 31, 2017, we no longer held an investment in CyrusOne. As ofDecember 31, 2016, our investment in CyrusOne is included as an asset of the Corporate segment. Deferred tax assets and liabilities totaled $19.3 million and$11.2 million as of December 31, 2017, respectively. Deferred tax assets totaled $64.5 million as of December 31, 2016.102Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Our business segment information is as follows: Year Ended December 31,(dollars in millions)2017 2016 2015Revenue Entertainment and Communications$789.9 $768.8 $743.7IT Services and Hardware511.8 430.7 435.4Intersegment(13.2) (13.7) (11.3)Total revenue$1,288.5 $1,185.8 $1,167.8Intersegment revenue Entertainment and Communications$1.7 $1.3 $1.3IT Services and Hardware11.5 12.4 10.0Total intersegment revenue$13.2 $13.7 $11.3Operating income Entertainment and Communications$65.3 $90.6 $129.9IT Services and Hardware10.6 23.2 20.6Corporate(37.8) (20.8) (22.5)Total operating income$38.1 $93.0 $128.0Expenditures for long-lived assets* Entertainment and Communications$196.4 $272.5 $269.5IT Services and Hardware181.1 13.7 14.0Corporate— 0.2 0.1Total expenditures for long-lived assets$377.5 $286.4 $283.6Depreciation and amortization Entertainment and Communications$174.7 $168.6 $129.2IT Services and Hardware18.1 13.5 12.3Corporate0.2 0.1 0.1Total depreciation and amortization$193.0 $182.2 $141.6 * Includes cost of acquisitions As of December 31, (dollars in millions)2017 2016 Assets Entertainment and Communications$1,117.8 $1,093.5 IT Services and Hardware444.0 60.0 Corporate and eliminations600.6 387.5 Total assets$2,162.4 $1,541.0 103Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Details of our service and product revenues including eliminations are as follows: Year Ended December 31,(dollars in millions)2017 2016 2015Service revenue Entertainment and Communications$785.1 $763.0 $735.0IT Services and Hardware221.0 215.7 198.0Total service revenue$1,006.1 $978.7 $933.0Product revenue Entertainment and Communications$3.1 $4.5 $7.4Telecom and IT hardware279.3 202.6 227.4Total product revenue$282.4 $207.1 $234.816. Discontinued OperationsCincinnati Bell Wireless LLC ("CBW"), our former Wireless segment, provided digital wireless voice and data communications services to customers in theCompany’s licensed service territory, which included Greater Cincinnati and Dayton, Ohio, and areas of northern Kentucky and southeastern Indiana. TheCompany’s customers were also able to place and receive wireless calls nationally and internationally due to roaming agreements the Company had withother carriers.In the second quarter of 2014, we entered into agreements to sell our wireless spectrum licenses and certain other assets related to our wireless business,including leases to certain wireless towers and related equipment and other assets. The agreement to sell our spectrum licenses closed on September 30, 2014for cash proceeds of $194.4 million. Prior to this date, the Company's digital wireless network utilized 50 MHz of licensed spectrum in the Cincinnati areaand 40 MHz of licensed spectrum in the Dayton area, which had a carrying value of $88.2 million. Simultaneous with the close of the spectrum sale, theCompany entered into a separate agreement to use certain wireless spectrum for $8.00 until we no longer provided wireless services. We ceased providingwireless service effective March 31, 2015. The fair value of the lease, which is considered a Level 3 measurement based on other comparable transactions,totaled $6.4 million and was recorded as a prepaid expense and amortized over a six month period ending March 31, 2015.As of March 31, 2015, there were no subscribers remaining on the network and we no longer required the use of the spectrum being leased. Therefore, the$112.6 million gain on the sale of the wireless spectrum licenses, which had been previously deferred, was recognized in Income (loss) from discontinuedoperations, net of tax during the three months ended March 31, 2015. On April 1, 2015, we transferred certain other wireless assets to the acquirer, includingleases to certain wireless towers and related equipment and other assets, which resulted in a gain of $15.9 million in the second quarter of 2015.104Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Wireless financial results for the twelve months ended December 31, 2017, 2016 and 2015 reported as "Income from discontinued operations, net of tax" onthe Consolidated Statements of Operations are as follows: Twelve Months Ended December 31,(dollars in millions)2017 2016 2015Revenue$— $— $4.4Costs and expenses Cost of products and services— — 12.0Selling, general and administrative— — 2.2Depreciation and amortization expense— — 28.6Restructuring charges— — 3.3 Gain on sale or disposal of assets— — (0.4) Amortization of deferred gain— — (6.5)Total operating costs and expenses— — 39.2Operating Loss— — (34.8)Interest income— — (1.7)Other income— (0.3) (2.3)Gain on transfer of tower lease obligations and other assets— — 15.9Gain on sale of wireless spectrum licenses— — 112.6Income before income taxes— 0.3 97.7Income tax expense— — 34.8Income from discontinued operations, net of tax$— $0.3 $62.9Following is selected operating and financing cash flow activity from discontinued operations included in Consolidated Statements of Cash Flows: Twelve Months Ended December 31,(dollars in millions)2017 2016 2015Depreciation and amortization$— $— $28.6Gain on sale of assets— — (0.4)Deferred gain on sale of spectrum licenses— — (112.6)Amortization of deferred gain on sale of towers— — (6.5)Gain on transfer of tower lease obligations and other assets— — (15.9)Non-cash spectrum lease— — 3.2Restructuring payments— (4.4) (14.5)Repayment of debt— — (0.3)105Table of ContentsForm 10-K Part II Cincinnati Bell Inc.17. Quarterly Financial Information (Unaudited) 2017 First Second Third Fourth (in millions, except per common share amounts)Quarter Quarter Quarter Quarter TotalRevenue$278.2 $294.0 $289.2 $427.1 $1,288.5Operating (loss) income(5.3) 20.9 12.7 9.8 38.1Net income (loss)60.4 2.1 (11.2) (16.2) 35.1 Net basic earnings (loss) per common share$1.37 $(0.01) $(0.33) $(0.45) $0.59 Net diluted earnings (loss) per common share$1.37 $(0.01) $(0.33) $(0.45) $0.58 2016 First Second Third Fourth (in millions, except per common share amounts)Quarter Quarter Quarter Quarter TotalRevenue$288.9 $299.2 $312.4 $285.3 $1,185.8Operating income29.6 27.4 25.5 10.5 93.0Income (loss) from continuing operations7.0 77.6 18.8 (1.6) 101.8Income from discontinued operations, net of tax— — — 0.3 0.3Net income (loss)7.0 77.6 18.8 (1.3) 102.1 Basic earnings (loss) per common share from continuing operations$0.10 $1.79 $0.39 $(0.10) $2.17Basic earnings per common share from discontinued operations$— $— $— $0.01 $0.01Net basic earnings (loss) per common share$0.10 $1.79 $0.39 $(0.09) $2.18 Diluted earnings (loss) per common share from continuing operations$0.10 $1.78 $0.38 $(0.10) $2.17Diluted earnings per common share from discontinued operations$— $— $— $0.01 $0.01Net diluted earnings (loss) per common share$0.10 $1.78 $0.38 $(0.09) $2.18The effects of assumed common share conversions are determined independently for each respective quarter and year and may not be dilutive during everyperiod due to variations in operating results. Therefore, the sum of quarterly per share results will not necessarily equal the per share results for the full year.Restructuring and employee severance charges totaled $25.6 million, $3.6 million and $3.5 million in the first, second and fourth quarter of 2017,respectively. Restructuring and employee severance charges totaled $11.9 million in the fourth quarter of 2016.Transaction and integration costs totaled $0.6 million, $1.7 million, $12.1 million and $4.1 million in the first, second, third, and fourth quarter of 2017,respectively. These costs were primarily related to the acquisitions of SunTel and OnX as well as the planned merger for the previously announcedacquisition of Hawaiian Telcom.In 2017, Net income includes gains from the sale of our CyrusOne investments of $117.7 million in the first quarter. In 2016, Income from continuingoperations includes gains from the sale of our CyrusOne investment of $118.6 million, $33.3 million, and $5.1 million in the second, third, and fourthquarter, respectively.In the fourth quarter of 2017, the Company recognized losses on extinguishment of debt of $3.2 million. In the first quarter of 2016, the Company recognizeda gain on the extinguishment of debt of $2.4 million. The Company recognized losses on the extinguishment of debt of $5.2 million, $11.4 million, and $4.8million in the second, third, and fourth quarter of 2016, respectively.In the fourth quarter of 2017, the company acquired OnX. The revenues and net income of OnX included in the quarterly financial information from theacquisition date through December 31, 2017 were $150.0 million and $11.5 million. For further information related to this acquisition, see Note 3 of theNotes to Consolidated Financial Statements.In the fourth quarter of 2017, the U.S. Government enacted the Tax Cuts and Jobs Act (the "Tax Act"). The transitional impact of the Tax Act resulted in aprovisional net charge of $6.8 million in the fourth quarter of 2017.106Table of ContentsForm 10-K Part I Cincinnati Bell Inc.18. Supplemental Cash Flow Information Year Ended December 31,(dollars in millions)2017 2016 2015Capitalized interest expense$0.7 $0.7 $1.1Cash paid/(received) for: Interest65.7 71.1 108.5Income taxes, net of refunds(12.9) 1.7 8.8Noncash investing and financing activities: Accrual of CyrusOne dividends— 1.1 2.1Acquisition of property by assuming debt and other financing arrangements17.3 12.0 5.8Acquisition of property on account12.0 23.8 34.6Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNo reportable information under this item.Item 9A. Controls and Procedures(a)Evaluation of disclosure controls and procedures.Cincinnati Bell Inc.’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, have evaluated theeffectiveness of the Company’s disclosure controls and procedures (as defined in SEC Rule 13a-15(e)) as of the end of the period covered by thisreport. Based on this evaluation, Cincinnati Bell Inc.’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of theperiod covered by this report, such controls and procedures were effective.(b) Management's annual report on internal control over financial reporting.Management's Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm are set forthin Part II, Item 8 of this Annual Report on Form 10-K.(c) Changes in internal control over financial reporting.There were no changes to Cincinnati Bell Inc.'s internal control over financial reporting during the fourth quarter of 2017 that materially affect, orare reasonably likely to materially affect, Cincinnati Bell Inc.’s internal control over financial reporting.Item 9B. Other InformationNo reportable information under this item.107Table of ContentsPART IIIItem 10. Directors, Executive Officers and Corporate GovernanceThe information required by Item 401, Item 405, Item 406 and 407 (c)(3), (d)(4) and (d)(5) of Regulation S-K regarding directors of Cincinnati Bell Inc. canbe found in the Proxy Statement for the 2018 Annual Meeting of Shareholders and is incorporated herein by reference.The Company’s Code of Ethics for Senior Financial Officers that applies to its Chief Executive Officer, Chief Financial Officer and Chief Accounting Officeris posted on the Company’s website at http://www.cincinnatibell.com. Within the time period required by the SEC and the New York Stock Exchange("NYSE"), the Company will post on its website any amendment to the Code of Ethics for Senior Financial Officers and any waiver of such code relating tosuch senior executive officers of the Company.In addition to the certifications of the Company’s Chief Executive Officer and Chief Financial Officer required under Section 302 of the Sarbanes-Oxley Actof 2002 and filed as exhibits to this Annual Report on Form 10-K, in May 2017 the Company’s Chief Executive Officer submitted to the NYSE thecertification regarding compliance with the NYSE’s corporate governance listing standards required by Section 303 A.12 of the NYSE Listed CompanyManual.Executive Officers of the Registrant:The names, ages and positions of the executive officers of the Company as of February 26, 2018 are as follows:Name Age TitleLeigh R. Fox 45 President and Chief Executive OfficerAndrew R. Kaiser 49 Chief Financial OfficerChristi H. Cornette 62 Chief Culture OfficerThomas E. Simpson 45 Chief Operating OfficerChristopher J. Wilson 52 Vice President and General CounselJoshua T. Duckworth 39 Vice President of Treasury, Corporate Finance and Investor RelationsShannon M. Mullen 41 Vice President and Corporate Controller Officers are elected annually but are removable at the discretion of the Board of Directors.The business experiences of our executive officers during the past five years are as follows:LEIGH R. FOX, President and Chief Executive Officer since May 31, 2017; President and Chief Operating Officer of the Company from September 2016 toMay 2017; Chief Financial Officer of the Company from October 2013 to September 2016; Chief Administrative Officer of the Company from July 2013 toOctober 2013; Senior Vice President of Finance and Operations from December 2012 to July 2013; Vice President of Finance at Cincinnati Bell TechnologySolutions Inc. (CBTS) from October 2008 to December 2012.ANDREW R. KAISER, Chief Financial Officer of the Company since September 2016; Vice President, Consumer Marketing and Data Analytics of theCompany from December 2015 to September 2016; Vice President Corporate Finance of the Company from January 2014 to December 2015; Partner atHoward Roark Consulting, LLC from 2005 to January 2014.CHRISTI H. CORNETTE, Chief Culture Officer of the Company since June 2017; Senior Vice President, Marketing of the Company from August 2013 toJune 2017; Vice President, Marketing of the Company from October 2008 to August 2013; Director of CBTS Marketing from October 2002 to October 2008.THOMAS E. SIMPSON, Chief Operating Officer since June 2017, Senior Vice President and Chief Technology Officer of the Company from January 2015to June 2017; Vice President and Chief Technology Officer at Cincinnati Bell Technology Solutions (CBTS) from 2014 to 2015; Vice President, Researchand Development at CBTS from 2010 to 2014; Director, Technical Operations at CBTS from 2008 to 2010.CHRISTOPHER J. WILSON, Vice President and General Counsel of the Company since August 2003.108Table of ContentsJOSHUA T. DUCKWORTH, Vice President of Treasury, Corporate Finance and Inventor Relations since October 2017; Vice President, Investor Relationsand Controller of the Company from July 2013 to October 2017; Assistant Treasurer and Director of Investor Relations for Cincinnati Bell Inc. from August2012 to July 2013; Assistant Controller for Cincinnati Bell Inc. from August 2010 to August 2012; Deloitte & Touche LLP's audit practice from October2004 to August 2010.SHANNON M. MULLEN, Vice President and Corporate Controller of the Company since October 2017; Vice President, Finance of the Company fromDecember 2016 to October 2017; Senior Director of Finance of the Company from October 2013 to December 2016; Director of Finance of the Companyfrom January 2008 to October 2013; Senior Financial Analyst of the Company from April 2006 to January 2008; Manager of Accounting Research andProjects of the Company from December 2004 to April 2006.Item 11. Executive CompensationThe information required by this item can be found in the Proxy Statement for the 2018 Annual Meeting of Shareholders and is incorporated herein byreference.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this item can be found in the Proxy Statement for the 2018 Annual Meeting of Shareholders and is incorporated herein byreference.Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information required by this item can be found in the Proxy Statement for the 2018 Annual Meeting of Shareholders and is incorporated herein byreference.Item 14. Principal Accountant Fees and ServicesThe information required by this item can be found in the Proxy Statement for the 2018 Annual Meeting of Shareholders and is incorporated herein byreference.109Table of ContentsPART IVItem 15. Exhibits and Financial Statement SchedulesFinancial StatementsConsolidated financial statements are included in Part II, Item 8.Financial Statement SchedulesFinancial Statement Schedule II — Valuation and Qualifying Accounts. All other schedules are not required under the related instructions or are notapplicable.Exhibits 2Exhibits identified in parenthesis below, on file with the Securities and Exchange Commission, are incorporated herein by reference as exhibits hereto.ExhibitNumber Description(2.1) Agreement and Plan of Merger, dated as of July 9, 2017, among Cincinnati Bell Inc., Twin Acquisition Corp. and Hawaiian TelcomHoldco, Inc. (Exhibit 2.1 to Current Report on Form 8-K, date of Report July 10, 2017, File No. 1-8519).(2.2) Agreement and Plan of Merger, dated as of July 9, 2017, among Cincinnati Bell Inc., Yankee Acquisition LLC, OnX Holdings LLCand MLN Holder Rep LLC (Exhibit 2.2 to Current Report on Form 8-K, date of Report July 10, 2017, File No. 1-8519).(3.1) Amended and Restated Articles of Incorporation of Cincinnati Bell Inc. (Exhibit 3.1 to Current Report on Form 8-K, date of ReportApril 25, 2008, File No. 1-8519).(3.2) Amendment to the Amended and Restated Articles of Incorporation of Cincinnati Inc. (Exhibit 3.1 to Current Report on Form 8-K,date of Report October 4, 2016, File No. 1-8519).(3.3) Amended and Restated Regulations of Cincinnati Bell Inc. (Exhibit 3.2 to Current Report on Form 8-K, date of Report April 25, 2008,File No. 1-8519).(4.1) Indenture dated July 1, 1993, between Cincinnati Bell Inc., as Issuer, and The Bank of New York, as Trustee, relating to CincinnatiBell Inc.’s 71/4% Notes Due June 15, 2023 (Exhibit 4-A to Current Report on Form 8-K, date of Report July 12, 1993, File No. 1-8519).(4.2) Indenture dated as of November 30, 1998, among Cincinnati Bell Telephone Company, as Issuer, Cincinnati Bell Inc., as Guarantor,and The Bank of New York, as Trustee (Exhibit 4-A to Current Report on Form 8-K, date of Report November 30, 1998, File No. 1-8519).(4.3) First Supplemental Indenture dated as of December 31, 2004 to the Indenture dated as of November 30, 1998, among Cincinnati BellTelephone Company, as Issuer, Cincinnati Bell Inc., as Guarantor, and The Bank of New York, as Trustee (Exhibit 4(c)(iii)(2) toAnnual Report on Form 10-K for the year ended December 31, 2004, File No. 1-8519).(4.4) Second Supplemental Indenture dated as of January 10, 2005 to the Indenture dated as of November 30, 1998, among Cincinnati BellTelephone Company LLC (as successor entity to Cincinnati Bell Telephone Company), as Issuer, Cincinnati Bell Inc., as Guarantor,and The Bank of New York, as Trustee (Exhibit (4)(c)(iii)(3) to Annual Report on Form 10-K for the year ended December 31, 2004,File No. 1-8519).(4.5) Indenture, dated September 22, 2016, among Cincinnati Bell Inc., the guarantor parties thereto and Regions Bank, as trustee (Exhibit4.1 to Current Report on Form 8-K date of Report September 22, 2016, File No. 1-8519).(4.6) First Supplemental Indenture dated April 3, 2017 among Cincinnati Bell Inc., SunTel Services LLC and Regions Bank, as trustee(Exhibit 99.1 to Current Report on Form 8-K, date of Report April 3, 2017, File No. 1-8519).(4.7) Second Supplemental Indenture dated May 31, 2017 among Cincinnati Bell Inc., Cincinnati Bell Telephone Company LLC,Cincinnati Bell Extended Territories LLC, and Regions Bank, as trustee (Exhibit 10.1 to Current Report on Form 8-K, date of ReportMay 31, 2017, File No. 1-8519).(4.8) Third Supplemental Indenture dated October 2, 2017 among Cincinnati Bell Inc., Cincinnati Bell Shared Services LLC, Data CenterSouth Holdings, LLC, Twin Acquisition Corp. and Regions Bank, as trustee (Exhibit 4.1 to Current Report on Form 8-K, date ofReport October 2, 2017, File No. 1-8519).(4.9) Fourth Supplemental Indenture dated as of December 22, 2017 among Cincinnati Bell Inc., CBTS Holdco LLC, and Regions Bank, astrustee (Exhibit 10.1 to Current Report on Form 8-K, date of Report December 22, 2017, File No. 1-8519).110(4.10) Indenture, dated October 6, 2017, between CB Escrow Corp. and Regions Bank, as trustee (Exhibit 4.1 to Current Report on Form 8-K,date of Report October 6, 2017, File No. 1-8519).(4.11) Escrow Agreement, dated October 6, 2017, by and among CB Escrow Corp., Regions Bank, as trustee, and Regions Bank, as EscrowAgent (Exhibit 4.2 to Current Report on Form 8-K, date of Report October 6, 2017, File No. 1-8519).(4.12) No other instrument which defines the rights of holders of long term debt of the registrant is filed herewith pursuant to Regulation S-K,Item 601(b)(4)(iii)(A). Pursuant to this regulation, the registrant hereby agrees to furnish a copy of any such instrument to the SECupon request.(10.1) Credit Agreement dated as of November 20, 2012, among Cincinnati Bell Inc., an Ohio corporation, the subsidiary guarantors partythereto, the Lenders party thereto and Bank of America, N.A. (Exhibit 10.1 to Current Report on Form 8-K, date of Report November20, 2012, File No. 1-8519).(10.2) First Amendment to Credit Agreement dated as of September 10, 2013, among Cincinnati Bell Inc., an Ohio corporation, thesubsidiary guarantors party thereto, the Lenders party thereto and Bank of America, N.A. (Exhibit 10.1 to Current Report on Form 8-K,date of Report September 10, 2013, File No. 1-8519).(10.3) Annex I to First Amendment to Credit Agreement dated as of September 10, 2013, among Cincinnati Bell Inc., an Ohio corporation,the subsidiary guarantors party thereto, the Lenders party thereto and Bank of America, N.A. (Exhibit 10.2 to Current Report on Form8-K, date of Report September 10, 2013, File No. 1-8519).(10.4) Second Amendment to Credit Agreement dated as of June 23, 2014, among Cincinnati Bell Inc., an Ohio corporation, the subsidiaryguarantors party thereto, the Lenders party thereto and Bank of America, N.A. (Exhibit 10.4 to Annual Report on Form 10-K, date ofReport February 26, 2015, File No. 1-8519).(10.5) Third Amendment to Credit Agreement dated as of September 30, 2014, among Cincinnati Bell Inc., an Ohio corporation, thesubsidiary guarantors party thereto, the Lenders party thereto and Bank of America, N.A. (Exhibit 10.1 to Current Report on Form 8-K,date of Report September 30, 2014, File No. 1-8519).(10.6) Fourth Amendment to Credit Agreement dated as of November 5, 2014, among Cincinnati Bell Inc., an Ohio corporation, thesubsidiary guarantors party thereto, the Lenders party thereto and Bank of America, N.A. (Exhibit 10.1 to Current Report on Form 8-K,date of Report November 5, 2014, File No. 1-8519).(10.7) Fifth Amendment to Credit Agreement dated as of May 11, 2016, among Cincinnati Bell Inc., an Ohio corporation, the subsidiaryguarantors party thereto, the Lenders party thereto and Bank of America, N.A. (Exhibit 10.1 to Current Report on Form 8-K date ofReport May 11, 2016, File No. 1-8519).(10.8) Amended and Restated Purchase and Sale Agreement dated as of June 6, 2011, among the Originators identified therein, CincinnatiBell Funding LLC, and Cincinnati Bell Inc., as Servicer and sole member of Cincinnati Bell Funding LLC (Exhibit 99.2 to CurrentReport on Form 8-K, date of Report June 6, 2011, File No. 1-8519).(10.9) First Amendment to Purchase and Sale Agreement dated as of August 1, 2011, among the Originators identified therein, CincinnatiBell Funding LLC and Cincinnati Bell Inc. as Servicer and sole member of Cincinnati Bell Funding LLC (Exhibit 99.2 to CurrentReport on Form 8-K, date of Report August 1, 2011, File No. 1-8519).(10.10) Second Amendment to Amended and Restated Purchase and Sale Agreement dated as of October 1, 2012, among the Originatorsidentified therein, Cincinnati Bell Funding LLC and Cincinnati Bell Inc. as Servicer and sole member of Cincinnati Bell FundingLLC. (Exhibit 99.2 to Current Report on Form 8-K, date of Report October 1, 2012, File No. 1-8519).(10.11) Third Amendment to Amended and Restated Purchase and Sale Agreement, dated as of June 1, 2015, among Cincinnati Bell Wireless,LLC, Cincinnati Bell Funding LLC and Cincinnati Bell Inc. (Exhibit 10.2 to Current Report on Form 8-K date of Report June 1, 2015,File No. 1-8519).(10.12) Amended and Restated Receivables Purchase Agreement dated as of June 6, 2011, among Cincinnati Bell Funding LLC, as Seller,Cincinnati Bell Inc., as Servicer, the Various Purchaser Groups identified therein, and PNC Bank, National Association, asAdministrator and LC Bank (Exhibit 99.1 to Current Report on Form 8-K, date of Report June 6, 2011, File No. 1-8519).(10.13) First Amendment to Amended and Restated Receivables Purchase Agreement dated as of August 1, 2011, among Cincinnati BellFunding LLC, as Seller, Cincinnati Bell Inc., as Servicer, the Various Purchasers and Purchaser Agents identified therein, and PNCBank, National Association, as Administrator and LC Bank (Exhibit 99.1 to Current Report on Form 8-K, date of Report August 1,2011, File No. 1-8519).(10.14) Second Amendment to Amended and Restated Receivables Purchase Agreement dated as of June 4, 2012, among Cincinnati BellFunding LLC, as Seller, Cincinnati Bell Inc., as Servicer, the Various Purchaser Groups identified therein, and PNC Bank, NationalAssociation, as Administrator and LC Bank (Exhibit 99.1 to Current Report on Form 8-K, date of Report June 4, 2012, File No. 1-8519).111(10.15) Third Amendment to Amended and Restated Receivables Purchase Agreement dated as of October 1, 2012, among Cincinnati BellFunding LLC, as Seller, Cincinnati Bell Inc., as Servicer, the Various Purchaser Groups identified therein, and PNC Bank, NationalAssociation, as Administrator and LC Bank. (Exhibit 99.1 to Current Report on Form 8-K, date of Report October 1, 2012, File No. 1-8519).(10.16) Fourth Amendment to Amended and Restated Receivables Purchase Agreement, dated as of June 3, 2013, among Cincinnati BellFunding LLC, as Seller, Cincinnati Bell, Inc., as Servicer, the various Purchasers and Purchaser Agents identified therein, and PNCBank, National Association, as Administrator (Exhibit 99.1 to Current Report on Form 8-K, date of Report June 3, 2013, File No. 1-8519).(10.17) Fifth Amendment to Amended and Restated Receivables Purchase Agreement, dated as of September 13, 2013, among Cincinnati BellFunding LLC, as Seller, Cincinnati Bell, Inc., as Servicer, the various Purchasers and Purchaser Agents identified therein, and PNCBank, National Association, as Administrator (Exhibit 10.16 to Annual Report on Form 10-K for the year ended December 31, 2013,File No. 1-8519).(10.18) Sixth Amendment to Amended and Restated Receivables Purchase Agreement, dated as of June 2, 2014, among Cincinnati BellFunding LLC, as Seller, Cincinnati Bell, Inc., as Servicer, the various Purchasers and Purchaser Agents identified therein, and PNCBank, National Association, as Administrator (Exhibit 99.1 to Current Report on Form 8-K, date of Report June 2, 2014, File No. 1-8519).(10.19) Seventh Amendment to Amended and Restated Receivables Purchase Agreement, dated as of September 30, 2014, among CincinnatiBell Funding LLC, as Seller, Cincinnati Bell, Inc., as Servicer, the various Purchasers and Purchaser Agents identified therein, andPNC Bank, National Association, as Administrator (Exhibit 10.17 to Annual Report on Form 10-K, date of Report February 26, 2015,File No. 1-8519).(10.20) Eighth Amendment to Amended and Restated Receivables Purchase Agreement, dated June 1, 2015, among Cincinnati Bell FundingLLC, as Seller, Cincinnati Bell, Inc., as Servicer and Performance Guarantor, the various Purchasers and Purchaser Agents identifiedtherein, and PNC Bank, National Association, as Administrator (Exhibit 10.1 to Current Report on Form 8-K, date of Report June 1,2015, File No. 1-8519).(10.21) Ninth Amendment to Amended and Restated Receivables Purchase Agreement, dated May 27, 2016, among Cincinnati Bell FundingLLC, as Seller, Cincinnati Bell, Inc., as Servicer and Performance Guarantor, the various Purchasers and Purchaser Agents identifiedtherein, PNC Bank, National Association, as Administrator, and PNC Capital Markets LLC, as Structuring Agent (Exhibit 10.1 toCurrent Report on Form 8-K, date of Report May 27, 2016, File No. 1-8519).(10.22) Tenth Amendment to Amended and Restated Receivables Purchase Agreement, dated May 26, 2017, among Cincinnati Bell FundingLLC, Cincinnati Bell, Inc., as Servicer and Performance Guarantor, the various Purchasers and Purchaser Agents identified therein,PNC Bank, National Association, as Administrator for each Purchaser Group, as LC Bank and the Swingline Purchaser (Exhibit 10.2 toCurrent Report on Form 8-K, date of Report May 31, 2017, File No. 1-8519).(10.23) Credit Agreement by and among Cincinnati Bell, Inc., the Guarantor parties thereto, the Lender parties thereto, PNC Bank, NationalAssociation, as the Swingline Lender, and Morgan Stanley Senior Funding, Inc., as Administrative Agent, Collateral Agent, SwinglineLender and an L\C Issuer, dated October 2, 2017 (Exhibit 10.1 to Current Report on Form 8-K, date of Report October 3, 2017, FileNo. 1-8519).(10.24)* Cincinnati Bell Inc. Pension Program, as amended and restated effective January 1, 2005 (Exhibit (10)(iii)(A)(3) to Annual Report onForm 10-K for the year ended December 31, 2008, File No. 1-8519).(10.25)* Amendment to Cincinnati Bell Inc. Pension Program, effective December 31, 2011 (Exhibit 10.12 to Annual Report on Form 10-K forthe year ended December 31, 2011, File No. 1-8519).(10.26)* Restatement of the Cincinnati Bell Management Pension Plan executed December 22, 2016 (Exhibit 10.28 to Annual Report on Form10-K for the year ended December 31, 2016, File No. 1-8519).(10.27)* Restatement of the Cincinnati Bell Pension Plan executed December 22, 2016 (Exhibit 10.29 to Annual Report on Form 10-K for theyear ended December 31, 2016, File No. 1-8519).(10.28)* Amendment to Cincinnati Bell Management Pension Plan executed December 22, 2016 (Exhibit 10.30 to Annual Report on Form 10-K for the year ended December 31, 2016, File No. 1-8519).(10.29)* Amendment to the Cincinnati Bell Pension Plan executed December 22, 2016 (Exhibit 10.31 to Annual Report on Form 10-K for theyear ended December 31, 2016, File No. 1-8519).(10.30)* Cincinnati Bell Inc. 2011 Short Term Incentive Plan (Appendix II to the Company's 2016 Proxy Statement on Schedule 14A filedMarch 17, 2016, File No. 1-8519).(10.31)* Cincinnati Bell Inc. Deferred Compensation Plan for Outside Directors, as amended and restated as of January 1, 2005 (Exhibit (10)(iii)(A)(2) to Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-8519).(10.32)* Amendment to Cincinnati Bell Inc. Deferred Compensation Plan for Outside Directors, as of November 7, 2016 (Exhibit 10.2 toCurrent Report on Form 8-K, date of Report November 7, 2016, File No. 1-8519).112(10.33)* Cincinnati Bell Inc. Executive Deferred Compensation Plan, as amended and restated effective January 1, 2005 (Exhibit (10)(iii)(A)(4)to Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-8519).(10.34)* Amendment to Cincinnati Bell Inc. Executive Deferred Compensation Plan, as of November 7, 2016 (Exhibit 10.1 to Current Reporton Form 8-K, date of Report November 7, 2016, File No. 1-8519).(10.35)* Cincinnati Bell Inc. 2007 Long Term Incentive Plan, as amended (Appendix I to the Company's 2015 Proxy Statement on Schedule14A filed March 20, 2015, File No. 1-8519).(10.36)* Cincinnati Bell Inc. Form of Stock Option Agreement (2007 Long Term Incentive Plan) (Exhibit (10)(iii)(A)(22) to Annual Report onForm 10-K for the year ended December 31, 2008, File No. 1-8519).(10.37)* Cincinnati Bell Inc. Form of Performance Restricted Stock Agreement (2007 Long Term Incentive Plan) (Exhibit (10)(iii)(A)(23) toAnnual Report on Form 10-K for the year ended December 31, 2008, File No. 1-8519).(10.38)* Cincinnati Bell Inc. Form of 2016 - 2018 Share-Based Performance Unit Award Agreement (2007 Long Term Incentive Plan) (Exhibit10.40 to Annual Report on Form 10-K for the year ended December 31, 2016, File No. 1-8519).(10.39) + Cincinnati Bell Inc. Form of 2017-2019 Share-Based Performance Award Agreement (2007 Long Term Incentive Plan).(10.40)* Cincinnati Bell Inc. Form of Stock Appreciation Rights Agreement (Employees) (Exhibit (10)(iii)(A)(21) to Annual Report on Form10-K for the year ended December 31, 2008, File No. 1-8519).(10.41)* Cincinnati Bell Inc. Form of Restricted Stock Unit Award Agreement (2007 Long Term Incentive Plan)(Exhibit 10.45 to AnnualReport for the year ended December 31, 2015, File No. 1-8519).(10.42)* Cincinnati Bell Inc. 2007 Stock Option Plan for Non-Employee Directors, as amended (Appendix I to the Company's 2016 ProxyStatement on Schedule 14A filed on March 17, 2016, File No. 1-8519).(10.43)* Cincinnati Bell Inc. 2017 Long-Term Incentive Plan (Appendix I to the Company's 2017 Proxy Statement on Schedule 14A filed onMarch 24, 2017, File No. 1-8519).(10.44)* Cincinnati Bell Inc. 2017 Stock Plan for Non-Employee Directors (Appendix II to the Company's 2017 Proxy Statement on Schedule14A filed on March 24, 2017, File No. 1-8519).(10.45)* Executive Compensation Recoupment/Clawback Policy effective as of January 1, 2011 (Exhibit 99.1 to Current Report on Form 8-K,date of Report October 29, 2010, File No. 1-8519).(10.46)* Amended and Restated Employment Agreement between Cincinnati Bell Inc. and Christopher J. Wilson effective January 1, 2015(Exhibit 10.51 to Current Report on Form 10-K, date of report February 26, 2015, File No. 1-8519).(10.47)* Employment Agreement between Cincinnati Bell Inc. and Christopher J. Wilson effective as of December 1, 2017 (Exhibit 10.4 toCurrent Report on Form 8-K, date of Report December 1, 2017, File No. 1-8519).(10.48)* Employment Agreement dated as of February 6, 2013 between Cincinnati Bell Inc. and Theodore H. Torbeck (Exhibit 10.1 to CurrentReport on Form 8-K, date of Report January 31, 2013, File No. 1-8519).(10.49)* Amended and Restated Employment Agreement between Cincinnati Bell Inc. and Leigh R. Fox effective as of September 1, 2016(Exhibit 10.1 to Current Report on Form 8-K, date of Report September 1, 2016, File No. 1-8519).(10.50)* Amended and Restated Employment Agreement between Cincinnati Bell Inc. and Leigh R. Fox effective as of March 1, 2017 (Exhibit10.1 to Current Report on Form 8-K, date of Report March 1, 2017, File No. 1-8519).(10.51)* Employment Agreement between Cincinnati Bell Inc. and Leigh R. Fox effective as of December 1, 2017 (Exhibit 10.1 to CurrentReport on Form 8-K, date of Report December 1, 2017, File No. 1-8519).(10.52)* Employment Agreement dated as of May 5, 2014 between Cincinnati Bell Inc. and Joshua T. Duckworth (Exhibit 10.1 to CurrentReport on Form 8-K, date of Report May 5, 2014, 2014, File No. 1-8519). (10.53)* Employment Agreement between Cincinnati Bell Inc. and Joshua T. Duckworth effective as of December 1, 2017 (Exhibit 10.5 toCurrent Report on Form 8-K, date of Report December 1, 2017, File No. 1-8519).(10.54)* Amended and Restated Employment Agreement between Cincinnati Bell Inc. and Thomas E. Simpson dated as of January 27, 2015(Exhibit 10.50 to Annual Report on Form 10-K, date of report February 26, 2015, File No. 1-8519).(10.55)* Amended and Restated Employment Agreement between Cincinnati Bell Inc. and Thomas E. Simpson effective as of September 1,2016 (Exhibit 10.1 to Current Report on Form 8-K, date of Report September 9, 2016, File No. 1-8519).(10.56)* Employment Agreement between Cincinnati Bell Inc. and Thomas E. Simpson effective as of December 1, 2017 (Exhibit 10.3 toCurrent Report on Form 8-K, date of Report December 1, 2017, File No. 1-8519).113 (10.57)* Employment Agreement between Cincinnati Bell Inc. and Andrew R. Kaiser effective as of September 1, 2016 (Exhibit 10.2 toCurrent Report on Form 8-K, date of Report September 1, 2016, File No. 1-8519). (10.58)* Employment Agreement between Cincinnati Bell Inc. and Andrew R. Kaiser effective as of September 1, 2017 (Exhibit 10.1 toCurrent Report on Form 8-K, date of Report August 3, 2017, File No. 1-8519). (10.59)* Employment Agreement between Cincinnati Bell Inc. and Andrew R. Kaiser effective as of December 1, 2017 (Exhibit 10.2 to CurrentReport on Form 8-K, date of Report December 1, 2017, File No. 1-8519). (10.60)* Employment Agreement between Cincinnati Bell Inc. and Christi H. Cornette effective as of September 1, 2017 (Exhibit 10.2 toCurrent Report on Form 8-K, date of Report August 3, 2017, File No. 1-8519). (10.61)* Employment Agreement between Cincinnati Bell Inc. and Christi H. Cornette effective as of December 1, 2017 (Exhibit 10.6 toCurrent Report on Form 8-K, date of Report December 1, 2017, File No. 1-8519). (10.62)* Employment Agreement between Cincinnati Bell Inc. and Shannon M. Mullen effective as of December 1, 2017 (Exhibit 10.7 toCurrent Report on Form 8-K, date of Report December 1, 2017, File No. 1-8519). (10.63) Voting Agreement, dated as of July 9, 2017, among Cincinnati Bell Inc., Twin Haven Capital Partners, L.L.C. and the affiliates ofTwin Haven Capital Partners, L.L.C. party thereto (Exhibit 10.1 to Current Report on Form 8-K, date of Report July 10, 2017, File No.1-8519). (10.64) Commitment Letter, dated as of July 9, 2017, between Cincinnati Bell Inc. and Morgan Stanley Senior Funding, Inc. (Exhibit 10.2 toCurrent Report on Form 8-K, date of Report July 10, 2017, File No. 1-8519). (12.1) + Calculation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends. (14) Code of Ethics for Senior Financial Officers, as adopted pursuant to Section 406 of Regulation S-K (Exhibit (10)(iii)(A)(15) to AnnualReport on Form 10-K for the year ended December 31, 2003, File No. 1-8519). (21) + Subsidiaries of the Registrant. (23) + Consent of Independent Registered Public Accounting Firm. (24) + Powers of Attorney. (31.1) + Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (31.2) + Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (32.1) + Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (32.2) + Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (101.INS)** XBRL Instance Document. (101.SCH)** XBRL Taxonomy Extension Schema Document. (101.CAL)** XBRL Taxonomy Calculation Linkbase Document. (101.DEF)** XBRL Taxonomy Extension Definition Linkbase Document. (101.LAB)** XBRL Taxonomy Label Linkbase Document. (101.PRE)** XBRL Taxonomy Presentation Linkbase Document. ______________ + Filed herewith. * Management contract or compensatory plan required to be filed as an exhibit pursuant to Item 15(a)(3) of the Instruction to Form 10-K. ** Submitted electronically with this report. The Company's reports on Form 10-K, 10-Q, 8-K, proxy and other information are available free of charge at the following website:http://www.cincinnatibell.com. Upon request, the Company will furnish a copy of the Proxy Statement to its security holders without charge, portions ofwhich are incorporated herein by reference. The Company will furnish any other exhibit at cost. 114Table of Contents Schedule II Cincinnati Bell Inc.VALUATION AND QUALIFYING ACCOUNTS Additions (dollars in millions) Beginning of Period Charge (Benefit) toExpenses (To) From OtherAccounts Deductions End of PeriodAllowance for Doubtful Accounts Year 2017 $9.9 $6.9 $— $6.4 $10.4Year 2016 $12.4 $9.4 $(2.0) $9.9 $9.9Year 2015 $12.4 $8.5 $— $8.5 $12.4 Deferred Tax Valuation Allowance Year 2017 $54.4 $(9.2) $0.3 $— $45.5Year 2016 $58.4 $(3.6) $(0.4) $— $54.4Year 2015 $64.4 $(5.5) $(0.5) $— $58.4115Table of ContentsForm 10-K Part IV Cincinnati Bell Inc.SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned thereunto duly authorized. Date:February 26, 2018 /s/ Andrew R. Kaiser Andrew R. Kaiser Chief Financial Officer 116Table of ContentsForm 10-K Part IV Cincinnati Bell Inc.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrantand in the capacities and on the date indicated.Signature Title Date /s/ Leigh R. Fox President and Chief Executive Officer February 26, 2018 Leigh R. Fox (Principal Executive Officer) /s/ Andrew R. Kaiser* Chief Financial Officer February 26, 2018 Andrew R. Kaiser (Principal Financial Officer) /s/ Shannon M. Mullen* Vice President and Corporate Controller February 26, 2018 Shannon M. Mullen (Principal Accounting Officer) Phillip R. Cox* Chairman of the Board and Director February 26, 2018 Phillip R. Cox Theodore H. Torbeck* Director February 26, 2018 Theodore H. Torbeck John W. Eck* Director February 26, 2018 John W. Eck Jakki L. Haussler* Director February 26, 2018 Jakki L. Haussler Craig F. Maier* Director February 26, 2018 Craig F. Maier Russel P. Mayer* Director February 26, 2018 Russel P. Mayer Lynn A. Wentworth* Director February 26, 2018 Lynn A. Wentworth Martin J. Yudkovitz* Director February 26, 2018 Martin J. Yudkovitz John M. Zrno* Director February 26, 2018 John M. Zrno *By: /s/ Leigh R. Fox Leigh R. Fox as attorney-in-fact and on his behalf as President and Chief Executive Officer 117 CINCINNATI BELL INC.2017-2019 SHARE-BASED PERFORMANCE UNIT AWARD AGREEMENTThis Share-based Performance Unit Award Agreement (the or this “Award”) is made between Cincinnati Bell Inc. (the “Company”and, together with all of its subsidiary corporations and organizations, the “Employer”) and PARTICIPANT NAME (the “Employee”)and is effective as of January 26, 2017. By signing this Award, the Company and the Employee each agrees to all of the terms of thisAward.Share-based Performance Unit AwardUnder and pursuant to the Cincinnati Bell Inc. 2007 Long Term Incentive Plan (the “Plan”), the Compensation Committee of theCompany’s Board of Directors (the “Committee”) hereby, on behalf of the Company and subject to the Employee signing this Awardand thereby agreeing to all of the terms of this Award, agrees that, to the extent required by and in accordance with the terms of thisAward, the Company shall distribute the value of a number of Units (in the form of common shares of the Company (“Shares”), cash,or a combination of Shares and cash) to or with respect to the Employee.For purposes of this Award, (a) a “Unit” is a measure that is used to determine the number of Shares and/or the amount of cash thatwill be distributed to or with respect to the Employee under this Award and (b) the “value” of a Unit that is to be distributed under thisAward shall be deemed to be equal to 100% of the fair market value (determined in accordance with the Plan’s terms for determiningfair market value) of one Share on the date of the distribution.Terms Used In This AwardThe following terms are used in determining the number of Units (if any) the value of which is to be distributed to or with respect tothe Employee under this Award and shall have the meanings indicated below.1.“Disability Termination” means, with respect to the Employee, the termination of the Employee’s employment with theEmployer because the Employee is unable to perform all of the duties of the Employee’s then current position with theEmployer due to a physical or mental condition, provided that such inability to perform such duties is reasonably expected to bepermanent.a.The Committee must determine that all of the above conditions are met for the Employee to be deemed to have incurreda Disability Termination.b.In order to make such a determination, the Committee may in its discretion require that the Employee’s condition ofdisability at the time of the Employee’s termination of employment be certified by a physician chosen or approved bythe Committee or that the Employee present evidence that the Employee has been determined by the U.S. SocialSecurity Administration to have been disabled at the time of such termination of employment.2.“EBITDA Result” means the quotient produced by dividing (a) the Employer’s earnings before interest, taxes, depreciation,and amortization for the Performance Period by (b) the approved EBITDA goal for each performance period, with suchquotient expressed as a percentage to the nearest one-tenth of one percent. For all purposes of this Award and section 15 of thePlan, an EBITDA Result of 100% shall be deemed the “target” EBITDA Result.13.“EBITDA Result Percentage” means the EBITDA Result Percentage that is determined from the following table (whichpercentage is based on the EBITDA Result):If EBITDA Result Is:Then EBITDA ResultPercentage Is:Under 95%0%95%50%100% (“target” EBITDA Result)100%105% or greater150%If the EBITDA Result is between 95% and 100% or between 100% and 105% the EBITDA Result Percentage shall beinterpolated from the above table (on the basis that the EBITDA Result Percentage increases from 50% to 100% and from100% to 150% on a linear basis), to the nearest one-tenth of one percent.4.“Invested Assets” is determined by calculating the average of the sum of PP&E (Property, Plant and Equipment) plusIntangibles plus Goodwill plus Net Working Capital.5.“NOPAT” means Net Operating Profit After Tax and is determined by subtracting depreciation and amortization fromEBITDA and multiplying this result by one minus the tax rate.6.“Performance Period” means each period for which the value of Units may be calculated under this Award. The PerformancePeriods are:a.“2017 Performance Period,” which begins on January 1, 2017 and ends on December 31, 2017;b.“2017-2018 Performance Period,” which begins on January 1, 2017 and ends on December 31, 2018; andc.“2017-2019 Performance Period,” which begins on January 1, 2017 and ends on December 31, 2019.7.“Relative Total Shareholder Return” means the rank (by percentile) of the Company’s total shareholder return for the 2017-2019 Performance Period when compared to the total shareholder return for the 2017-2019 Performance Period of allcompanies in the Russell 2000 Index. For all purposes of this Award and section 15 of the Plan, a Relative Total ShareholderReturn of at least the 45th but not greater than the 55th percentile shall be deemed the “target” Relative Total ShareholderReturn.8.“Relative Total Shareholder Return Percentage” means the Relative Total Shareholder Return Percentage that is determinedfrom the following table (which percentage is based on the Relative Total Shareholder Return):2If Relative Total ShareholderReturn Is:Then Relative Total ShareholderReturn Percentage Is:Less than 35th Percentile85%At least 35th but less than 40th Percentile90%At least 40th but less than 45th Percentile95%At least 45th but not greater than 55th Percentile (“target” Relative TotalShareholder Return)100%Greater than 55th but not greater than 60th Percentile105%Greater than 60th but not greater than 65th Percentile110%Greater than 65th Percentile115%9.“Retirement” means, with respect to the Employee, the Employee’s termination of employment with the Employer (a) after theEmployee either has both attained at least age 55 and completed at least 10 years of employment with the Employer or hasbecome eligible for retiree medical coverage under an Employer health care plan and (b) other than by reason of theEmployee’s fraud, misappropriation or embezzlement, gross insubordination, failure to perform in good faith the Employee’sassigned duties, or any other reason for which a termination of employment would be deemed for “cause” under anyemployment agreement between the Employee and the Employer that is in effect at the time of the Employee’s termination ofemployment with the Employer.10.“Return on Invested Capital Result” means the quotient produced by dividing (a) NOPAT by (b) Invested Assets for eachPerformance Period, with such quotient expressed as a percentage to the nearest one-tenth of one percent. For all purposes ofthis Award and section 15 of the Plan, a Return on Invested Capital Results of 100% shall be deemed the “target” Return onInvested Capital Result.11.“Return on Invested Capital Result Percentage” means the Return on Invested Capital Result Percentage that is determinedfrom the following table (which percentage is based on the Strategic Revenue Result):If Return on Invested Capital Result Is:Then Return on InvestedCapitalResult Percentage Is:<75%0%75%75%100% (“target” Return on Invested Capital Result)100%125% or greater150%12.“Share-based Performance Unit Percentage” means the results calculated for the 2017 Performance Period, the 2017-2018Performance Period, or the 2017-2019 Performance Period, determined for such Performance Period from the tables for theStrategic Revenue, EBITDA and Return on Invested Capital Results, collectively. Accordingly, the Share-based PerformanceUnit Percentage is a composite percentage (between 0% and 150%) of the Strategic Revenue Results Percentage, the EBITDAResults Percentage, and the Return on Invested Capital Result Percentage for the respective performance period, weightedequally.13.“Strategic Business” means the Employer’s Wireline segment (as identified in the Company’s reports).314.“Strategic Revenue Result” means the quotient produced by dividing (a) the revenue for the Performance Period of theStrategic Business by (b) the approved Strategic Revenue Goal for each Performance Period, with such quotient expressed as apercentage to the nearest one-tenth of one percent. For all purposes of this Award and section 15 of the Plan, a StrategicRevenue Result of 100% shall be deemed the “target” Strategic Revenue Result.15.“Strategic Revenue Result Percentage” means the Strategic Revenue Result Percentage that is determined from the followingtable (which percentage is based on the Strategic Revenue Result):If Strategic Revenue Result Is:Then Strategic RevenueResult Percentage Is:Under 95%0%95%50%100% (“target” Strategic Revenue Result)100%105% or greater150%If the Strategic Revenue Result is between 95% and 100% or between 100% and 105%, the Strategic Revenue ResultPercentage shall be interpolated from the above table (on the basis that the Strategic Revenue Result Percentage increases from50% to 100% and from 100% to 150% on a linear basis), to the nearest one-tenth of one percent.16.“Target Number of Units on Cumulative Basis” means:2017 Performance PeriodGRANT CUSTOM 12017-2018 Performance PeriodGRANT CUSTOM 22017-2019 Performance PeriodNUMBER OF AWARDS GRANTEDGeneral Rules for Payment of and Conditions for AwardFor purposes of this “General Rules for Payment of and Conditions for Award” part of the Award:1.“payment date” means March 15, 2020 (or, if earlier, any date that occurs between January 1, 2020 and March 15, 2020 andthat is chosen by the Company for payment of the amount, if any, to be distributed under this part of the Award); and2.“payment eligible” means, with respect to the Employee, either (i) that the Employee is still employed by the Employer on thepayment date, (ii) that the Employee’s employment with the Employer ended after the date as of which this Award becameeffective and before the payment date because of the Employee’s Retirement or Disability Termination, or (iii) that theEmployee’s employment with the Employer ended after December 31, 2019 and before the payment date because of theEmployee’s death.Except as is otherwise provided in the following parts of this Award, the Company shall, on the payment date and provided that theEmployee is payment eligible, distribute to the Employee (or, in the event the Employee has died by the time of the payment, theEmployee’s beneficiary) the value of the number of Units determined by the following steps (with the final number of Units the valueof which will be distributable being the number of Units determined from the result of step 5 below):1.first multiplying (a) the Target Number of Units on Cumulative Basis for the 2017 Performance Period by (b) the Share-basedPerformance Unit Percentage for the 2017 Performance Period;42.second multiplying (a) the Target Number of Units on Cumulative Basis for the 2017-2018 Performance Period by (b) theShare-based Performance Unit Percentage for the 2017-2018 Performance Period, and then subtracting the total number ofUnits (if any) calculated under step 1 above (except that the result of subtracting the number of Units calculated in step 1 aboveshall not in any event be deemed to be less than zero Units);3.third multiplying (a) the Target Number of Units on Cumulative Basis for the 2017-2019 Performance Period by (b) the Share-based Performance Unit Percentage for the 2017-2019 Performance Period, and then subtracting the total number of Units (ifany) calculated under each of step 1 and step 2 above (except that the result of subtracting the number of Units calculated ineach of step 1 and step 2 above shall not in any event be deemed to be less than zero Units);4.fourth, adding the total number of Units (if any) calculated under steps 1, 2 and 3 above; and5.fifth (and last), by multiplying (a) the result of step 4 above by (b) the Relative Total Shareholder Return Percentage (with theresult of this step 5 rounded to the nearest whole number of Units).The Committee shall verify (and report to the Company) the resulting number of Units the value of which will be distributed by theCompany to the Employee pursuant to this Award within a reasonable period after the end of the 2017-2019 Performance Period (butin no event later than the start of the first March 15 that occurs after the end of the 2017-2019 Performance Period).Special Rules for Payment of Award Upon Employee’s Death Prior to 2020Subject to the following parts of this Award, if the Employee dies (a) prior to January 1, 2020 and (b) while the Employee is stillemployed by the Employer, then the Company shall, within 60 days after the date of the Employee’s death and in lieu of any otherdistribution being made under this Award, distribute to the Employee’s beneficiary the value of a number of Units that is equal to thenumber of Units that would have been paid to the Employee if both (i) the Employee had survived and remained continuouslyemployed by the Employer from the date on which this award is granted until at least March 15, 2020 and (ii) the result of eachperformance goal applicable to this Award was satisfied at this Award’s “target” result for such goal (the result that gives a 100%percentage for applying such result under this Award).Forfeiture of AwardSubject to the following parts of this Award, except for the value of such number of Units that the Company distributes pursuant to anyof the foregoing parts of this Award, all of the Employee’s rights under this Award, including the Employee’s rights to receive anydistribution under this Award (other than a distribution required to be made under any of the foregoing parts of this Award),automatically will be permanently forfeited upon the earliest of: (a) March 15, 2020; (b) the date that the Employee’s employment withthe Employer terminates for any reason; or (c) the date on which a distribution is made under any of the foregoing parts of this Award.Special Rules for Change in ControlNotwithstanding any of the other parts of this Award, if a Change in Control (as is defined in the Plan) occurs prior either to anydistribution being made or forfeiture occurring under any of the foregoing parts of this Award, then (i) the provisions of section 15 ofthe Plan shall be deemed incorporated into this Award and shall apply to this Award and (ii) the other parts of this Award shall besubject to the terms of section 15 of the Plan.5Employment TerminationFor all purposes of this Award, the Employee’s employment with the Employer shall be deemed to have terminated when theEmployee’s status as an employee on an active employee payroll maintained by the Employer for payment and withholding purposesends.BeneficiaryFor all purposes of this Award, the Employee’s “beneficiary” shall be the person or entity designated by the Employee, in a writingdelivered prior to the Employee’s death to the Company’s Corporate Secretary, to be the Employee’s beneficiary under this Award.Should the Employee die prior to designating a beneficiary, then the Employee’s beneficiary for purposes of this Award shall bedeemed to be the Employee’s surviving spouse or, if none, the Employee’s estate.Effect of Employment AgreementNotwithstanding any of the provisions of the other parts of this Award, if the provisions of a written employment agreement betweenthe Company and the Employee would require that the Company distribute to the Employee the value of any Units pursuant to thisAward on a date that occurs on or before the date on which either the Company distributes to the Employee the value of such Units orthe Employee’s rights under this Award are forfeited under the provisions of the other parts of this Award, or would require that theEmployee be deemed to be employed by the Employer until a date later than the actual date on which the Employee’s employmentwith the Employer terminates for purposes of determining the extent to which and the date on which either the Company will distributeto the Employee the value of any Units pursuant to this Award or the Employee’s rights under this Award will be forfeited, then suchemployment agreement’s provisions shall control (and shall be deemed an amendment to this Award and incorporated herein byreference).Payment in Shares or CashNotwithstanding any other provision of this Award to the contrary, the value of any Units that is required to be distributed under thisAward on any date shall be made in Shares to the extent that there are then a sufficient number of Shares available to be issued underthe Plan to make such distribution in Shares. In such situation, the number of Shares to be distributed on such date shall be equal to thenumber of Shares that have a fair market value (determined as of such distribution date and in accordance with the Plan’s terms fordetermining fair market value) equal to the value of the Units required to be distributed under this Award.Further and also notwithstanding any other provision of this Award to the contrary, any amount that is required to be distributed underthis Award on any date shall be made in cash and not in Shares to the extent that there are not then a sufficient number of Sharesavailable to be issued under the Plan to make such distribution in Shares. In such situation, the amount of cash to be paid on such dateshall be equal to the difference between the value of the Units required to be distributed under this Award on such date and the fairmarket value (determined as of such distribution date and in accordance with the Plan’s terms for determining fair market value) of thenumber of Shares that are able to be distributed on such date under the Plan in payment of such Units’ value pursuant to theimmediately preceding paragraph.Distribution of Shares and Statements of Holding; Payment in Cash6For all purposes of this Award, the Company shall be deemed to have distributed Shares to the Employee (or the Employee’sbeneficiary) pursuant to this Award as of any date by transferring the ownership of such Shares on the Company’s records to theEmployee (or, if applicable, the Employee’s beneficiary) on such date. Such transfer shall make the Employee (or, if applicable, theEmployee’s beneficiary) the legal owner of such Shares.Further, on or as soon as possible after any date on which the Company transfers the ownership of any Shares on the Company’srecords to the Employee (or, if applicable, the Employee’s beneficiary) pursuant to this Award, the Company will provide to theEmployee (or, if applicable, to the Employee’s beneficiary) a statement of holding that indicates the number of Shares the Employeeowns in book-entry form.For all purposes of this Award, the Company shall be deemed to have distributed cash to the Employee (or the Employee’sbeneficiary) pursuant to this Award as of any date by on such date personally delivering or depositing in the mail or with a deliveryservice a cash payment in any commercially acceptable form (e.g., a check) or depositing such amount into an account specificallyidentified by the Employee (or the Employee’s beneficiary).To the extent the Company delivers cash to the Employee (or the Employee’s beneficiary) in payment of the value of any Units underthis Award, the Employee (or the Employee’s beneficiary) shall have no right to receive Shares in payment of such value.Withholding RequirementsThe Employer shall satisfy all federal, state, and local tax withholding requirements related to the Company’s distribution of any Sharesor cash pursuant to this Award. The Company shall satisfy such tax withholding requirements by, without any advance notice havingto be given to the Employee (or the Employee’s beneficiary), either:1.withholding an amount sufficient to meet such requirements from any amounts payable to or with respect to the Employee bythe Employer other than by reason of this Award;2.retaining Shares having a fair market value, or cash, sufficient to meet such requirements from the Shares and cash that theCompany would otherwise distribute pursuant to this Award; or3.combining the methods described in clauses 1 and 2 above.The Employer may choose the method by which such tax withholding requirements shall be satisfied, in its sole discretion.Regulatory ComplianceNotwithstanding any other provision of this Award, Shares or cash may be distributed by the Company under this Award at any timeonly upon full compliance with all then-applicable requirements of law and, in the case of the distribution of Shares, the requirementsof the exchange upon which Shares may then be traded.Investment RepresentationThe Employee represents and agrees that if the Employee is distributed any Shares at a time when there is not in effect under theSecurities Act of 1933 a registration statement pertaining to the Shares and there is not available for delivery a prospectus meeting therequirements of Section 10(A)(3) of such Act:71.the Employee will accept and receive such Shares for the purpose of investment and not with a view to their resale ordistribution;2.the Employee, upon receipt of such Shares, will furnish to the Company an investment letter in form and substance satisfactoryto the Company;3.the Employee, prior to selling or offering for sale any such Shares, will furnish the Company with an opinion of counselsatisfactory to the Company to the effect that such sale may lawfully be made and will furnish the Company with suchcertifications as to factual matters as the Company may reasonably request; and4.the transfer agent holding the Employee’s Shares in book-entry form will be notified of the restrictions on sale or transfer.AdjustmentsIf, after the date of this Award, the Shares are, as a result of a merger, reorganization, consolidation, recapitalization, reclassification,split-up, spin-off, separation, liquidation, stock dividend, stock split, reverse stock split, property dividend, share repurchase, sharecombination, share exchange, issuance of warrants, rights, or debentures, or other change in the corporate structure of the Company,increased or decreased or changed into or exchanged for a different number or kind of shares of stock or other securities of theCompany or of another organization, then:1.there automatically shall be substituted for each Unit that is still subject to this Award a Unit that on the date on which anydistribution is to be made under this Award has a value equal to 100% of the fair market value (determined in accordance withthe Plan’s terms for determining fair market value) of the number and kind of shares of stock or other securities into which eachShare is changed or for which each Share is exchanged; and2.the Company shall make such other adjustments to the Units subject to provisions of the Plan and this Award as may beappropriate and equitable.NoticesAny notice to the Company relating to this Award must be in writing and delivered in person or by registered mail to the Company atthe following address, Cincinnati Bell Inc., 221 East Fourth Street, Cincinnati, Ohio 45202, Attention: Corporate Secretary, , or at suchother address as the Company has designated by notice.Any notice to the Employee or other person or persons succeeding to the Employee’s interest must be delivered to the Employee orsuch other person or persons at the Employee’s address on record with the Company or such other address as is specified in a noticefiled with the Company.Determinations of the Committee FinalAny dispute or disagreement which arises under, as a result of, or in any way relates to the interpretation or construction of this Awardshall be determined by the Committee. The Employee hereby agrees to accept any such determination as final, binding, and conclusivefor all purposes.Successors8All rights under this Award are personal to the Employee and are not transferable except that, in the event of the Employee’s death,such rights are transferable to the Employee’s legal representatives, heirs, or legatees. This Award shall inure to the benefit of and bebinding upon the Company and its successors and assigns and the Employee and the Employee’s legal representatives, heirs, andlegatees.Obligations of the CompanyThe liability of the Company under the Plan and this Award is limited to the obligations set forth in the Plan and this Award. No termor provision of the Plan or this Award shall be construed to impose any liability on the Company in favor of the Employee with respectto any loss, cost, or expense which the Employee may incur in connection with or arising out of any transaction in connectiontherewith.No Guarantee of EmploymentThe granting of this Award to the Employee does not constitute a contract of employment and does not give the Employee the legalright to be continued as an employee of the Employer. The Employer may deal with the Employee and the terms of the Employee’semployment as if this Award did not exist.Governing LawThis Award will be governed by and interpreted in accordance with the laws of the State of Ohio.PlanThis Award is issued under the Plan, the Cincinnati Bell Inc. 2007 Long Term Incentive Plan. Except as is otherwise specificallyprovided herein, this Award is subject to all of the terms of the Plan and the provisions of the Plan shall control if there is any conflictbetween the Plan and this Award and with respect to any matters that are not addressed in this Award. The Plan is incorporated byreference and made a part of this Award.Entire AwardExcept for any written employment agreement that is subject to the provisions of the part of this Award that is entitled “Effect ofEmployment Agreement,” (a) this Award and the Plan supersede any other agreement, whether written or oral, that may have beenmade or entered into by the Employer and the Employee relating to the Shares that are subject to this Award, (b) this Award and thePlan constitute the entire agreement by the parties with respect to such matters, and (c) there are no agreements or commitments exceptas set forth herein and in the Plan.Captions; CounterpartsThe captions in this Award are for convenience only and shall not be considered a part of or affect the construction or interpretation ofany provision of this Award. This Award may be executed in any number of counterparts, each of which shall constitute one and thesame instrument.IN ORDER TO GRANT THIS SHARE-BASED PERFORMANCE UNIT AWARD, the Company and the Employee have causedthis Award to be duly executed as of the dates noted below and, by signing below, agree to all of the terms of this Award.9EMPLOYEE: CINCINNATI BELL INC.__________________________ Phillip R. CoxChairman, Board of DirectorsDate: ACCEPTANCE DATE Date: January 26, 2017 10Exhibit 12.1Calculation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends Year ended December 31(dollars in millions) 2017 2016 2015 2014 2013Pre-tax income from continuing operations in consolidated subsidiaries plus fixedcharges* $156.6 $251.1 $586.4 $384.8 $139.0Fixed charges: Interest expensed and capitalized 85.9 76.4 104.2 146.7 176.6 Appropriate portions of rentals 2.7 3.2 3.4 2.5 2.3 Total fixed charges 88.6 79.6 107.6 149.2 178.9Pre-tax income required to pay preferred dividends 19.6 16.6 16.1 17.6 11.7 Total combined fixed charges and preferred dividends $108.2 $96.2 $123.7 $166.8 $190.6Ratio of earnings to fixed charges 1.83.25.42.6—Coverage deficiency** n/a n/a n/a n/a 39.9 Ratio of earnings to combined fixed charges and preferred dividends 1.42.64.72.3—Coverage deficiency** n/an/an/an/a$51.6 * Earnings used in computing the ratio of earnings to combined fixed charges and preferred dividends consists of income from continuingoperations before income taxes, adjusted to exclude loss from equity method investees and fixed charges except for capitalized interest, andadjusted to include dividends received from equity method investees.** For the period in which a coverage deficiency is presented, earnings were inadequate to cover fixed charges or combined fixed charges andpreferred dividends by the amount of the deficiency.Exhibit 21Subsidiaries of the Registrant(as of February 26, 2018)Subsidiary Name State or Country ofIncorporation orFormationCincinnati Bell Shared Services LLC OhioCincinnati Bell Wireless LLC OhioCBTS LLC DelawareCincinnati Bell Entertainment Inc. OhioCincinnati Bell Funding LLC DelawareTwin Acquisition Corp. DelawareCB Escrow Corp. OhioCincinnati Bell Telephone Company LLC OhioCincinnati Bell Extended Territories LLC OhioCBTS Technology Solutions LLC DelawareCBTS Canada Inc. OntarioOnX Holdings LLC DelawareCBTS Virginia LLC VirginiaCBTS UK Limited United KingdomOnX International S.A.R.L. LuxembourgOnX Holdings S.A.R.L. LuxembourgOnX UK Limited United KingdomOnX Holdings 2 S.A.R.L. LuxembourgOnX Managed Services S.A.R.L. LuxembourgMomentum Digital Solutions Inc. OntarioOnX Enterprise Solutions Ltd. OntarioOnX Exchange Co. Inc. OntarioOnX USA LLC DelawareOnX Managed Services Inc. IllinoisOnX Managed Services Inc. OntarioOnX Enterprise Solutions India LLP IndiaExhibit 23CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in Registration Statement Nos. 333-192225, 333-192226, 333-159160, 333-143089, 333-143088, 333-204562,333-211670, 333-217839, and 333-217840 on Forms S-8 of Cincinnati Bell Inc. and subsidiaries (the “Company”) of our reports dated February 26, 2018,relating to the consolidated financial statements and financial statement schedule of the Company and the effectiveness of the Company’s internal controlover financial reporting, appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2017./s/ Deloitte & Touche LLPCincinnati, OhioFebruary 26, 2018Exhibit 24POWER OF ATTORNEYWHEREAS, Cincinnati Bell Inc., an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and ExchangeCommission under the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, an annual report on Form10-K for the year ended December 31, 2017 andWHEREAS, the undersigned is a director of the Company;NOW, THEREFORE, the undersigned hereby designates and appoints Leigh R. Fox, Andrew R. Kaiser and Christopher J. Wilson, and each of them singly,his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K,and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do andperform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might orcould do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done byvirtue hereof.IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 25th day of January, 2018. /s/ Phillip R. CoxPhillip R. CoxDirectorSTATE OF OHIO) ) SS:COUNTY OF HAMILTON)On the 25th day of January, 2018, personally appeared before me Phillip R. Cox, to me known and known to me to be the person described in and whoexecuted the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.Witness my hand and official seal this 25th day of January, 2018./s/ Connie M. VogtConnie M. VogtNotary Public, State of OhioMy commission expires 04-28-2020Exhibit 24POWER OF ATTORNEYWHEREAS, Cincinnati Bell Inc., an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and ExchangeCommission under the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, an annual report on Form10-K for the year ended December 31, 2017 andWHEREAS, the undersigned is a director of the Company;NOW, THEREFORE, the undersigned hereby designates and appoints Leigh R. Fox, Andrew R. Kaiser and Christopher J. Wilson, and each of them singly,his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K,and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do andperform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might orcould do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done byvirtue hereof.IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 25th day of January, 2018. /s/ John W. EckJohn W. EckDirectorSTATE OF OHIO) ) SS:COUNTY OF HAMILTON)On the 25th day of January, 2018, personally appeared before me John W. Eck, to me known and known to me to be the person described in and whoexecuted the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.Witness my hand and official seal this 25th day of January, 2018./s/ Connie M. VogtConnie M. VogtNotary Public, State of OhioMy commission expires 04-28-2020Exhibit 24POWER OF ATTORNEYWHEREAS, Cincinnati Bell Inc., an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and ExchangeCommission under the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, an annual report on Form10-K for the year ended December 31, 2017 andWHEREAS, the undersigned is a director of the Company;NOW, THEREFORE, the undersigned hereby designates and appoints Leigh R. Fox, Andrew R. Kaiser and Christopher J. Wilson, and each of them singly,her attorneys for her and in her name, place and stead, and in her office and capacity in the Company, to execute and file such annual report on Form 10-K,and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do andperform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as she mightor could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done byvirtue hereof.IN WITNESS WHEREOF, the undersigned has hereunto set her hand this 25th day of January, 2018. /s/ Jakki L. HausslerJakki L. HausslerDirectorSTATE OF OHIO) ) SS:COUNTY OF HAMILTON)On the 25th day of January, 2018, personally appeared before me Jakki L. Haussler, to me known and known to me to be the person described in and whoexecuted the foregoing instrument, and she duly acknowledged to me that she executed and delivered the same for the purposes therein expressed.Witness my hand and official seal this 25th day of January, 2018./s/ Joseph P. CondrenJoseph P. CondrenNotary Public, State of OhioMy commission expires 09-26-2020Exhibit 24POWER OF ATTORNEYWHEREAS, Cincinnati Bell Inc., an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and ExchangeCommission under the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, an annual report on Form10-K for the year ended December 31, 2017 andWHEREAS, the undersigned is a director of the Company;NOW, THEREFORE, the undersigned hereby designates and appoints Leigh R. Fox, Andrew R. Kaiser and Christopher J. Wilson, and each of them singly,his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K,and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do andperform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might orcould do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done byvirtue hereof.IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 25th day of January, 2018. /s/ Craig F. MaierCraig F. MaierDirectorSTATE OF OHIO) ) SS:COUNTY OF HAMILTON)On the 25th day of January, 2018, personally appeared before me Craig F. Maier, to me known and known to me to be the person described in and whoexecuted the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.Witness my hand and official seal this 25th day of January, 2018./s/ Connie M. VogtConnie M. VogtNotary Public, State of OhioMy commission expires 04-28-2020Exhibit 24POWER OF ATTORNEYWHEREAS, Cincinnati Bell Inc., an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and ExchangeCommission under the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, an annual report on Form10-K for the year ended December 31, 2017 andWHEREAS, the undersigned is a director of the Company;NOW, THEREFORE, the undersigned hereby designates and appoints Leigh R. Fox, Andrew R. Kaiser and Christopher J. Wilson, and each of them singly,his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K,and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do andperform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might orcould do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done byvirtue hereof.IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 25th day of January, 2018. /s/ Russel P. MayerRussel P. MayerDirectorSTATE OF OHIO) ) SS:COUNTY OF HAMILTON)On the 25th day of January, 2018, personally appeared before me Russel P. Mayer, to me known and known to me to be the person described in and whoexecuted the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.Witness my hand and official seal this 25th day of January, 2018./s/ Connie M. VogtConnie M. VogtNotary Public, State of OhioMy commission expires 04-28-2020Exhibit 24POWER OF ATTORNEYWHEREAS, Cincinnati Bell Inc., an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and ExchangeCommission under the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, an annual report on Form10-K for the year ended December 31, 2017 andWHEREAS, the undersigned is a director of the Company;NOW, THEREFORE, the undersigned hereby designates and appoints Leigh R. Fox, Andrew R. Kaiser and Christopher J. Wilson, and each of them singly,her attorneys for her and in her name, place and stead, and in her office and capacity in the Company, to execute and file such annual report on Form 10-K,and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do andperform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as she mightor could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done byvirtue hereof.IN WITNESS WHEREOF, the undersigned has hereunto set her hand this 25th day of January, 2018. /s/ Lynn A. WentworthLynn A. WentworthDirectorSTATE OF OHIO) ) SS:COUNTY OF HAMILTON)On the 25th day of January, 2018, personally appeared before me Lynn A. Wentworth, to me known and known to me to be the person described in and whoexecuted the foregoing instrument, and she duly acknowledged to me that she executed and delivered the same for the purposes therein expressed.Witness my hand and official seal this 25th day of January, 2018./s/ Connie M. VogtConnie M. VogtNotary Public, State of OhioMy commission expires 04-28-2020Exhibit 24POWER OF ATTORNEYWHEREAS, Cincinnati Bell Inc., an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and ExchangeCommission under the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, an annual report on Form10-K for the year ended December 31, 2017 andWHEREAS, the undersigned is a director of the Company;NOW, THEREFORE, the undersigned hereby designates and appoints Leigh R. Fox, Andrew R. Kaiser and Christopher J. Wilson, and each of them singly,his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K,and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do andperform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might orcould do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done byvirtue hereof.IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 25th day of January, 2018. /s/ Martin J. YudkovitzMartin J. YudkovitzDirectorSTATE OF OHIO) ) SS:COUNTY OF HAMILTON)On the 25th day of January, 2018, personally appeared before me Martin J. Yudkovitz, to me known and known to me to be the person described in and whoexecuted the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.Witness my hand and official seal this 25th day of January, 2018./s/ Connie M. VogtConnie M. VogtNotary Public, State of OhioMy commission expires 04-28-2020Exhibit 24POWER OF ATTORNEYWHEREAS, Cincinnati Bell Inc., an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and ExchangeCommission under the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, an annual report on Form10-K for the year ended December 31, 2017 andWHEREAS, the undersigned is a director of the Company;NOW, THEREFORE, the undersigned hereby designates and appoints Leigh R. Fox, Andrew R. Kaiser and Christopher J. Wilson, and each of them singly,his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K,and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do andperform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might orcould do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done byvirtue hereof.IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 25th day of January, 2018. /s/ John M. ZrnoJohn M. ZrnoDirectorSTATE OF OHIO) ) SS:COUNTY OF HAMILTON)On the 25th day of January, 2018, personally appeared before me John M. Zrno, to me known and known to me to be the person described in and whoexecuted the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.Witness my hand and official seal this 25th day of January, 2018./s/ Connie M. VogtConnie M. VogtNotary Public, State of OhioMy commission expires 04-28-2020Exhibit 24POWER OF ATTORNEYWHEREAS, Cincinnati Bell Inc., an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and ExchangeCommission under the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, an annual report on Form10-K for the year ended December 31, 2017 andWHEREAS, the undersigned is a director of the Company;NOW, THEREFORE, the undersigned hereby designates and appoints Leigh R. Fox, Andrew R. Kaiser and Christopher J. Wilson, and each of them singly,his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K,and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do andperform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might orcould do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done byvirtue hereof.IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 25th day of January, 2018. /s/ Theodore H. TorbeckTheodore H. TorbeckDirectorSTATE OF OHIO) ) SS:COUNTY OF HAMILTON)On the 25th day of January, 2018, personally appeared before me Theodore H. Torbeck, to me known and known to me to be the person described in and whoexecuted the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.Witness my hand and official seal this 25th day of January, 2018./s/ Connie M. VogtConnie M. VogtNotary Public, State of OhioMy commission expires 04-28-2020Exhibit 31.1CertificationsI, Leigh R. Fox, Chief Executive Officer, certify that:1.I have reviewed this annual report on Form 10-K of Cincinnati Bell Inc;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered bythis report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure control and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’sinternal control over financial reporting.Date:February 26, 2018/s/ Leigh R. Fox Leigh R. Fox Chief Executive OfficerExhibit 31.2CertificationsI, Andrew R. Kaiser, Chief Financial Officer, certify that:1.I have reviewed this annual report on Form 10-K of Cincinnati Bell Inc;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered bythis report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure control and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’sinternal control over financial reporting. Date:February 26, 2018/s/ Andrew R. Kaiser Andrew R. Kaiser Chief Financial OfficerExhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Cincinnati Bell Inc. (the “Company”) on Form 10-K for the period ending December 31, 2017 as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Leigh R. Fox, Chief Executive Officer of the Company, certify, pursuant to 18U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company./s/ Leigh R. Fox Leigh R. Fox Chief Executive Officer February 26, 2018 Exhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Cincinnati Bell Inc. (the “Company”) on Form 10-K for the period ending December 31, 2017 as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Andrew R. Kaiser, Chief Financial Officer of the Company, certify, pursuant to18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company./s/ Andrew R. Kaiser Andrew R. Kaiser Chief Financial Officer February 26, 2018

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