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Cincinnati Bell Inc (CBB) Q4 2018 Earnings Conference Call Transcript

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Cincinnati Bell Inc  (NYSE: CBB)
Q4 2018 Earnings Conference Call
Feb. 14, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day everyone and welcome to the CBB's Fourth Quarter 2018 Earnings Call. Today's call is being recorded. At this time, I would like to turn the call over to Josh Duckworth. Please go ahead.

Joshua Duckworth -- Vice President of Treasury, Corporate Finance and Investor Relations

Thank you and good morning. I would like to welcome everyone to Cincinnati Bell's fourth quarter 2018 earnings call. With me on the call today, is our President and Chief Executive Officer, Leigh Fox and our Chief Financial Officer, Andy Kaiser. Leigh's comments today will recap our 2018 highlights and provide an update on our strategic initiatives. Andy will then provide detail on our fourth quarter financial performance by segment and our 2019 guidance.

Following the prepared remarks, Tom Simpson, our Chief Operating Officer will join Leigh and Andy for the question-and-answer portion of the call. Before we proceed, let me remind you that our earnings release presentation and financial statements are posted on our Investor Relations website. In addition, if you'd like to listen to this call at a future time, a tape recording will be available on the website starting today at noon.

Now I would like to draw your attention to our Safe Harbor statement presented on Slide 2. In our remarks this morning, we will be discussing forward-looking information. Due to various risks and uncertainties, actual results or outcomes may differ materially from those indicated or suggested by any such forward-looking statements.

More information on potential risks and uncertainties is available in the Company's recent filings with the SEC including Cincinnati Bell's Annual Form 10-K report, Quarterly Form 10-Q report and Form 8-K report. This presentation also contains certain non-GAAP financial measures, reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are also available on our website.

With that, I'm pleased to introduce Cincinnati Bell's President and Chief Executive Officer, Leigh Fox.

Leigh Fox -- President and Chief Executive Officer

Thanks, Josh and welcome everyone. Thanks for joining us today. 2018 marked the end of a very transformational two-year period for Cincinnati Bell. We have successfully integrated OnX and closed the merger with Hawaiian Telcom. We have reorganized the business and now managed two distinct yet complementary businesses and IT services business with a diverse customer reach and growing recurring revenue base and a network business with two attractive fiber-centric footprint with growing Internet market share.

We achieved all of this, while also delivering strong operational performance and achieving our 2018 financial guidance. As noted on Slide 5, consolidated revenue totaled $1.4 billion for the year, generating adjusted EBITDA of $372 million and positive free cash flow.

Moving to our IT Services business, our strategy for 2018 was simple. We create a company that addresses the IT and network needs of commercial enterprise clients, beyond our network footprint. As many of the network products have become software based, we identified an opportunity to begin adding value to our clients regardless of location for a full stack of products, from simple hardware sales through managed voice and software defined network management.

To accomplish this, we need to take our carrier-grade commercial and enterprise solutions, traditionally sold within our footprint and significantly expand our reach. I'm pleased to tell you the strategy is working. The October 2017 merger with OnX created instant scale by providing access to 15 additional North American market and 500 highly trained IT professionals. We also diversified our customer base by adding 2,000 plus new logos to sell our strategic IT services across our expanded geographic footprint.

Through a combination of selling our services to existing OnX customers and adding new logos, our recurring revenue services accounted for more than 25% of the gross sales of that segment in 2018. This is an incredible achievement for a company that was typically considered a traditional value-added reseller. In addition, we recently examined our Top 200 customer relationships which account for a significant percentage of our annual IT services and hardware revenue. Of these customers, 85% purchased an IT hardware product and nearly 50% purchased a consulting service. But what I believe is even more impressive is that, within these 200 customers, approximately 40% purchased a communications solution, with 30% purchasing a cloud-based solution. These latter two products are incredibly sticky and move our relationship with customers well beyond transactional interactions.

We remain particularly encouraged by the growing demand for our communications and consulting services. During 2018, the communications practice secured multi-year engagement with a total contract value of more than $65 million to be realized over the next three or five years, resulting in $2 million of monthly recurring revenue.

Our consulting practice also realized an uptick in demand as we established a new relationship with a Fortune-10 enterprise and added resources to two Fortune-100 customers. In total, billable resources increased approximately 17% year-over-year, generating full-year revenue of $155 million, the consulting practice. The growing demand for strategic IT services has also expanded into our Hawaiian market.

Our extensive portfolio of products has provided the Hawaiian Telcom team, the platform needed to further develop existing relationships and identify new opportunities in underserved market. Since the merger with Hawaiian Telcom on July 2nd, we have made significant strides toward realizing our synergy targets and our operational objectives. As a result, adjusted EBITDA has now increased for two consecutive quarters. Looking ahead, we expect adjusted EBITDA to grow 5% to 10% in 2019 as ongoing operational efforts remained focused on increasing Internet penetration and improving product delivery and customer service.

Additionally, the merger with Hawaiian Telcom was an important step toward building scale and marketing an fiber density value for shareholders and customers. As we continue to anticipate and capitalize on the growing demand for speed, that only a fiber network can provide. We are confident that dense fiber will increasingly be a market differentiator. And our continued investment in fiber networks will further differentiate us from our like peers. We simply have better assets.

To illustrate the distinction between our assets and those of our peer group, fiber to the premise has been constructed to approximately 60% of the addresses in Cincinnati and 50% of the addresses on the island of Oahu, which is home to 1 million residents. In contrast to this, with our next closest peer which is only able to offer a 100 megabit Internet product to slightly more than 25% of its addresses. Our fiber investments resulted in both Cincinnati and Hawaii, increasing their Internet market share year-over-year.

As additional evidence of the accelerating demand for faster Internet speeds, more than 50% of Cincinnati's Internet customers subscribe to speeds greater than a 100 megabit, compared to two years ago, when only 20% subscribe to such speeds. Ultimately, Cincinnati Bell and Hawaiian Telcom's distinctive brand and superior assets provide each of the means to capture current market share and future value from data-intensive bandwidth standards.

With that, let me turn the call over to Andy who will review our fourth quarter earnings results and provide additional details about the segment performance and financial outlook for 2019.

Andy Kaiser -- Chief Financial Officer

Thanks, Leigh. Starting on Slide 6, consolidated revenue totaled $399 million for the quarter, with adjusted EBITDA totaling $108 million. Both revenue and adjusted EBITDA were up approximately 3%, sequentially on stronger IT services revenue, resulting from increased demand for consulting and communication services as well as seasonally high infrastructure sales.

Turning to Slide 7, we have highlighted our Entertainment and Communications segment results for the quarter. Contributions from the merger with Hawaiian Telcom resulted in fourth quarter revenue of $252 million and adjusted EBITDA totaling $91 million. Compared to the third quarter of 2018, revenue decreased less than 1% as growth in consumer SMB Fiber and Enterprise Fiber partially offset continued legacy declines. Total entertainment and communications adjusted EBITDA remained consistent with the prior quarter, as merger related synergies offset the slight decline in revenue.

Additional details regarding consumer SMB Fiber revenue also referred to as Fioptics in Cincinnati and the related metrics have been included on Slide 8. In Cincinnati, Fioptics revenue totaled $87 million for the quarter, increasing 8% year-over-year, as continued strong demand for higher speed Internet solutions and ARPU growth mitigated video subscriber declines. We ended the year with 239,000 Fioptics Internet subscribers, up 12,400 from a year ago, which includes a combination of fiber-to-the-premise and fiber-to-the-node customers.

Video subscribers declined 6,600 during 2018, ending the year at 140,000 as customer preference shifts toward over the top program. Video ARPU for the quarter totaled $96, up 9% year-over-year. As demand for faster Internet speeds continues to accelerate, our fiber-to-the-premise offering is proving itself the superior product to the competitors offering, as well as our fiber-to-the-node product.

During the year, we added 22,000 fiber-to-the-premise Internet customers including 4,700 in the fourth quarter. Fiber-to-the-premise Internet penetration increased to 43% during the quarter with churn improving slightly from the prior year to 1.6%. Fiber-to-the-premise Internet ARPU for the quarter increased 4% from a year ago, totaling $52. In Hawaii, consumer SMB Fiber revenue totaled $22 million, up 3% sequentially.

During the fourth quarter, Hawaiian Telcom added 2,100 fiber-to-the-premise Internet subscribers with penetration rates increasing to 31%. Total Internet subscribers remain consistent with the previous quarter while ARPU increased 9% to $37. Video subscribers remained flat at 49,000 resulting in penetration rates up 20%. Video ARPU decreased slightly to $79 during the quarter due to an increase in bulk activations.

Turning to our IT Services and Hardware Segment on Slide 9. Revenue for the quarter totaled $154 million, up 16% over the prior year and 9% sequentially, including a $10 million contribution from Hawaiian Telcom. Each of our four practices contributed to the revenue growth with infrastructure solutions being seasonally stronger in the fourth quarter. Consulting revenue results were impressive, growing 8% during the quarter due primarily to an increase in billable resources.

Our strong revenue results generated adjusted EBITDA, totaling $20 million for the fourth quarter of 2018, which was up 34% year-over-year and 15% compared to the previous quarter. As highlighted on Slide 10, we continue to be encouraged by the strong demand for our UCaaS, SD-WAN, and NaaS offerings within the communications practice. Excluding contributions from Hawaiian Telcom, communications revenue increased by 4% during 2018, due to the 26% growth in strategic products more than offsetting legacy declines.

During the quarter we more than doubled our NaaS locations and increased SD-WAN locations by 65%. We also added 16,000 hosted UCaaS seats since the third quarter of 2018 and now manage nearly 240,000 profiles, including approximately 24,000 in Hawaii.

Turning to our financial position on Slide 11. Free cash flow for the year totaled $41 million, up $13 million from the prior year, primarily due to full year contributions from OnX, as well as contributions from Hawaiian Telcom, since the close of the merger. Consistent with the prior quarter, we ended the year with net debt of $1.9 billion resulting in leverage of 4.6 times.

Our current capital structure and ability to generate positive free cash flow is more than appropriate to execute our long-term growth strategy, as our liquidity at year-end exceeded $200 million and we have no significant maturities due until 2024. As a reminder, we also maintain a gross net operating loss carry-forward of approximately $650 million, which will defray any federal tax obligations into the foreseeable future. As presented on Slide 12, full-year capital expenditures totaled $221 million including $44 million for Hawaiian Telcom.

For the full year of 2018, we invested $99 million in our Fioptics suite of products, building fiber-to-the-premise to 41,000 new addresses. As a result, Fioptics is now available to 611,000 homes and businesses or approximately 75% of Greater Cincinnati. In Hawaii, consumer SMB Fiber is available to approximately 222,000 addresses on Oahu, covering more than 65% of the island, while only 12% of the 160,000 total addresses on the neighbor islands have been upgraded with the fiber product.

Heading into 2019, we are planning to remain free cash flow positive, while continuing to identify opportunities to expand our fiber to the premise footprint to residential and commercial addresses with the highest return profile. As illustrated on Slide 13, we expect capital expenditures will be $215 million to $235 million for the Company, including $60 million to $70 million for Hawaiian Telcom.

Interest payments are expected to be $130 million to $140 million in 2019, with contributions to our pension and post-retirement plans ranging from $15 million to $20 million. We are anticipating full year 2019 revenue to be $1.515 billion to $1.575 billion and forecasting adjusted EBITDA to be $400 billion to $410 million. These targets include Hawaiian Telcom's revenue and adjusted EBITDA contribution of $350 million to $360 million and $95 million to $100 million respectively.

In previous communications, we have discussed the challenges and headwinds facing the cloud practice within our IT services and hardware segment due to in-sourcing initiatives at one of our largest customers. Our 2019 guidance as conservatively quantify the potential impact of these efforts to reduce adjusted EBITDA by $15 million to $20 million as compared to 2018. We continue to maintain a close relationship with this customer, providing the opportunity to win projects within the entities various business units.

With that, I'll turn the call back to Leigh, for closing remarks.

Leigh Fox -- President and Chief Executive Officer

Thanks, Andy. 2018, was undoubtedly a challenging year for our sector. However, our superior assets, brand equity and customer relationships combined with our early decision to accelerate our regional fiber build in both, Cincinnati and Hawaiian, have created unique networks capable of producing higher bandwidth and faster Internet speeds in our competition, significantly differentiating Cincinnati Bell from our historical peer group.

In addition, within our IT Services segment, we now deliver flexible end-to-end solutions to customers across North America. Our diversified services portfolio has created a competitive and innovative platform, driving significant recurring revenue across our expanded footprint. In closing, we remain committed to growing our two distinct businesses as we drive toward increasing valuation multiples associated with our expanding fiber rich network and our IT services business.

Our strategic transformation combined with our discipline, capital allocation and sharp focus on execution has positioned Cincinnati Bell to capitalize on industry trends to deliver long-term shareholder value.

I will now turn the call over to the operator and open it up for Q&A.

Questions and Answers:

Operator

Thank you. (Operator Instructions) We'll take our first question from Simon Flannery with Morgan Stanley.

Simon Flannery -- Morgan Stanley -- Analyst

Thanks a lot. Good morning. Leigh, you've talked in the past about the some of the parts value of the Company and potentially considering separation of the IT services. Could you just update us on those plans. And then on the customer in-sourcing, is that impact likely to be linear through the year or is there some kind of lumpiness through that? Thank you.

Leigh Fox -- President and Chief Executive Officer

Thanks, Simon. Yeah. So, an update on CBTS, I think we've done pretty much all we can do to separate organizations, both from a financial reporting standpoint and organizational standpoint. At this point, we're looking to execute in both of our segments and whether the right time to sell is tomorrow or three years from now, I think we'll determine that as time goes on. I think the important part is, our job was to highlight the value that I think we have in that segment. And honestly, I think the kind of the brilliant maneuver that we made. And if you really think about it, what CBTS represents, is -- if you look at a traditional, call it, a national Teleco -- pick one of the national guys that are much larger than we are in our sector, so, pick a name.

Typically, the products that we sell and in fact -- I think we have of more complete and deep product set than most of our peers. They sell those within their business units either in a commercial group or an enterprise group. What we've done, given our limited geography of our network was basically take those products and separate them out into a different entity. And now we're not constrained by geography, right. So as we sell network type products in our geography that are connected to our fiber network, we now have the ability to go take this commercial and enterprise products and even -- more robust stack of products with kind of within that -- those segments, and sell the commercial and enterprise clients across North America.

So that's what we're going to focus on. We have the ability to spin that company out at any point, if value dictates that we should. But right now, we're focused on growing it. I'm incredibly happy with the momentum. That Company has got a lot of tailwind behind it, so I'm looking forward to what 2019 brings. What was -- I'm sorry, what was your second question?

Simon Flannery -- Morgan Stanley -- Analyst

It was on the...

Leigh Fox -- President and Chief Executive Officer

Oh, yeah. Sorry, the trends of GE, it's probably going to be a lot more focused on the first half of the year. We should see a trend that out sort of in the first six months. One of the things we struggled with was timing. With the range that we gave on guidance, that's in my mind, worst case scenario, it will be no worse than that range. We're working with this customer, they are in-sourcing this product. We're working with them, to better understand timing, to help them as much as we can, but it is timing as a bit of an unknown, but if I were to model it, I would model it out in the first six months and then it's sort of normalized past that point.

Simon Flannery -- Morgan Stanley -- Analyst

Okay. So it's possible, it might not hit in Q1?

Leigh Fox -- President and Chief Executive Officer

Yeah, I would somehow doubt that it would all hit in Q1.

Simon Flannery -- Morgan Stanley -- Analyst

Okay, great. Thanks a lot.

Operator

We'll take our next question from David Barden with Bank of America Merrill Lynch.

David Barden -- Bank of America Merrill Lynch -- Analyst

Hey guys, thanks for taking the question. I had a couple, first one was on, thank you for the CapEx detail in the legacy year, Cincinnati business. I guess the expected run rate of Hawaii is going to tick down pretty substantially from what we saw in the last six months of 2018 into next year. If you could kind of elaborate a little bit on what's driving that? And then related to the CapEx question is, I think you kind of made a statement about the expectations for more fiber coverage in targeted economic areas, I wonder if you could kind of size that a little bit in terms of what the goals are now with the throttled capital expenditures?

And then lastly, kind of gauging your optimism on at 43% penetration in the Cincinnati market, kind of how easy is it to kind of continue to grind that number higher in the competitive climate where you're kind of closing in on -- what we would assume would become more of a natural 50-50 market share? Thanks.

Leigh Fox -- President and Chief Executive Officer

Thanks, David. Appreciate it. With respect to the HCOM CapEx run rate, I think what you should expect is we'll continue to invest in fiber build, but the reason you're seeing a slight tick down is, as we've mentioned in prior calls from an operation standpoint, we'd like to align the operations of Cincinnati and Hawaii in the cross-functional disciplines and really ensure that we are thinking about the world the same way across territories, that work is already begun, and it's going very well and I think you see that in the results. But one of the things we didn't want to do, we didn't want to just jump into spending capital without being convinced that we're doing in the most optimal way.

And so I think that's what you see in 2019. So we're going to assess progress as we go and make sure that we're seeing everything from the ARPUs we expect, to the penetration we expect. And then assess as we move on, which I think is the financially prudent and operationally prudent thing to do. From a goal standpoint, I think this relates to the penetration question, I think we're at a point as a company where we have pretty deep metro fiber. And one of the things that we focus on is with those markets at slightly over 50% or over 50%, one being greater than the other, but both being over 50% fiber-to-the-prem.

To your point on penetration, we're going to start to focus on what is the right type of penetration. And I think you heard us talk last year about the right types of customers, but we weren't going to chase vanity metrics, we weren't going to chase unprofitable subs. This year there is going to be a lot of focus on pace, and what are the right types of subs. You're still going to see us attack subs, I think you're going to see Internet growth, but it really is learning as supply and demand for fiber-based speeds shifts and changes.

One of my concerns is being too far ahead of demand with supply. And so we see in the next three to five years, the landscape changing immensely from a data usage standpoint. But at the same time, I don't want to be too far ahead of that from a capital expenditure standpoint. And so we will be focusing on, hitting the right neighborhood was your point. Making sure we're getting the right type of subs. And what that might mean is, us pressing the bounds of to your point on what those, what is the bounds of our penetration? I don't know that it's a 50-50 market, to be honest.

I think with our assets and as demand shift with the assets we have. I think over time, we can be a net winner in the market and be over the 50% kind of share of the markets that we're in, simply based on the assets. And so, that's what we're going to test, but we're going to do it in as prudent way as possible. Obviously, look I could sit down and we could build business models, so say, let's just build fiber as aggressively as possible, as well as I do what that means is your debt increases, we're more highly levered, but we have more of these dense assets and we have very good assets and so it's sort of a wait and see and hope it comes, and right now we feel like we're in a very good position, we have very good assets and now the prudent thing to do is to really start to be measured about how we build out from this point and make sure that we're seeing the results that we expect especially as you see this demand shift over time. So I hope that makes sense, but that's sort of how we're thinking about the world.

David Barden -- Bank of America Merrill Lynch -- Analyst

Thanks, Leigh.

Operator

Our next question comes from Batya Levi with UBS.

Batya Levi -- UBS -- Analyst

Great. Thank you. First on the exposure to that large customer, can you also provide a range for the revenue exposure we should think about. And you mentioned that we shouldn't expect anything beyond that, have we seen some of that pressure already in showing up in 2018 numbers? And then a follow-up on the CapEx, can you just help us think about what your CapEx guidance assumes in terms of fiber reach in Cincinnati and Hawaii? Maybe in Cincinnati is that sort of like half of the buildout we saw in 2018, about 20,000 homes and in Hawaii, where would that coverage get us by year-end?

And just last question, maybe an update on the competitive environment, especially in Hawaii. I believe you mentioned that churn picked up a bit, can you talk a little bit more about that?

Leigh Fox -- President and Chief Executive Officer

Yeah, thanks, Batya. With respect to GE, I would say that the revenue range, as it matches guidance with, would be -- call it $25 million to $30 million in that range. I'm probably pretty close. From a build results, I think you're exactly right on Cincinnati, we're probably 15,000 to 20,000 homes and in Hawaii, we're 5,000 to 10,000 utilizing caps, and another different financing mechanisms. So that's probably what the landscape looks like. With respect, I guess your last question was with respect to churn in the competitive environment. We haven't seen a massive change in the competitive environment, it's been pretty consistent. I would say the one change that we saw this year was the obvious addition of our mobile products from our competitor. But I'm not sure that that's driven anything incremental from a result standpoint.

Fiber churn looks good, I think if you see any difference in churn, it really comes down to the fact that VDSL churn is increasing. So fiber-to-the-prem churn looks great, which is again why you're seeing a lot of our posture in discussion, switching over to talking about fiber-to-the-prem, more than we talked about anything else. We're really considering VDSL now as a legacy type product, just because of the baseline speeds. So I would say that if you saw any difference in churn, it was around the VDSL products which we expected. And again, that's why we focused on, to the prem-build.

Batya Levi -- UBS -- Analyst

Okay. Thank you.

Operator

Our next question comes from Sergey Dluzhevskiy with GAMCO Investors.

Sergey Dluzhevskiy -- GAMCO Investors -- Analyst

Good morning guys. My first question is on integration, so you've had Hawaiian Telcom obviously for over for a year now. So maybe if you could share how you are executing against your integration focus areas like, fill the network optimization, improving efficiency, reducing churn, obviously we've seen EBITDA improved sequentially. And you also mentioned that you need to further align operations with Cincinnati and Hawaii. So maybe at a high level, if you could talk, what does that entail in 2019 and beyond?

Leigh Fox -- President and Chief Executive Officer

Yeah, thanks, Sergey. Thanks for the question. Yeah, I think it's going really well. I think you said it honestly you answered your own question. I think the results are in the -- the EBITDA growth that you see. I think when we announced that merger, I think there is a lot of question on when you see consecutive quarters of decline, what could you do with this asset and what it would look like and we were pretty confident that we could stabilize and reverse trends and that's exactly what's happened. So, it's going well, the team is doing really well and Hawaii, I'm really confident with the team we have and looking forward to some good results in 2019. So from that standpoint, everything is going very well.

From the standpoint of operations, I think it's as simple as pricing -- pricing parity, making sure that pricing methodology is the same, build methodology is the same. I mean you kind of take the transactional items in any operations then you start to break down every piece of it. And what we're doing is we're working with the teams to make sure that we have consistent thought process, while also considering the differences in the geographies. So the business environment as an example, might be a little different than the business environment in Cincinnati. So we're making sure that those teams understand as we look at business customers. Here is how we consider business customers, while taking into account their environment, same with consumer customers. While taking on the consumer side into account the fact that the MDU, SFU mix is different than what it is here in Cincinnati. So it really is just aligning those methodologies. And then as we look at build, what have they done, educating ourselves on what they've done and how they've performed. And then looking at the opportunities and where the best opportunities are, at least initially as we merge teams together and teams become familiar with one another, again, the results have been fantastic, I'm encouraged by everything that's been done.

I think we've got some tailwinds behind us, so I'm looking forward what 2019 brings. And as you know, we got a lot of opportunities on the business side. And then on the IT front, I think that's -- we said in the script, so I think that's completely untapped market and we have a lot of opportunities on that side too. So, I'm really looking forward to what 2019 brings.

Sergey Dluzhevskiy -- GAMCO Investors -- Analyst

Great, and my second question is on 5G and obviously you're seeing a largest wireless carriers getting close to launching 5G and experiments with six mobiles, as Verizon launching a product in four markets. So have any developments on the 5G front over the past six months or so, changed your view on the recent resources opportunities at 5G, presents to Cincinnati Bell and if you could share your latest thinking on the subject? That's would be great.

Leigh Fox -- President and Chief Executive Officer

Yes, thanks. Great question. And honestly, this is the subject, I get personally involved in every week. And I think -- I don't know that my viewpoint is changed. I still think it is an opportunity. I think it can be a risk in some areas of the business, but I think overall it's a massive opportunity both for where we have assets and honestly everywhere in the country, this infrastructure is deployed. How it impacts financials? I mean we're stand pretty close to conversations around deployments and technology shifts. And when I say that I mean, everything from -- we're meeting with chip makers to product developers to carriers themselves, and staying very connected with what the plans are in the current thought processes.

I'm not convinced that it's a fixed wireless as a broadband replacement. What I am convinced is, is that it will drive technology shifts, and an increased demand for speed and data usage, based on the deployment of products that will come around, having a robust infrastructure. And kind of the easy things to think about around that are autonomous vehicles, augmented reality, we've seen some pretty cool products are in augmented reality and what that could do to life going forward.

So I'm encouraged by the fact that I think data usage is going to increase exponentially. And if you look at some of the trends and predictions on that, it shows -- the prediction show that. And the other thing, I'm encouraged by that historically, whenever we've tried to predict data usage in the future, we've been grossly off and conservative. So I think that same thing is going to happen. So the way I look at it is data usage is going to explode over the next three to five years, and having a robust deep metro fiber asset in two areas. Especially, in one, if you think about Hawaii, one that's not easy to build-in, right.

And so we've got a very unique asset on Hawaii as data explodes. It's not easy to build in Hawaii and we've got over 50% of the Island Oahu, built and we're building other Islands through CAF. And so we're in a very unique position to take advantage of some of these trends. So, that's where my heads are right now. But I'm keeping my finger on the pulse of (inaudible) as much as I can.

Sergey Dluzhevskiy -- GAMCO Investors -- Analyst

Thank you.

Operator

Our next question comes from Davis Herbert with Wells Fargo.

Davis Herbert -- Wells Fargo -- Analyst

Good morning, guys, thanks for taking the questions. How long the same lines of the Enterprise Fiber division, I think you reported $30 million of revenue this quarter. What's your outlook for that segment? How should we look at that, the total addressable market? Is that going to be pretty predictable driver of revenue this year?

Andy Kaiser -- Chief Financial Officer

I would say -- I always view that area as somewhat kind of flat to slightly up. The challenges we're effectively migrating customers, right. When you, are the 90-pound gorilla when it comes to fiber infrastructure in the areas that you have infrastructure. A lot of what you're dealing with it, is the transition of these legacy products and it's more robust fiber base products. And honestly they're buying on a bandwidth standpoint, they're getting more for less, right. So they're buying bigger pipes for a less cost on a megabit -- from a megabit standpoint of cost -- from megabit standpoint.

So I always viewed as it's consistent, but it's not -- I don't expect robust growth. It's almost like, tell sales people, their jobs are hard because it's almost like they're on a treadmill running pretty fast to stand still, but that treadmill is incredibly important, right. We've got to help those customers transition to upgraded infrastructure. So that's what we do. And we have great relationships and will continue to help customers migrate.

Davis Herbert -- Wells Fargo -- Analyst

Okay. Thank you. And then on the GE issue, just thinking longer-term, is there any reason we should expect another impact in 2020? And do you still view of the $100 million EBITDA, I mean granted, I know that's several years away perhaps, but you still did think that's achievable?

Leigh Fox -- President and Chief Executive Officer

Yes. So I absolutely do. I think and I don't expect anything like this to happen again. I mean, I look at our overall product portfolio and we knew that this was an incredible relationship and an incredible product that we've been very successful with. And honestly, successful with them, it's been a great product for them. We've done everything we can as a vendor to try to keep that relationship with that specific product. But ultimately, they've decided end source it, which I completely understand. But I don't see any exposure like it anywhere else, it was fairly unique.

So going forward, I think we have kind of normal business risk, I would call it. But beyond normal business risk, I think we have incredible products and incredible opportunity within CBTS. And as I described earlier, the opportunities that we have -- the footprint that we now sell and is much larger than the footprint that you traditionally think about with Cincinnati Bell. And I think that's -- I don't know that people have necessarily wrapped their head around that, right. And I think you're going to see that in the results. So yes, I think $100 million is absolutely doable and that's doable on an organic basis. Obviously, that's not going to happen in 2019, it's going to take us some time, but I see great opportunities with CBTS and incredible momentum going forward. So, yeah, I'm really encouraged and once we get pass this and kind of normalize this issue, I'm really encouraged.

Davis Herbert -- Wells Fargo -- Analyst

Okay. That's helpful. And last question, we saw CenturyLink take their leverage target down to a much lower level and the leverage seems to be a concern across the sector itself. You guys are at 4.6 times, Andy pointed out. And you do have runway, but how urgent do you see the need to reduce leverage and get to more conservative balance sheet position? And can you, -- can you repurchase bonds as a way to do that? Thank you.

Leigh Fox -- President and Chief Executive Officer

Yeah, thanks. Yeah, I think, so we're obviously focused on leverage -- I mean it is an absolute issue. I think within our sector, and the reason it's an issue is we're in a capital refresh cycle as a sector, right. And so I think what we're doing as from a build standpoint being prudent not levering back up aggressively in order to build fiber, I think it's a prudent thing to do. At the same time, I'm not super concerned about the long-term outlook, because we're putting good assets in the ground. And I think the concern around leverage in our sector has everything to do with the fact that, for the most part you see businesses with income statements that have products that are effectively failing, right. They haven't invested in the future. I don't feel that way with us, right.

We've invested in the future, I think we have very good products, both on the consumer side, we are well positioned. And on the business side, I think we're incredibly well positioned, right. We've invested in things that, I know for a fact other organizations in the sector don't have, right. And so I look at the future, and unfortunately we're a really nice house in a bad neighborhood. And I can't help that, because we're small, people just compare us with those big guys, automatically and say why are you any different, I don't see why are your any different. We just sort of make a decision to move on.

You and I have had discussions in the past about how we are different, and so I focus on that. I focus on making sure that our revenue run rates, our profit run rates look appropriate and that we have enough runway to pay the interest and invest, and if need be, we delever. Now that said, I also, I'm big fan of optionality, right. And so if I ever do get into a bind where, oh my gosh, let's say it's 2023, nothing has changed in the environment, and we need to delever. Look, I have assets that you could spend, and which is one of the reasons why we did -- what we did with CBTS to show the world that, look, we've got great assets here. And we're going to grow these assets and if we ever get into an issue where leverage does become a things, I can spin, one of the assets. And it has a -- it will have a profound effect on our balance sheet.

And so, I look at our optionality, I look at the type of assets we have, both from an infrastructure standpoint products, I look at our run-rates and I look at how our ability did execute against our plans and really counter a lot of the legacy declines that -- they're just a reality in our sector. And I think we're incredibly well positioned. So I look at the other guys and what they announced, and I get it. I get why they do it, but we are a different animal and we're going to -- we're going to run the Company as prudently as we can from the standpoint of mixing short-term results with long-term needs. And I think we're doing it very well.

Sergey Dluzhevskiy -- GAMCO Investors -- Analyst

Great. Thank you, Leigh.

Operator

We'll take our next question from Steven Sigler with Aetna.

Steven Sigler -- Aetna -- Analyst

Thanks for taking the questions. First on HCOM. In the past you stated that one of the best practices you wanted to bring to HCOM was better aligning, completing fiber construction with selling and installing. So can you give an update on the HCOM's fiber builds you've done so far in 4Q 2018 and into 2019? Have you started to implement those practices? And are you seeing higher initial penetration as a result?

And then second on CapEx, in Cinci, you passed 6,000 more homes with fiber-to-the-prem in 2018, than original guidance. But the Fioptics CapEx was in line with guidance. So can you talk a bit about what contributed to that outperformance in terms of homes passed? And do you see those trends continuing in 2019? Thanks.

Leigh Fox -- President and Chief Executive Officer

Thanks, Steven. I'm going to actually turn this over to Tom and let him answer this one.

Thomas Simpson -- Chief Operating Officer

Hey, Steven, this is Tom Simpson. A couple of things. So with regard to Hawaiian Telcom, with the capital expenditures we had in 2017 and 2018, that we inherited the major focus for the team out there was to increase fiber penetration. And we started to see that trend shortly after close. So there are a lot of business, fiber doors built on Oahu and neighboring islands. And we've increased that penetration, single digit percentage and we'll continue to see that penetration grow upwards of 20%, 23% this calendar year. And I consider that very successful as it was in the teens.

In the consumer fiber business, we've also been focused on success-based capital, and that is the major focus for 2019 in Hawaii, is increasing the fiber penetration on non-bulk doors as there is a under penetrated market areas, that we're focusing on. Part of that focus has been largely increased service, so we're talking sales intervals to installation times, increasing or decreasing that to just a few days, decreasing our repair intervals, where we -- the team did a tremendous job. Where we had several thousand open repairs, that we're a week or more out in the beginning of 2018 and it's really less than a couple going in the 2019. And with those things that we see the demand is strong, and now we're able to follow up with the sales activity. So that's good for the team.

I'm sorry, what was the second question with regard to capital efficiency in Cincinnati? Yeah, with Cincinnati, we've found as we look at the customer lifetime value of our fiber builds end-market, we're certainly looking for -- we look for pockets of areas that have the best yields from a build and return activity. So we are simply more efficient this year and that's really the strategy for 2019 is building as efficiently as possible. We're not doing anything crazy like shallow trenching or anything like that, like some of our other folks that have abandoned markets, it's still good old fashion pick and shovel or hanging fiber. But we're doing it exceptionally efficiently.

Leigh Fox -- President and Chief Executive Officer

Yeah. And just to add to that, I mean, you guys are also doing a lot on the install efficiency. We've migrated a lot of customers to self installs, which has had an incredible effect on capital efficiency and that's also one of the things that we hope to bring to the Hawaiian market and that has a profound impact, not just on the current year, but on your kind of long-term run rates. And what that means is, spending less capital on installs, you can shift that capital over and do more with the installation, so that part of it.

Thomas Simpson -- Chief Operating Officer

Yeah, self-installations have been a big impact in 2018 in Cincinnati and will impact Hawaii in 2019. And the focus for both the teams in 2019 has again increased the fiber penetration on the doors that we've passed, and it's hard to shift more of our video product to more software defined. So we're not deploying setups (ph).

Steven Sigler -- Aetna -- Analyst

Great. Thanks guys.

Leigh Fox -- President and Chief Executive Officer

Thanks, Steven.

Operator

And that does conclude our question-and-answer session. I would like to turn the conference back over to Leigh Fox for any additional or closing remarks.

Leigh Fox -- President and Chief Executive Officer

Thank you. Thanks everyone for joining. 2018 was a great year in moving our strategic vision forward. I'd like to thank our 4,300 employees for the incredible work they've done over the last two years. I look forward to applying that same energy and focus to accomplish our goals and objectives in 2019 and beyond. Thanks again for joining the call today and thanks for your continued support, Cincinnati Bell. Have a great day.

Operator

That does conclude today's presentation. Thank you for your participation and you may now disconnect.

Duration: 50 minutes

Call participants:

Joshua Duckworth -- Vice President of Treasury, Corporate Finance and Investor Relations

Leigh Fox -- President and Chief Executive Officer

Andy Kaiser -- Chief Financial Officer

Simon Flannery -- Morgan Stanley -- Analyst

David Barden -- Bank of America Merrill Lynch -- Analyst

Batya Levi -- UBS -- Analyst

Sergey Dluzhevskiy -- GAMCO Investors -- Analyst

Davis Herbert -- Wells Fargo -- Analyst

Steven Sigler -- Aetna -- Analyst

Thomas Simpson -- Chief Operating Officer

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