Cincinnati Bell Inc&Unit Off S&PWatch, Rtgs Raised.

NEW YORK--(BUSINESS WIRE)--S&P's CreditWire 10/13/98--Standard & Poor's today raised its short-term and long-term ratings on Cincinnati Bell Inc. (CBI) and wholly owned local telephone subsidiary, Cincinnati Bell Telephone Co. (CBT) (see table below).

The upgrade affects about $420 million in total debt outstanding at June 30, 1998, pro forma for the spin-off of some $755 million in debt to Convergys. The ratings were also removed from CreditWatch, with positive implications, where they were placed on June 1, 1998.

In addition, Standard & Poor's assigned its preliminary single-'A'/double-'A'-minus rating to the joint CBI/CBT $350 million shelf registration for unsecured debt. The outlook is stable.

The CreditWatch removal reflects the planned spin off of CBI's customer billing company, MATRIXX marketing subsidiary and minority share in an Ameritech Cellular joint venture to a new company (Convergys), including about $755 million of debt.

Standard & Poor's has viewed the marketing unit as having a fairly risky, volatile performance profile and as such its spin off enables CBI to achieve a stronger, more stable business profile more closely tied to its Cincinnati Bell Telephone unit, which will be the primary source of revenues and operating cash flows, post-divestiture. Divestiture of Convergys will also result in a substantial decline in debt levels at CBI and an associated improvement in financial measures.

The ratings reflect expectations for continued strong performance at incumbent local telephone provider CBT, which grew its access line base by 4% for the 12 months ended June 30, 1998. CBT has benefited from limited competition in its franchise area, due in part to the service territory's relatively wide local calling area and aggressive deployment by CBT of technologically advanced telecommunications infrastructure, such as ADSL and fiber, both of which have served to discourage entry by alternative local carriers. Moreover, state regulation remains favorable to the company, and adoption by the Public Utilities Commission of Ohio of an alternative rate plan for CBT provides the company increased pricing flexibility, without requiring productivity offsets; a similar plan is under consideration by Kentucky regulators. Given the stability of its core telephone business and expectations for increased penetration of enhanced services over the next several years, credit measures at CBT will remain at healthy levels, with FFO interest coverage expected to remain in the area of 10 times (x) in the 1999/2000 timeframe. CBI's consolidated FFO interest coverage is expected to remain somewhat lower, in the range of 7 to 8 times over the next few years, however, given additional debt requirements in 1998 for the AT&T wireless venture.

Ratings incorporate CBI's major expansion into the wireless arena, with its pending purchase of an 80% share in an AT&T PCS joint venture, which is anticipated to close by year-end 1998, and will require CBI to pay $110 million for the PCs network, plus its share of additional capital expenditures and cash operating losses incurred prior to close. Although this venture will be subject to substantial competition as a late entrant to the Cincinnati/Dayton market places, capital requirements for the venture are expected to remain relatively modest, and are not anticipated to adversely affect the overall financial profile over the next few years.

OUTLOOK: STABLE

The outlook for both CBI and CBT is stable. Post spin off, CBI's outlook will remain largely tied to performance at CBT, which will provide substantially all of CBI's consolidated cash flows over the next several years. CBT, in turn, is expected to remain competitively well-postured in its local markets, although its ability to contribute to pay down of consolidated debt will be limited by the continued capital requirements for telephone network modernization, Standard & Poor's said.--CreditWire

RATINGS RAISED AND REMOVED FROM CREDITWATCH POSITIVE

Cincinnati Bell Inc.                    To             From
  Corporate credit rating               A/A-1          A-/A-2
  Senior unsecured debt                 A              A-
  Commercial paper                      A-1            A-2
  Unsecured Bank loan                   A              A-
Cincinnati Bell Telephone Co.
  Corporate credit rating               AA-            A+
  Senior unsecured debt                 AA-            A+