It's been nearly three months since my Special Situations portfolio acquired more shares in Cincinnati Bell (NYSE:CBB), but with clearly improving performance and catalysts on the horizon, I'm back to add to my position.

A solid quarter and catalysts
CinBell has multiple ways to create value for shareholders. The largest and most obvious is its 43% stake in CyrusOne (NASDAQ:CONE), a fast-growing data center REIT. It's hard to imagine a REIT growing any faster organically, with revenue up 28% in the most recent quarter. But the company sells at around 16 times this year's funds from operations and sports a 3.2% dividend yield. I expect the company to continue a brisk build-out of its operations over the next few years, at least.

CinBell's stake in CyrusOne is a huge asset -- now worth about $720 million by my calculations -- and as CinBell sells down that stake, the proceeds will be used to pay off debt. It's already sold off one tranche of CyrusOne, with that cash going to debt paydown. Further paydown will occur once the tiny telecom closes its previously announced deal to sell its fading wireless unit for $210 million in cash, likely later this year.

As CinBell retires its high-interest debt -- with rates around 8% -- the company will generate more free cash flow. The deleveraging also offers the opportunity to refinance existing debt to lower rates, further increasing free cash flow.

That wireless sale helps clean up the bad headlines of declining revenue, since the primary remaining unit -- CinBell's wireline business -- is actually growing revenue as strategic investments bear fruit. For now, the market is disregarding the solid underlying performance at the company's wireline unit. Following the divestiture of the wireless unit later this year, quarterly earnings releases should actually be able to trumpet increasing revenue and EBITDA. And I expect that to change the market's perception of the company. Even modestly growing revenue and EBITDA should force the market to reevaluate the stock.

Foolish takeaway
A few new wrinkles -- all positive -- since my last purchase make CinBell a great candidate for more money, even though the company comprises nearly 7% of my Special Situations portfolio already. I'll add another $500 to the position later this week.

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Jim Royal owns shares of Cincinnati Bell. The Motley Fool owns shares of Cincinnati Bell. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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