AT&T Selling Yellow Pages - Analyst Blog
April 10 2012 - 9:30AM
Zacks
AT&T Inc. (T), the second-largest U.S.
mobile service provider, will sell 53% stake in its Yellow Pages
business to Cerberus Capital Management LP, a private equity firm.
The deal would be worth $950 million, including debt. AT&T will
receive $750 million in cash and Cerebus will assume $200 million
in debt.
The Yellow Pages business is the part of AT&T’s Advertising
Solutions segment, which fell 16.3% last year and represented about
3% of the company’s revenue. Profitability at the Yellow Pages
business had been declining for the past several years as the
telephone directories have become obsolete due to changing customer
habits. The operations were highly impacted by the online service
provides like Google Inc. (GOOG), Yelp
Inc. (YELP) and Groupon Inc. (GRPN) that
have replaced the concept of printed phonebooks. AT&T recorded
$2.9 billion or 48 cents in asset impairments of its directories
business in the fourth quarter of last year.
AT&T’s decision to sell off Yellow Pages was an outcome of
its plan to shed some of its slower-growing assets or restructuring
underperforming or non-strategic assets such as the directory
business and rural access lines. Now, AT&T will focus on its
core wireless, IP, cloud and application-based services.
The deal, pending regulatory approval, is expected to close in
middle of the year. The transaction would have minimal effect on
its earnings this year. The Yellow Pages includes AT&T’s
Advertising Solutions and Interactive assets. It excludes the
recently formed AT&T AdWorks, a New York-based operation that
sells advertising offerings across 3-screen platforms (online,
mobile and TV).
AT&T is following similar trends as that of its major rival
Verizon Communication Inc. (VZ). Verizon, the
largest U.S. mobile service provider, had exited its directories
business in 2006.
Cerberus Capital, managed by the billionaire investor Stephen A.
Feinberg, is hopeful of generating substantial cash flow from the
Yellow Pages. It also believes that any growth potential in the
business is likely to stem from its online and mobile
initiatives.
We are maintaining our long-term Neutral recommendation on
AT&T. The company retains the Zacks # 3 (Hold) Rank for the
short term (1–3 months).
GOOGLE INC-CL A (GOOG): Free Stock Analysis Report
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