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Verizon May Sell or Spin Off Directory Division Next Year
By Ken Belson New York Times
Monday, December 5, 2005

Verizon Communications said yesterday that it was considering whether to sell or spin off its directory business so it can concentrate more on providing wireless, data and phone services.

Based on similar sales in the past, the Verizon division could sell for $17 billion, or 10 times its 2004 profit before taxes and other charges of $1.7 billion.  Qwest Communications, the smallest of the four big Bell operating companies, sold its directories business for $7 billion in August 2002.

Verizon's board has authorized the company, the second-largest telecommunications carrier after AT&T, to hire bankers to explore its options now that its purchase of MCI is almost completed.  The company could sell or spin off the directories group, Verizon Information Services, in 2006.

"With the MCI transaction close to completion, this is the right time for us to take action that helps us sharpen our focus on our three network-based businesses," said Peter Thonis, a Verizon spokesman. "This move will give them additional flexibility to maneuver in a fast-moving marketplace."

Verizon Information Services publishes 1,750 directories in 44 states and Washington, D.C.  The division also operates, which it says is the nation's largest online yellow pages.  The division generated $3.6 billion in revenue last year, and it employs 7,300 people.  Sales fell 5.7 percent last year, and they may slip another 2.4 percent this year, according to the investment firm Sanford C. Bernstein.

Directories businesses are typically more profitable than many other divisions at phone companies like Verizon because they require far less investment in equipment.  Automation and revenue from Web sites have also helped their profitability.

Verizon has hired Bear, Stearns & Co. and JPMorgan Securities as its financial advisors.

The Justice Department and the Federal Communications Commission, as well as two dozen states, have already approved Verizon's purchase of MCI, the country's second-largest provider of telecommunications services to corporations.  Regulators in five states must still give their approval, which Verizon expects as early as the end of the year.

In addition to concentrating more of its energy on its core businesses, Verizon is also trying to reassure investors, who have seen the company's stock fall 21 percent this year.