US phone carrier AT&T Inc. is selling its majority stake in its Yellow Pages Unit (YP Holdings LLC) to private-equity firm Cerberus Capital Management LP for $950 million.
The deal includes 1,200 print Yellow Pages directories, the online directory yp.com, AT&T’s local ad network and the YPmobile app. It does not include AT&T AdWorks. The print version of the Yellow Pages reaches 150 million homes and businesses in 22 states.
AT&T will maintain a 47% stake, saying the sale is part of an effort to dispose of underperforming units. The sale affects 8,400 employees, and existing union contracts will be honored.
AT&T says it does not expect the sale to affect its 2012 earnings.
Relic In a Digital Age
Once a reliable resource, phone books have been made less relevant thanks to the convenience of the internet. In recent years, the Yellow Pages has been unable to successfully compete against websites like as Yelp, Groupon and Google.
In 2011, the Yellow Pages made $3.3 billion in revenue and sales fell 16%. In 2010, profit was $855 million. In January 2012, Chief Executive Randall Stephenson said he would consider selling the underperforming unit.
Rival Verizon Communications spun off its phone directory business in 2006, and AT&T hung on hoping sales would move from its print to online services, but they didn’t.
Some analysts say holding on to Yellow Pages as long as AT&T did in hindsight was a bad decision, one that AT&T probably regrets. Overall, the sale is perceived as a good business move for AT&T.
AT&T is the second-largest mobile phone carrier in the US, and will now focus on its mobile services as well as its television and broadband internet offering.
President and chief executive of AT&T Advertising Solutions Jose Gutierrez says: "This transaction makes strategic sense for both AT&T and Advertising Solutions."
Key Facts – Yellow Pages
- According to a survey conducted by Harris Interactive, nearly 70% of adults in the US “rarely or never” use a phone book.
- Every year, local governments spend $9 million recycling old phone books and an additional $54 million to dispose of unwanted phone books, according to The Product Stewardship Institute.
- In a study performed by research services firm Burke, internet yellow pages were ignored by all demographic groups. For ages 18-54, search engines are the preferred method of finding addresses and phone numbers.