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Verizon considers phone book, Web site spinoff

By ASSOCIATED PRESS
Published July 8, 2006

NEW YORK - Verizon Communications Inc. took a step Friday that would permit it to spin off its phone book and Web directory business, but said it hasn't decided yet whether to go that route or sell the unit.

The possibility of a sale was another option mentioned when plans to divest the business were announced last December.

The phone and broadband services provider filed a registration form with the Securities and Exchange Commission for a possible spinoff of Verizon Information Services, which includes the superpages.com site.

Verizon said possible transactions include the creation of a publicly traded company that would be spun off to its shareholders as well as a sale of the business or some combination of alternatives. A decision on the issue is expected by year-end, Verizon said.

Though the business is highly profitable, Verizon has decided to focus on its fast growing cellular unit and rewiring its traditional phone network with fiber-optic lines that can deliver cable TV and far faster Internet connections. The divestiture of the phone book operation would provide cash for that multibillion-dollar network upgrade while allowing Verizon to park some of its hefty debt load with the departing business.

A spunoff directories business would be based in Dallas, would employ about 7,100 people and would be managed by people independent from Verizon, the company said.

A relatively small number of Verizon's approximately 11,000 employees in the Tampa Bay area work for the directories business, said spokesman Bob Elek. He couldn't say how a spinoff might affect their jobs.

As of the end of last year, Verizon Information Services provided sales, publishing and other services for 1,750 directory books, including 1,200 Verizon-branded publications with a circulation of 121-million copies.

Though it's a low-growth business, phone book publishers took in revenues of $14.7-billion last year, some generating profit margins in the 45 percent to 50 percent range, according to the Kelsey Group.

If a spinoff is chosen, Verizon stockholders would receive stock in the directories business through a tax-free distribution. Cash would be distributed in place of any fractional shares of the new stock due Verizon shareholders, and would be taxable.

Verizon reiterated Friday that it expects to maintain the current annual dividend of $1.62 per share following any spinoff. The new directories stock would be expected to pay a dividend as well.

Verizon's struggling share price fell 31 cents to close at $32.71 on the New York Stock Exchange. The stock has traded between $29.13 and $35.17 over the past 52 weeks.

Times staff writer Steve Huettel contributed to this report.

[Last modified July 8, 2006, 00:47:42]