NEW YORK – Verizon Communications Inc. may sell or spin off its phone book and online directories business to raise cash as it nears completion of its purchase of MCI Inc. and invests billions in rewiring its telephone network to deliver cable TV and speedier Internet access.
The company, laden with long-term debts of $34.4 billion, disclosed late Sunday it was reviewing alternatives for Verizon Information Services. The unit provides sales, publishing and other services for 1,750 directory books, including 1,200 Verizon-branded publications with a circulation of 121 million copies.
While Verizon did not say how much VIS might be worth, published reports said the business could be valued at more than $17 billion. The company said VIS had operating revenue of $3.6 billion in 2004, operates from Texas and employs 7,300 people. Analysts estimated the unit will show an operating profit of $1.8 billion for 2005.
“With the MCI merger expected to close shortly, this is the right time for us to optimize our business mix and unlock value,” Verizon Chief Executive Ivan Seidenberg said in a statement.
Some analysts questioned the wisdom of giving up the strong, profitable cash flows from directories despite Verizon’s need to bolster its finances as it replaces its copper phone lines with speedy fiber-optic cables and invests in its fast-growing Verizon Wireless venture. The company also faces a substantial investment upgrading and integrating with MCI’s national network to compete in the lucrative corporate services market.
Shares of Verizon, down more than 20 percent in the year, fell 16 cents to close at $31.71 Monday on the New York Stock Exchange.
A directories sale or spinoff would mirror a move three years ago by another regional Bell, Qwest Communications International Inc., but contrast with the ongoing investment in print and online directories demonstrated by two other Bell rivals.
John Hodulik, an industry analyst for UBS Investment Research, said Verizon would miss the cash flows from the directories business.
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