AT to sell bulk of Yellow Pages to Cerberus

AT&T Inc. announced this morning that it has agreed to sell a majority stake in its Yellow Pages business to the private-equity firm Cerberus Capital for $950 million. The sale is part of AT&T’s strategy to jettison shrinking parts of its business to focus on growing ones, particularly wireless. Revenue from the Yellow Pages business has shrunk 30% in two years, as consumers turn to the Web instead of phone books. Phone books were once a cash cow, generating reliable profits as businesses paid for ads that were right under consumers’ fingertips as they were looking for local stores and services. Even with the steep revenue decline, AT&T’s Yellow Pages unit has been profitable before impairment charges for the last three years. AT&T, the country’s largest phone company, is following in the footsteps of Verizon, the second-largest, in cutting its exposure in the phone book business. Verizon spun off its directories business to shareholders in 2006, only to see it file for bankruptcy three years later. Cerberus is paying AT&T $750 million in cash and a $200 million note, plus a 47% stake in YP Holdings, which will oversee the business. The sale will affect 8,400 employees and is expected to close midyear. AT&T says it expects the sale to have a minimal effect on this year’s earnings. The assets being sold include the printed Yellow and White Pages, websites like Yellowpages.com and a mobile app. Together they generated revenue of $3.3 billion last year, about 3% of AT&T’s overall revenue.