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—— http://story.news.yahoo.com/news?tmpl=story2&u=/ap/20020825/ ap_on_hi_te/telecom_phone_directories_2 Struggling Telecoms Sell Phone Books Sun Aug 25, 1:52 PM ET

By CATHERINE TSAI, AP Business Writer

DENVER (AP) – The latest savior for a telecom industry struggling through a digital revolution is an old mainstay: the phone book.

Qwest Communications International Inc. is selling its QwestDex directory unit in a $7.05 billion deal to reduce its $26.6 billion in debt.

In April, the telecom McLeodUSA Inc. closed a deal to sell its directory to the British Yell Group, which already owned Yellow Book USA.

And now Sprint Corp. is considering whether to sell its directory business.

With memories of dot-com collapses still fresh, investing in the directories is a safer bet, said John Kelsey, chief executive of Yellow Pages consultant The Kelsey Group.

That worked out well for Qwest, which was trying to ease investors’ concerns about liquidity issues.

After months of negotiations, Qwest reached a deal last week to sell QwestDex to the private equity firms The Carlyle Group and Welsh, Carson, Anderson and Stowe.

“Our investors will benefit from the stable, predictable cash flows of the directories business without assuming the risks that characterize many other telecom-related investments today,” said James Attwood, managing director of The Carlyle Group.

The print phone directory business has been the most profitable in media during the latest economic slump, Kelsey said. Until Internet directories catch on among more users, it should remain steady, he said.

“In five years, I think there will be less interest in investing in the Yellow Pages business,” Kelsey said. “But right now, it’s a solid business with healthy returns, and it will continue to have healthy returns for years.”

British Telecom spun off its Yellow Pages division to ease what was then $39.8 billion of debt and sold it last year to venture capitalists.

The resulting Yell Group was the business that bought McLeodUSA Publishing this year for $600 million.

Yell viewed its purchase as a way to increase its foothold in the United States.

“It helped Yell confirm its position as the largest independent directory publisher in the fastest growing sector of the world’s largest directory publishing market,” Yell spokesman Jon Salmon said.

But while some telecoms are selling, Verizon is expanding its directory business. Representatives are selling ads for a new Colorado Springs edition that is to be delivered this fall, and within two weeks they will sell ads for a Denver edition set to debut next summer.

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