News Analysis: TELMEX Acquires Controlling Interest in Enlace

Blue Equity, LLC and Teléfonos de México, S.A. de C.V. announced that the Mexican telecommunications company TELMEX has acquired an 80% stake in Cobalt Publishing, an affiliate of Blue Equity that publishes Enlace Yellow Pages in the U.S. Under the deal, Enlace will cease to exist, and will be renamed Seccion Amarilla USA, LLC, assuming the name of TELMEX's Yellow Pages operation in Mexico.

Prior to the agreement, Enlace was the largest independent publisher of Hispanic phone directories in the U.S., with over 32 directories in 18 states.

For its part, TELMEX currently 135 of its Seccion Amarilla directories throughout Mexico as well as in other Latin American countries, including Argentina and Chile. Telmex's yellow pageswebsite was visited 15 million times in 2005, and the company's print and digital yellow pages revenues amount to approximately $300 million a year. Telmex does not disclose its yellow page business separately but included it under the "Other Services line of its 2005 Profit & Loss statement.

With the purchase of Enlace Yellow Pages, the terms of which were not disclosed, TELMEX will also enjoy a controlling stake in Enlace's online platform, whose website already bares the Seccion Amarilla crest, following the deal.

Blue Equity will hold a 20% equity stake in Seccion Amarilla, LLC, and will manage U.S. operations in conjunction with TELMEX.

Brand loyalty
Seccion Amarilla is very well known among Mexican-Americans living in the U.S, particularly to first generation Mexicanimmigrants.By expanding North of the border, Telmex Seccion Amarillaalso targets Mexicans North of the border. Telmex Seccion Amarilla will now be able to offer a large U.S. Spanish-language Yellow Pages footprint to Mexican advertisers who want to market to Mexican immigrants in the U.S.

Speaking to the opportunities presented by the deal, Blue Equity's Director of Marketing Kendra Calvert says, “TELMEX is a strong brand, with a great understanding on how to reach the market. This is an opportunity to take Enlace to next level. While Enlace is currently reaching nearly half of U.S. Hispanics, we hope this deal will move us closer to reaching all U.S. Hispanics.”

Toward that end of dominating all U.S. Hispanic markets, Ms. Calvert says that they will use a combined strategy of new launches and acquisitions, as dictated by each market. She also says that Seccion Amarilla USA will pay particular attention to emerging markets, like Alabama, Charlotte, and Nashville.

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