Who Will Buy Verizon’s Hispanic Yellow Pages?

Verizon Communications Inc. plans to sell its directories publishing business, Verizon Information Services, next year. What will happen to its Hispanic directories?

According to the Wall Street Journal, if Verizon sells the phone-directories business, the deal could be worth more than $17 billion. Based in Texas, the unit publishes 1,750 white- and yellow-pages directories with a circulation of 121 million. It also controls SuperPages.com. Verizon's Hispanic directories, including Spanish and bilingual flip books, are published in more than 50 Hispanic markets in Arizona, California, Colorado, Florida, Nevada, New Jersey, New York, Texas and Virginia and have a circulation of 8 million.

The company said Verizon Information Services, which employs 7,300 people, had operating revenue of $3.6 billion in 2004. Analysts estimated the unit will show an operating profit of $1.8 billion for 2005.

According to Andrew Buchholtz, Managing Director of Investment Banking at Veronis Suhler Stevenson, the Spanish language piece is so small that it wouldn't make sense to sell the Hispanic and general market directories separately. Revenue from Hispanic directories is only about $100 million out of $3.6 billion total operating revenue (2004). This is a multiple of what independent Hispanic directory publishers like Cobalt Publishing and HYP Network generate. Because of the scale of the purchase, Buchholtz says there are only really 5 or 6 large private equity funds that could potentially buy the directories. “And even then, a few of them would probably have to join together to make the purchase,” explained Buchholtz. “A public market spin-off would seem to make sense, but I don't know how appealing that's going to be.” Buchholtz says that depending on who buys the directories, the Hispanic books could be discontinued altogether if they aren't profitable enough to be critical to the growth of the business.