AT&T to sell most of Yellow Pages business to private equity firm Cerberus for $950 Million

AT&T 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 so it can focus on segments that are growing, particularly its wireless business.

Revenue from the Yellow Pages unit has shrunk 30 percent in two years, as consumers continue to shun phone books in favor of the Web. Phone books were once a cash cow, generating reliable profits as businesses paid for ads that were right under consumer’s finger tips 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. Profitable but shrinking businesses generally sit poorly with public companies who want to show shareholders that they’re growing. Private-equity firms don’t have to please public shareholders and are happy to make money from dwindling assets. Sanford Bernstein analyst Craig Moffett said the sale price was low relative to Yellow Pages’ earnings, but the deal is still a sensible one for AT&T, in terms of its strategy.