AT&T finally sells its Yellow Pages unit

Mark Garrison Apr 9, 2012

Kai Ryssdal: The other big corporate acquisition of the day is decidedly less Web 2.0 than Facebook and Instagram. AT&T said today it’s going to sell a majority stake of its business directory unit to the private equity firm Cerberus for $750 million. “Business directory” is a fancy way to say Yellow Pages. Yes, they still get printed and dropped on your doorstep every so often. But $750 million? How can that be?

Mark Garrison reports.

Mark Garrison: To report on the Yellow Pages, first I have to find a phonebook. The last place I remember seeing one was in tall stacks in my apartment lobby, wrapped in plastic and untouched.

Building superintendent Jimmy Copeland hates seeing them pile up.

Jimmy Copeland: They sit there for the long time, maybe two or three months and then you have to wind up throwing them in the garbage, because nobody uses them books no more. You go on the Internet now.

The Internet is also where Brett Lentine looks for customers. The owner of Pure Luck Tea Bar in Brooklyn has no plans for a phonebook ad.

Brett Lentine: I would never give them a dollar. I wouldn’t give them a penny.

To find more iced, organic, locally-made kombucha drinkers, he markets on Yelp, where he can give would-be customers more information.

Lentine: They have reviews. They have the map function. You know, you can get directions, photos.

It’s no secret AT&T’s Yellow Pages unit is losing ad money to sites like Yelp, Google and Groupon. Still, with 150-million copies in 22 states, it brought in $3.3 billion last year.

Cerberus is the latest investor to try to tap Yellow Pages’s gold. Private equity firms have bought directory businesses from phone companies before, including a $7 billion deal for Qwest’s unit a decade ago.

Charles McGill: I’ve used the analogy to a melting icicle or a melting iceberg.

Charles McGill worked on a number of big acquisitions before joining NYU’s business school. He says public companies like AT&T have to think about quarterly earnings, so they worry about the iceberg shrinking. Cerberus is private equity, without the same pressure to grow each quarter, so it’s happy to have what’s left of the iceberg, the cold cash.

I finally find a phonebook at the last line of defense for the printed page, the public library. The phonebooks aren’t far from the encyclopedias, two endangered species huddling together. I open it up and see all the ads from plumbers, lawyers, antique stores and other businesses.

The Yellow Pages are also online, but Forrester Research analyst Nate Elliott says attempts to compete with Groupon and Yelp have fallen short.

Nate Elliott: The reality is they’re starting basically from scratch. The fact that they were dominant a few years ago doesn’t carry any weight. They would need to first catch up to what all these other services are offering online.

Cerberus says it’ll try to grow the online business, but Elliott believes that would cost a fortune. Once a vital resource, the Yellow Pages may end up ridden into extinction by a private equity firm named after a three-headed hellhound.

In New York, I’m Mark Garrison for Marketplace.

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