AT&T Completes YP Sale
AT&T has finalized the sale of 53 percent of its Yellow Pages operation to the private equity firm Cerberus Capital, which has launched YP Holdings LLC. The new company will be led by newly appointed CEO David Krantz, who had been running AT&T Interactive, the digital arm of AT&T’s directories business.
The remainder of the leadership team was not announced but is said to include executives from the Directory Operations and Interactive wings of the business, as well as representatives of the buyer.
YP remains the world’s largest directory organization with revenues of $3.3 billion in 2011, about 30 percent of which come from digital.
The new company has a number of decisions to make, including whether to merge the Advertising Solutions and Interactive business units. The common branding YP suggests that decision may already have been made. Cerberus is likely to take its time with any big decisions on the organization, but it will probably move quickly to focus on costs.
More long term, the company needs to decide if it wants to continue investing in product development or focus more on establishing a “trusted advisor” relationship with its mainly small-business advertisers and help them acquire new customers and manage existing ones.
The deal’s completion follows AT&T’s Q1 earnings release, which showed some signs of improvement in the Yellow Pages revenue picture.
In the current environment, improvement comes in the form of a lower rate of decline. AT&T’s Q1 Yellow Pages results were revenues of $744 million, down from $868 million in Q1 2011. This works out to a 14.3 percent decline. In Q1 2011, the decline was 16.6 percent. In Q4 2011, AT&T shed from 15.7 percent from the Advertising Solutions business and 16.3 percent for the full year.
AT&T didn’t offer any color on the Q1 results nor did it disclose digital revenues, as it did in all quarters through 2011. We can expect much less transparency on the former AT&T directories business going forward.
The slowing of revenue loss seems to have come at the expense of margin. Q1 EBITDA for the directories business was $197 million, down a whopping 33.4 percent. The publisher’s EBITDA margin fell to 26.5 percent, from 34.1 percent in Q1 2011.
We’ve been following the adventures of AT&T pretty closely. Take a look at some of our recent posts on this topic:
For Better or Worse, AT&T Deal Sets Bar for Yellow Pages
Is It a Done Deal for AT&T’s YP Business?
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Now the fun begins!
Now that YP Holdings can’t hide under the shroud of AT&T’s results reporting, it will be very interesting to see exactly where they are at and where they are heading.