Telecom ready to sell Yellow Pages

Telecom is selling its Yellow Pages and online directory business to avoid competing head-on with online heavyweights that pose a significant threat to revenue, analysts say.

The company is also negotiating new deals with a global online and search player, which it has not named.

Confirming the likely sale of the Yellow Pages Group yesterday, Telecom chief financial officer Marko Bogoievski said the online media and local search marketplace had changed significantly.

Brands such as Google, MSN and Yahoo were using their global strength to compete.

"The breadth and depth of such brands are proving attractive to consumers interested in a rich online experience that brings together search, entertainment, messaging and communications in a simple and attractive manner," he said.

Analysts said the Yellow Pages Group - which includes the online and printed versions of the Yellow and White Pages - could fetch between $1 billion and $2 billion.

Telecom said it would look at partial or full sale of the Yellow Pages Group or a public float.

Bogoievski said Telecom would expect to have a comprehensive ongoing commercial arrangement with Yellow Pages.

He described the Yellow Pages Group as "a very successful print and media business" and said it would generate earnings before interest, tax, depreciation and amortisation of more than $160 million for the year to June 2007.

While Telecom did not name the online player it was talking to, analysts pointed out that Google was opening up a New Zealand office and that Microsoft had said it was looking at the online sector here.

Despite the strength of the Yellow Pages brand, Bogoievski said Telecom would be able to deliver more services in partnership with other providers.

IDC telecommunications analyst Chris Loh said working with multinational players would be one way to offset the threat they posed to its Yellow Pages business.

Google, Microsoft and Vodafone were looking at different options for advertising revenue, he said.

"It seems quite proactive of Telecom to move out of it before there starts to get real pressure on in New Zealand, and the international impact is going to have to manifest itself with the likes of Google, Microsoft and Vodafone," he said.

Forsyth Barr analyst Jeremy Simpson said Telecom had to work with a company such as Google because it could not compete with the online giant.

"It has always been Telecom's strategy to find international partners in all areas of its business. It shows they have confidence in their online strategy, that, depending on their price, they don't have to own some of those assets anymore."

Vodafone -Telecom's main competitor - has started to introduce new advertising options through mobile and internet.

Shares in Telecom rose 11c to $4.21.

Telecom intended to provide an update to the market at the first quarter results announcement in early November.