Sunday, March 05, 2006

AT&T Is Said to Be Near Deal for BellSouth - New York Times

AT&T Is Said to Be Near Deal for BellSouth - New York Times

AT&T (the RBOC former known as SBC)is set to purchase BellSouth.

Well, the first thing that comes to mind is a question I poised from the floor of the Kelsey conference when the purchase was announced. Elmer Smith of BellSouth and Denny Payne of SBC congratulated each other on their business acumen.

To the panel on local advertising, I asked this question.

"$100 million for Too much, too little or just about right?"

Most panelists danced around the issue, but Suhkinder Singh Cassidy, who was managing Google's local initiative said that she thought that it was the prelude to the two companies merging.

You Go Girl!

Now, the second thing that comes to mind.

How will this impact the local advertisers?

Gee, assuming that this purchase was not made for the directory business's long-term growth prospects (that's sarcasm, in case you missed it), it should be a matter of months before the combined company announces that they are seeking "Strategic Alternatives" for the directory business.

In other words, they're going to sell off their Yellow Pages business and use the cash to pay down debt.

Since Verizon is also selling their directory business, this could become very interesting indeed.

The acquirers will likely be investment bankers who will take a flamethrower to the company's overhead.

This could be good for advertisers, as the directory publisher must become more competitive to survive.

This will very ugly to folks who may be considered expendable when the cuts come.


Anonymous Anonymous said...

Dick, it is very unlikely that the combined AT&T/BellSouth will sell the YP business. First, the deal is too big for investment bankers to do and, second, the tax hit is too great for AT&T/BLS.

A spin-off perhaps, but I doubt a sale.

10:36 AM  
Blogger Dick Larkin said...

I consider a spin-off and a sale to be the same thing. The net result is the telco receives cash and releases control of the company to other owners.

It is a big deal to be sure. But is it also one that throws off a beautiful cash flow that has been amazingly consistent.

That makes a deal like this much easier to finance.

7:57 AM  

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