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AT&T to sell most of Yellow Pages

AT&T said Monday that it has 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 by 30 percent in two years, as consumers continue to shun phone books in favor of the Internet.

Phone books were once a cash cow, generating reliable profits as businesses paid for ads that were right under consumers' 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 that 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.

AT&T, the country's largest phone company, is following in the footsteps of Verizon Communications, the second-largest, in cutting its exposure in the phone book business. Verizon spun off its directory business to shareholders in 2006, only to see it file for bankruptcy three years later.

Cerberus is paying $750 million in cash and a $200 million note to AT&T plus a 47 percent stake in YP Holdings LLC, which will oversee the business.

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 strategically.

The sale affects 8,400 employees and is expected to close at midyear. AT&T said that it expects the deal to have a minimal effect on 2012 earnings.

Shares of Dallas-based AT&T fell by 30 cents, or 1 percent, to $30.64 on Monday.

The assets being sold include 1,200 printed Yellow Pages editions in 22 states plus websites such as Yellowpages.com and a mobile app. Together, they generated revenue of $3.3 billion last year, about 3 percent of AT&T's total.

The sale excludes the recently formed AT&T AdWorks, which sells advertising offerings across online, mobile and television.

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