Denver-based Qwest Communications International Inc. has agreed to sell its yellow pages business for more than $7 billion to a group of financiers, the company announced Tuesday.
Qwest agreed to sell the unit, QwestDex, in a two-stage transaction to the Carlyle Group and Welsh, Carson, Anderson & Stowe.
Utah will be involved in the second phase of the deal, which is expected to close in 2003.
Qwest spokeswoman Caroline Roemer said Tuesday it is "premature" to discuss possible effects on Utah customers, who benefit from the directory business through a subsidy on phone bills that offsets costs of local phone service. A Denver Post survey of state regulators earlier this year indicates that the subsidies amount to about $311 million a year across Qwest's 14-state local-service region.
Public Service Commission Chairman Steve Mecham said the directory revenue that is reflected on Utah customers' bills amounts to about $2.40 per month for a local residential line and $2.50 per month for a local business line. The commission a few years ago attributed yellow pages revenues to the company's local-service operations, even though Qwest's predecessor, US WEST, had spun the directory services out of the local operations.
"Qwest customers have a compensable interest in Dex, and the questions will be how the customers are compensated," he said. "That simply hasn't been decided."
QwestDex has 2,588 employees, including 133 in Utah. Qwest spokesman Chris Hardman said that whether any QwestDex employees will lose their jobs is up to the buyer.
The split transaction was designed to speed cash to Qwest. The telecommunications provider expects to use the proceeds from the sale to pay down debt and to fund other company operations.
"The sale of QwestDex is a significant part of our plan to delever and strengthen our balance sheet and will allow us to focus on maximizing the profitability of our core operations," Richard C. Notebaert, Qwest's chairman and chief executive, said in a prepared statement.
Qwest has been under heavy pressure to sell QwestDex or other assets to unload some of its $26.6 billion in debt to avoid violating loan terms that place a ceiling on its total debt. Other non-core assets that may be sold include Qwest's wireless business, access lines and possibly cell towers.
The directory unit generated $1.6 billion in revenue last year.
The first stage of the deal — involving the sale of QwestDex operations in Colorado, Iowa, Minnesota, Nebraska, New Mexico, North Dakota and South Dakota — is for $2.75 billion and is expected to close in the fourth quarter of 2002.
The second phase — which includes Utah, Arizona, Idaho, Montana, Oregon, Washington and Wyoming — is for $4.3 billion.
Qwest reportedly is trying to reach a settlement with the Securities and Exchange Commission, which is investigating how the company accounted for $1.1 billion in revenue over several years.
The company acknowledged earlier this month that it discovered accounting mistakes from 1999 to 2001 and expects to restate financial results for 2000 and 2001.
Qwest's stock price gained 29.5 percent early Tuesday on news of the sale. The price of $2.90 was 66 cents higher than Monday's closing price. In the past year, the price has ranged from $1.07 to $24.20.
Contributing: Associated Press.
E-MAIL: bwallace@desnews.com