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The recent earnings' results from BellSouth, SBC and Verizon all show that their growth is coming primarily from high-speed Internet and wireless. Accordingly, we believe that the FCC's recent decision will enourage more investment in DSL by the RBOCs. Since all three RBOCs have historically high debt levels, now would be a good time to consider spinning off their Yellow Pages subsidiaries to generate cash to facilitate their investment objectives.

Our view is that the Yellow Pages businesses would be worth more in the private equity market if they were broken up into bite-sized contiguous chunks. There certainly is no lack of interest in the Yellow Pages business as an investment vehicle. And the success of Dex Media and R.H. Donnelley in managing incumbent Yellow Pages publishers suggests that a well-managed sale will be hugely successful.

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