Verizon Considers Spinning Off Telephone Directories Division

Telecom News Editorials Reports Glossary

Verizon Considers Spinning Off Telephone Directories Division

6:30 am on October 17, 2006 | Category: Business, Telephone, Corporate

Verizon Communications is reportedly considering spinning off its telephone directories division, rather than selling it outright, in an attempt to avoid hefty tax losses.

Verizon board members are set to debate this issue in the weeks to come, before making a decision in about a month, one source said. If executives decide to spin off the division, Verizon Information Services will become a separately traded corporation, based in Dallas, Texas. Shares in the new company will be divided among shareholders of the parent company, without incurring a capital gains tax.

Selling the directories business would reduce Verizon’s debt load, and allow it to more readily high-growth businesses like wireless and FiOS; but in addition to the tax losses, it would eliminate a big cash cow that generated $1.03 billion in profit last week alone.

In many ways, spinning off Verizon Information Services seems like more of a happy medium for the telecom giant, allowing shareholders to continue taking advantage of Yellow Pages revenue, while freeing up the company itself for long-term growth ventures.

Overall, allowing investors to balance their own asset mix of income and growth stocks seems like a good strategy to follow.