Yell to go Dutch as new owners look overseas

Yellow Pages company to enter talks with debt-laden KPN telecoms group
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The Independent Online

Yell, the Yellow Pages business that British Telecom sold for £2.14bn last month, is eyeing its first takeover, which could herald a major push into continental Europe and the US.

It is understood that the new owners of the business, Apax Partners and Hicks, Muse, Tate & Furst, are considering buying a directories business in the Netherlands.

On Tuesday KPN, the debt-laden Dutch telecoms company, announced it would sell a stake in its own yellow pages business. Yell's new venture capitalist owners have reportedly expressed an interest and are planning to speak to KPN executives later this month about a possible deal.

A spokesman for Yell said: "We are looking for opportunities in this marketplace but we have made no firm decisions yet."

Like BT, KPN is attempting to reduce its debt mountain by selling off its non-core assets. However, KPN has dismissed speculation that it is considering selling its mobile or fixed line operations.

Yell is also understood to have approached Dutch publisher VNU about buying its World Directories business.

On top of this, Yell's new owners are believed to be looking at opportunities in the US, where the market is relatively fragmented. Yell already owns Yellow Book USA. The company hit the headlines last month when its American executives were offered multi-million pound payouts.

BT's sale of Yell was sparked by the conclusion of an Office of Fair Trading (OFT) investigation into the Yellow Pages. The investigation was passed to the Department of Trade and Industry, which ruled last month that Yell would have to cap its advertising rates in the UK to inflation minus 6 per cent.

The ruling wiped nearly £1bn off Yell's price tag. Before the judgement, BT executives had been considering a demerger of Yell, where the separated company would be loaded up with debt. But the ruling spurred BT chief executive Sir Peter Bonfield to go for the sale.

Documents just released by the OFT reveal that Yell narrowly escaped an even tougher regulatory regime.

The papers show that in February, the director-general of fair trading, John Vickers, proposed a much larger price reduction on Yell's advertising rates, but this was rejected by trade and industry secretary Stephen Byers.

The price reduction has been attacked by Thomson, the number-two directories business in the UK owned by Seat Pagine Gialle, an Italian publisher.

Speaking publicly for the first time since the ruling, Kendall Gordon, Thomson's marketing director, said: "In our view the price cap is not an appropriate instrument to encourage competition in the marketplace. We are very concerned about it."

Asked if Thomson was now considering lowering its rates, Mr Kendall said: "The price cap is giving us food for thought."