Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:
Verizon May Spin Off Its Directories Unit [New York Times]
Summary: In a move that would allow it to focus on its faster-growing wireless business and its new fiber-optic network, Verizon Communications is close to deciding to spin-off rather than sell its directories division, which will cost less in taxes. Verizon’s board could make a final decision in about a month, and Verizon Information Services could be independent by year's end. The division, which publishes Verizon SuperPages directories in 35 states, generated $3.4B in revenue and $1.03B in profits last year, and has 7,100 employees. Verizon stockholders would receive shares in the new company tax-free. The new division would assume as much as $9B in Verizon debt, according to estimates. According to Jeffrey Halpern who covers the company for Sanford C. Bernstein & Company, if a spinoff takes place, Verizon’s profits would decline by between 18 and 20 cents a share, while also lowering the company's debt substantially. Halper believes that, "Ivan G. Seidenberg, Verizon’s CEO, is not going to sit on $8 billion. It sets them up to buy out Vodafone and increase their long-term growth.”
Related links: • Verizon Communications Q2 2006 Earnings Conference Call Transcript • Verizon to Outlay $18 Billion for Upgraded Fiber Optic Network, Cable TV Access • Annals of Accounting: A Look at AT&T and Verizon's Methods • Chart: Telecom Stocks - Annual Earnings Growth
Potentially impacted stocks and ETFs: Verizon Communications Inc. (NYSE:VZ), Vodafone Group plc (NASDAQ:VOD), AT&T (NYSE:T), Sprint-Nextel (NYSE:S), iShares Dow Jones U.S. Telecommunications Index (BATS:IYZ), Vanguard Telecommunication Services ETF (NYSEARCA:VOX), PowerShares Dynamic Telecom & Wireless (NASDAQ:PTE)
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