This Sale Should Enhance Verizon’s Growth

Article Excerpt

VERIZON COMMUNICATIONS INC. $33 (New York symbol VZ; Conservative Growth Portfolio, Utilities sector; WSSF Rating: Average) is investing heavily to expand its wireless networks, and replace traditional copper phone lines with high-speed fiber optic cables. These upgrades should help it attract new customers, and offer new services such as TV programs and games. As part of this strategy, Verizon will probably either sell or spin off its telephone directories business by the end of this year. This business accounts for about 5% of its total revenue, and is facing growing competition from online search services. A straight sale would give Verizon more cash to upgrade its networks. However, it would have to pay tax on the proceeds. If it spins off the subsidiary to its stockholders as a tax-deferred dividend, the company would not receive any cash. But a spin-off would let it transfer some of its long-term debt (77% of equity) to the directories business. Less debt would cut its interest costs, and…

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