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The Kelsey Report® Advisory

QwestDex Transaction Announced
Bobbi Loy-Luster,John Kelsey,Neal Polachek , 8/20/2002

Issue: QwestDex Sale Points to Changing Industry Structure

News: After many months of analysis, due diligence and speculation, Qwest Communications announced the sale of its QwestDex Yellow Pages subsidiary to a private equity investment team formed by the Carlyle Group and Welsh, Carson, Anderson & Stowe. The value of the transaction is estimated at US$7.05 billion, or about seven times earnings before interest, taxes, depreciation and amortization (EBITDA). The directory unit generated US$1.6 billion in revenue last year and an estimated US$1.0 billion in EBITDA.

The first stage of the deal, involving the sale of QwestDex operations in Colorado, Iowa, Minnesota, Nebraska, New Mexico, North Dakota and South Dakota, is for US$2.75 billion and is expected to close in the fourth quarter of 2002. The second phase, which includes Arizona, Idaho, Montana, Oregon, Utah, Washington and Wyoming, is for US$4.3 billion and is expected to close in 2003. Should the transaction close at this price, it would represent the lowest valuation for any major Yellow Pages property in recent years.

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