1: If we can determine what the value to the current holder is (i.e. Telecom NZ with Yellow Pages) and someone offers more – yes they should take it.

2: There may be a higher value business plan for Yellow Pages – which may involve an on-line element. If a third-party thinks that they can execute a higher value business plan – this could open up all sorts of new services. Yell still obtains 96% of revenues from print. If there is a third party with a higher value business plan we should see that play out in the sale process.

3: The answer to your question is $1.28 billion – not quite $1.5+ billion. There has been a lot of very interesting feedback to this post which has made me want to revisit the assumptions. Look for a new post.

Mark

1: If the value is really $900m, and someone offers $1.5bn, then it’s the right thing by the shareholders to sell.

2: Sure there is additional value to be unlocked through properly moving online, but as Telecom has demonstrated through Ferrit and XtraMSN, not to mention the appalling YellowPages.co.nz site itself, they are institutionally unable to ‘get’ the internet. Selling to a more nimble player may be the only way NZ will get a decent yellowpages site.

3: The model presumes an EBIT margin of 35%. Sensis, at 50% EBIT margin, is much more similar (e.g. it’s also a monopoly) to NZ Yellow Pages than is Yell (@28%). Upping the EBIT margin assumption to 45-55% would give the touted $1.5bn.