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Bids are in for Qwest's Yellow Pages unit

In its bid to raise cash, the telecom company says it's received multiple offers for its phone book publishing business. Analysts give the reminder, though, that it's not over till it's over.

Qwest Communications International announced Thursday that it has received bids for its phone book directory business, one of a few assets that the troubled telecom company plans to sell to raise cash.

The company said in a statement that it received multiple bids for all or part of its phone book publishing business, called QwestDex.

The Denver-based company, which provides local phone service in 14 states, is also shopping around its wireless business and nonessential access phone lines to reduce its $25 billion debt.

The general economic downturn has hit the telecom industry hard. Start-up carriers Global Crossing, McLeodUSA and Williams Communications have declared bankruptcy, and Qwest's debt rating has been cut as the company has faced the possibility of defaulting on its loans. The U.S. Securities and Exchange Commission is also investigating the company for possible accounting violations.

Selling its phone book unit would give Qwest the cash to help fix its short-term financial problems, but analysts are waiting to see the final selling price to determine how much the deal could help Qwest in the long term. The selling price needs to be high enough to offset the steady income Qwest would lose without the unit.

"Selling the directory unit might reduce debt, but if cash flow goes down dramatically, they have a serious problem," said Drake Johnstone, an analyst at investment bank Davenport, who has a "sell" rating on Qwest stock. "It doesn't mean that they're out of the woods."

The company's directory business has managed to grow over the past few quarters despite turmoil in its other businesses.

In the company's first fiscal quarter this year, Qwest's revenue dipped to $4.37 billion from $5.05 billion during the same quarter last year, a 13.5 percent drop. Sales from its directory business increased to $350 million from $342 million a year ago. Qwest's sales also fell in the fourth quarter of last year and remained flat in the third, while the QwestDex unit posted growth.

The unit generated $1.6 billion in revenue in 2001.

Wall Street wants to hear more information from Qwest about how much income the phone book publishing business generates. Under a renegotiated loan, the company must keep its debt at a certain level relative to its income.

At the end of the next two quarters, the company's debt divided by its earnings before interest, taxes, depreciation and amortization (EBITDA) must come in below a ratio of 4.25 and fall below 4.0 for the first two quarters of next year.

"There's a whole bunch of information the company has to disclose before you can figure out of if it's a good deal," said Peter DeCaprio, a principal analyst at investment bank Thomas Weisel Partners.

The company did not disclose when it would make a decision on the bids.