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The Kelsey Report® Advisory

DonTech Acquisition Puts RHD in Billion-Dollar Club
Charles Laughlin , 8/4/2004

SUMMARY: Last week's announcement that R.H. Donnelley will acquire the SBC directories for Illinois and Northwest Indiana puts R.H. Donnelley into the exclusive club of global Yellow Pages publishers generating at least US$1 billion in annual revenue. The acquisition also signals R.H. Donnelley's complete transformation from a sales agent with a cloudy future into a full-fledged integrated directory publisher that has aggressive plans to compete and grow in an increasingly competitive environment. The properties involved comprise the DonTech partnership that has been jointly managed by SBC and R.H. Donnelley for decades, but in recent years has proven an ineffective structure for managing a competitive directory operation. Something had to give in this relationship, and in the end, SBC decided that it was better off exiting the relationship.

R.H. Donnelley now has a free hand to manage this business as it sees fit, and the general expectation is that the business will perform better with a focused owner willing to make the necessary investment to support the business in its competitive battle with challenger Yellow Book USA. In the span of a little more than 18 months, R.H. Donnelley has gone from hired Yellow Pages sales agent to top-10 global Yellow Pages company. The market conditions are vastly different from when Reuben H. Donnelley moved to Chicago 140 years ago, but like then, the business challenges will abound.

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