KEY POINTS:
Telecom is likely to prefer to sell its Yellow Pages directory business to the controllers of its new online partner, Yahoo!7, so it can continue to have commercial involvement.
It has been reported that Kerry Stokes' Seven Network and its new private equity partner Kohlberg Kravis Roberts have made a shortlist to buy the directories, which are expected to fetch around $2billion.
CVC, which co-owns PBL Media with James Packer's Publishing and Broadcasting, are also believed to be in the running.
The two other private equity groups understood to have made the shortlist are New York's CCMP and a consortium of Bain Capital and Australian buyout group Private Equity Partners, according to reports.
Australian ABN AMRO media analyst Fraser McLeish said that there would be a good fit between Yahoo!7 and Telecom's directories business, especially since the recent tie up to provide internet services.
The main criterion for assessing offers was likely to be price, and if there was not much difference between the bids, Telecom would make a decision based on wider strategic issues, "in which case you would have to think that Yahoo!7 would have more to offer Telecom than private equity".
A telecommunications analyst agreed, but said: "Maybe ninemsn [co-owned by PBL] can do something to offset that."
Telecom's adviser, Goldman Sachs JBWere, has told potential buyers that Yellow Pages revenue is expected to reach $280 million in the year to June.
Telecom shares yesterday closed up 16c to $4.89.
