THE Carlyle Group and Bain Capital, the private equity groups, have emerged as early front-runners in the race to buy the $17 billion (£9.75 billion) phone books business being put up for sale by Verizon, the US telecoms company, The Times has learnt.

Verizon confirmed yesterday that it is seeking “strategic alternatives” for its information services division, which includes one of the biggest networks of local phone books in America.

The Verizon board said that it was exploring a “spin-off, sale or other strategic transaction” so that it can focus on its broadband and wireless businesses. It is understood that a sale rather than a spin-off is the most likely outcome of the exploration.

Verizon’s directories business is extremely lucrative and is likely to spark an intense bidding war if the company puts it up for sale.

A source close to Bain, which bought Verizon’s Canadian Superpages brand last year for $1.54 billion, said that the size of the potential deal was so great that the business would almost certainly be bought by a consortium of venture-capital investors.

It has also emerged that The Carlyle Group, which bought Verizon’s Hawaii-based local phone books for $1.65 billion last year, is already looking at offering a deal.

A Carlyle source said that the Verizon Information Services (VIS) business would be a perfect fit with its existing directories and telecoms assets and that a conference call among Carlyle’s senior management had been scheduled to discuss a potential deal.

VIS controls 1,750 directory titles in 44 states and Washington DC with a circulation of 121million copies. The directories business, which is based in Texas and has 7,300 employees, had operating revenues of $3.6 billion in 2004.

Ivan Seidenberg, the Verizon chief executive, said: “Given the attractive opportunities developing in the local search and advertising markets for VIS, we believe a divestiture would provide VIS with more flexibility in the fast-changing environment of content providers.”

Analysts have estimated that VIS could sell for as much as $17 billion. Such a price would preclude 3i, the London-based private-equity company, from bidding, a spokesman said. In 2003, Verizon sold six Eastern European directory units to 3i and Veronis Suhler Stevenson for an undisclosed sum.

Yell, the UK publisher of Yellow Pages which owns Yellow Book in America, is said to be not interested in buying VIS.

Shares in Verizon were down slightly at $31.67 in afternoon trade on Wall Street.

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts