Here’s Why A Mexico Lawsuit Could Cost Yahoo $2.7 Billion

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There are many things that have people scratching their heads about Yahoo’s $2.7 billion loss in a Mexican court to a little-known telephone-directories company.But the biggest one: How on earth could the market for a Mexican Yellow Pages possibly be worth billions of dollars?

After all, two big, publicly traded players in the Yellow Pages business, Hibu and Dex One, are negotiating with their lenders and flirting with bankruptcy right now.

To recap: Carlos Bazan-Canabal, the founder of Worldwide Directories, sued Yahoo after a deal to produce print and online telephone directores in Mexico fell through. He won a $2.7 billion judgment in a Mexican court for breach of contract and other grounds.

We still haven’t seen the text of the judgment, so we have to guess how Bazan-Canabal justified the $2.7 billion damages claim. A new report that Bazan-Canabal is willing to settle with Yahoo has a hint.

Reportedly, Yahoo and Worldwide Directories had reached an agreement to extend their partnership beyond Mexico into Puerto Rico, Central America, Australia, and Japan, according to Reuters.

A global Yellow Pages franchise—especially one not laden with debt like existing players—might reasonably be seen as pretty valuable. While the telephone-directory business is under assault by the Internet, like a lot of other forms of advertising, it still throws off a lot of cash from small businesses that lack other advertising options.