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Yellow Media Inc. President and Chief Executive Officer Marc Tellier poses for a photograph prior to the company's quarterly results meeting in Montreal, Thursday, May 6, 2010.

Graham Hughes/The Canadian Press

Yellow Media Inc. posted a $24-million profit in its last quarter, but the company warned Tuesday that revenues are in free fall as its customers turn away from traditional phone books and embrace less expensive digital alternatives.

The Montreal-based company – which is awaiting a Quebec judge's decision on a restructuring plan that would reduce its $1.4-billion debt and all but wipe out common shareholders – said revenue fell 17 per cent in the third quarter as its customers chose pixels over printing presses.

Like other companies that rely on printed advertisements for their revenue, Yellow Media's customers have been moving online. And while Yellow Media is keeping most of them as customers as they make the transition, they don't spend as much online as they did in print.

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"Online revenue growth is not expected to compensate for the declining revenue in our traditional print offerings in the near future," the company disclosed.

Chief executive officer Marc Tellier said the restructuring would buy the company, once known mainly for its printed phone books, the time it needs to reinvent itself and bring its costs in line with the lower revenue digital model, without having to worry about debt payments coming due. The judge is expected to issue his decision before the end of the month.

While the company is still posting profits (it earned $67-million in the last quarter) and has almost $400-million cash on hand, it is losing customers to online services such as Google and seeing those who remain spend much less than they did in the past. The number of companies using its services decreased 8 per cent in the quarter to 319,00, and the average revenue per user decreased slightly to $3,300 as its larger customers reduce their print spending.

Its renewal rate also decreased slightly, with 86 per cent of its customers renewing their contracts in the quarter compared to 87 per cent at the same time last year.

"We recognize the importance of quickly aligning our corporate structure with our operational strategy," chief executive officer Marc Tellier said in conference call with analysts, refusing to answer a question about whether he'd put the company into bankruptcy protection if the judge vetoes his restructuring.

After focusing on the restructuring through much of the year, Mr. Tellier said the company has started to advertise its services again. Last month it launched an ad campaign it called "Meet the New Neighbourhood" that sought to "demonstrate the relevance of the company's digital tools."

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