All Hawaiian Telcom residential customers will get a coupon redeemable for a free corded telephone as part of the phone company's $435 million sale of its directories publishing business.

The state Public Utilities Commission Tuesday approved the sale on the condition that Hawaiian Telcom provide the coupons within 45 days of the sale, which could close late this year or early next year.

Hawaiian Telcom announced in May that it planned to sell its directory publishing business, which inludes both the Yellow Pages and White Pages, to Englewood, Colo.-based Local Insight Media LP.

The sale will help Hawaiian Telcom reduce $1.38 billion in long-term debt created when the company was sold from Verizon Communications Inc. to The Carlyle Group in 2005.

The reduced debt would increase the company's financial flexibility while moving Hawaiian Telcom closer to a PUC-mandated debt-to-equity ratio. When that ratio is reached, dividend payments to the phone company's investors can begin.

As things stand, the highly profitable Yellow Pages business essentially helps subsidize the less-profitable phone business. Under the proposed conditions, which were previously agreed to in part by Hawaiian Telcom, the company would agree to include $42.6 million of directory publishing revenues as regulated phone business revenues in future rate-change requests.

Hawaiian Telcom said it was reviewing terms of the PUC approval.

If parties in the sale agree to the PUC terms, plans are to close the deal as soon as possible, said Hawaiian Telcom Chief Executive Mike Ruley.

If the sale goes through, the directory will continue to be published as the official telephone book of Hawaiian Telcom and will still be named the Hawaiian Telcom Yellow Pages.

The sale would have no impact on the directory business' 62 contract employees, Hawaiian Telcom has said. LM Berry Co. is expected to remain the directory's printer.

Reach Sean Hao at shao@honoluluadvertiser.com.