Dolans lower boom on Voom

Cablevision halts spinoff

NEW YORK — New York-area cabler Cablevision spread some holiday cheer on Wall Street Tuesday with plans to possibly disband or sell its money-losing Voom satellite service and to suspend a spinoff of Rainbow Media. Voom was to have been a centerpiece of the new, stand-alone entity.

“All bad things must come to an end,” quipped analyst Rich Greenfield of Fulcrum Global Partners.

Investors sent Cablevision stock up a whopping 13.34% to close at $25.06.

Voom launched in October 2003 as a satellite service focused on high-definition TV. Analysts and industry rivals scratched their heads, given the increasing availability of high-def programming on DirecTV and EchoStar, as well as the massive head start enjoyed by the nation’s top two satcasters. Voom had amassed about 26,000 subs by the end of September — vs. 12 million for DirecTV and 10 million for EchoStar.

Voom’s lineup includes about three dozen high-def channels.

Investors had racked their brains for a hidden payoff or a contrarian strategy — but still couldn’t make the numbers work. Some noted that James Dolan, CEO and son of founder Chuck Dolan, was to become chairman of Cablevision, while Chuck would have become chairman of the new entity. It’s not clear if James Dolan will still assume the expanded title.

Cablevision was tightlipped about lowering the boom on Voom, declining to comment beyond a one-sentence SEC filing that read: “The board of directors has decided to suspend pursuing the spinoff of its Rainbow Media Enterprises subsidiary, in its previously announced form, and instead to pursue strategic alternatives for its Rainbow DBS business.”

Most Wall Streeters instantly predicted a sale, with Charlie Ergen’s EchoStar the likeliest buyer.

Cablevision has already spent more than $150 million on the Voom service, including the launch of the Rainbow 1 satellite last year. It leases several others. Late last month, the cabler inked a deal with Lockheed Martin to construct five satellites for about $740 million. The status of that agreement is now unclear.

Greenfield lambasted Voom as a misguided cash drain based on shaky strategic logic. He valued it at a negative $1.5 billion. “Even if (Cablevision) could sell it for $1, our target (stock) valuation would increase from $27.50 to $32.70.”

OpCo analyst Thomas Eagan figured Voom’s cash flow losses amount to $125 million-$175 million a year.

Analysts said the cable company has decent fundamentals. And they’re pleased they can again value the Rainbow assets — which include AMC, IFC and WE — without the added cash drain and financial risk of a Rainbow DBS platform.

Sanford Bernstein’s Craig Moffett thinks the news will inevitably trigger speculation that the other Rainbow nets may be on the block. Cablevision sold Bravo to NBC two years ago for $1.25 billion.

Cablevision’s other businesses include its regional cable and telecom interests; telecom company Lightpath; Madison Square Garden and its sports teams, the NBA Knicks and the NHL Rangers; Radio City Music Hall; Clearview Cinemas; News 12; Metro Channels; and Rainbow’s interests in regional sports networks around the country.

The company remains the target of an SEC probe launched in the summer of 2003 focused mainly on accounting irregularities at AMC.

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