NEW YORK — Cablevision shares surged more than 13% Friday as Wall Streeters lauded its plans to shutter the money-losing high-def Voom service — even as they pondered the future of the New York-area cabler.
One analyst suggested that Time Warner quit pursuing an Adelphia buy and make a run at Cablevision, long thought to be a potentially stellar addition to Time Warner Cable’s Gotham footprint. “Strike while the CVC board appears more independent than ever before,” urged Richard Greenfield of Fulcrum Global Partners.
Cablevision stock hit a 52-week high, closing up 13.19% at $28.84 on news that the Bethpage, N.Y.-based company would unload Voom’s satellite and related assets to satcaster EchoStar for $200 million in cash. Move followed a fierce internal battle pitting Cablevision founder, chairman and devoted Voom backer Charles Dolan against his son, CEO James Dolan, who won enough board support to discontinue the venture.
It was a major victory for James Dolan, who has had a checkered reputation with investors and a tough time emerging from his father’s shadow.
Given its middling size in a consolidating biz, prime assets and at times unclear strategic direction, Cablevision has been viewed as a perpetual takeover target — but, according to Greenfield, with a pricetag always about 5% above what anyone was willing to pay. Now, “a clear opportunity exists,” he said. “We believe (Charles) Dolan’s desires may not hold the sway in takeover discussions that they once did.”
A Cablevision buy would give Time Warner 3 million additional subscribers — enough, Greenfield suggested, to swap out Comcast’s 21% interest in Time Warner Cable and still boost TWC’s footprint. Unraveling Comcast’s TWC stake has been one motivation for the partners jointly bidding on Adelphia.
He figures Cablevision would cost $4,000-$4,500 per subscriber — above the circa $3,500 per sub for Adelphia — but that it would bring far greater “value-creation opportunities.”
At the very least, shuttering Voom saves Cablevision $100 million-$150 million in annual cash flow losses and “ends a costly and ultimately misguided venture into the satellite distribution business,” Oppenheimer analyst Thomas Eagan said.
Cablevision, which is said to have invested about $500 million in Voom to date, will still have to take an unspecified writedown for the project.
Cablevision has said it will continue to explore strategic alternatives, including sales, for its remaining DBS assets.
Shares of EchoStar also firmed 1.75% to close at $32.54 Friday as Wall Streeters say the extra capacity will help the satcaster in its pitched battle with DirecTV.