Rainbow to Buy Satellites

Nov 24, 2004  •  Post A Comment

Cablevision said its fledgling satellite service Rainbow DBS will pay Lockheed Martin $740 million to build five Ka-band satellites, but said it only has funding available to cover the first year’s worth of payments.

In a filing submitted Wednesday to the Securities and Exchange Commission, Cablevision said the satellites will be delivered to Rainbow DBS over the next 38 to 50 months. This coincides with an announcement earlier this week that Rainbow DBS’s service, called Voom, is planning to increase its high-definition channel capacity to 70 channels from its current level of 39 channels by March.

Cablevision said Rainbow has enough cash on hand to make $48 million in payments to Lockheed, which would cover the first year of the contract, but has not identified funding sources it will use to make subsequent payments.

The company also noted that it has the right to terminate the agreement at any time, and could refuse satellites as a result. UBS Securities analyst Aryeh Bourkoff said this indicates Rainbow’s contract with Lockheed is success based-if Voom continues to languish in terms of subscriber growth, Rainbow can pull the plug on receiving more satellites.