Cablevision Sells Voom to EchoStar

Jan 20, 2005  •  Post A Comment

Cablevision Systems said late Thursday it has sold its satellite service Voom to EchoStar Communications for $200 million cash, laying to rest mounting speculation over the fate of the floundering satellite business Cablevision launched more than a year ago.

As part of the deal, EchoStar will acquire the Rainbow 1 satellite, as well as related Federal Communications Commission licenses. In addition, EchoStar will acquire the satellite service’s ground facility in South Dakota.

Cablevision said it continues to examine strategic alternatives, including selling the remaining assets in Rainbow DBS Co., the Cablevision unit that housed Voom. Those assets include three national cable channels: AMC, IFC and WE: Women’s Entertainment.

News of Voom’s sale is likely to be greeted with cheer on Wall Street. Most investors and analysts have blasted Cablevision for its pursuit of a satellite business. Those howls grew louder after Voom failed to build a meaningful subscriber base. Launched in October 2003, Voom had only 26,000 subscribers at the end of the 2004 third quarter and continued to suffer from a high rate of churn.

EchoStar, which has lagged rival DirecTV Group in offering high-definition programming, had always been considered a likely buyer for Voom, whose major selling point is its robust offering of HD channels.

Cablevision planned to spin off Rainbow DBS into a separately traded company, but scuttled those plans at the end of last year. At the time, the company said it was exploring strategic options for the assets of Rainbow DBS.

But in the past few days, speculation that Cablevision might dump the satellite business picked up steam following reports of a battle between Cablevision Chairman Charles Dolan–an ardent support of Voom–and other board members, including his son and Cablevision CEO James Dolan, who were leaning toward dumping the satellite service.

Then a memo to Rainbow employees surfaced Thursday stating that the Cablevision board in a split decision voted to sell Voom.