Dolan Keeping Up Push to Save Voom

Mar 14, 2005  •  Post A Comment

Cablevision Systems Chairman Charles Dolan will fund his struggling satellite service Voom by selling off pieces of his personal fortune, including his interest in Cablevision, according to a Securities and Exchange Commission filing submitted last week.

The March 10 filing provides further details of just how far Mr. Dolan is willing to go to keep Voom alive amid an effort by some Cablevision board members, including Mr. Dolan’s son, Cablevision CEO James Dolan, to shut down the satellite service.

Cablevision’s board of directors reached an interim agreement March 8 with Charles Dolan to keep the company’s fledgling satellite business going while the company and Mr. Dolan work toward finalizing a separation of the satellite operation from the cable operator.

The agreement, reached during a closely watched board meeting, is the latest chapter in an ongoing saga that has pitted Charles Dolan against James Dolan over the fate of Voom. Charles Dolan has advocated keeping Voom alive, while James Dolan has pushed to scrap the venture, which has been criticized by investors and analysts as a bottomless money pit.

The back-and-forth reached a crescendo last week when Charles Dolan ousted three board members who had opposed funding Voom. The move raised the hackles of corporate-governance experts, who feared the board appointments would pave the way for a rubber-stamping of whatever plans Charles Dolan might have for Voom.

Cablevision said the latest agreement allows Voom to continue while Charles Dolan and his other son, Thomas Dolan, try to arrange a transaction that would avoid a shutdown of the satellite service.

Under the terms of the agreement, Charles Dolan agreed to pay with his own cash or stock any amount over and above the costs associated with shutting down the service.

The agreement terminates March 31, and if Charles Dolan and the Cablevision board can’t reach an agreement, Voom is likely to be shut down.

Fulcrum Global Partners analyst Richard Greenfield said Charles Dolan’s decision to dip into his fortune to finance Voom should go a long way toward allaying the fears of investors who thought the board shakeup might result in Cablevision continuing to fund Voom.

Other analysts noted it provides further evidence that Cablevision might be sold in the not-so-distant future because Charles Dolan is likely to face a tough time obtaining funding for Voom without liquidating his holdings in Cablevision.

Yet even with additional time, many analysts believe Voom’s future remains cloudy.

Craig Moffett, an analyst at Bernstein Research, called last week’s pact between Charles Dolan and the board “a temporary delay” of Voom’s eventual shutdown. “We do not believe it materially changes the position at Cablevision,” Mr. Moffett said.

However, what could change is Cablevision’s deal to sell Voom’s sole satellite to EchoStar Communications. Mr. Moffett thinks Charles Dolan has determined that the only way Voom remains viable is by having continued access to a satellite that Cablevision agreed to sell to EchoStar for $200 million. Some of the extra breathing room being given to Voom could be used to strike a new deal with EchoStar, Mr. Moffett said.

Mr. Moffett noted that the satellite, known now as Rainbow 1, is the only high-power satellite providing nearly complete U.S. coverage that is not owned by either EchoStar or DirecTV Group.