Breaking News: EchoStar to Purchase Rainbow DBS Assets

[Gregg Lengling]

Breaking News: EchoStar to Purchase Rainbow DBS Assets

EchoStar agreed to purchase certain satellite assets from Rainbow DBS Co., a subsidiary of Cablevision Systems, for $200 million.

Specifically, EchoStar will purchase Rainbow 1, a direct broadcast satellite (DBS) located at 61.5 degrees West Longitude, together with the rights to 11 DBS frequencies at that location. The satellite includes 13 frequencies, up to 12 of which can be operated in "spot beam" mode.

EchoStar is assessing how the Rainbow satellite's flexibility can best be utilized to enhance DISH Network's existing service. Also, as part of the transaction with Cablevision, EchoStar will acquire ground facilities and related assets in Black Hawk, S.D.

The transaction is subject to review by the Federal Communications Commission and other regulatory agencies.

[AndrewP]

Yea, it is a sad day for us Voomers.  
It was a great service.
I will use Voom boxes for OTA until D*, E* or less likely TW will show a proof that they are commited to HD.

Andrew

[Ralph Kramden]

I'm a current Dish HD customer, and have been waiting to see if Dish would make this move. I hope Dish decides to add more HD channels. I cancelled my HD package a couple months ago, but will start up again if they add more decent HD channels. Gregg, what do you think Dish will do? Thanks.

[Gregg Lengling]

The VOOM deal that everyone was waiting for is now done, with EchoStar agreeing to buy a satellite, access to DBS frequencies at 61.5 degrees and ground facilities from Cablevision and Rainbow DBS for $200 million.

The deal involving the struggling VOOM service from Cablevision was announced by the companies late Thursday night, and first reported by SkyREPORT (for story, see: http://www.skyreport.com/viewskyreport.cfm?ReleaseID=1572). So, what's next for the transaction?

The EchoStar/Cablevision deal is subject to review by the Federal Communications Commission and other regulatory agencies, the companies said.

EchoStar said it's assessing how the Rainbow satellite can best be utilized to enhance its DISH Network DBS service. Rainbow 1, the satellite supporting VOOM, is located at 61.5 degrees, and the companies' deal comes with rights to 11 DBS frequencies at the orbital location. Also, the satellite includes 13 frequencies, up to 12 of which can be operated in spot beam mode.

EchoStar operates its EchoStar III satellite at 61.5 degrees.

Cablevision said it will continue to explore strategic alternatives, including monetization, for the remaining Rainbow DBS related assets, including programming, equipment and spectrum. VOOM will continue to provide service to its current customers during a transition period, Cablevision said.

Also, as part of the transaction, EchoStar will acquire ground facilities and related assets in Black Hawk, S.D. Sources said the deal doesn't include VOOM subscribers, which as of last count number 26,000.

The deal announced by EchoStar and Cablevision followed speculation that Cablevision Chairman Charles Dolan would personally try to buy VOOM and the Rainbow DBS assets. Earlier this week, the Cablevision board voted to put the satellite TV business up for sale. James Dolan, Charles' son and Cablevision CEO, reportedly persuaded the board to put VOOM on the sales block.

[Gregg Lengling]

by Michael Hopkins mhopkins@mediabiz.com

Now it's a bit more clear what will happen with VOOM, the satellite TV service from Cablevision. The service and its customers may remain in some limbo, given that VOOM said it will continue providing service during a transition period. But the satellite supporting the service and other assets are going to EchoStar. And that deal alone may have sealed VOOM's eventual fate.

And probably no one could be happier than the folks on Wall Street. Some in the financial community thought a dark cloud had hovered over the Cablevision stock due to VOOM. Richard Greenfield of Fulcrum Global Partners said in November that the "correct management decision would be to shutter or sell VOOM, ending the cash 'black hole' they are perpetuating."

What Wall Street got right was who would eventually get the VOOM stuff. Fulcrum's Greenfield, Tom Eagan of Oppenheimer and Co., Craig Moffett of Bernstein Research, and others predicted that EchoStar would end up with the key assets, including the Rainbow satellite supporting VOOM.

And it appears the deal is a winner for DISH. The company bought a satellite already in orbit and associated ground facilities for $200 million. The satellite appears to be functioning normally, and EchoStar doesn't have to go through the process of ordering, building and launching a satellite. Those points alone may appear that DISH got the assets on the cheap side.

The asset is already in space, and it's in a DBS orbital location where EchoStar already conducts operations. And it gives the company access to more orbital capacity, a critical component given that TV viewers will eventually be moving to more advanced services and programming, including more high def.

The next big event will be regulatory approval, including a blessing from the Federal Communications Commission. Expect the companies involved to push for a quick OK on this deal while at The Portals.

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