No more Voom

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BY HARRY BERKOWITZ
STAFF WRITER

April 7, 2005, 10:08 PM EDT

The Cablevision board of directors agreed Thursday night to end chairman Charles Dolan's titanic struggle to rescue the Voom nationwide satellite TV service, a source close to the company said.

The 15-member board, including Dolan, voted unanimously to adopt a timetable to shut the service, whose uncertain fate had torn the board and Dolan's family, including his chief executive son James, who opposed Voom against his father's wishes.

In another major development affecting Cablevision, Adelphia Communications Thursday presented a bankruptcy judge with a handshake deal to accept a $17.6-billion joint bid for the company from Time Warner and Comcast Corp. Cablevision had stepped in with a $16.5-billion counterbid, but apparently to no avail.

Cablevision's stock price jumped 3.7 percent, or 99 cents a share, to $27.84 Thursday, although it was not clear if that was in anticipation of the Voom and Adelphia developments, which Cablevision investors have been hoping for.

Despite speculation that the bid and Voom's fate were somehow intertwined, the source close to the company said they were completely separate.

A Cablevision spokesman, Charles Schuler, declined to comment.

Thursday night's meeting came one week after the board's deadline passed for Dolan to reach a deal that would allow him to take Voom off the company's hands. No such deal was reached, leaving the board little choice but to set a timetable for a shutdown after having agreed on March 7 to extend Voom's life to March 31, the source said.

Charles Dolan, 79, had repeatedly pulled rabbits out of his hat to keep Voom going, despite tremendous pressure to close it. Voom had $661 million in losses last year, and has only attracted 40,000 subscribers, company officials have said.

The original HDTV channels created for Voom will remain a part of the company's Rainbow Media programming unit, which also includes channels such as AMC. They'll also be offered to other cable and satellite TV companies.

Dolan had tried to block Cablevision's $200 million deal to sell Voom's sole satellite to EchoStar Communications by telling the Federal Communications Commission last week the sale would cut competition and hurt consumers. But in its own FCC filing, the company disavowed Dolan's actions, which also included pledging $400 million to buy the satellite and rescue Voom.

The company has refused to say whether Dolan was continuing to help fund Voom temporarily after his pledge of $10 million to help see it through the end of last month ran out.

Dolan has ousted three board members who opposed him on Voom, naming five new directors, and plans to cut another three April 18. Cablevision is also suing to block a Jets stadium for the West Side after having its own bid for a residential complex on the site rejected by the Metropolitan Transportation Authority.

If Cablevision were to beat the Time Warner-Comcast bid, it would likely sell off or swap many of the Adelphia systems, seeking to be left only with strong clusters in big media markets.

Fulcrum Global Partners analyst Richard Grenfield questioned, however, whether bondholders of Adelphia, which is in bankruptcy proceedings, would trust a Cablevision bid, "given the nearly unbelievable gyrations within the Dolan family and ... board of directors."

In a note to investors, Grenfield also questioned the strategy of adding cable systems with less appealing demographics than those in the New York area, which spends heavily on cable and high-speed Internet.

"While we have high regard for Tom Rutledge and his operating team, demos are quite different than those in Buffalo, Coudersport, rural New England, Ohio, etc." he said.

Analysts say Time Warner and Comcast could more easily swap Adelphia systems to create major clusters. In the Los Angeles area, for instance, five cable companies including Adelphia, Time Warner and Comcast, split the cable market of 3.5 million subscribers.

Analysts have speculated Dolan might try to provide that HD programming to Adelphia's more than 5 million subscriberstretching from Los Angeles to Buffalo if it won the bidding.

The Adelphia bid was "a unique opportunity" for Cablevision, which has 3 million subscribers, all in the New York metro area, to expand, a source familiar with the strategy said. The private equity firms Kohlberg Kravis & Roberts and Providence Equity Partners, which bid $15 billion for Adelphia, had tried to bring Cablevision into their bid.

Without confirming the Adelphia bid, Cablevision chief operating officer Tom Rutledge said last week the company could use its managerial expertise to improve cable systems elsewhere and raise their value.
Copyright 2005 Newsday Inc.