Cable Operators

UBS Lowers Boom on Cablevision, Voom

1/18/2005 7:19 AM Eastern

UBS Warburg LLC cable debt and equity analyst Aryeh Bourkoff reduced his rating on Cablevision Systems Corp. Tuesday from “buy” to “neutral,” just as the MSO’s board of directors was scheduled to meet to discuss the future of its Rainbow DBS direct-broadcast satellite unit.

Cablevision announced in December that it postponed the planned spinoff of Rainbow DBS indefinitely and was seeking strategic alternatives for the service.

Rainbow DBS, marketed as Voom, has been a drag on Cablevision’s stock for months. The service has burned through about $400 million in funding so far, and it could need $1.5 billion-$2 billion to build and launch new satellites.

In the meantime, Voom has been bleeding subscribers -- it lost 2,700 customers between August and September, and it currently has about 26,000.

And reports that there may be dissension among Cablevision’s top executives concerning the future of the service could further affect the stock, Bourkoff wrote in a report.

According to a report in The Wall Street Journal, Cablevision chairman Charles Dolan is in favor of keeping the service alive, while his son, CEO James Dolan, favors shuttering the service or selling it at a discount, if necessary. The Journal said most of Cablevision’s board sides with James Dolan on the Voom issue, but that could change.

“While the board appears to slightly favor selling/shutting Voom, dissention could lead to a public battle, potentially pitting chairman vs. CEO,” Bourkoff wrote. “This could lead to near-term share volatility.”

Cablevision shares were down 39 cents in afternoon trading Monday to $23.96 each.

September