Newsday's latest update, posted just over an hour ago:
Dolan family may emerge as bidders to buy Voom
BY HARRY BERKOWITZ NEWSDAY STAFF WRITER
January 20, 2005, 1:34 PM EST
Charles Dolan may personally try to buy the Voom satellite TV service from Cablevision Systems Corp., where he is chairman and where the board of directors has rejected his wishes for the company to keep funding the deeply troubled operation, he told employees in a remarkable internal memo.
The memo from the billionaire founder of Cablevision and his son Thomas, who runs Voom, was sent to Voom staff on Wednesday, the day after the board, by a narrow majority that included chief executive James Dolan, reiterated its demand to sell it or shut it down.
Calling the vote "startling," Charles and Thomas Dolan said in the memo that it reflects "today's post Enron regulatory climate, which places great emphasis on the potential legal liability of directors who sit on the boards of corporations involved with new enterprises such as RDBS," referring to Rainbow DBS, the formal name for the direct-broadcast-satellite service.
The issue has created an extraordinary split between those Dolans and CEO James, who is also the chairman's son. Another son, Patrick, is also on the board, but it could not be learned whether he is siding with Charles and Thomas or James.
"Potential bidders for RDBS include members of the Dolan family," the memo states. "We love working with a skilled group as dedicated as the RDBS staff, and we love the Voom project."
The contents of the memo, which found its way onto the Internet, was confirmed by sources who have seen the original.
Analysts questioned how the Dolans could personally finance Voom's hundreds of millions of dollars in losses short of selling their big stake in Cablevision or even selling Cablevision, which has long been desired by Time Warner, which runs the nation's second biggest cable TV service.
Cablevision is the New York metroplitan area's biggest cable service, with 3 million subscribers, and the sixth biggest in the nation.
The board may be reluctant to grant the Dolans major breaks if they try to buy Voom, given the scrutiny directors would face from investors in such a transaction.
Last month, the board canceled plans to spin off Voom, which has cost the company hundreds of millions of dollars and attracted few subscribers, as part of a separate risk-oriented company. That vote was 8-6, according to a Wall Street source. That decision followed months of repeated delays as the spinoff plan failed to win Securities and Exchange Commission approval.
Analysts say that it would be difficult to sell Jericho-based Voom, which began service in October 2003 and attracted only 26,000 subscribers as of last Sept. 30, as a going business. Instead, Cablevision might find a buyer for Voom's single satellite, worth an estimated $250 million, and its government-granted licenses for frequencies and an orbital slot.
But Charles and Thomas Dolan are pushing for Voom to survive as a business.
"It is our expectation that RDBS will be offered for sale as an operating business," the memo states. "To do otherwise risks minimizing the return to Cablevision. Sale of RDBS requires RDBS to continue to operate normally. Should RDBS, the business, be sold, RDVS staff will simply work under new ownership."
Analysts have been urging that Voom be dropped as quickly as possible so that it does not further drain Cablevision finances, especially at a time when the Bethpage-based company has been trying to prove it can start generating ongoing, reliable profits after years of heavy spending and risky side ventures.
"We find it fascinating that the Dolans are considering buying Voom, themselves," independent analyst Richard Greenfield of Fulcrum Global Partners told investors, putting the cost of buying it at $200 million. "While we believe the Dolans might have enough liquid capital to acquire Voom ... it is hard to imagine they have adequate liquid capital to fund Voom's ogoing operating loses. Unless they have third-party capital lined up, we wonder whether it might imply a greater willingness to sell the core cable system assets."
The Dolan memo asks and thanks Voom employees for their "patience during this potentialy confusing period."
