Cablevision Revamps Board, Delays Voom Shutdown (CNet-NYTimes) 3.4.05


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Jun 9, 2004

Cablevision revamps board, delays Voom shutdown

By Nat Ives and Geraldine Fabrikant of The New York Times
Published: March 4, 2005, 11:16 AM PST

(CNET-NYTimes) The boardroom and family battles at Cablevision Systems took a new turn yesterday as the company said it would delay shutting the Voom satellite television service to give Charles F. Dolan, the Cablevision chairman, more time to assemble a deal to buy the business.

Another twist emerged later in the day, when an independent committee of directors accused Dolan of expanding Voom through his newly created Web site in violation of his agreement with Cablevision. A letter from the committee said it was "imperative that the expansion of the business stop immediately."

The independent board members may have partly been taking steps to protect themselves from possible shareholder suits if Cablevision continued to sell the service. As recently as Monday, Cablevision had declared negotiations over, saying it planned to close Voom within 30 days.

Even before the letter went out, Dolan appeared to have taken down the Web site that Cablevision said was taking orders for new customers. Dolan could not be reached for comment.

The company, which made its disclosures in filings with the Securities and Exchange Commission, said Dolan was expected to update the board on his efforts to buy Voom, at a meeting scheduled for Monday.

The reprieve for Voom came one day after Dolan named four new Cablevision directors in a move that seemed intended to shore up his support on the board. Dolan holds shares that represent 75 percent of Cablevision's vote, but the battle over Voom has pitted him against some directors, including one of his sons, James L. Dolan, the chief executive at Cablevision. Another son, Thomas C. Dolan, the executive vice president, supports his father's attempts to keep Voom alive.

The new directors are John C. Malone, chairman of Liberty Media; Frank J. Biondi Jr., the former chief of Viacom and Universal Studios; Dr. Leonard Tow, the former chief executive of Citizens Communications; and Rand Araskog, the former chief executive of the ITT Corporation. Cablevision acquired Madison Square Garden from ITT when it was led by Araskog.

Dolan also said he would ask the board to expand by one seat to accommodate Brian Sweeney, senior vice president for e-media at Cablevision and Dolan's son-in-law. Wall Street was unhappy about the reconfiguration of the board. "We regard this latest development as highly problematic as Dolan has essentially reshaped the board to sustain the option of acquiring Voom," said Jessica Reif Cohen, a Merrill Lynch analyst, in a research note to investors.

"The exiting directors had voted against funding the struggling satellite service. In this era of corporate governance, Dolan's actions are remarkable for a public company, marked by the nomination of another family member to the board."

Cablevision stock fell $1.59, or 5.3 percent, to $28.65 in regular trading yesterday, and lost another 20 cents in after-hours trading.

Aryeh B. Bourkoff, a cable and satellite analyst at UBS Investment Research, said Dolan had clearly reasserted himself as the owner of Cablevision. "The changeover of the board strengthens Chuck Dolan's position and marks the resurrection of the Voom venture," he said.

The structure of a potentially revived Voom business remains uncertain, said Bourkoff, who has a neutral rating on Cablevision stock and bonds.

In its filing, Cablevision also said that the S.E.C. was conducting an informal inquiry into trading in its securities from Nov. 1 through Jan. 20, the period leading up to Cablevision's Jan. 20 sale of the Voom satellite to EchoStar Communications for $200 million.

The inquiry involves public statements Cablevision made in December, when it dropped plans to spin off Voom and several cable networks into a company called Rainbow Media Enterprises, and in January, when it announced the satellite sale to EchoStar. Cablevision said it learned of the inquiry on Monday. Dolan said in February that he would form a company to buy the remaining assets of Voom.

Cablevision started Voom in 2003 with the intention of attracting subscribers by providing more high-definition television programming than other satellite or cable operators. Voom acquired relatively few subscribers, however, as demand for high-definition programming lagged expectations and undermined the value of Voom's specialty.

Despite the turmoil and uncertainty, Bourkoff said the new board members could improve the outlook at Cablevision. "The important thing to keep in mind is that Chuck Dolan has certainly brought some industry expertise to the board," he said. "But obviously, they will be much more aligned with Chuck Dolan."

Charles Schueler, a spokesman for Cablevision in Bethpage, N.Y., declined to elaborate on the filings or make executives available for comment.

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