Voom Gets Reprieve
To recap our story so far, in mid-February, Cablevision agreed to sell the Voom satellite and FCC operation licenses to competitor EchoStar for $200 million, a transaction that is apparently still under regulatory scrutiny. The sale was supported by the younger Dolan but opposed by his father. Then, the elder Dolan wrote a letter of intent to buy the remaining Voom assets from Cablevision by the end of the month. When that deadline passed without a deal being reached, Cablevision announced it would shut down the Voom service by the end of March.
Dolan responded by exercising his right as controlling shareholder to oust several board members and replace them with industry friends who would supposedly support his bid to keep Voom operating and ultimately allow him to purchase the remaining assets from Cablevision. He also put up a new Voom Web site to solicit new customers, much to the consternation of his son James and other industry analysts. As of our last news story on this saga, the new site was not operational, but it is now; in fact, it's being redirected to the old Voom site after being shut down by Cablevision last week.
At first, the new board gave the elder Dolan until March 7 to finalize the purchase of Voom's remaining assets. On Tuesday of this week, it extended that deadline to the end of March, agreeing to keep Voom alive until then. In a statement released on Tuesday, Cablevision said it had reached an agreement with Charles Dolan and his son Thomas to "work cooperatively to finalize the separation from Cablevision of its Rainbow DBS operation [the corporate entity that provides the Voom service]. The agreement allows Rainbow DBS to remain in operation and to continue to provide its Voom service to subscribers while Charles and Thomas Dolan seek to arrange an alternate transaction that would avoid a shutdown of Rainbow DBS. Charles Dolan has agreed to fund any costs incurred by Rainbow DBS above those that would have been incurred under a shutdown scenario." That's no small commitment—Voom lost over $660 million last year on revenues of only $14.9 million.
It remains unclear just how Charles Dolan plans to pay for Voom's remaining assets. Some speculate that he would have to sell all or part of Cablevision in order to raise the necessary cash, which would likely put son James out of a job (no doubt one source of contention between them). Reuters reports that the elder Dolan is expected to present his plan to the Cablevision board on Monday, but anticipating what those plans might be is difficult because his behavior in this matter has defied conventional business logic.
Even if he's successful in acquiring the assets, what will he do with them if the satellite and FCC licenses are sold to EchoStar? Board member Victor Oristano wrote a letter to Dolan on behalf of angry Cablevision shareholders expressing concern that his actions could jeopardize that sale, leading to the loss of $200 million in proceeds. The letter, which was also filed with the Securities and Exchange Commission, briefly mentions Dolan's intention to enter into discussions with EchoStar regarding the possible combination of satellite, licenses, and the rest of the Voom business. Stay tuned as we continue to follow this incredible story.
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