Dolans plan sale of $60 million in Bethpage-based Cablevision Systems stock
Ken Schachter
Charles Dolan and six family trusts plan to sell about $60 million in Cablevision Systems class A shares over 12 months as he prepares to shed his role as chairman and assume that role for the Rainbow DBS satellite TV spin-off.
The sales, outlined in a government filing, are designed to provide "liquidity" but will leave intact the Dolan clan's majority control of both Cablevision and Rainbow DBS, whose Voom service is seeking to find traction in the satellite TV business.
Wall Street is anxiously awaiting spin-off details, which are expected to be supplied in another filing within two weeks.
"We still don't know enough about what they're willing to spend on their satellite business," said Andrew Rittenberry, an analyst at Gabelli & Co., whose sister company, Gabelli Funds LLC, has 7.4 million Cablevision shares worth $172 million, making it the sixth-largest institutional holder. "That's what everyone's concerned about."
Cablevision plans to fold its AMC, IFC (The Independent Film Channel) and WE: Women's Entertainment channels into Rainbow DBS. In 2003, the stations accounted for about 15 percent of adjusted operating cash flow.
"The channels are worth quite a bit of money," said Rittenberry, who added that Cablevision's plans to borrow against the broadcast properties to finance the startup of Voom is a gamble.
"The worst case is that they rev this thing up and it goes bankrupt," he said. "I don't think that's going to happen. Hopefully, they'll be prudent in how they invest in it."
A second analyst, David Mantell of Loop Capital Markets, who downgraded Cablevision from "perform" to "underperform" after the company released fourth-quarter earnings earlier this month, said he also has misgivings about the Voom spin-off.
"You've got a market with two very well entrenched competitors," he said, referring to News Corp.'s DirecTV and Echostar's Dish Network. "They have been at it some time and they know the business well."
Also vying for TV-watchers' wallets is U.S. Digital Television, which is rolling out a lower-cost alternative to cable and satellite. The service, which beams programming from the towers of local stations, offers 32 channels for $19.95 per month but requires subscribers to buy a $99.95 set-top box. Like Voom, the service is highlighting high-definition programming. USDTV reportedly has signed up about 1,000 subscribers so far in Salt Lake City and is rolling out service to Albuquerque, N.M. Voom, which began beta testing of its service in October, had signed up 1,627 subscribers as of the end of February, before it began promotional pricing on the HD receiver, dish and remote control.
In a research note, Mantell said Cablevision's transfer of the cable channels will hurt the company's cash flow and put pressure on the its telecommunications units, Optimum Voice for consumers and Lightpath for businesses, to "fire on all cylinders."
Charles Dolan and his wife, Helen Dolan, each beneficially own 37.9 million shares, or 14.8 percent of shares, with other family members bringing the clan's beneficial stake in the company to more than 65 percent.
Cablevision officials declined comment on the purpose of the Dolans' sale.
Ken Schachter
Charles Dolan and six family trusts plan to sell about $60 million in Cablevision Systems class A shares over 12 months as he prepares to shed his role as chairman and assume that role for the Rainbow DBS satellite TV spin-off.
The sales, outlined in a government filing, are designed to provide "liquidity" but will leave intact the Dolan clan's majority control of both Cablevision and Rainbow DBS, whose Voom service is seeking to find traction in the satellite TV business.
Wall Street is anxiously awaiting spin-off details, which are expected to be supplied in another filing within two weeks.
"We still don't know enough about what they're willing to spend on their satellite business," said Andrew Rittenberry, an analyst at Gabelli & Co., whose sister company, Gabelli Funds LLC, has 7.4 million Cablevision shares worth $172 million, making it the sixth-largest institutional holder. "That's what everyone's concerned about."
Cablevision plans to fold its AMC, IFC (The Independent Film Channel) and WE: Women's Entertainment channels into Rainbow DBS. In 2003, the stations accounted for about 15 percent of adjusted operating cash flow.
"The channels are worth quite a bit of money," said Rittenberry, who added that Cablevision's plans to borrow against the broadcast properties to finance the startup of Voom is a gamble.
"The worst case is that they rev this thing up and it goes bankrupt," he said. "I don't think that's going to happen. Hopefully, they'll be prudent in how they invest in it."
A second analyst, David Mantell of Loop Capital Markets, who downgraded Cablevision from "perform" to "underperform" after the company released fourth-quarter earnings earlier this month, said he also has misgivings about the Voom spin-off.
"You've got a market with two very well entrenched competitors," he said, referring to News Corp.'s DirecTV and Echostar's Dish Network. "They have been at it some time and they know the business well."
Also vying for TV-watchers' wallets is U.S. Digital Television, which is rolling out a lower-cost alternative to cable and satellite. The service, which beams programming from the towers of local stations, offers 32 channels for $19.95 per month but requires subscribers to buy a $99.95 set-top box. Like Voom, the service is highlighting high-definition programming. USDTV reportedly has signed up about 1,000 subscribers so far in Salt Lake City and is rolling out service to Albuquerque, N.M. Voom, which began beta testing of its service in October, had signed up 1,627 subscribers as of the end of February, before it began promotional pricing on the HD receiver, dish and remote control.
In a research note, Mantell said Cablevision's transfer of the cable channels will hurt the company's cash flow and put pressure on the its telecommunications units, Optimum Voice for consumers and Lightpath for businesses, to "fire on all cylinders."
Charles Dolan and his wife, Helen Dolan, each beneficially own 37.9 million shares, or 14.8 percent of shares, with other family members bringing the clan's beneficial stake in the company to more than 65 percent.
Cablevision officials declined comment on the purpose of the Dolans' sale.
