Could risk-taking Cablevision chairman be thinking about selling?
By David Lieberman, USA TODAY
NEW YORK — As an entrepreneur who built some of the earliest cable systems in New York and created HBO, Cablevision Systems Chairman Charles Dolan is one of the industry's most venerated champions.
But is he about to become its most heartbreaking defector? Some analysts say it's plausible, even likely, that he will — by selling the No. 6 cable operator in order to fund his pet project, a nascent high-definition TV satellite service called Voom.
He startled colleagues late last week when he struck a tentative deal to pick up the Voom assets. Cablevision recently decided to jettison Voom in a bitter showdown in which the board has sided with Dolan's son, James, who's CEO.
Charles and another son, Tom, plan to operate Voom, including its 21 high-definition channels that currently go out to about 26,000 subscribers, in a private company.
But they have to arrange the funding by Feb. 28, and appear to have few options. "I don't know how else Chuck can finance a satellite platform over the next several years" without selling Cablevision, says Fulcrum Global Partners' Richard Greenfield. "I think he's more interested in selling the company today that he has ever been."
The Dolan family controls nearly 76% of Cablevision's voting shares. Although the Dolans own less than 2% of the publicly traded Class A shares, they have all of the Class B shares, which get 10 votes a share.
A buyer would probably have to pay more than $12 billion, UBS analyst Aryeh Bourkoff says, for Cablevision's nearly 3 million subscribers and marquee properties, including Radio City Music Hall, Madison Square Garden, basketball's New York Knicks and cable's AMC and the Independent Film Channel.
But a sale would be a shocking vote of no confidence in cable as it faces intensifying competition from satellite broadcasters and, soon, phone companies.
Dolan's decision to back Voom already "puts him at odds with cable companies in general and Cablevision in particular," Bear Stearns analyst Raymond Katz says in a report. He wonders how Dolan can remain at his cable company "as he gets deeper into his involvement with a directly competitive provider, as well as a potential vendor" of HDTV channels.
A sale also could jolt Time Warner and Comcast, which recently made an estimated $17 billion joint bid for Adelphia Communications. They hope to split its 5.3 million subscribers, with Time Warner claiming systems that would enable it to control Los Angeles. But Time Warner, the No. 2 cable operator, long has salivated for the chance to consolidate its Manhattan system with Cablevision's franchises concentrated in New York City's outer boroughs and suburbs.
Of course Dolan appreciates better than anyone how dangerous it could be to cash cable in to fund a risky new satellite venture. "He has a history of launching ventures, and Cablevision has never been for sale," Bourkoff says. "I think he still believes in the (cable) technology."
In the end, the Cablevision board may insist that cooler heads prevail in the drama that pits father against son, and cable against satellite.
Directors must approve the final Voom deal once Dolan arranges the financing. The company says that there's "no assurance" that it will accept the terms.
