After a week of dueling press releases, conflicting Web sites, a changeover in the board of directors and a harshly worded letter (SN, March 7), the Voom saga reached an almost anti-climatic point last week when Cablevision announced it had reached agreement to keep its Rainbow DBS direct-to-home satellite business, which does business as Voom, alive.

Cablevision said March 8 that it entered into an agreement with Charles Dolan, its chairman, and Thomas Dolan, executive vice president of Cablevision Systems, the terms of which call for both parties to work together to finalize the separation of Voom from Cablevision. According to Cablevision’s statement, the Dolans agreed to fund any costs incurred by Rainbow DBS above those that would have been incurred under a shutdown scenario. In the mean time, Rainbow DBS will continue to provide service to its subscribers. Cablevision said the agreement, which was approved by Cablevision’s board of directors and a special committee of independent directors, terminates March 31.

A Schedule 13D filed March 9 with the Securities and Exchange Commission revealed some further details on the agreement between the Dolans and Cablevision, including the first indication of the money that will be spent by Charles Dolan to keep Voom alive.

The filing disclosed that Charles Dolan was “to deliver to Cablevision by the close of business on March 9 cash and/or shares of Class A Common Stock or Class B Common Stock free and clear of any liens, claims and encumbrances and together with a stock power duly endorsed to Cablevision and having a market value of $10 million.”

The filing also appeared to address some of the incidents during the activities between the two companies. The filing noted that “Rainbow DBS is and shall remain subject to the management and internal controls of Cablevision. Cablevision shall continue to have the right to contact and deal with any employee, consultant, vendor, supplier or customer of Rainbow DBS. Neither (Charles) Dolan nor Tom Dolan shall, directly or indirectly, give any instruction or take any action inconsistent herewith.”

And those words seem to have at least quashed any conflicting messages that cropped up on the Internet during the height of this drama. A quick trip to Voom’s Web site (http://www.voom.com) reveals the site is back up and running and actually taking orders. Also, the competing Web site launched by the Dolans during the height of the back and forth between them and Cablevision (http://www.voomllc.com) now automatically redirects visitors to the Voom site. Of interest on the Voom Web site is the current offer available to new subscribers. According to the site, new subscribers can get up to three rooms installed for service for $1. That offer is valid, according to the Web site, through April 30, which can be looked upon as a possible sign that all parties involved in this deal expect this transaction to close before the March 31 deadline.

Wall Street Reacts

The news was met with some positive reaction on Wall Street for Cablevision but came with some mixed reaction regarding the future of Voom. Speculation about how Voom would be funded also followed the announcement from Cablevision.

Alan Bezoza, analyst with Friedman Billings Ramsey said in a March 9 equity research report, “With Chuck Dolan picking up the tab for the incremental expenses, we view this as a positive resolution for both Cablevision shareholders and all 46,000 die-hard Voom subscribers.”

In a March 9 research report, Oppenheimer analyst Thomas Eagan called the latest development “a mild positive for Cablevision because it is a step toward Voom’s final deconsolidation from Cablevision. This is important because we expect Voom’s cash flow losses will continue to drag the company’s cash flow generation. In 2004, Cablevision’s cash flow would have grown 37 percent (instead of a reported 15 percent) excluding Voom’s $367 million in cash flow losses.”

But while Eagan painted a slightly positive picture for the future of Cablevision, his optimism did not extend to the future of Voom. In the report, Eagan noted that questions linger regarding how Charles Dolan will fund the Voom acquisition and its operations in the long term. Eagan added that questions as to where Voom HD will secure the capacity it needs to maintain operations also remain unanswered for the moment, as Cablevision has already agreed to sell the Rainbow-1 satellite to EchoStar Communications Corp. He adds, “Unfortunately for Voom, EchoStar needs the satellite’s capacity to transmit high-definition programming to compete with DirecTV and the latest cable HD packages. It would seem to us, therefore, that Voom’s future looks bleak.”

Others on Wall Street are viewing the Voom situation as a possible prelude to someone taking over Cablevision, as Charles Dolan would likely have to sell off a potentially large portion of his holdings in Cablevision to fund Voom.

Richard Greenfield, analyst with Fulcrum Global Partners, noted in a March 10 equity report that the schedule 13-D disclosure “illustrates Chuck Dolan’s willingness to sell Cablevision to fund Voom.” He added, “Voom has substantial near-term losses and even selling the whole Cablevision company does not raise immediate capital as a cable transaction usually takes 12 months to close (due to regulatory hurdles).” Greenfield added that the only way Voom will be able to be funded on the long term is if Cablevision is put up for sale.

–Gregory Twachtman (Alan Bezoza, Freidman Billings Ramsey, 212/457-3315; Richard Greenfield, Fulcrum, 212/803-7025; Thomas Eagan, Oppenheimer, 212/668-5769)