Satellite Spinoff Plans Put on Hold
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Cablevision Systems Corp. said Tuesday that it suspended plans for a spinoff of its money-losing satellite broadcasting business, boosting expectations on Wall Street that the company would choose to sell the unit instead.
The news drove the Bethpage, N.Y.-based cable TV company’s shares up $2.95, or 13.3%, to $25.06 on the New York Stock Exchange.
Exiting the satellite business could save Cablevision as much as $1.5 billion in spending to develop the venture, Vijay Jayant, an analyst at Lehman Bros., said in a note to clients.
The high-definition satellite business, marketed under the brand name Voom, has had a tough start since being launched more than a year ago. It has been a source of major concern among Cablevision’s investors.
The spinoff of Voom would have been bundled with other, more stable Cablevision businesses, including three profitable cable networks -- AMC, the Independent Film Channel and WE: Women’s Entertainment.
The company said in a brief regulatory filing that it would suspend the spinoff in its current form and instead “pursue strategic alternatives” for the satellite business -- financial shorthand for seeking a buyer, analysts said. A Cablevision spokesman declined to comment further.
Voom has struggled since being launched in the fall of 2003. In its third-quarter earnings report last month, Cablevision said the Voom service had just 26,000 customers and had posted an operating loss of $75.3 million on revenue of $5.9 million.
Investors have long been skeptical of Voom’s prospects, noting the high set-up costs for launching a satellite TV service as well as the stiff competition from the two deep-pocketed players that dominate the field, EchoStar Communications Corp.’s Dish network and DirecTV Group Inc., which is controlled by Rupert Murdoch’s News Corp.
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