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Cablevision Sells Rainbow 1 Satellite to EchoStar for $200 Million |
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BETHPAGE, N.Y., Jan. 21, 2005/Satnews Daily/ — Eager to unload an unprofitable venture, Cablevision Systems Corp. (NYSE:CVC) announced on Thursday it has entered into a definitive agreement for its subsidiary Rainbow DBS Co. LLC to sell its direct broadcast satellite and certain other related assets to a subsidiary of EchoStar Communications Corp. (Nasdaq: DISH) for $200 million in cash.
Under the terms of the agreement, EchoStar will acquire the Rainbow 1 satellite, located at the 61.5 degree W.L. orbital position, as well as FCC licenses to construct, launch and operate DBS services over 11 frequency channels at the 61.5 degree W.L. orbital location. The satellite includes 13 frequencies, up to 12 of which can be operated in "spot beam" mode.
In addition, EchoStar will acquire the contents of Rainbow DBS's ground facility in Black Hawk, S.D. and related assets. The transaction is subject to review by the Federal Communications Commission and other regulatory agencies.
In a statement, Cablevision said it will continue to explore strategic alternatives, including monetization, for its remaining Rainbow DBS related assets, including programming, equipment and spectrum. It added Voom will continue to provide service to its current customers during a transition period.
EchoStar III satellite, also located at 61.5 degrees West Longitude, broadcasts Dish Network TV programming to hundreds of thousands of consumers today using DBS spectrum controlled by EchoStar at that location. EchoStar said it is assessing how the Rainbow satellite's flexibility can best be utilized to enhance Dish Network's existing service.
Cablevision's Rainbow Media Holdings LLC started the high-definition satellite venture marketed under the brand name Voom in 2003. But the operation struggled to turn a profit and has dragged Cablevision’s finances.
In November last year, Rainbow DBS ordered five geostationary telecommunications satellites from Lockheed Martin to provide direct broadcast services across the continental United States (CONUS). Cablevision then revealed it was spending about $740 million saying the deal underscores Rainbow DBS’ determination to push ahead with the Voom service in spite of continuing doubts on its costs and future viability.
Explaining the orders, Tom Dolan, CEO of Rainbow Media, said the plan was to boost VOOM satellite service and expand in March next year from its current 39 to more than 70 high-definition channels covering the full continental U.S.
Despite that announcement, however, investors doubted how the company could raise the money. In August, Cablevision reported a 25% increase in revenue but still posted a second-quarter net loss of $187.1 million as strong cable TV operations failed to offset investment losses and contain costs related to the launch of a satellite broadcast service Voom.
Meanwhile, reports say Cablevision Systems chairman Charles Dolan and his family may buy the Rainbow DBS satellite- television unit after the board decided to sell or close the business. In a memo sent to employees late Thursday, Dolan said the Rainbow staff would be retained if he buys the unit, which operates the Voom satellite-TV service.
Charles Dolan and his family opposed the sale of the business and has argued that Cablevision should continue funding Voom, according to a Wall Street Journal report.
Recent Stories: Lockheed Martin Confirms Contract for Five A2100 Satellites from Cablevision Michael Huseby Appointed Executive VP and CFO of Cablevision Cablevision Systems Revenue Rises by 25% But Still Posts $187.1 Million Loss in Second Quarter |
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