Cablevision's ( CVC) aspirations of satellite TV grandeur are officially over. And analysts are pretty happy about it. On Thursday evening, the Long Island-based cable operator said it was selling key assets of its flailing Voom satellite business to the well-established operator EchoStar ( DISH). The $200 million sale, which is subject to regulatory approvals, effectively lays to rest Cablevision's
likely-doomed-from-the-start attempt to become a player in the satellite TV business in the shadow of EchoStar and DirecTV ( DTV). It also represents, according to analysts, a nice, cost-effective way for EchoStar to speed up the rollout of local high-definition programming -- a key product offering for the Dish Network operator as it competes with DirecTV and cable operators from Comcast ( CMCSA) on down. On Friday morning, Cablevision's shares rose $1.56 to $27.04, and EchoStar's gained 28 cents to $32.26. DirecTV -- which Sanford Bernstein analyst Craig Moffett reported Friday is raising prices 5% to 7% -- was up 5 cents to $16.15. Under the terms of Thursday's agreement, Cablevision will sell EchoStar its orbiting Rainbow 1 satellite, along with Federal Communications Commission licenses for 11 transmission frequencies at that orbital location. EchoStar will also acquire the contents of Cablevision's ground facility in Black Hawk, S.D. Cablevision says it will continue to explore "strategic alternatives, including monetization," for its remaining related assets, including programming and spectrum. Voom, says Cablevision, "will continue to provide service to its current customers during a transition period." EchoStar says it is assessing how the satellite assets "can best be utilized to enhance Dish Network's existing service." Analysts, who had expected if not downright rooted for Voom's demise, were generally pleased by the news. In a report entitled "Ding! Dong! The Voom! is Dead," Friedman Billings Ramsey analyst Alan Bezoza reiterated his outperform rating on Cablevision's stock, on which he has a $28 price target. Estimating a gradual shutdown of Voom, Bezoza estimates that the service will drain $100 million of Cablevision's operating cash flow in 2005. But a speedier shutdown, writes Bezoza, could limit that drain and push Cablevision to the upside of his current estimates. Fulcrum Global Partners analyst Richard Greenfield, for example, who noted that Cablevision had invested "upward of $500 million" in Voom, raised his price target on the stock from $27.50 to $33. Greenfield has a buy rating on the stock. Moffett was one of several analysts to note how the deal not only cuts Cablevision's losses but significantly improves EchoStar's competitive position against DirecTV as they race to increase their high definition TV programming offerings. "For EchoStar, the deal brings a high quality satellite that would have cost $250M or more to build and launch, and shaves more than two years from EchoStar's time to market for offering HDTV local channels," writes Moffett. "EchoStar instantly gains much needed clarity in its HD locals strategy, and thereby eliminates most of the overhanging uncertainty around the capital investment required to keep pace with DirecTV's Spaceway launch due later this year. In fact, EchoStar will now likely to be first to market with HD locals." Moffett has market perform ratings on both Cablevision and EchoStar; his firm has performed recent non-investment-banking securities-related services for Cablevision.