Cablevision Has Plans for Spectrum

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Cablevision Systems Corp. is looking to build a new wireless-telephone service in the New York metropolitan area, and will possibly sell some non-New York-area wireless assets to pay for it, sources said last week.

That news emerged last week, as Cablevision tried to calm investors after its Oct. 5 announcement that it wouldn't proceed with a planned $1 billion preferred-stock offering. The company said it would explore other means of raising cash, including asset sales, additional borrowing, reductions in capital expenditures and the issuance of debt, preferred stock or equity securities.

Questions about which assets might be on the block — along with a statement that said quarterly revenue and cash-flow growth would likely fall below the latest forecasts — whacked Cablevision's stock. It dropped 11 percent on Oct. 5, to $39.67.

Cablevision officials could not be reached for comment. But investors at an Oct. 10 meeting in New York reported that Cablevision chairman Charles Dolan said the company would most likely tap into an existing bank facility or sell bonds.

Privately, Dolan also told a small group about plans for wireless licenses held by Northcoast PCS LLC, a company in which Cablevision owns a 50 percent voting interest and a 90 percent economic interest. Charles Dolan's nephew, John Dolan, controls Northcoast.

CIBC World Markets analyst Jeff Wlodarczak last week said he figures Northcoast wireless assets outside New York are worth between $500 million to $600 million, while its New York-area PCS assets are worth about $1.5 billion.

Wlodarczak said Cablevision officials are touting a New York digital wireless service combined with a future cable telephony offering that uses Internet-protocol technology. But that argument might not be very persuasive to investors.

"They need to raise a lot of capital," Wlodarczak said. "I think the market will be pretty disappointed. Cable investors want to stick to cable."

Wlodarczak also said Cablevision might build out the wireless network with the intention of either selling it later or partnering with an existing provider.

"To me it would make more sense if they sell a portion of it to a wireless provider and have some revenue participation," Wlodarczak said. "But if you look at the history of Chuck Dolan, he's always had an issue with price. He may think it's a lot more valuable if he just builds them out on his own."

LAUNCHED IN CLEVELAND

Northcoast recently began offering service in Cleveland and has the rights to offer service in New York and Boston. According to Cablevision's latest financial documents, the Northcoast licenses cover territories that reach a potential population of about 450 million.

As for filling in for the scrapped stock sale, Wlodarczak said he thinks Cablevision will try to sell $750 million to $1 billion in debt securities. Issuing another $1 billion in bonds would raise Cablevision's debt-to-cash flow ratio to about 8.5 times from its current level of 7.5 times, putting it at the higher end of the industry's range.

To bump up the cash-flow portion of that ratio, Wlodarczak said Cablevision would also likely trim capital expenditures by pulling back slightly on its digital-cable rollout. Cablevision officials have told him they now intend to offer digital set-tops only to those customers that request them, rather than doing a blanket switchout of all existing set-tops, he said.

"Slowing it down is a smart idea," Wlodarczak said. "When they were talking about rolling out all of these new services at once, it made us nervous. It's a big operational challenge."

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