Rainbow spin-off will boost Cablevision

At the end of last year, US cable giant Cablevision announced its plans to spin off its Rainbow Media Holdings programme-making and channel business.  The scheme called for a distribution of new stock to existing shareholders and thus makes the move tax efficient.  Rainbow’s channels are highly-regarded and include AMC (home of Mad Men), IFC and Sundance Channel amongst others.

At the Morgan Stanley media & telecom conference in Los Angeles this week Cablevision’s EVP Gregg Seibert explained that an earlier spin-off (in early 2010) of the group’s Madison Square Garden (MSG) enterprise was highly beneficial in highlighting the true value of MSG, and a benchmark for the current plan.

“[We’ll then] have three distinct assets,” Seibert told delegates. “Having them in three distinct public companies makes all the sense in the world. And in addition the Rainbow spinoff will give us additional financial flexibility at Cablevision to either make more acquisitions, invest in the business or continue to return capital to shareholders and probably some combination of all of those.”

Cablevision has already demonstrated its expansion muscle by buying New York-based Bresnan Communications last December for $1.37bn.  Bresnan, while HQ’d in Cablevision’s greater New York area, operates its MSO business in the Mid-West/Rocky Mountains areas.

Cablevision COO Tom Rutledge told the conference that it was already making improvements for Bresnan subscribers, driving growth and targeting ARPU growth from around $250 today to the more typical $400 achieved at Cablevision.  “One of the things we immediately set about doing was upgrading all the video products so that we have a better product than satellite, more HD, more video on demand, higher data speeds so that we would be more competitive against DSL and a voice product that can’t be beat by anyone in the marketplace and using all of that combination to drive deeper into the marketplace.”

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