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Cablevision Suspends Rainbow Spinoff

(AP) -- Cablevision Systems Corp. said Tuesday it is suspending plans for a spinoff of its money-losing satellite broadcasting business and will consider other alternatives for the unit.

The high-definition satellite venture, which is marketed under the brand name VOOM, has had a tough start since being launched more than a year ago and has been a source of major concern among Cablevision's investors.

The spinoff of VOOM would have been bundled with several other, more stable Cablevision businesses, including three profitable cable networks - AMC, The Independent Film Channel and WE: Women's Entertainment - as well as the Clearview Cinemas chain of movie theaters.

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. A company spokesman declined to make any further comment.

Investors cheered the news, sending Cablevision's shares up $2.95, or 13.3 percent, to close at $25.06 in heavy trading Tuesday on the New York Stock Exchange.

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 revenues 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.

Katherine Styponias, a media industry analyst with Prudential, told investors in a research note Tuesday that the "best case scenario" was for the VOOM unit to be shut down immediately and its satellite assets sold off.