Backseat Blonde - NASCAR’s Title Sponsorship Uncertain Amid Telecom War

December 13, 2004

NASCAR’s Title Sponsorship Uncertain Amid Telecom
War
By Allison Wagda

As it turns out, while Kurt Busch may be the first NASCAR
Nextel Cup champion, he may very well be the last.

Following all of the rumors swirling around Nextel
Communications Inc. on Friday, one conclusion can be
reasonably anticipated – within the next week or so,
someone is going to buy the company.

Does this mean we’ll get a new trophy yet again?

Industry pundits are speculating that a merger deal between Nextel
Communications (Nasdaq: NXTL) and Sprint Communications (NYSE: FON), will be
announced by Wednesday. That buzz alone had NASCAR followers wondering what
the potential fallout might mean for the sport. After all, Nextel has only completed a
single season out of a reported 10-year, $700 million title sponsorship contract.

But any announcement between Sprint and Nextel this week may only be an opening
salvo in a potential bidding to determine Nextel’s ultimate fate. A merger deal
between the two is only the first step toward consolidation. Verizon Wireless, a joint
venture between Verizon Communications and the UK’s Vodafone Group Plc, may
swoop in and start a bidding war for Nextel once the Sprint terms are disclosed.

What affect, if any, could all of this hullabaloo have on NASCAR and the upcoming
season?

More than anything, it’s likely to be something of a distraction for the suits in Daytona.
That, in my opinion, is not necessarily a bad thing, since this management team has
shown a certain proclivity toward restlessness.

I have to assume NASCAR has a contingency plan in place for just such an
occurrence. After all, telecommunications is one of the most fluid industries on the
planet. After Cingular purchased AT&T Wireless a few weeks ago, NASCAR must
have seen the likelihood of Nextel becoming a prime target in the telecom wars.

So, for a second, let’s assume Sprint ends up owning Nextel (while it is being called
a merger, Sprint is likely to gain majority ownership). Will they keep the title
sponsorship of NASCAR?

I don’t see Sprint making any rash moves, like pulling out immediately. These deals
take time to complete anyways. However, the Nextel moniker could be the first
casualty, especially if Sprint decides to discontinue or phase out the brand.

Nextel’s title sponsorship of NASCAR is one of the company’s most expensive
marketing investments, and as such could be a target for executives looking to
illustrate to shareholders that the combined organization can trim expenses. It’s the
kind of budget cut often made when short-term goals trump foresight (a talent
NASCAR executives should certainly be able to appreciate).

Sprint does have a track record in sports sponsorships and has been involved with
NASCAR in the past, sponsoring Kyle Petty (leaving in 2002). Sprint’s target
demographic is decidedly white collar, and their current sponsorships reflect that
image. Plus, they already have a major sponsorship with a national sport…the PGA,
and are the lead sponsor on a new sports arena in Kansas City. NASCAR may not
be the best fit with Sprint’s corporate culture right now.

On the other hand, NASCAR is coming off of a strong ratings season, and Nextel has
reported significant subscriber successes directly related to the NASCAR
sponsorship. Sprint CEO Gary Forsee, the likely leader in a consolidated company,
is also on the board of directors at Goodyear, a connection that may benefit NASCAR.

Sprint has also recently shown a greater interest in sports marketing, signing a deal
with ESPN to provide customers with unique dynamic sports content from their cell
phone.

If Sprint inherits the Nextel contract and chooses to continue with the commitment,
will the “Sprint Cup” confuse newbie racing fans with Sprint Car racing? Or instead of
the Chase for the Championship, maybe it’ll become “The Sprint to the Finish Line.”
Oh goodie.

NASCAR may find itself in a more tenuous situation if Verizon successfully executes
a takeover of Nextel. Vodafone may be less interested in a U.S. domestic sports
series. Verizon as a corporation concentrates more on Olympic sports
sponsorships. The New York Mets are the sole exception.

Verizon has dabbled in NASCAR as the “Official Wireless Provider” of California
Speedway several years ago, and was reportedly a competitor for the spring 2002
Atlanta Motor Speedway race.

Interestingly, due to Nextel’s exclusivity contract with NASCAR (typical in such a major
sponsorship), both Verizon and Sprint are presently locked out of the sport. Yet if
either opted out of the title sponsorship following a takeover of Nextel, then it is likely
all could once again participate.

If Sprint/Verizon/Vodafone decide to bail on NASCAR, who are the likely replacement
candidates?

Before Nextel was signed, other companies rumored to be in talks with NASCAR
included Visa, Motorola and Nokia. Motorola stands to lose in a big way if Sprint and
Nextel merge, which would probably negate any interest in a sponsorship on the
scale of NASCAR at this time.

Coca-Cola may be leaving (or has left? Unsure) NASCAR…could they be lured back
into the fold for such an opportunity? And we thought the big blue bottle was bad…

McDonalds has indicated an interest to continue its support of NASCAR through
various sponsorship opportunities, even though the company gave up its Official
Fast Greasy Food of NASCAR status a couple of weeks ago.

Or is it even remotely possible the title sponsor could be a liquor company?
Hmmm…the Bacardi Cup….

The fact is, there aren’t many companies with the kind of deep pockets NASCAR
requires who want to target strictly a consumer audience.

Whereas five years ago the marketing industry buzz surrounded the power of brand
identity and corporate visibility initiatives, marketing organizations in today’s economy
are often tasked with more metric-oriented lead generation activities. If actual sales
cannot be traced directly back to a program, it’ll be axed fast.

So what started last week with a rumor could very well become the dominant
NASCAR storyline for the off-season.

Nextel’s ad slogan could end up being oddly prescient. After all, NASCAR is sure to
race on, but as for Nextel? This time, they may very well be Done.

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