Sprint/Nextel merger talks and NASCAR

UPDATE #3 A Sprint and Nextel merger announced Wednesday morning won't change the name of NASCAR's Nextel Cup in 2005, but Gary D. Forsee, the president and CEO of the new company said Sprint Nextel would "work with the appropriate branding for that in the future." Sprint and Nextel, the No. 3 and No. 5 U.S. wireless telephone companies, made the announcement to merge their Overland Park, Kan.- and Reston, Va.-based businesses at a New York news conference led by Forsee, Sprint's chairman and CEO and Timothy M. Donahue, Nextel's chairman and CEO, who will become chairman of Sprint Nextel. The two companies, along with their affiliates and partners, operate networks that directly cover nearly 262 million people, more of the U.S. population than any other carrier.

When asked about the new company's involvement with NASCAR, Forsee and Donahue deferred to Tom Kelly, executive vice president and chief operating officer of Nextel, who will become Sprint Nextel's chief strategy officer. Kelly said he had spoken with NASCAR, and the sanctioning body was very excited "not only for a great sponsorship relationship, but also continuing to build this sport." An excerpt of the transcript from the news conference with complete answers from Forsee, Donahue and Kelly follows:
Michael Bowen, Friedman, Billings, Ramsey & Co.: "Assuming that this closes in the second half of 2005, then how quickly will you move to integrate the Nextel Cup with the Sprint initiatives as well. Will we see immediate driver phones as well for Sprint customers on both networks and things like that?"

Gary D. Forsee, president and CEO of Sprint Nextel: "(That's) something that I'm particularly excited about, and as we've talked about the great relationships that we have within the two companies, certainly one that stands out is the NASCAR relationship. And I look forward to getting to know that team and some of that's going to be an important part of that. So certainly you can expect in 2005 — because we're in flight already with the planning for that — that it would be the Nextel Cup in 2005. And we'll certainly work with the appropriate branding for that in the future. Tim, I don't know if you want to comment further on that, but that's an exciting opportunity for us as a new company."

Timothy M. Donahue, chairman of Sprint Nextel: "Yeah, well, Tom Kelly was the architect — God bless him — of the Nextel NASCAR relationship, and he's probably more qualified than any of us to answer that question."

Tom Kelly, chief strategy officer of Sprint Nextel: "The only thing to really say about this is the NASCAR relationship has been a very exciting relationship for Nextel, probably the most or the best investment we have made in marketing since we have been in the business. It also expands the opportunity beyond the small to medium business category to all of the consumer category. For many of you who have talked to us before, you know that there are 75 million NASCAR fans out there, 40 million of which are avid. That is a mix of business and consumer. When you add the two of these together with the branding that we've done and the opportunities for the combined companies together, this opportunity is going to be probably one of the best marketing tools that we will have to continue to penetrate the marketplace we want with higher ARPU (average revenue per unit), more loyal and, frankly, more application-rich and open customers in the future. So I think it's going to be a fantastic time.

"I have spoken with the NASCAR family, the Frances (and) all the folks associated with this. They're very excited about it. They see it as a great opportunity, not only for a great sponsorship relationship, but also continuing to build this sport. And I think they are just as excited, in fact, I know they are as we are about this opportunity." transcript from FoxSports.com

12/15/04 This rumor is upgraded to 'fact' today. Sprint and Nextel Communications agreed Wednesday to a merger that will create the third largest U.S. wireless company. The stock-cash deal has an estimated value of more than $35 billion, depending on the value of Sprint stock when the deal closes in the second half 2005. Nextel shareholders will receive 1.3 Sprint shares and about 50 cents in cash for each Nextel share. Significant layoffs are expected. Upon completion the merged entity will have more than 35 million wireless subscribers, while Verizon Wireless has 42.1 million customers and Cingular Wireless, the market leader, has 47 million subscribers. The companies, which have yet to announce a formal name for the combination, will spinoff local phone operations, largely seen as cash businesses with little prospect for growth. Each company's boards will hold six seats on the new entity's board, and Sprint chief executive Gary Forsee will take the same job with the merged company. Nextel chief executive Timothy Donahue become chairman of the new company. Executive offices will be in Reston, Va., while operational headquarters will be in Overland Park, Kan., a suburb of Kansas City. The new company will be listed on the New York Stock Exchange. Big News Network 12/12/04 Members of Sprint Corp.'s board of directors are scheduled to gather here beginning Sunday amid reports that the Overland Park, Kan.-based telecommunications company is near a merger with Nextel Communications. The possible merger between the companies — the country's third- and fifth-largest wireless carriers, respectively — raced through financial markets Friday. While neither company would confirm that a deal is in the works, industry observers, consumer advocates and investors took the speculation seriously. How such a merger would affect Nextel's sponsorship of NASCAR's Nextel Cup Series remained unclear late Saturday. "We don't comment on possible mergers or other speculation," said Nextel spokesman Mike Mooney, who works with motorsports media that cover NASCAR. In 2003, Nextel signed a 10-year deal to sponsor NASCAR's top series for reported $700 million. According to a report in the Washington Business Journal, in its first year as the Cup series sponsor, Nextel has already sold 40,000 NASCAR-branded phones, and other Nextel phone sales attributable to the sponsorship were listed in the "hundreds of thousands." Kansas City Star 12/10/04 US mobile telephone groups Sprint and Nextel are engaged in merger talks which could create the third-biggest US mobile operator worth some 30 billion dollars, according to reports. The Financial Times and The Wall Street Journal reported that a tie-up between Sprint and Nextel could create a new group with some 38.5 million customers. We wonder what effect this might have on NASCAR, perhaps a very positive effect.

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