NASCAR says it won’t allow Verizon to replace Alltel on Penske Racing car
By Bob Pockrass - Associate Editor
Thursday, June 12, 2008
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When Verizon agreed to purchase Alltel, it’s doubtful that sponsorship of a Sprint Cup car was part of the negotiations leading to the June 5 announcement. But as part of the major telecom deal, Penske Racing might lose sponsor Alltel, which backed an up-and-coming driver named Ryan Newman beginning in 2000 and followed him full time into the Cup series in 2002.
When Nextel bought sponsorship rights to the Cup series in 2003 as part of a $700-million to $750-million, 10-year agreement, it allowed Alltel and Cingular to remain in the sport as long as they didn’t change their branding nor teams. AT&T, which bought Cingular in December 2006, challenged that grandfather clause in federal court and, after mixed results, settled in September 2007 on a deal that allowed AT&T marks on the car through 2008.
“We have not had any discussion vis-à-vis strategically how that [potential sale] will affect the brand at this point,” team owner Roger Penske said June 8. “They have a number of options. It’s way too early for me to speculate what’s going to happen with that sponsorship. … It’s not even fair to ask the question.
“This came out last week. We have no prior knowledge that this is going to take place. We’re waiting to see when the transaction, if it happens, gets executed and what’s going to be the brand strategy.”
Verizon, which hopes to close the $28 billion Alltel deal by the end of the year, pending regulatory approvals, likely will drop the Alltel name as it becomes the nation’s largest wireless company. Its next step is unclear as far as the Penske sponsorship.
“It’s premature to talk about this,” Verizon Vice President of Corporate Communications Jim Gerace said June 6 in a statement. “Our first priority will be to complete the acquisition, which we hope to do by the end of this year.
“When we do, I’m sure we’ll have a good handle on the NASCAR situation. … We do intend to change the Alltel brand to Verizon Wireless, but over what time period, I can’t say.”
That changing of brands, according to NASCAR, will kill the sponsorship of the Penske car, which the team indicated goes beyond 2008.
“When Nextel became the title sponsor, we notified all teams that existing competing sponsorships could stay in the series indefinitely so long as there was no change in branding,” NASCAR spokesman Ramsey Poston said June 5 in a statement. “This is the case with the Alltel brand – it can stay on the car indefinitely, but if it transitions to Verizon or any competing company, then it can no longer run a different sponsor on any car in the [Cup series].”
That sponsorship issue could impact contract negotiations with Newman, whose contract is up at the end of this year.
“Long term, yeah, it’s going to have an influence,” Newman said June 6. “I don’t know what that influence is yet. Obviously, it’s new news to everybody, including most of the people at Alltel. I’ll keep doing what I usually do and see what happens.”
The Alltel sponsorship status might not be determined until late in the season or early next year, depending on when the deal is completed and when Verizon drops the Alltel name. Newman could sign a contract without a committed sponsor, but that is rare for marquee drivers.
“I don’t know,” Newman said, when asked if he would sign without a sponsor commitment. “I have no idea how long things are going to take and what the situation is going to be like.”
Penske said there is no danger of the No. 12 team disappearing.
“We’re a team that can operate with or without a sponsor,” Penske said. “We have done it in the past. We’ve supported a number of multiple cars through our own company, and one of the reasons we’ve had the success is because of the continuity of financial support.”
It could take a lot of time, and part of that likely will be spent with Verizon lawyers poring over court documents from that AT&T-NASCAR case.
During those legal proceedings, NASCAR said between January and May 2005, Nextel, concerned over rumors that Verizon might acquire Alltel, asked NASCAR to formally reaffirm the interpretation of the grandfather clause. NASCAR sent a letter to Penske Racing on April 4, 2005, saying, “[S]hould the company’s name change, we will not allow any paint scheme or branding on the car/team promoting this new name or a third party.”
Following up on that letter, an amendment to the Nextel-NASCAR agreement dated June 16, 2006, prohibits NASCAR from allowing Cingular or Alltel to activate its sponsorship under the brand of a prohibited competitor of Sprint (which had merged with Nextel). Verizon is one of those prohibited competitors.
“We are aware of recent news regarding potential changes in the wireless competitive landscape,” said Tom Murphy, Sprint vice president of sponsorships and media. “We support NASCAR’s stance on this topic, and it remains business as usual for Sprint and our NASCAR sponsorship.”
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