U.S. Cellular exiting Midwest market, selling to Sprint/Nextel
U.S. Cellular announced this morning that it would be selling its Chicago, St. Louis and central Illinois markets, among others, to subsidiaries of Sprint Nextel Corp. for $480 million. The Chicago-based company reiterated its commitment to Chicago, and to continuing its relationship with the Chicago White Sox. However, without significant retail operations in the Midwest, the efficacy of retaining its naming rights to the home of the White Sox is questionable.
U.S. Cellular signed an agreement in 2003 to rename the new Comiskey Park "U.S. Cellular Field" for $68 million over 20 years. The agreement pays the White Sox $3.4 million per season for the stadium's name, and also includes a commitment to purchase substantial advertising with the White Sox each season.
According to the Chicago Tribune, U.S. Cellular confirmed its commitment to the White Sox:
"We have a long-term relationship with the White Sox," David Kimbell, chief marketing officer at U.S. Cellular, said Wednesday morning. "Even after this transaction, we're going to have 1,400 associates in Chicago so that relationship (with the White Sox) is not part of that deal and will not be changing."
However, the company intends to close its retail stores in the Chicago-area, as well as closing other operations.
The deal with Sprint still requires regulatory approval and would not be completed until well into the 2013 season.
U.S. Cellular, of course, may be telling the truth and really does intend to keep the naming rights. But having a stadium with a company's name in a location where it does not sell to consumers, in addition to being required to purchase advertising in a location where it does not sell to consumers, is a questionable business practice.
While it is not entirely clear what sort of consumer/business operations U.S. Cellular will continue in the Chicago-area (if any), it would be usual for a deal such as this to include some restrictions on it, given that Sprint is attempting to gain market share in these markets and U.S. Cellular continuing substantial operations would run contrary to that purpose.
Furthermore, it is likely that its naming rights deal with the White Sox contains extensive restrictions on U.S. Cellular's ability to transfer those rights to another company, even in a sale of assets such as this, and it is unlikely the White Sox would have been informed of the deal with Sprint prior to its announcement today. So, despite its protestations to the contrary, U.S. Cellular's commitment to the White Sox should rightly be questioned.