Sprint Nextel's (S) shares appreciated 10.48 percent last week, and 38.25 percent over the last month. See the one-month chart, below:
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And though Sprint shares are now up over 48 percent since the start of the 2012, they are still down 36.1 percent over the last 12 months, which means that the company still has a long way to go until most longer-term investors are back to even. See the one-year chart, below:
Sprint's recent strength and general outperformance compared to the broader market appears largely due to its growing relations with Apple (AAPL), though its lack of European and Emerging Market exposure is probably also responsible for some of that outperformance.
Sprint first received the iPhone at the start of the fourth quarter of 2011, which is also the last time that the company's shares were trading at their present level. Most argued that Sprint would continue to see reductions to its subscriber base so long as it did not offer the popular smartphone, which was then available though AT&T (T) for over four years and through Verizon (VZ) for three quarters.
At first, the news was taken as a major boon for Sprint, but the sentiment soon changed when news swirled regarding the contract Sprint made with Apple, which requires Sprint to purchase $15.5 billion worth of iPhones. This sizable obligation weight down Sprint shares, largely because the company was already saddled with significant debt and the need to continuously upgrade its network.
Nonetheless, Sprint has already reported selling over three million iPhones, with more to report for the already completed second quarter of 2012. Additionally, the company noted a turn-around in its subscriber losses due to those iPhone sales. Further, starting June 29, Sprint began selling the iPhone through the Virgin Mobile USA branded prepaid service.
This marks just the second U.S. pay-as-you-go carrier deal for Apple's iPhone, after Leap Wireless International (LEAP). The move should help Sprint sell more iPhones in the coming quarters. Sprint acquired Virgin Mobile USA in 2009 from billionaire Richard Branson's Virgin Group. Virgin Mobile USA was already running its on Sprint's network, and is one of Sprint's two main pre-paid brands, along with Boost Mobile.
Sprint is also the only of the three main mobile operators to continue to sign unlimited data plans for iPhones, including under Virgin Mobile USA, while both AT&T and Verizon have opted to phase out unlimited data plans. This distinction should appeal to data-heavy users that are not around wi-fi. Since Sprint has only had the iPhone from the start of Q4 of 2011, it has benefited from the addition for a short period of time, but it does appear that Sprint is on track to have sold over six million iPhones by the end of 2012.
Sprint is also finally launching its LTE network in the second half of 2012, which will not only make it more competitive in the smartphone arms race, but will also allow it to service the iPad. Currently, Sprint cannot directly provide a data plan to an iPad, though a smartphone subscriber could use their phone as a hotspot for their iPad.
Additionally, Sprint has a good working relationship with Google (GOOG) and its Android OS, including being early adopters of Google Wallet and allowing for data only plans that integrate Google Voice. Sprint is likely to benefit from the continued adoption of Android, including by offering the newest Galaxy S3 Android option.
Last year, AT&T tried to buy T-Mobile USA, a subsidiary of Deutsche Telekom (DTEGY.PK), for $39 billion. The U.S. Department of Justice filed suit to prevent AT&T from acquiring T-Mobile, voicing concerns that the combination of the second and fourth ranked U.S. mobile service providers might stifle competition and raise consumer prices. Sprint was also a vocal opponent to the deal.
Despite the inability of one major telecom to buy another, major competition may enter the wireless phone and data business in the coming years. Since the development of fiber optic networks, Verizon and AT&T have both offered home-based cable and Internet services that compete with cable companies such as Comcast (CMCSA), Cablevision (CVC), Time Warner Cable (TWC) and DirecTV (DTV).
A common bundled service offered by cable and telephone companies is known as the triple play (phone, cable TV and high-speed internet). There appears to be no real reason why AT&T and Verizon could not bundle a quadruple play by including mobile device service into the already existing package. If this were to occur, cable providers without satellite networks may find it essential to partner up with the independent mobile service providers in order to offer the same suite of services. Sprint would be a logical third-party provider for those cable companies, or a potential acquisition.
Sprint appears poised to continue to benefit from more Apple and Android related strength, and its general lack of exposure to European weakness. Given Sprint's accelerating strength into the end of this second quarter of 2012, it appears likely that Sprint should continue to gain into its Q2 earnings report. Sprint is scheduled to release its Q2 results on July 26, or in about five weeks. AT&T is scheduled to report its Q2 results on July 24, and Verizon is scheduled to report its Q2 results on July 19.
Disclosure: I am long S.