Will Verizon Stay Strong in 2013?

Verizon (NYSE: VZ  ) is coming off a terrific 2012. Sales and free cash flows are running at record highs; the margin damage that followed from introducing the Apple (NASDAQ: AAPL  ) iPhone in 2011 has been repaired; and the stock has crushed its fellow Dow Jones (DJINDICES: ^DJI  ) components lately:

VZ Total Return Price Chart

VZ Total Return Price data by YCharts.

So, what's in store for 2013? Can Big Red stay strong and deliver another year of terrific shareholder returns?

The industry is changing at breakneck speed. Smaller rival T-Mobile USA and MetroPCS (NYSE: TMUS  ) are merging in an attempt to create economies of scale. Troubled third-place network Sprint Nextel (NYSE: S  ) is set to get a new lease on life if Japanese peer Softbank's pending bid for a 70% stake in the company is approved. Sprint could end up with the strongest wireless spectrum assets in the industry if everything works out -- its own bid for Clearwire (UNKNOWN: CLWR.DL  ) depends on regulatory approval and Softbank's cash.

So, the earth is moving under Verizon and AT&T's (NYSE: T  ) feet. Assuming that all of these pending transactions clear their approval hurdles and become reality, the wireless industry will look very different by the end of 2013.

But this isn't Verizon's first rodeo. The company managed the move from wireline to wireless just fine, becoming a nationwide giant in the process. The sea change from simple talk-only handsets to feature phones and now smartphones didn't bring Big Red down, either -- even if the company was left flat-footed without an iPhone at the start of the smartphone era. Verizon simply found a way to stay in the game.

So maybe we're all moving to low-cost data plans without a voice component, or dropping handset subsidies in favor of more honest pricing. Or perhaps these changes will take years to materialize.

Either way, Verizon has the resources and the street smarts to stay relevant in any market environment. I wouldn't bet against Big Red in 2013.

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