Sprint (S) will release its quarterly report on Tuesday, and investors have seen the shares go on a roller-coaster ride over the past several months as speculation swirls around a possible deal to merge with T-Mobile US (TMUS -0.40%). Yet regardless of whether Sprint remains independent or joins forces with T-Mobile, the big challenge facing the company is how to challenge the dominance that AT&T (T -0.67%) and Verizon (VZ -1.10%) have exercised over the wireless industry in the U.S. thus far.

Sprint has reinvented itself over the past year, with the massive capital infusion from Softbank breathing new life into the company after many had begun to write off the No. 3 wireless carrier's prospects for survival. Yet even with Softbank's support, the size advantage that Verizon and AT&T have over Sprint and T-Mobile have led many to conclude that the two smaller companies need to merge in order to have any long-term competitive chance to disrupt their larger rivals. Let's take an early look at what's been happening with Sprint over the past quarter and what we're likely to see in its report.

Source: Sprint.

Stats on Sprint

Analyst EPS Estimate


Year-Ago EPS


Revenue Estimate

$8.97 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: S&P Capital IQ.

Will Sprint earnings grow faster this quarter?
In recent months, analysts haven't changed their views markedly on Sprint earnings, narrowing their loss estimates for the fourth quarter by just a single penny per share. The stock has gained 14% since early November, although it has given up much larger gains in the past month or so.

Sprint's third-quarter earnings report showed the impact that the Softbank transaction has had on the wireless carrier, but it also revealed continuing weakness. Sprint earned a profit for the quarter, although the gain was made possible by a gain related to the merger of Sprint and Clearwire with Softbank. Yet subscriber counts continued to drop, in stark contrast to net additions from AT&T and Verizon.

One key initiative that Sprint has started is its Spark network, a part of its Network Vision concept that it hopes to use to improve its network quality. By using Sprint's available spectrum more effectively, Spark could eventually allow mobile devices to use multiple frequencies simultaneously to increase bandwidth and speed.

But lately, investor attention has squarely focused on a potential deal to buy T-Mobile. By late December, Sprint shares rose above $11 briefly as reports of a possible formal bid started coming out. Such a deal would be compelling, giving the combined entity almost as many subscribers as AT&T and Verizon each have and making Sprint/T-Mobile a much bigger threat. But despite recent reports that Sprint is close to lining up financing for a possible bid, antitrust concerns still linger in the industry, and since the beginning of 2014, shareholders have largely lost their enthusiasm as no actual offer appeared on the table.

Another key component of the battle among U.S. wireless carriers is in pricing, where companies have fired increasingly aggressive salvos at each other. In particular, T-Mobile and AT&T have viciously competed against each other, with high-value bounties to lure customers away from their current networks. Yet even though Sprint and Verizon have largely stayed out of the price war, they might well have to step into the fray sooner than later if AT&T and T-Mobile don't back down soon.

In the Sprint earnings report, watch to see how the company decides to position itself strategically. Even as investors focus on possible M&A activity, it's even more important for Sprint to demonstrate its ability to compete regardless of whether it joins forces with T-Mobile.

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