AT&T Inc. (T), Verizon Communications Inc. (VZ), Sprint Nextel Corporation (S) – Telecom’s Big Three: Room for Growth?

AT&T Inc. (T)The ‘Big Three’ of the wireless carrier world, AT&T Inc. (NYSE:T)Verizon Communications Inc. (NYSE:VZ) and Sprint Nextel Corporation (NYSE:S), have each in turn fallen from the media’s graces this year.

Last month, Verizon Communications Inc. (NYSE:VZ) customers were fuming over the recent revelation that the company was dutifully turning over customer phone records in compliance with government orders. It was also reported that AT&T Inc. (NYSE:T)‘s second-quarter 2013 adjusted earnings per share missed estimates, coming in at $0.67. Analysts believe the company’s performance was hurt by steeper cost of service and sales. Operating income decreased 10.3% year over year to $6.1 billion, while operating expenses increased 4.9% year over year to $25.9 billion.

Even so, the three leaders are each overcoming their struggles, though with vastly different strategies. Most notably, Sprint Nextel Corporation (NYSE:S) is in the middle of trying to recoup from particularly negative press revolving around its ineffective launch of its 4G LTE. As it attempts to maintain momentum, I see both AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) taking a more solid lead in the industry.

Verizon not going anywhere

Let’s first acknowledge that Verizon Communications Inc. (NYSE:VZ) has been a mainstay and will continue to be at the top of its class in terms of influence and market share. Once it began offering Apple Inc. (NASDAQ:AAPL)’s iPhone on its networks, it saw new subscribers jump by more than 2 million in two quarters. By Q1, Verizon had sold a whopping 5.2 million iPhones, more than double that of AT&T Inc. (NYSE:T)’s sales – not to mention AT&T had a paltry gain of only 800,000 new customers. With such a healthy lead, its operating costs are also promising. It’s gross margin is currently at 58.63%, compared with the other top two, AT&T at 54.73% and Sprint Nextel Corporation (NYSE:S) at 43.54%.

Moreover, the news about “project Snowden” didn’t seem to hurt the company’s stock performance. When it was announced, Verizon Communications Inc. (NYSE:VZ)‘s stock price rose 3.46% throughout the week, earning it the title of ‘best-performing stock’ in the Dow Jones Industrial Average for one day.

What about AT&T?

Likewise, AT&T Inc. (NYSE:T) has sported some pretty impressive numbers the first few quarters. It generated nearly $32 billion in revenue, representing a gain of $575 million, or 1.8%, compared to last year. AT&T added 632,000 wireless customers in the reported quarter, totaling 107.9 million. This was primarily due to Apple Inc. (NASDAQ:AAPL) iPhones and Google Inc (NASDAQ:GOOG) Android-based phones, which pushed sales beyond 6.8 million units.

I appreciate AT&T’s movement as well. In late 2011, the company failed to purchase T-Mobile. But rather than rest and lick its wounds, it searched out other ways to acquire spectrum and customers, most recently announcing its intention to acquire Leap Wireless for $1.2 billion. The deal includes the assumption of Leap’s net debt of approximately $2.8 billion and works out to $15 per share. Even with the assumption of debt, the deal doesn’t look too expensive, especially since AT&T will be better able to monetize the additional spectrum than Leap. Still, AT&T Inc. (NYSE:T) has a long way to go to upgrade its network and, in that area, lags far behind Verizon Communications Inc. (NYSE:VZ).

And then there’s Sprint…

Sprint Nextel Corporation (NYSE:S) has had a rough time. Last quarter the company posted a loss of about 29 cents per share. It tried to calm fears by emphasizing that it wasn’t as bad as last year. Even so, Sprint Nextel Corporation (NYSE:S) improved year-over-year revenue by about 7%, totaling $7.2 billion. It also reported an additional million subscribers during last quarter, making its total customer base about 56 million. With such numbers, one would expect slightly better news.