'Smart Money' Places Its Wireless Bets on Nextel, AT&T Wireless

If you're wondering who's responsible for the stratospheric rise in some battered wireless carrier's stocks, look no further: It's your fund manager.

The wireless industry has taken a beating the past few years as the bubble burst and profits remained elusive, with the carriers no exception. But as a few players have turned the corner on profitability, fund managers have rushed in to place their bets. A quick glance speaks volumes about the smart money's bets on the sector's likely winners and losers.

Within this fiercely competitive sector, some players will be forced to consolidate in the next 12 months. "Consolidation is likely. [And it] will reduce the number of players, hopefully creating a more rational pricing environment benefiting all remaining players," said John Krause, equity research analyst for Thrivent Financial.

According to data through the third quarter, compiled by fund-tracker Morningstar for TheStreet.com, fund managers have dog-piled into Nextel (NXTL) since the summer, helping fuel the stock's 400% gain. Value fund managers, meanwhile, are finding plenty to like in AT&T Wireless (AWE). But by and large, they are getting out and staying out of money-losing Sprint PCS (PCS).

As we reported last week, the nuts and bolts of the wireless industry -- names like Qualcomm (QCOM), Nokia (NOK) and Motorola (MOT) -- have once again returned to favor, posting huge share gains and finding friends among the value-fund set. Today, let's take a closer look at how money managers have played three wireless carriers, and what the company's prospects are for 2003. We've asked RealMoney's Wireless Wiz, Tero Kuittinen, to weigh in on what he sees as the key issue for each carrier.

AT&T Wireless: The Value of a Solid Balance Sheet

Because of its relatively strong balance sheet, AT&T Wireless has become a darling of the value set, with value-minded (AGTHX)American Funds Growth Fund of America snapping up 66.8 million shares in the third quarter. Nearly 20 value funds have at least 1% of their assets in AT&T Wireless, and it shows up in 22% of all large-cap value funds vs. just 12% for large-cap growth funds, according to Morningstar.