NEW YORK ( TheStreet) -- Hidden amid the daily rumblings about Apple's (AAPL - Get Report) share price is a twist to one of the biggest investing stories of 2012: the fourth quarter earnings of Verizon (VZ - Get Report) and AT&T (T - Get Report).
As the telecom giants prepare to report, investors will get a full glimpse of how subsidized iPhone sales impact overall profit margins. While analysts are increasingly seeing reason for subsidies to cause earnings to fall short of expectations, they also argue an earnings miss by Verizon or AT&T could create a long-term buying opportunity.
Understanding the dynamics at the heart of Verizon and AT&T's much anticipated earnings gets to some of the key drivers of telecom sector investments. Apple, as it turns out, is a major factor that often goes underappreciated in the daily speculation on whether the iPhone and iPad maker is overvalued or undervalued.
The key issue for investors to consider is whether they are impressed by the strong overall subscriber and earnings growth posted by the likes of Verizon and AT&T, or whether they're fearful of falling wireless profit margins every time Apple rolls out a new iPhone.Jonathan Schildkraut, an analyst with Evercore Partners says that while subscriber additions at Verizon and AT&T will push overall wireless margins lower for the fourth quarter, it could represent a buying opportunity for investors. Schildkraut highlights that a big surge in subsidized fourth quarter iPhone subscriber additions could clear the air for both carriers in 2013. Currently, Schildkraut expects Verizon and AT&T to sell nearly 10 million smartphones for the quarter, with iPhones accounting for 75% to 80% of handset sales. "Similar to what we are expecting with