BOSTON (TheStreet) -- Apple's (AAPL) iPhone 4 will soon be available on Verizon's (VZ) wireless network after a four-year exclusive agreement with AT&T (T), shaking up the industry close to fourth-quarter results.Verizon Wireless, the joint venture between Verizon and Vodafone ( VOD), revealed the pact earlier this month on the worst-kept secret in the telecom sector: the iPhone 4 will arrive on Verizon's network next month, the first time the iPhone will be compatible with a network other than AT&T's since its launch in 2007.
Craig Moffett, a senior analyst at Sanford C. Bernstein, notes that fourth-quarter earnings results will close the books on the pre-Verizon iPhone era. "That already seems a long, long time ago," he wrote in a research note Monday. "Given how transformational the iPhone is likely to be to market share and growth dynamics, the real question is ... will anyone care what happened in Q4?" Yes, the fourth quarter happened and these telecom companies will be reporting on it. But as Moffett wonders, will it matter what these companies say about the final three months of 2010 if so much of the focus will be on the impact of the iPhone 4 in 2011 and beyond? "It matters to some degree, but I don't think investors are expecting a negative surprise," says Smith. "That's why everyone will be listening very closely to what management has to say about 2011 expectations in terms of earnings and revenue growth and the thoughts on margin trends. That will be the real focus." The battle for subscribers between Verizon and AT&T has nearly cut Sprint Nextel out of the picture. For its part, Sprint Nextel announced a new plan to spend $5 billion to upgrade its network over the next five years. But without a "killer" handset like the iPhone, investors aren't sure what to expect out of the struggling wireless provider. Like Smith, James Dailey, manager of the TEAM Asset Strategy Fund ( TEAMX), turned to the telecom sector as part of his portfolio construction as a way to play the mobile Internet space. But while Smith will be focusing on each company's outlook, Dailey says the most important aspect of earnings season is how the stocks react after reporting. "We think there is tremendous information in trying to identify if the stock is in strong hands or weak hands," says Dailey, whose fund has investments in AT&T and Verizon. "We look for persistent uptrends if the stocks selloff on good news." Unlike Smith, Dailey also cautions investors or potential investors in the telecom stocks about placing too much importance on what management says during conference calls. "There is a tremendous amount of political realities in the job of a CEO or CFO," he says. "They're so constrained by lawyers at this point that they rarely come up with anything useful in that setting. With some limited exceptions to the rule, they're like politicians in that sense. They're never going to tell you anything that bad. They'll always try to spin things in a positive way." On the next few pages, TheStreet previews these telecom stocks and what fund managers are looking for in the fourth-quarter financial results from AT&T, Verizon and Sprint Nextel.