NEW YORK ( TheStreet) -- Lost in the initial reaction to MetroPCS ( PCS) and T-Mobile's decision to merge in a long-awaited blockbuster telecoms deal is the fact that struggling industry third player Sprint ( S) remains on track to go from worst to first as a stock performer in the fast-moving sector. In 2011, Sprint shed more ground than any telecom within the S&P 500 Index, losing over 44% in share value, according to Bloomberg data. The wireless carrier's financial condition deteriorated on billions spent to bring on Apple ( AAPL) iPhone subscribers and upgrade its nationwide network to handle an expected surge in smartphone data use. Now, as worst case fears such as bankruptcy recede according to even bearish analyst estimates, the merger of MetroPCS and T-Mobile - long seen as a big negative for Sprint - isn't derailing Overland, Kansas-based Sprint from being the top performer in the telecom sector in 2012. On the heels of Wednesday's merger announcement between MetroPCS and T-Mobile, Sprint shares rallied over 6%, adding to year-to-date gains in excess of 100% in 2012. Sprint remains the top performer in the space beating out 40%-plus 2012 gains posted by MetroPCS and Crown Castle ( CCI), and dramatically outperforming double digit stock gains posted by larger rivals AT&T ( T) and Verizon ( VZ). In response to the blockbuster merger in a complicated cash and stock deal that has MetroPCS taking over larger T-Mobile in a 1 for 2 reverse stock split, Citigroup analysts led by Michael Rollins added Sprint to the bank's "Most preferred List" of stocks, and advocated that investors consider a pair trade where it outperforms MetroPCS through year-end. The trade comes as Sprint finds itself in a competitive battle for its industry third position and loses an obvious takeout candidate in MetroPCS, which some expected could propel it into closer competition with AT&T and Verizon. Citigroup's bullishness on Sprint is predicated on expected improvements in the company's operating margins and its eventual success in building out a viable nationwide network to handle LTE enabled smartphones like the Apple iPhone 5 and the Samsung Galaxy. "
We believe the core investment thesis for Sprint remains centered around the prospects to restructure its network architecture and improve margins," wrote Citigroup's Rollins in a note to clients, assessing the impact on Wednesday's mega-merger. Rollins highlights improving finances and annual operating income growth of over 25% in the next two years as reason to expect Sprint can turn profitable and generate 65 cents in 2014 earnings per share.