In late September, long-term bear Craig Moffett of Bernstein Research said that improving cash flow dynamics has removed the prospect of bankruptcy as Sprint spends billions to revamp its network and try to steal subscriber market share by offering the only unlimited Apple iPhone data plan.

After assigning a 50% likelihood in March that Sprint would end up in bankruptcy as it raced to build a national wireless network -- and citing bond trading prices -- Moffett now says that readily available financing takes that prospect remote. In a best case scenario, the company's unlimited data plans may appeal to data hungry iPhone users and the continued rollout of its upgraded national LTE network will ably handle surging network loads.

Still, Moffett maintains a bearish view on the company, though, questioning whether Sprint's network can handle iPhone 5 data loads or whether profit margins can be maintained. "From here, Sprint will have to show that it really can pull off a turnaround in fundamentals -- that is, can it sustainably gain share and grow?" wrote Moffett in a Sept 27 note to clients. He isn't optimistic.

Citing a continued network disadvantage to competitors AT&T and Verizon and the prospect that profit margins drop sharply in coming quarters, Moffett holds an underperform rating and a $3 price target on Sprint shares. With the launch of the iPhone 5, those issues may come to a head. In reaction to Wednesday's deal, Moffett said on a call with investors that Sprint could be pushed into MetroPCS sweepstakes to maintain its market position, but saw no reason to speculate on a bidding war or remove his underperform rating.

In September, Goldman Sachs analyst Jason Armstrong wrote in a research note that it would make sense for Sprint to combine with MetroPCS or pre-paid cellular competitor Leap Wireless ( LEAP).

For telecom sector investors, Sprint's push from worst to first may now be about whether the company can execute on its Network Vision upgrade and take on smartphone subscribers profitably, over handicapping sector consolidation efforts.

As for Leap Wireless, Rollins of Citigroup sees a far more negative impact from the MetroPCS and T-Mobile merger. "We are reducing our rating on Leap from Buy to Neutral, as we balance the positive spectrum value support from the PCS deal, but also recognize the operating risks on a 3-yr view have increased meaningfully," the analyst wrote.

In Wednesday trading, Sprint shares were up nearly 6% to $5.20, while MetroPCS shares slumped nearly 10% to $12.24. Leap Wireless shares tumbled nearly 18% to $6.23.

For more on the wireless industry, see why AT&T is still hungry for more spectrum and how a tower deal twists industry consolidation.

-- Written by Antoine Gara in New York

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