UPDATE 2-Sprint loss widens on iPhone costs

* Q4 adj shr Loss $0.35 vs street view shr Loss $0.37

* Q4 OIBDA margin 9.5 pct VS analyst view 8.6 pct

* Q4 net subs 161,000 vs analyst view 272,000

* Shares rise 5 pct to $2.57

Feb 8 (Reuters) - Sprint Nextel posted a bigger loss, reflecting the higher costs of selling Apple Inc's iPhone. But the loss was smaller than expected because its signed up fewer subscribers than expected.

Since Sprint subsidizes the cost of some of its phone sales, its costs rise and profit dwindles the more customers it wins. But since subscriptions fell short of expectations, its loss was smaller than expected.

Sprint's loss was 35 cents per share excluding unusual items compared with Wall Street expectations for a loss of 37 cents per share, according to Thomson Reuters I/B/E/S.

Its profit margin based on operating earnings before interest, depreciation and amortization (OIBDA) fell to 9.5 percent from 16 percent a year earlier but beat expectations for 8.6 percent, according to eight analyst estimates Reuters compiled.

"It's still unbelievably depressed and subscribers were below expectations," said Roe Equity Research analyst Kevin Roe who also noted that Sprint's targets for the full year were not particularly impressive.

The margin decline was hurt by the hefty cost of selling the iPhone.

Sprint's rivals Verizon Wireless and AT&T Inc also struggled in the fourth quarter with rising costs.

Sprint added 161,000 total net subscribers in the quarter compared with the average expectation for 272,000 additions from eight analyst estimates compiled by Reuters.

But it sold 1.8 million iPhones in the quarter, 40 percent of which to new customers.

Sprint's loss widened to $1.3 billion, or 43 cents per share, from $929 million, or 31 cents per share, a year earlier.

Revenue rose to $8.72 billion from $8.3 billion and was slightly ahead of Wall Street expectations for $8.69 billion, according to Thomson Reuters I/B/E/S.

Sprint forecast full-year net service revenue growth of 4 percent to 6 percent and forecast 2012 adjusted OIBDA between $3.7 billion and $3.9 billion.