UPDATE 5-Sprint loss narrows though customers go, shares up

* Q4 shr loss before items $0.01 vs Street view $0.03 loss

* Q4 rev $8.4 bln vs Street view $8.5 bln

* Q4 postpaid sub losses 1.1 mln, in line with Street view

* Sees subscriber loss improvements in 2009

* Shares up 19 pct after climbing as much as 28 pct (Adds Fitch downgrade, share price, debt price update)

By Sinead Carew

NEW YORK, Feb 19 (Reuters) - Sprint Nextel Corp (S.N) posted a fourth-quarter loss as 1.3 million subscribers left its mobile phone service, but the results were not as bad as some had feared and its shares rose 19 percent.

The No. 3 U.S. mobile company, whose share price has plunged 70 percent in the past year as it has struggled with customer defections, said on Thursday it expected subscriber losses to narrow in 2009.

Analysts expect Sprint to benefit from selling Palm Inc's (PALM.O) forthcoming Pre phone, expected to be a strong competitor to Apple Inc's popular iPhone.

Sprint will be the exclusive U.S. operator for the phone at least through the end of 2009, a person familiar with the matter said. Sprint has not announced how long exclusivity will last.

But while analysts said Sprint appears to be improving and has enough cash to pay back its debts, they worry that a recovery will be tough in a recession with consumers reluctant to spend and in a wireless market where growth is slowing.

"Unfortunately for Sprint, the water is getting drained from the pool just as they are learning to swim again," said Bernstein analyst Craig Moffett in a research note.

Sprint said its net loss narrowed to $1.6 billion, or 57 cents per share, from $29.3 billion, or $10.31 per share, a year earlier, when it recorded a big writedown.

Before items such as asset impairment charges, its loss per share was 1 cent, smaller than the analysts' average forecast for a loss of 3 cents, according to Reuters Estimates.

REVENUE FELL

Revenue fell 14 percent to $8.4 billion, below Wall Street expectations of $8.5 billion. Rating agency Fitch cut its credit rating for Sprint further into junk territory, citing the revenue fall and Sprint's limited visibility.