Sprint loss widens, but fewer subscribers flee

By Paul Thomasch and Sinead Carew

NEW YORK (Reuters) - Sprint Nextel Corp (S.N) reported a wider quarterly loss and a revenue decline, but its success in slowing the loss of the most valuable wireless subscribers took some of the sting out of the results.

At the heart of Sprint's struggles is the loss of postpaid monthly-bill-paying subscribers, the most lucrative subscribers in the mobile business. That dwindling subscriber base has put Sprint further behind rivals Verizon Wireless and AT&T Inc (T.N) in the wireless wars.

In the third quarter, Sprint, the No. 3 U.S. mobile service, lost 801,000 postpaid subscribers, a significant number but well below the 870,000 losses analysts had feared.

Helped by the introduction of Palm Inc's (PALM.O) popular Pre smartphone, the subscriber losses slowed from 991,000 in the second quarter and 1.25 million in the first quarter.

"They still have an extremely long way to turn around the business and generate positive post-paid subscriber growth," said Soleil/Nelson Alpha Research analyst Michael Nelson.

"Clearly, a loss of 800,000 a quarter isn't going to cut it, but it does show some sign of improvement and says they are at least heading in the right direction."

Its shares fell 4 percent in early afternoon trading.

Sprint Chief Executive Dan Hesse called the sequential improvement the best in more than five years, and said he expected a smaller postpaid subscriber loss again in the fourth quarter. Hesse expects improving subscriber trends in 2010.

The results are a far cry from the numbers put out by AT&T and Verizon Wireless, a venture of Verizon Communications (VZ.N) and Vodafone Group Plc (VOD.L). Between them, AT&T and Verizon Wireless added more than 3 million subscribers in the third quarter.

Still, the improvement in the postpaid business helped offset depressed quarterly financial results, analysts said.

"Although it generated lower financial results, certainly the highlight of the quarter was the improvement in postpaid customer losses," said Nelson.

Sprint's third-quarter loss widened to $478 million, or 17 cents a share, from $326 million, or 11 cents a share, a year earlier. Revenue fell about 9 percent to $8.04 billion.

Excluding items, Sprint posted a loss of 19 cents a share, according to Thomson Reuters I/B/E/S, compared with analyst estimates of a loss of 15 cents per share. Revenue was forecast at $8.09 billion.

While losing monthly-bill-paying wireless customers, Sprint fared well with prepaid customers, adding some 666,000 of them in the quarter due to Boost Mobile, a service that allows for unlimited calls and texting at a set monthly fee.

Still, investors worry that Sprint could be overly dependent on growth from prepaid, a business that tends to be less profitable and less predictable than postpaid. Some also worry the market will pull back once the economy improves.