UPDATE 1-Fitch cuts Sprint Nextel rating to junk after loss

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NEW YORK, Feb 28 (Reuters) - Fitch Ratings on Thursday cut its rating on Sprint Nextel Corp. (S.N) to junk status and warned it may cut the rating again after the No. 3 U.S. mobile service posted a $29.45 billion quarterly loss.

Fitch cut Sprint's rating by one notch to "BB-plus," the highest junk rating, from "BBB-minus." The downgrade reflects expectations that Sprint's 2008 results will be significantly worse than expected, Fitch said in a statement.

Earlier on Thursday, Standard & Poor's warned it may cut Sprint's "BBB-minus" rating to junk status and said a downgrade may be more than one notch.

Sprint forecast that in the current quarter it would lose 1.2 million customers who pay monthly bills, up from 683,000 losses in the fourth quarter.

Subscriber losses, plus the positive momentum of competitors Verizon Wireless and AT&T Wireless, increase the challenges Sprint will face in turning around its operating results, Fitch said.

Sprint has been losing ground to rivals amid network and customer service problems. Analysts had braced for a poor fourth quarter but Sprint's forecast for subscriber losses was worse than expected.

(Reporting by Dena Aubin; Editing by Chizu Nomiyama)