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(Adds executive quotes, details, share price update)
By Sinead Carew
NEW YORK, May 12 (Reuters) - Sprint Nextel Corp (S.N), the No. 3 U.S. wireless service provider, said on Monday it may seek changes to its credit agreements, raising questions about how long it will take to turn around the business.
The company posted a wider loss as customers defected to larger rivals and it forecast only marginal improvements in the current quarter.
Sprint expects to have enough cash for operations and repayments of maturing debts through the end of 2009, but it said it may enter into discussions with creditors to obtain waivers or amendments on credit facilities.
"This is a nightmare game of whack-a-mole where new problems keep popping up faster than you can address," said Bernstein analyst Craig Moffett. "The fact they're now talking openly about their available liquidity makes it clear this is not a short-term turn around."
The company, which reported net debt of $19.5 billion at the end of the first quarter, said it was continuing with cost reductions and looking at ways of improving the ratio of debt to EBITDA (earnings before interest, tax, depreciation and amortization), and considering getting rid of non-core assets.
Sprint expects to remain in compliance with its covenants over the next few quarters, but in its quarterly filing with U.S. regulators it said it was unable to identify specific sources to meet "liquidity needs over the longer term." Standard & Poor's cut Sprint's credit rating to junk status on May 1.
Analysts on Sprint's quarterly conference call were anxious for a response to reports the company was considering a sale of its customer-losing Nextel business, which it bought in 2005 for $35 billion. Last quarter, Sprint wrote off most the value of the acquisition, which it has struggled to integrate.
Chief Executive Dan Hesse said a separation of the Sprint and Nextel networks would be complex, but added that "nothing is off the table."
He said a turnaround at Sprint, which lost 1 million customers in the first quarter, would take "many quarters." Sprint was working to reduce customer cancellations and return to profit, but it was "still far from where we need to be."
Sprint posted a first quarter net loss of $505 million, or 18 cents a share, compared with a loss of $211 million, or 7 cents a share, a year earlier.
Excluding one-time items and merger-related expenses, it earned 4 cents per share, beating the average analyst forecast for 2 cents a share, according to Reuters Estimates.
Revenue fell 7.9 percent to $9.3 billion. Analysts on average had expected $9.4 billion.
Sprint warned of continued pressure on gross additions of post-paid customers, who pay monthly bills, and post-paid average revenue per user, as well as adjusted operating income before depreciation and amortization in the next few quarters.
The company expects post-paid churn, or customer cancellations, and net post-paid subscriber losses to improve marginally in the current quarter, attributing the improvement to typical seasonal trends and better customer service.
"I see very little to get excited about one way or the other," said Stifel Nicolaus analyst Chris King, adding that, even if Sprint's subscriber trends improve this quarter, "it's still not going to be a pretty number either way."
Sprint, which ended the quarter with 52.8 million subscribers, reported postpaid churn of 2.45 percent compared with 2.3 percent churn in the fourth quarter. First-quarter prepaid churn rose to 9.9 percent from 7.5 percent.
Sprint, which has been rumored as a potential acquisition target for Deutsche Telekom AG (DTEGn.DE), said it would update shareholders in August on its assessment of its business model, its sale and marketing plans and its financial outlook.
Hesse did not intend to fill the roles of Chief Operating Officer and a Chief Marketing Officer as he favored a flatter management structure.
AT&T Inc (T.N) and Verizon Wireless, a venture of Verizon Communications Inc (VZ.N) and Vodafone Group Plc (VOD.L), both reported customer growth in the first quarter and analysts have said these bigger companies took market share from Sprint.
Sprint said wireless service revenue fell 9 percent year over year and 6 percent sequentially.
The company, which last week announced a WiMax venture with Clearwire Corp CLWR.O, has seen its share price fall about 65 percent since its $35 billion purchase of Nextel Communications in 2005. It wrote off most of the value of that deal in the fourth quarter of 2007.
Sprint's biggest affiliate, iPCS Inc IPCS.O, said on Monday it was suing Sprint over the Clearwire deal because it would breach their exclusivity agreement. Sprint shares closed down 1.5 percent at $9.24 on New York Stock Exchange. (Additional reporting by Ritsuko Ando; Editing by Derek Caney and Andre Grenon)