October 29, 2009 / 11:30 AM / 8 years ago

UPDATE 6-Sprint loss widens, but fewer subscribers flee

* Q3 adj loss $0.19 vs Wall St view $0.15 loss

* Q3 postpaid losses 801,000, fewer than expected

* Q3 rev $8.04 billion vs Wall St view $8.09 bln

* Shares down 5 percent in afternoon trade (Updates share price move, adds analyst comment)

By Paul Thomasch and Sinead Carew

NEW YORK, Oct 29 (Reuters) - Sprint Nextel Corp (S.N) reported a wider quarterly loss and a revenue decline on Thursday, and raised concerns that future results would be hurt by its costly efforts to slow subscriber losses.

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.

Shares of Sprint, the No. 3 U.S. mobile service, fell 5 percent after the report, which showed a loss of 801,000 postpaid subscribers.

While significant, the subscriber loss figure was not as bad as many analysts had feared. It also marked an improvement from declines of 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.”

The results are a far cry from the numbers put out by AT&T and Verizon Wireless, a venture of Verizon Communications Inc (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.

But 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 trouble is that Hesse is banking on the sale of attractive phones like Palm Inc’s PALM.O Pre and HTC Corp’s (2498.TW) Hero -- but that comes at a cost.

    Carriers often shoulder much of the expense of advanced devices so that they can price them attractively for retail sale, which can draw subscribers but which also increases costs. Sprint’s quarterly equipment subsidies, for instance, rose to $950 million from $700 million a year before.

    “Right now Sprint is having a difficult time balancing subscriber growth with profitability,” said Nelson, who along with other analysts, cut his 2010 earnings before interest, taxes, depreciation and amortization, or EBITDA, estimate for Sprint.

    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 9 percent to $8.04 billion.

    Excluding items, it 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. Analysts had expected revenue of $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.

    “Part but not all of it has been driven by economic factors,” Sprint’s Hesse said in an interview. But he added: “It’s clearly here to stay. I don’t think we’ll ever go back to where prepaid was a year ago.”

    Shares of Sprint were down 17 cents to $3.07 on the New York Stock Exchange late in the session, after dropping as low as $2.97. (Reporting by Paul Thomasch; Editing by Gerald E. McCormick and Derek Caney)

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