Sprint Nextel posted a lower quarterly profit Wednesday, but beat Wall Street expectations as the No. 3 U.S. mobile phone service added customers, sending its shares up more than 3 percent.
The company, which has struggled with customer defections in recent quarters, posted net income of $19 million, or 1 cent per share, compared with $370 million, or 10 cents a share, a year earlier.
Excluding one-time items and amortization, Sprint earned 25 cents per share, topping the average analyst forecast by 3 cents, according to Reuters Estimates. Revenue came in slightly below expectations.
Sprint shares rose 3.6 percent to $20.95 in premarket trade after closing on Tuesday at $20.22 on the New York Stock Exchange. The stock has risen almost 16 percent since January as investors hoped for a turnaround.
Sprint said it added 16,000 customers who pay monthly bills, called postpaid subscribers, in the quarter, compared with an average forecast of 28,000 among six analysts contacted by Reuters. Their estimates ranged from a loss of 20,000 subscribers to a gain of 50,000.
The company, which lost postpaid subscribers in the past three quarters due to network problems and other issues, had promised improvements in the second quarter.
UBS analyst John Hodulik said the return to postpaid growth was a good sign and that Sprint's operating margin of 32.7 percent beat his estimate for 31.7 percent.
"Stronger than expected margins in a worsening competitive wireless environment should buoy the stock today after the recent sell-off," Hodulik said in a note to clients.
But Surterre Research analyst Todd Rethemeier was less impressed, saying the subscriber improvement appeared to come from fewer cancellations rather than market share gains.
"The numbers were pretty much in line with my estimates ... They met our pretty low expectations," he said.
Rethemeier said he was concerned that Sprint did not appear to be regaining market share lost to rivals such as AT&T and Verizon Wireless, owned by Verizon Communications and Vodafone Group.
Sprint said postpaid churn, the industry term for customer cancellations, fell to a little more than 2 percent in the second quarter from 2.3 percent in the first quarter.
The company maintained its previous guidance for full-year operating income, before depreciation and amortization, of $11 billion to $11.5 billion on revenue of $41 billion to $42 billion. Analysts' average forecast for revenue was $40.97 billion, according to Reuters Estimates.
Sprint said its second-quarter profit was helped by reduced costs due to job cuts made in the first quarter. In January Sprint announced plans to cut 5,000 jobs this year.
Quarterly revenue rose 1.5 percent to $10.16 billion. Analysts on average had expected $10.19 billion.