Sprint Nextel 3Q loss grows on subscriber losses

KANSAS CITY, Mo. - Sprint Nextel Corp., the nation's third-largest wireless carrier, on Thursday reported a wider third-quarter loss and a larger exodus of customers despite an improved slate of phones and cheaper rates.

Sprint, which hasn't reported a quarterly net gain in subscribers in more than two years, continues trying to regain ground in a highly competitive market. Besides investing heavily in improving its customer service efforts, the company has beefed up its portfolio of high-tech smartphones, including Palm Inc.'s Pre, in a bid to better compete with the likes of Apple Inc.'s iPhone, now sold by AT&T Inc.

It also has tried to undercut its competitors on price, offering unlimited mobile-to-mobile calls.

The company said it lost $478 million, or 17 cents per share during the three-month period ending Sept. 30. By comparison, it lost $326 million, or 11 cents per share, during the same period a year ago.

Sprint's latest quarter included $15 million in severance costs, $97 million in equity losses connected to its investment in Clearwire Corp. and $53 million in gains from spectrum exchanges and access charge agreements. The company did not provide an earnings figure excluding items.

Analysts surveyed by Thomson Reuters, who typically exclude one-time items from their estimates, expected a loss of 15 cents per share.

Revenue during the quarter slipped 9 percent to $8.04 billion from $8.8 billion, below the $8.09 billion expected by analysts.

Wireless revenue declined 8 percent as the company shed a net of 545,000 wireless subscribers, including 801,000 so-called postpaid customers who sign annual contracts and tend to spend the most.

It was larger than the 257,000 net subscribers lost in the second quarter, but it was an improvement on the postpaid front as the company lost 991,000 last quarter. Sprint lost 1.3 million total subscribers during the third quarter of 2008.

During a conference call with analysts, CEO Dan Hesse said that Sprint's efforts to beat competitors on price are gaining some traction with new customers, saying the company posted its best quarter in several years for gross additions, or subscriber growth before disconnects.

"We had some successes in the third quarter but we still have much progress to make," he said.

Some analysts weren't impressed, noting that bringing in those new customers, many of whom opted for heavily subsidized smartphones, hurt the company's bottom line.

"Sprint threw everything and the kitchen sink (read 'marketing dollars') at effecting a turnaround" during the third quarter, Craig Moffett of Bernstein Research wrote in a note to clients. "And for all that, they succeeded only in making the rock roll downhill a bit more slowly."

Rick Franklin, an analyst with Edward Jones, was more optimistic, saying the company is presenting a good argument for being a value player in the market and could finally grow its share if Sprint can convince more customers to stick with it.

"However, the company must fix its subscriber loss rates to remain a viable competitor within the industry," said Franklin.

The loss of postpaid customers was somewhat offset by a gain of 666,000 prepaid customers — customers who pay for their service on a month-to-month basis, most of them coming through Sprint's Boost Mobile subsidiary. That was down from the second quarter, when Sprint added 777,000 prepaid customers.

With 48.3 million subscribers, Sprint is the third-largest U.S. wireless provider.

Sprint rival AT&T Inc. already reported adding 2 million subscribers during the quarter and Verizon Wireless added 1.2 million.

Sprint's postpaid wireless churn, or the measure of subscribers dropping service, was 2.17 percent, higher than 2.15 percent a year ago and 2.05 percent in the second quarter. Prepaid churn was 6.65 percent, down from 8.16 percent a year ago but up from 6.38 percent in the second quarter.

Sprint, based in Overland Park, Kan., hasn't provided specific financial guidance for the year, but said it continues to expect total and prepaid subscriber losses will be smaller than in 2008.

In morning trading, Sprint shares added 3 cents to $3.27.

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