Sprint Posts $344 Million Loss As Users Continue to Jump Ship

Carrier Focuses on Improving Customer Service

Sprint Nextel swung to a loss during the second quarter but still exceeded Wall Street's expectations and said it had slowed the loss of monthly subscribers. But the third-largest wireless carrier said it expected losses to increase in the third quarter.

Sprint lost $344 million (12 cents per share), compared with a $19 million profit (1 cent), during the corresponding period last year. Second-quarter revenue fell 11 percent, to $9.06 billion, falling short of the $9.17 billion analysts expected.

Shares were down 14 percent yesterday, to close at $7.34.

The company, headquartered in Overland Park, Kan., with operations in Reston, saw revenue for its wireless business drop by a 12.5 percent, to $7.7 billion. Sprint said it lost 901,000 subscribers, including 776,000 of its most-valuable customers, who pay monthly bills. While the defection rate is nearly twice as high as those reported by rivals AT&T and Verizon Wireless, it is an improvement from the first quarter, when the company lost 1.1 million subscribers.

"We've clearly made improvements in the second quarter," chief executive Dan Hesse said yesterday on a conference call with analysts. "While I'm pleased with the pace of progress so far, it will take some time to fully resolve our challenges."

Hesse said the company is focusing on retaining existing customers rather than acquiring new ones. Improving customer service has been a high priority, and more marketing dollars are being spent on keeping subscribers. Sprint has continued to tighten its credit standards for new customers to increase the likelihood that they'll pay bills in full and on time.

"We're focusing much more on quality rather than quantity," Hesse said. "We may give up some volume . . . but we believe this trade-off is in the company's best economic interests."

Sprint has been pushing its newest handset, Samsung's Instinct, as a competitor to Apple's new iPhone 3G, released last month. Sprint executives said the iPhone's emphasis on data exchange and mobile Web browsing has helped boost the number of upgrades to more expensive plans and sophisticated phones, with customers signing new, two-year contracts in the process.

But some analysts are skeptical that Sprint's recent efforts will be enough to bring it out of its slump. Walter Piecyk, analyst at Pali Research, said there are "clear signs of improvement" at Sprint, but there remains "no clear answer on how the company can return to growth."

"Meanwhile the industry continues to move forward without Sprint, further diminishing the company's relevance in the market," he wrote in a note to investors.