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Sprint Q3: Customer Exodus Continues

Despite the hot Palm Pre and efforts to stem the tide of customer migrations at Sprint Nextel (NYSE: S), the company continues to record mounting losses.

The nation's No. 3 wireless carrier today reported a 9 percent dip in revenue and a steeper third-quarter loss than Wall Street had expected as subscribers continued to jump ship for rivals.

Sprint posted a loss of $478 million, or $0.17 per share, on $8.04 billion in revenue -- down 1 percent from the second quarter. In the same quarter last year, it lost $326 million, or $0.11 per share, on $8.8 billion in revenue.

Minus one-time items, the company saw a loss of $0.19 per share. Sprint had been expected to report a loss of $0.15 per share on $8.09 billion in revenue, according to an analyst poll by Thomson Reuters.

The company said its year-over-year decline came primarily due to lower contribution from post-paid wireless service revenues as well as wireline voice and legacy data revenues, Sprint said. Losses had been partially offset by an increase in prepaid wireless service and equipment revenues, according to the company.

The grim report comes as Sprint is trying to rebound by significantly overhauling its customer service operations and by offering a lineup of new smartphones, namely the Palm Pre, which launched June 6, and its smaller, entry-level sibling, the Pixi, which goes on sale next month.

The carrier is also betting on the Android-powered HTC Hero and Samsung Moment to jumpstart sales in the fourth quarter.

Those efforts are aimed at stemming declining revenue from its most profitable group of users.

During the quarter, Sprint reported that its customer base continues to wane, losing a net of 545,000 wireless subscribers. A large part of that net loss came as a result of losing 801,000 customers with annual contracts -- the demographic that typically generates the most revenue for Sprint.

As a result, Sprint reported exiting the quarter with 43.8 million customers. The nation's third-largest carrier lost a net of 257,000 subscribers in the second quarter, though it then also recorded a wider loss of 991,000 annual contract customers.

The continuing declines stand in sharp contrast to Sprint's larger rivals, who posted huge gains in new subscribers over the past quarter. AT&T added 2 million after a record-breaking quarter of Apple iPhone sales, while Verizon Wireless increased its own customer base by 1.2 million.

The figures mean that Verizon remains in the top spot with a total of 88.9 million customers while AT&T checks in at 81.6 million.

To stem the hemorrhage of its user base, Sprint last month introduced a plan that allows unlimited calls to other mobile phones, as well as unlimited data services, starting at $70 a month.

"Sprint achieved its best net retail subscriber results in more than two years and improvement in both post-paid and prepaid gross subscriber additions in the third quarter," Sprint CEO Dan Hesse said in a statement. "Sprint is beginning to attract more customers with the industry's best device lineup and the clarity and simplicity of our offers and seven sequential quarters of improvement in customer care satisfaction."

Hesse added that operating income had been hit by "costs associated with growth in customer additions, previous quarters' subscriber losses and certain seasonal costs in the quarter," but that the company "continues to manage costs rigorously."

"We expect to see sequential quarterly improvement in both post-paid and total net subscriber losses in the fourth quarter of 2009," he said.