Updated from 8:04 a.m. EST

Sprint Nextel ( S) fell short of Wall Street's estimates for the third quarter Friday as the company's struggling wireless division remained under pressure.

The Overland Park, Kan., wireless phone shop swung to a third-quarter loss of $326 million, or 11 cents a share, compared with a profit of $64 million, or 2 cents a share, in the year-ago quarter. Excluding items, Sprint's earnings came in at break even, falling short of Wall Street's average estimate for a profit of 3 cents a share.

Sprint said net operating revenue declined 12% from a year ago to $8.82 billion. On average, analysts forecasted revenue of $8.85 billion, according to Thomson Reuters.

After trading 6% higher in the premarket session Sprint shares were lately down 7.1% to $3.42. The stock has now dropped 72% for 2008.

Sprint's struggling wireless division saw revenue decline 13% from the same period a year ago to $7.53 billion, as the unit continued to see subscriber losses. Sprint said its total count of wireless customers shrank to 50.5 million from 54 million in the year-ago quarter and 51.9 million in the second quarter of 2008.

Total wireless customers fell by a net 1.3 million, including losses of 1.1 million post-paid customers and 329,000 prepaid users, which was slightly offset by a 130,000 increase in the number of wholesale and affiliate subscribers, the company said.

The churn rate, or the rate at which customers left the service, of traditional post-paid subscribers shrank to 2.15% from 2.3% in the same quarter a year ago, although that figure rose from 2% in the previous quarter and is still well above that of rivals AT&T ( T) and Verizon ( VZ).

The churn rate of Sprint's Boost mobile customers grew to 8.2% from 7.4% sequentially, as customers fled the iDEN network. Last week, Sprint it does not plan to shed its struggling Nextel unit, which it acquired in 2005 for $35 billion, despite reports it was shopping the the iDEN network to potential buyers.

The average revenue per wireless subscriber was stable at $56 from both the first and second quarters, although that was down from a year ago. The company said ARPU held steady as growth in data substantially offset voice declines. Data revenue contributed approximately $13.50 to overall post-paid ARPU, Sprint said.

Elsewhere, wireline revenue slipped to $1.57 billion, which was slightly lower from a year ago and sequentially. Sprint said the decline in wireline revenue came as legacy voice and data declines exceeded Internet revenue growth.

Looking ahead, Sprint currently expects to report higher post-paid subscriber losses in the fourth quarter. On the bright side, Sprint said that gross additions should stabilize and that the wireless churn rate will be consistent with the third quarter. Sprint said it expects slight downward pressure on post-paid ARPU in the fourth quarter.

Sprint also said that earlier in the month it renegotiated the terms of its revolving credit facility, "providing greater flexibility regarding its financial covenants." Sprint also said it retired about $1 billion in principal of debt.

"The restructuring of the credit agreements is good news, but only marginally so," Craig Moffett, analyst with Sanford Bernstein, wrote in a note. "As feared, the price is a materially higher borrowing cost and a reduced credit line."

Earlier this week, the Federal Communications Commission approved Sprint and Clearwire's ( CLWR) joint venture. During the company's conference call, CEO Dan Hesse said he expects the deal to close in the fourth quarter.