Sprint Nextel's Revenue Falls

The company exceeds Wall Street's adjusted bottom-line estimates for the first quarter.
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Sprint Nextel

(S) - Get Report

beat Wall Street's bottom-line estimates for the first quarter Monday, although the company missed revenue targets due to its struggling wireless business.

The Overland Park, Kan., communications provider posted a first-quarter loss of $505 million, or 18 cents a share, more than doubling the loss of $211 million, or 7 cents a share, in the year-ago quarter.

Excluding charges related to merger activities and severance costs, Sprint earned 4 cents a share during the quarter, topping the consensus estimate of 2 cents.

However, Sprint said net operating revenue declined 8% from a year ago to $9.33 billion. Analysts forecast revenue of $9.41 billion, according to Thomson Reuters.

Sprint's wireless division saw revenue decline 9% from the same period a year ago to $7.96 billion, as the unit continued to see subscriber losses. Sprint said its total count of wireless customers shrank to 52.8 million from 53.6 million at the end of the same quarter a year ago.

"As expected, our wireless business delivered weak financial results," said CEO Dan Hesse, in a press release. "While the business will continue to face challenges in the short term, we are making progress in methodically attacking the sources of our performance issues."

Among its Boost mobile customers, the churn rate, or the rate at which customers left the service, ballooned to 9.9% from 7.5% in the fourth quarter. The increase in churn occurred within traditional prepaid users, which Sprint attributed to the elimination of some of its retention efforts and more aggressive prepaid marketing by national carriers.

The churn rate of more traditional post-paid subscribers was 2.45%, well above that of rivals

AT&T

(T) - Get Report

and

Verizon

(VZ) - Get Report

On the positive side, wireline revenue rose 2% from a year ago to $1.63 billion. Sprint said the growth was driven by IP services, which increased 44% annually and 9% sequentially.

Looking ahead, Sprint Nextel predicted continued downward pressure on post-paid gross additions over the next few quarters. "We expect these financial metrics will begin to stabilize towards the end of this fiscal year. In the second quarter of 2008, we expect to report an improved post-paid customer churn rate and net post-paid subscriber losses to improve marginally from the first quarter," the company said.

Sprint offered few comments on a torrent of news items that boosted its stock price over the last week. Leading up to the first-quarter results, Sprint's management had to contend with rumors that rival

Deutsche Telekom

(DT) - Get Report

was considering a bid

to acquire the company.

At the same time,

rumors surfaced that Sprint was mulling the sale or spinoff

of its Nextel unit. Were that to happen, it would mean the dramatic failure of the $35 billion Nextel deal, which the company completed less than three years ago.

Then on Wednesday, Sprint and

Clearwire

(CLWR)

announced they have finally reached a $14.5 billion deal that will combine their respective WiMax wireless broadband businesses.