Updated from 11:12 a.m. EST

Despite losing 4.5 million customers last year,

Sprint

(S) - Get Report

managed to post a smaller-than-expected loss in the fourth quarter.

The No. 3 wireless shop had an adjusted net loss of a penny a share in the quarter ended in December. That compares with an 8 cent profit in the year-ago period, but it was better than the 3 cent loss analysts were looking for.

Sales for the quarter were $8.4 billion, down 14% from the $9.8 billion level a year ago, and slightly below the $8.5 billion top line analysts were looking for.

The results were encouraging enough for investors, who pushed the stock up 34 cents, or 12%, to $3.05 in pre-market trading. Shares were recently up 26% to $3.41.

The erosion of Sprint's customer base continued at an eye-popping rate with 1.3 million net subscribers dropping the service last quarter. Sprint now serves 49.3 million customers, down from the 53.8 million it had in 2007. Most of those defections came from Sprint's Nextel division.

"In tough economic times, we're generating substantial cash and reducing costs to ensure we remain financially sound. We already have the cash on hand to be able to meet our debt service requirements at least through the end of 2010," CEO Dan Hesse said in a press release.

For the full year, Sprint posted a profit, excluding one-time items of 9 cents a share, down 90% from the 90 cents in earnings it booked in 2007. And total 2008 sales fell 11% to $35.6 billion from $40.1 billion in 2007. Analysts had been looking for a 7 cent pro forma profit on sales of $36 billion.

Sprint has been losing customers to larger rivals

AT&T

(T) - Get Report

and

Verizon

(VZ) - Get Report

amid a restructuring effort in the wake of the Nextel integration challenges.