The Associated Press

Mon, May 12, 2008 (5:22 a.m.)

Wireless carrier Sprint Nextel Corp. said Monday it had a larger first-quarter deficit as revenue fell, it lost more than a million subscribers and it absorbed charges for severance and other costs.

Its shares fell almost 4 percent in premarket trading.

Overland Park, Kan.-based Sprint said its loss totaled $505 million, or 18 cents per share, in the three months ended March 31 compared with a loss of $211 million, or 7 per share, during the first quarter of last year.

Not including a number of one-time charges, including $231 million for severance and asset impairment and $86 million in deal-related costs, the company said it earned 4 cents per share, compared to 18 cents per share in the year-ago quarter.

Revenue fell 7.5 percent to $9.3 billion from $10.1 billion a year earlier.

Analysts surveyed by Thomson Financial had expected earnings of 2 cents per share on $9.4 billion in sales.

Its shares fell 37 cents, or 3.9 percent, to $9.01 in premarket trading.

Sprint, which has struggled since buying Nextel Communications Inc. in 2005, said its total subscriber base fell by 1.09 million to 52.8 million, including the loss of 1.07 million post-paid customers who pay a monthly bill.

That was actually smaller than the 1.2 million in post-paid losses the company had forecast last quarter.

Churn, or the measure of customers dropping service, was 2.45 percent during the quarter, an increase from the first quarter of 2007 and last quarter. Average revenue generated per post-paid user fell 6 percent from last year to $56.

"As expected, our wireless business delivered weak financial results," Sprint Chief Executive Officer Dan Hesse said. "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."

During the first quarter, the company introduced a $99.99 plan that provides unlimited voice and data services, undercutting by price its chief rivals AT&T Mobility and Verizon Wireless' similar unlimited plans.

It also has revamped its marketing, which has often been criticized since the purchase of Nextel as being unfocused.

The company said it expected to continue feeling pressure on wireless revenue and would have only "marginal" improvement of post-paid subscriber losses in the second quarter. However, it said it expected its finances to stabilize towards the end of the year.

Sprint also said it was exploring the possible sale of non-core assets and other moves designed to help profitability and ensure the company maintains compliance with its debt covenants. It also said it may ask its lenders for waivers to its credit facilities but said it expected to remain in compliance with those covenants "over the next few financial quarters while exploring and pursuing these measures."

Last week, Sprint and Clearwire Corp. announced they had resurrected their plan to offer high-speed mobile Internet service with the help of some deep-pocketed supporters.

The two companies said they will combine their wireless broadband units to create a $14.55 billion communications company, to be called Clearwire, that will continue developing a mobile network based on WiMax technology.

WiMax is similar to the WiFi service found in coffee shops, airports and many homes but able to cover larger areas and supposedly download at speeds faster than the latest cellular networks for movies, games and other data services.

A similar partnership fell through last November. This time, however, the duo is getting help from a group of outside investors, including Intel Corp., Google Inc., Comcast Corp., Time Warner Cable Inc. and Bright House Networks, who will kick in $3.2 billion for the new company.

Other rumors swirling around the company is whether it plans to spin off or sell its press-to-talk Nextel business and if it is a possible acquisition target by Deutsche Telekom, the owner of wireless rival T-Mobile.