Sprint Nextel's road to recovery is paved with many potholes.
The company did beat analysts' expectations for the first quarter of 2010, but high-value customers continued to depart, albeit at a slower rate. And its financial losses in the first quarter widened.
Sprint lost 578,000 postpaid customers who are on a contract and pay monthly bills. This beat expectations, as analysts had expected the company to lose about 623,500 customers, according to Reuters. A year ago, Sprint lost 1.25 million postpaid customers.
The company's net customer loss, including prepaid customers, was 75,000. A year ago, Sprint lost 182,000 total customers.
Prepaid customers grew well during the quarter for Sprint. The company added 348,000 prepaid customers and 155,000 wholesale customers.
But overall, the company said it was generating less revenue on each of its subscribers. Due to flat-rate pricing on the postpaid side, Sprint's customers on average spent slightly less on their monthly bills than previously, with the average revenue per user at $55. Prepaid revenue also fell during the quarter.
Sprint reported that it lost $865 million, or 29 cents per share, compared to a loss of $594 million, or 21 cents a share, during the first quarter a year ago. Excluding tax related charges, Sprint's loss was 17 cents a share, which is line with analysts' expectations.
Revenue for the first quarter dipped 2 percent to $8.09 billion, compared with $8.21 billion last year, but it was better than analysts had expected. They had pegged revenue forecasts at $8.05 billion.
The financial losses and the customer losses come as Sprint struggles to compete with AT&T and Verizon Wireless. Sprint has aggressively priced its service plans with flat-rate pricing and it's been offering more compelling devices, such as new Android smartphones. It's also been focusing more on its prepaid businesses. Even though the company is still losing customers and its revenues were down, Sprint has been improving.
What's more, Sprint isn't the only wireless provider that is finding it difficult to add valuable postpaid customers. With wireless market penetration in the U.S. over 90 percent, AT&T and Verizon Wireless also struggled to add new high-value customers in the first quarter.
Sprint reiterated its forecast that subscriber losses would continue to improve in 2010. And it said it would spend $2 billion on its network in 2010.