UPDATE 3-Sprint posts wider quarterly loss on steep costs

By Sinead Carew NEW YORK, July 30 (Reuters) - Sprint Corp, the No. 3U.S. mobile service provider, posted a wider quarterly loss dueto hefty costs from shutting down its older Nextel network andit warned that customer defections would continue to hurt it incoming quarters. Shares in Sprint, which recently sold 78 percent of itsshares to Japan's SoftBank Corp, rose 1 percent onTuesday morning as its revenue was better than expected. But analysts worried whether Sprint can turn aroundsubscriber losses in a bitterly competitive market where itneeds to catch up to stronger rivals Verizon Wireless and AT&T Inc and smaller rival T-Mobile US is offering service price discounts. Moffett Research analyst Craig Moffett is concerned that itmight have to cut service prices in order to return to reportingquarterly net customer additions again. "The risk of a price war is much higher than it has been inthe past," said Moffett, who is worried that service discountsat will lure away Sprint customers. "People are struggling withconcerns about what its going to cost to turn this ship aroundin particular in terms of competition." Sprint has struggled with Nextel customer losses since itbought that company in 2005 and it finally shut down the networkin the second quarter. While it expects savings from theshutdown, it will still be hurt by related customer defections,known in the industry as churn, this quarter. And Sprint, which will use SoftBank investments and spectrumfrom Clearwire to beef up its network, also expects customers tokeep leaving while it works on a network upgrade for the rest ofthis year as its high-speed data service trails rivals'. "Between now and then, those will be the headwinds," SprintChief Executive Dan Hesse told Reuters. Some businesses who used the Nextel service have alsodecided to pull their employees from the Sprint network becauseof the Nextel network shutdown according to Hesse who expectsthe biggest exodus of those customers this quarter. Nomura analyst Michael McCormack said the report was in linewith his expectations but he worried about future quarters. "They will have a hard time balancing return to subscribergrowth against profitability," McCormack said. Sprint lost 1.045 million contract customers in the quarter,more than the average estimate for a loss of almost 972,000 byfour analysts contacted by Reuters. Their estimates ranged froma loss of 885,000 to 1.1 million customers. The company said its Sprint-branded service added 194,000customers in the quarter, but it would have posted a net declineof 170,000 without 364,000 users who moved from the Nextelnetwork to the Sprint service. In comparison, the top U.S. mobile service Verizon Wirelesshad 941,000 subscriber additions and the No. 2 provider AT&Tadded over 550,000 net new subscribers in the second quarter. Sprint's second-quarter loss widened to $1.6 billion, or 53cents per share, from loss of $1.4 billion, or 46 cents pershare, in the year-ago quarter. Excluding unusual items Sprint'sloss would have been 31 cents per share, or a penny worse thanWall Street expectations, according to Thomson Reuters I/B/E/S. Revenue rose to $8.88 billion from $8.84 billion and wasahead of Wall Street estimates closer to $8.7 billion. Sprint said this was driven by average revenue per user(ARPU) on the Sprint network, which increased to $64.20 in thequarter from $63.38 in the year-ago quarter as its customersspent more on wireless data services such as mobile web surfing. "The highlight of the quarter for us was revenue and ARPU,"said Hesse, who expects more ARPU growth in the coming quarters. While Sprint has struggled to compete for years, SoftBankChief Executive and founder Masayoshi Son is betting that he canhelp it to become a much stronger competitor. SoftBank paid $21.6 billion to take control of Sprint onJuly 10 after months of battling with rival bidder Dish NetworkCorp. SoftBank helped Sprint - previously the majorityowner of Clearwire Corp - to take full control of Clearwire soit can use Clearwire's spectrum to boost Sprint's network. After SoftBank's earnings report, also on Tuesday Sonacknowledged that "Sprint's fight is no easy task" because ofstiff competition from Verizon and AT&T. [ID: nL4N0FZ2TD] Sprint said it expects 2013 adjusted operating income beforedepreciation and amortization (OIBDA) between 5.1 billion and$5.3 billion, including non-cash one-time costs related to itsSoftBank deal and its July buyout of Clearwire. But excluding these costs, Sprint said its 2013 target wasfor adjusted OIBDA between $5.5 billion and $5.7 billion, whichis ahead of its previous goal to reach the high end of a $5.2billion to $5.5 billion target range. Sprint set its 2013 capital spending budget at $8 billion. Its shares were up 10 cents or 1.8 percent at $5.85 on the NewYork Stock Exchange after the news.