Sprint's Loss Widens on Severance Costs

By KERRY E. GRACE Sprint Nextel Corp.'s first-quarter loss widened on a charge related to severance costs as the wireless provider continued to lose subscribers. Chief Executive Dan Hesse has repeatedly said he expects subscriber losses to stabilize, but Wall Street is concerned about any decline when rivals continue to add subscribers. More Sprint in Talks to Outsource NetworkMr. Hesse said Monday that the company had the largest sequential improvement in gross additions in company history, driven by the success of Boost Mobile prepaid plans. However, the company continued to lose subscribers overall. The third-largest provider of U.S. mobile-phone services posted a loss of $594 million, or 21 cents a share, compared with a year-earlier loss of $505 million, or 18 cents a share. The latest results include $327 million in severance costs. The company is shedding 13% of its work force to save about $1.2 billion a year. Revenue decreased 12% to $8.21 billion. Analysts polled by Thomson Reuters had projected a loss of five cents a share on revenue of $8.28 billion. Subscriptions slid 0.4% from the prior quarter, putting the figure at 49.1 million. The number of contract, as opposed to prepaid, customers dropped by 1.3 million, putting the total decline in the past six quarters at more than six million. The segment provides the highest revenue margins. Rivals AT&T Inc. and Verizon Wireless added 1.2 million and 1.3 million customers in during the period, respectively. Sprint has suffered from high turnover rates in recent years, prompting the company to work on improving customer service and to push prepaid plans such as those at Boost Mobile. The rate of turnover for contract customers was 2.25% in the latest quarter, up from 2.16% in the fourth quarter and down from 2.45% a year earlier. The figures were well above those at rivals. Sprint will exclusively offer the Palm Inc. Pre, a touchscreen smart phone a new rival to Apple Inc.'s iPhone. The move should help Sprint keep subscribers who want a high-end phone. Wireless revenue fell 12% and average monthly revenue per user, a key metric for wireless companies, was flat in the contract segment. Wireline revenue dropped 10% on voice and data declines. Capital spending fell 79% from a year earlier to $291 million. The company again said subscriber losses would improve this year and said it still expects capital spending this year to be consistent with last year's levels. Write to Kerry E. Grace at kerry.grace@dowjones.com