KANSAS CITY, Mo. - Sprint Nextel said Friday it lost $326 million in the third quarter as it continued to hemorrhage customers and announced a change in its credit terms that restricts the payment of dividends.
The nation's third-largest wireless provider said its loss amounted to 11 cents per share for the three months ending Sept. 30. It had earned $64 million, or 2 cents per share, in the same period a year ago.
Excluding one-time items, the Overland Park, Kan.-based company said it would have broken even during the quarter. Thomson Reuters said analysts it surveyed expected a profit of 3 cents per share.
Its revenue fell 12 percent to $8.81 billion from $10.0 billion a year ago. Analysts expected $8.85 billion in revenue for the latest quarter.
The company's wireless business reported a 13 percent decline in revenue to $7.5 billion as it lost a net of 1.3 million subscribers, including 1.1 million valuable "postpaid" customers who have monthly contracts. That was worse than in the second quarter, when Sprint Nextel lost 901,000 subscribers, including 776,000 postpaid customers.
Postpaid churn, or the measure of customers starting and stopping service, was slightly less than 2.15 percent, up from 2 percent in the previous quarter but below the 2.3 percent rate a year ago.
The company said it expected to continue to lose postpaid customers in the fourth quarter and that it expected the churn rate to be similar to the third quarter.
Also Friday, Sprint Nextel said it had changed the terms of its credit agreement, reducing the amount it can borrow to $4.5 billion from $6 billion but increasing the allowed debt ratio to 4.25 times earnings before taxes and other adjustments, up from 3.5 under the previous deal.
The company said it will pay higher interest under the new agreement and cannot pay cash dividends unless certain conditions are met.
It also said it repaid $1 billion of the outstanding loan under the amended credit agreement.
"We believe the market is likely to view this as a positive, as it appears to give Sprint Nextel ample flexibility through the maturity of the agreement in 2010," Stifel Nicolaus analyst Christopher King said in a research note, adding that the company doesn't currently pay dividends to common shareholders.
Sprint Nextel shares rose 25 cents to $3.93 in premarket trading Friday.
The company's wireline business, largely used for high-speed Internet customers, reported a 24 percent decrease in operating income to $120 million while quarterly revenues fell 2 percent to $1.58 billion.
Sprint Nextel, which sits behind AT&T and Verizon Wireless in third place with 50.5 million customers, has been hobbled by a combination of technical problems, marketing issues and difficulties integrating operations.
It fell further behind in the third quarter as AT&T and Verizon Wireless added 2 million and 1.5 million subscribers, respectively — both saying most of the new customers defected from other carriers.
The company last week said it was planning to hold on to its Nextel-branded network, which operates on a separate technology, called iDEN, and has been responsible for a good portion of its subscriber losses. The move was seen as both a repudiation of some analysts' calls for Sprint to sell off the network it purchased in 2005 and proof the faltering economy and tough credit environment made it impossible to sell the network at a reasonable price.
In addition, the Federal Communications Commission gave Sprint Nextel approval to close a deal with Clearwire Corp. to create and jointly operate a high-speed wireless broadband service using WiMax technology.
The service, which Sprint sells under the brand Xohm, is already operating in Baltimore and is expected to open soon in Chicago and Washington, D.C.
The new Clearwire, as the company will be called, is a $14.6 billion venture with investments from firms like Google Inc., Intel Corp. and a group of cable companies.
iPCS Inc., a Sprint affiliate, has filed suit in Illinois state court to stop the deal, saying it would allow Sprint to compete in its territories in violation of an exclusivity agreement.