Sprint Nextel Corp. on Wednesday reported its first quarterly revenue increase in three years, as improvements in Sprint-branded and prepaid service offset the continued flight of subscribers from the Nextel network.
But its net loss widened compared with a year ago, when a large tax benefit boosted results. Investors also figured that the subscriber gains came at a high price, and they sent shares down.
Sprint, the country’s third-largest wireless carrier, gained a net 644,000 subscribers in the July-September period, compared with a loss of 545,000 in the same quarter last year. It ended September with 48.8 million.
Its quarterly loss amounted to $911 million, or 30 cents per share. That’s larger than its loss of $478 million, or 17 cents per share, a year earlier.
Though tax effects were the main reason for the larger loss, new subscribers meant Sprint sold more phones at a discount. Typically, a carrier subsidizes each new smart phone by hundreds of dollars, then counts on making the money back in service fees over the run of a two-year contract.
The lower operating margin appeared to spook investors. Shares of the company, based in Overland Park, Kan., fell 49 cents, or 10 percent, to $4.29 in midday trading Wednesday. That erased two months of gains.
Barclays Capital analyst James Ratcliffe said investors were expecting the improvement in subscriber numbers, but margin decline causes doubt about the long-term benefits of upgrading customers to smart phones, even though they come with monthly data fees.
Sanford Bernstein analyst Craig Moffett was even more negative, saying the results amounted to “as a sizable miss.” Sprint’s results are improving late in the game, when almost everyone already has a phone, and bigger rivals AT&T Inc. and Verizon Wireless have tied up most of the smart phone subscribers.
Revenue rose 1 percent to $8.15 billion from $8.04 billion…