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Sprint Nextel continues to bleed customers

As it struggles to regain its footing amid a sales decline and complaints of poor service following a failed merger, wireless-service provider rapidly loses customers to rivals.

Sprint Nextel subscribers continue to jump ship, as the company's sales decline and losses widen.

The company has been struggling for several quarters as customers have complained of poor service, especially from its Nextel division. Sprint bought Nextel for $35 billion in 2005, and the merger has largely been a failure, costing the company billions of dollars to integrate while causing the company to also lose millions of newly dissatisfied customers. Many Nextel customers have complained of poor service and a lack of handset choices.

Investors have been pushing the company to sell assets and focus on its core cell phone business. Recently, the company has been rumored to be in talks to sell its Nextel division. And last week, it announced would spin off its next-generation WiMax network in a joint venture that includes six other companies.

CEO Dan Hesse wouldn't comment on rumors that the company is thinking about dumping Nextel, but he acknowledged that Sprint has considered selling some assets. He said a spin-off of Nextel assets would involve "significant complexities."

The company lost $505 million for the quarter, compared to a loss of $211 million a year earlier. In February, the company announced a whopping $29.5 billion loss for the fourth quarter. This was due to the write-down of most of the assets from the Nextel merger.

Revenue in the first quarter also fell 7.5 percent, to $9.33 billion.

Sprint continued to lose customers in the first quarter, with about 1.1 million "post paid" subscribers, or customers who pay a monthly bill for service, ditching the service. This is compared to 1.07 million post-paid customers who left in the fourth quarter and a loss of 1.2 million customers in all of 2007. Hesse had warned in February that Sprint expected to lose about 1.2 million customers in the first quarter.

Sprint also lost about 543,000 prepaid customers, or customers who pay for service in advance. On the flipside, the company gained 343,000 customers through its youth-oriented brand, Boost. And it gained 183,000 subscribers from carriers that wholesale its network.

In total, Sprint now has 52.8 million subscribers.

The company's churn rate, or the rate at which people cancel its service, increased to 2.45 percent from 2.3 percent last quarter.

Meanwhile, Sprint's competitors have been adding customers. AT&T added 1.3 million wireless subscribers during the first quarter. And Verizon Wireless gained 1.5 million customers.

Despite the disappointing quarter, Hesse tried to remain positive. During the fourth-quarter earnings call, he had said it would take several quarters for Sprint to recover. And while the company is still clearly a long way away from a full recovery, Hesse said he sees "improved profitability in the long term."

The company is taking initiatives to get back on track. It is using its new "Simply Everything" service plan to help retain customers. This plan offers unlimited voice, data, text messaging, and Web surfing for $99.99 a month. Hesse wouldn't divulge specifics, but he said during the call that the plan is selling better than expected and has helped keep some customers.

Hesse is also continuing to cut costs. The company expects to lay off 4,000 workers. It also plans to close some retail stores.