Sprint Nextel Corp posted a fourth-quarter loss as 1.3 million subscribers left its mobile phone service, but the results were not as bad as some had feared, and its shares rose more than 14 percent.

The No. 3 U.S. mobile company, which has struggled with customer defections in the last few years, said on Thursday that its net loss narrowed to $1.6 billion, or 57 cents per share, from $29.3 billion, or $10.31 per share, a year earlier, when it recorded a big charge.

Excluding items such as asset impairment charges, Sprint's loss per share was 1 cent, smaller than the analysts' average forecast for a loss of 3 cents, according to Reuters Estimates.

Revenue fell 14 percent to $8.4 billion, below Wall Street expectations of $8.5 billion.

Stifel Nicolaus analyst Chris King said that while Sprint's revenue was weaker than expected and subscriber numbers were poor, some investors had feared much worse.

It wasn't good, but it probably could have been worse, he said. Operationally they still continue to struggle mightily ... I don't think you necessarily saw any signs of improvement in the fourth quarter.

Sprint shares, which had fallen 70 percent in the past year, rose 14.4 percent to $3.10 in trading before the market opened.

During the quarter, the company lost 1.1 million postpaid customers, who pay monthly bills, in line with the average forecast from four analysts contacted by Reuters.

Including postpaid customers and prepaid customers who pay for calls in advance, it lost 1.3 million customers.

In comparison, Sprint's biggest rival, Verizon Wireless, a venture of Verizon Communications and Vodafone Group Plc , added 1.4 million customers in the quarter, while AT&T Inc, the No. 2 U.S. mobile service, added 2.1 million.

We have yet to turn the corner, and we are far from satisfied with our results, Sprint Chief Executive Dan Hesse said on a conference call.

Sprint said it expected subscriber losses to improve in 2009, but Stifel's King said it would be tough for the company to turn the business around as overall market growth slows.

There's not a whole lot of growth left, he said. For these guys to grow subscribers they're going to have to take subscribers from AT&T and Verizon. That's going to be very challenging.

It's very much a question mark whether Sprint will ever be able to grow subscribers again on a consistent basis, he added.

Sprint said 2009 capital spending would be consistent with 2008 levels, excluding spending on high speed wireless WiMax technology. The company contributed its WiMax assets to a venture with Clearwire last year.

It expects to continue to generate positive free cash flow during 2009, but did not give a specific number. While the company appeared to have enough cash to meet debt payments, some investors worry that it will trip covenants.

They're in decent financial shape, said King. They have enough cash to meet their debt maturities through the end of 2010, but we continue to be worried about them perhaps tripping a debt covenant in 2010 and about their debt maturities in 2011.

(Reporting by Sinead Carew; Editing by Derek Caney and Lisa Von Ahn)

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