Sprint Nextel posted a smaller-than-expected quarterly loss but its full year forecast showed the costs of selling Apple Inc.'s iPhone could hurt the results for the rest of the year.

The No. 3 U.S. mobile operator , which started selling iPhone this month, forecast 2011 free cash flow in a range of a loss of $200 million to a gain of $100 million. It had previously promised positive free cash flow for this year.

Free cash flow generally refers to earnings before interest, taxes, depreciation and amortization, but includes capital expenditures.

The company was sharply criticized for not disclosing the cost of selling the iPhone at its Oct 7. analyst day.

Sprint still expects to report net subscriber growth for 2011 and to improve its total customer numbers from 2010, including prepaid customers.

The phone company, which has been struggling for years to stem subscriber losses, lost 44,000 customers in the quarter compared with the average expectation for a loss of about 11,000 from nine analysts contacted by Reuters.

Sprint's quarterly loss decreased to $301 million, or 10 cents per share, compared with Wall Street expectations for a loss of 22 cents per share, according to Thomson Reuters I/B/E/S.

A year earlier, it posted a loss of $911 million, or 30 cents per share.

Net operating revenue rose to $8.33 billion from $8.15 billion in the year ago quarter but was slightly below Wall Street expectations for $8.379 billion.

(Reporting by Sinead Carew; editing by Derek Caney)