Losses at phone carrier Sprint Nextel grew in the first quarter as the company lost over 1 million contract customers.

The net loss for the quarter was $505 million, or 18 cents per diluted shares, compared with a loss of $211 million, or 7 cents per diluted shares.

Chief executive Dan Hesse said that while the loss was expected, the firm is working methodically overcome short term challenges and regain long-term profitability, better brand promotion, cost cutting and other strategic and organizational changes.

On an adjusted basis, it earned 4 cents per share compared to a gain of 18 cents per share a year ago. Net operating revenues were $9.33 million, coared with $10.1 bilion in the same quarter a year ago. Analysts had expected a profit of 2 cents per share, on revenues of $9.4 billion, according to a poll from Reuters Estimates.

Last week, the company said it will merge its broadband wireless service with that of Clearwire Corp to launch the first U.S. high speed wireless network.

Hesse says the new venture has a time-to-market advantage over competitors in that type of service. Placing the broadband unit in a separate company also allows Sprint Nextel to focus on improving its core business, he said.

The company said its total wireless subscribers fell by 1.09 million. It lost 1.07 million contracts subscribers and 543,000 traditional pre-paid users, partially offset by gains of 343,000 customers through its Boost pre-paid brand and 183,000 wholesale and affiliate customers.

Customer contract turnovers, or churn rose to 2.45 percent, or 2.3 percent during the quarter.

The average return per users was down 6 percent to $56 compared to a year ago. While voice service sales have been pressured, they have been partially offset by the sale of data service.

He also says that the company is putting its highest priority on reducing the contract turnover rate by improving its service.