Sprint Nextel lost more subscribers than expected in the second quarter and warned that the rate of customer defections would increase in the current quarter, sending shares tumbling 17 percent.

The No. 3 U.S. mobile service provider has spent heavily to try to fend off rivals, but investors are increasingly impatient for signs of a turnaround after years of struggle.

Sprint was expected to outline by now its plans to develop a fourth-generation (4G) high-speed wireless network, but said on Friday that would be postponed until October.

Even news of a $9 billion network agreement with Harbinger Capital-backed LightSquared failed to comfort investors, who were skeptical about whether they would ever see the fruits of that partnership.

If Sprint cannot fulfill its promise to return to growth in subscribers, also known as post-paid customers, it cannot turn around its financials, Bernstein analyst Craig Moffett said.

Without post-paid subscriber growth, Sprint has little prospect of generating sustainable revenue growth, nor of generating sustainably rising margins, Moffett said. On those critical dimensions, Sprint's results were a clear disappointment.

Sprint, which lost ground to bigger rivals Verizon Wireless and AT&T Inc in the quarter, saw defections of about 101,000 net subscribers compared with analyst expectations for losses of 15,000.

Sprint's adjusted profit margin of 16.3 percent was below Wall Street expectations that were closer to 19 percent as Sprint spent heavily to maintain market share in the first full quarter when Verizon Wireless sold the Apple Inc iPhone and AT&T Inc sold a discounted iPhone.

This was a unique quarter because of intense competition, Chief Financial Officer Joe Euteneuer explained to analysts on a conference call. We made conscious decision (to spend) so didn't get killed with market share.


Investors had been hoping Sprint would unveil a 4G strategy to fight off AT&T and Verizon. But Chief Executive Dan Hesse told analysts on a conference call that Sprint would not discuss its network plans until an event on Oct 7.

They had promised a mid-year announcement with respect to 4G. If (LightSquared) is their 4G plan, they don't have a plan, said Stifel Nicolaus analyst Christopher King.

Investors are worried the LightSquared deal would come to nothing because it was dependent on LightSquared solving difficult interference problems with key services, such as airline navigation. On top of this, it was not clear if LightSquared would be able to raise money to pay Sprint.

Meanwhile, Sprint's biggest rival Verizon Wireless added 1.3 million subscribers in the second quarter while AT&T, the No 2 U.S. mobile service, added 331,000 subscribers.

Sprint still expects to report subscriber additions for the full year 2011, citing a strong handset line-up. But the company did not give details of any new products.

Its loss widened to $847 million, or 28 cents per share, from $760 million, or 25 cents a share, a year earlier.

Before items such as investment losses, Sprint's quarterly loss per share was 6 cents, better than analyst expectations for 12 cents, according to Thomson Reuters I/B/E/S.

Net operating revenue rose to $8.31 billion from $8.03 billion. Sprint shares were down 46 cents at $4.70 in premarket trading.

Sprint shares were down 88 cents to $4.28 in early trade on New York Stock Exchange.

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