Sprint Nextel's first-quarter revenue was higher than expected as customers spent more on data services, sending its shares up about 4 percent in trading before the market opened.
The higher revenue and a lower-than-expected net loss particularly impressed analysts, considering that Sprint lost more wireless subscribers than expected in the first quarter as it faced new competition from Verizon Wireless, which launched the Apple Inc iPhone in February.
Revenue rose about 3 percent to $8.3 billion, above the analyst expectation for $8.19 billion, according to Thomson Reuters I/B/E/S.
Its average monthly revenue per subscriber (ARPU) of $56 was well ahead of analyst expectations, according to Pacific Crest analyst Steve Clement who had been expecting ARPU of $55.30.
The postpaid net adds was the one area below expectations. Everything else looked solid, Clement said, referring to high-value postpaid subscribers who pay monthly bills and commit to long-term contracts.
Sprint lost 114,000 subscribers in the quarter, compared with the average estimate for losses approaching 40,000 from seven analysts contacted by Reuters.
In comparison, Verizon Wireless added 906,000 subscribers in the first quarter of 2011 while the No. 2 U.S. mobile service, AT&T Inc, added 62,000 subscribers.
The company said it added 1.1 million customers in the quarter including prepaid customers who pay for calls in advance but do not commit to a long-term contract. Sprint's 846,000 prepaid net additions was its best ever, it said.
Mizuho analyst Michael Nelson said prepaid additions were well ahead of his expectation for 450,000.
These are favorable results, they're encouraging. The company is making steady progress improving its wireless business, Nelson said.
Sprint's net loss narrowed to $439 million, or 15 cents per share, from a loss of $865 million, or 29 cents per share, a year earlier and was much better than analyst expectations for a loss of 22 cents per share.
Sprint has been clawing its way back from years of subscriber losses. In the fourth quarter, it had reported growth for the first time in more than three years.
However, analysts feared that Verizon's new iPhone would represent another roadblock to Sprint's growth due to expected pent-up demand for the Verizon device after years of exclusive iPhone sales by AT&T.
Sprint shares were up 4 percent at $4.98 in electronic trading before the market opened. The stock closed on Wednesday at $4.79.
(Reporting by Sinead Carew; editing by Derek Caney and Matthew Lewis)