Credit rating firm Standard & Poor's cut its outlook on Sprint Nextel Corp to negative from stable, saying the wireless carrier's financial health could deteriorate further this year as it loses more subscribers.

Sprint shares fell 4.21 in early trade on Friday after S&P issued a report that affirmed its BB credit rating but said the company appeared to be losing customers to rivals such as AT&T Inc and Verizon Wireless, owned by Verizon Communications Inc and Vodafone Group .

Smaller carriers like Leap Wireless International Inc and MetroPCS Inc are also gaining subscribers, S&P said.

The ratings on Sprint Nextel continue to reflect a weak business profile because of its elevated churn relative to its peers, anemic subscriber trends, and significant competition from other wireless carriers, which is particularly important as the industry continues to show signs of maturation, it said.

Sprint's position as the third-largest U.S. wireless carrier and its strong portfolio of spectrum licenses were mitigating factors, it said.

(Reporting by Ritsuko Ando; Editing by Derek Caney)