Sprint Nextel Corp reported better-than-expected subscriber additions in the fourth quarter, adding customers for the first time in more than three years.

Shares of the No. 3 U.S. mobile service were up 3.9 percent following results that showed it added 58,000 subscribers in the quarter. That was more than three times the 17,000 customer additions that eight analysts contacted by Reuters expected on average.

While the number was tiny compared with growth at bigger rivals Verizon Wireless and AT&T Inc, it marked a milestone for Sprint, which last reported contract customer growth in the second quarter of 2007.

They put up a very good fourth quarter, said Piper Jaffray analyst Christopher Larsen.

Investors also cheered Sprint's forecast for full year 2011 subscriber growth, its first growth year since 2006, but there was some skepticism about whether it could achieve this due to intensifying competition from Verizon and AT&T.

They gave guidance that could be reassuring but, there's a large unknown around the Verizon iPhone launch and AT&T's latest price cut, Larsen said.

Looking to counter its loss of exclusive U.S. rights to the Apple Inc iPhone, AT&T on Wednesday unveiled a service option allowing unlimited phone calls to any mobile phone, an offer option that has helped Sprint win customers.


Analysts expect Sprint to revert to a subscriber loss this quarter, particularly with Verizon now selling the iPhone.

Larsen said rumors about the new iPhone may have helped Sprint's customer cancellations, or churn, in the fourth quarter if a lot of consumers were waiting to go to Verizon.

Churn may have been artificially low, industry wide, in the fourth quarter as people waited, Larsen said.

Sprint Chief Executive Dan Hesse said: there's no question growth will be hurt this quarter by the Verizon iPhone as well as the typical post-holiday season sales dip. But he told Reuters that Sprint would still improve over last year.

If you compare the first quarter versus the first quarter of 2010 and the second quarter to the second quarter of 2010, you'd expect to see continued improvements, he said.

But Hesse cautioned that Sprint still has a lot to do.

I'm not declaring mission accomplished yet, far from it, he said, on a conference call with analysts.

Sprint could potentially add the iPhone to its own device line-up, but Hesse declined to comment on any Apple talks.

We'd be interested in carrying any device our customers are interested in, he told Reuters.

On top of the new iPhone, Sprint also faces tough competition in high-speed wireless services. It was the first U.S. operator to sell phones supporting high-speed wireless services based on the latest technology standards. Verizon plans to launch high-speed phones in coming months.

Sprint's high-speed wireless service depends on the network of Clearwire Corp , in which Sprint is a 54 percent owner. While Sprint and Clearwire have been bickering over the wholesale rates, Hesse told analysts the companies were having good discussions.

He also cautioned analysts away from taking the talks as a sign of any Sprint intentions to invest more money in Clearwire. If they need more it'll be a bridge we cross at that time, he said.

Sprint's loss narrowed to $929 million, or 31 cents a share, from $980 million, or 34 cents a share, a year earlier.

Revenue rose more than 5 percent to $8.3 billion, ahead of analysts' average estimate of $8.15 billion, according the Thomson Reuters I/B/E/S.

In comparison to Sprint's 58,000 net subscriber additions, Verizon Wireless had 872,000 additions in the fourth quarter while AT&T had 400,000.

Sprint said 2011 capital spending would be about $3 billion, up from its previous target for $2.5 billion due to a network modernization project it is kicking off this year.

Verizon Wireless is a venture of Verizon Communications and Vodafone Group Plc .

Sprint shares were up 17 cents at $4.52 on New York Stock Exchange.

(Reporting by Sinead Carew; editing by Lisa Von Ahn, Derek

Caney and Tim Dobbyn)