• by Laurie Sullivan  @lauriesullivan, November 2, 2007

Sprint Nextel Thursday reported third-quarter earnings fell 77% as more customers bailed to subscribe with rivals.

Revenue slid 4.2%, to $10 billion, down from $10.5 billion in the year earlier. The wireless business fell 4%, to $8.7 billion. Long-distance wireless sales dropped 1%, to $1.6 billion. Sprint reported that net income fell to $64 million, or 2 cents per share, down from $279 million, or 9 cents per share, in the year-ago quarter.

Sprint reported that prepaid subscriptions fell by 60,000 subscribers to 54 million, including those signed by affiliates and wholesale customers. The company also lost 337,000 subscribers who sign annual contracts and pay monthly bills. Compare that with AT&T adding 2 million subscribers, and Verizon Wireless 1.6 million.

Compounding Sprint's woes is the search for a CEO to fill the seat vacated in October by Chairman/CEO Gary Forsee, who orchestrated the company's takeover of Nextel in 2005. He also championed the company's move toward the wireless technology WiMax.

CFO Paul Saleh stepped in for the interim as the Reston, Va.-based carrier continues the search. "In the quarter, our Sprint Ahead marketing campaign gained traction, we improved our device portfolio, and we continued to achieve best-ever network performance," Saleh says in a prepared statement.

On the contrary, according to Julien Blin, IDC research analyst, wireless and mobile communications. "The message is clear both in Verizon's 'most reliable network' and in AT&T's 'fewest dropped calls' campaigns," he says. "Sprint's message gets lost in 'Sprint Ahead,' and in its previous ads, 'Power-Up,' because people don't understand what that means."

Sprint's merger with Nextel has been difficult, too. Analysts say the quality of service on the network declined, and the marketing message was lost, leaving Nextel customers feeling underserved and out in the cold.

On a positive note, wholesale channels added 194,000 subscribers in the quarter, bringing the total to nearly 7.2 million About 124,000 subscribers also signed up to its prepaid service program known as Boost Unlimited. Expansion plans for the service are in the works. Today, the service is offered in Texas and California. Twelve states will have the prepaid option soon, along with unlimited Internet surfing and text messaging.

New top-selling phones added include Motorola's MotoRazr2 V9m; LG's Muziq; HTC's Mogul; and Sanyo's HTC, Katana II, and Katana DLX. Between October and December 2007, Sprint will add phones from LG, Motorola, Palm, Sanyo, and Research In Motion. In addition, news agency Reuters reports Sprint, along with Verizon Communications and Vodafone Group, is in talks to put applications from Web search giant Google on its cellular phones.