Nov. 7 (Bloomberg) -- Sprint Nextel Corp. fell 8.4 percent in New York trading after posting third-quarter earnings that trailed analysts' estimates, hurt by the deepest subscriber losses since at least 2005.

Excluding some items, the carrier broke even, short of the 3-cent average profit estimate compiled by Bloomberg. Sprint also said today that it renegotiated its credit agreements, helping to avoid the risk of default.

The carrier lost 1.1 million contract subscribers last quarter as people flocked to rivals with more popular handsets, such as AT&T Inc.'s iPhone. Sprint, which has lost more than $1 billion this year, foresees ``continued pressure'' on monthly customers this quarter.

``The quarter was fairly miserable across the board,'' said Christopher King, an analyst at Stifel Nicolaus & Co. in Baltimore. He has a hold rating on the shares, which he doesn't own. ``Bankruptcy is off the table for them, at least for the next couple years, but this is going to be a long turnaround.''

Almost 4 million contract customers have abandoned Sprint, the third-largest U.S. carrier, in the past two years. The company has struggled to integrate the acquisition of Nextel Communications Inc. and failed to placate customers who complained of dropped calls. Sprint has written down the value of the Nextel assets by almost $30 billion.

Plunging Shares

Sprint fell 31 cents to $3.37 at 4 p.m. in New York Stock Exchange composite trading. The shares have declined 74 percent this year.

Sprint said it replaced $6 billion of revolving credit with a $4.5 billion agreement due in 2010. The new terms require Sprint to carry debt of no more than 4.25 times earnings before taxes, depreciation, interest and amortization, compared with 3.5 times before.

The new credit terms allow Sprint to amass more debt relative to earnings, giving the carrier more room to meet its obligations and reducing the threat of bankruptcy, said Jennifer Fritzsche, a Wachovia Securities Inc. analyst in Chicago.

``The covenant is the best news of all,'' said Fritzsche, who rates the shares ``outperform'' and doesn't own them. ``I'm not saying the challenges are not there, but I would characterize this quarter as kind of a baby step.''

Debt Conditions

If Sprint were to exceed its new limits, lenders would have the right to demand immediate repayment. The ratio was 2.2 this quarter, Fritzsche said. Sprint, which had $18.4 billion in net debt at the end of the quarter, also will be required to pay higher interest rates on the loan, and it's prohibited from paying dividends or buying back stock.

The third-quarter net loss was $326 million, or 11 cents a share, compared with a profit of $64 million, or 2 cents, a year earlier, Sprint said. Sales fell 12 percent to $8.82 billion, compared with the $8.86 billion average of estimates compiled by Bloomberg.

Chief Executive Officer Dan Hesse, who replaced Gary Forsee in December, is closing employee cafeterias and turning down heaters to cut costs at Sprint offices. He has tied employee bonuses to customer turnover and increased the number of users' calls that are answered in 30 seconds or less to appease subscribers.

``He's doing the right thing,'' said Richard Dineen, an analyst at HSBC Securities in New York, who has a neutral rating on Sprint and doesn't own the shares. ``He's grasping the nettle, holding his nose and getting right to the source of the trouble, which is customer service.''

Clearwire Deal

Hesse also has agreed to spin off Sprint's WiMax high-speed wireless network in a deal with Clearwire Corp., which will save the company from investing more to build it out.

Sprint aims to win back customers from larger rivals AT&T and Verizon Wireless by offering unlimited monthly plans at lower prices. It's also introducing phones that encourage users to pay for Internet access. AT&T is the exclusive U.S. service provider for the iPhone, while Verizon is the only carrier for another popular handset, Research In Motion Ltd.'s BlackBerry Storm.

Sprint, which ranked the lowest in customer satisfaction in a survey by J.D. Power & Associates Inc. last month, has cut jobs and retail sites to revive profit margins.

J.D. Power, a unit of McGraw-Hill Cos., gave Verizon Wireless the top customer satisfaction rating in five out of six U.S. regions in the survey. T-Mobile, a unit of Deutsche Telekom AG, won the highest rank in Southwestern states.

To contact the reporter on this story: Amy Thomson in New York at athomson6@bloomberg.net

Last Updated: November 7, 2008 16:18 EST