Aug. 6 (Bloomberg) -- Sprint Nextel Corp. and Qwest Communications International Inc. posted lower second-quarter sales amid heightened competition for telephone customers.

Sprint, the third-biggest U.S. wireless carrier, today said it had a $344 million loss as sales declined 11 percent. Qwest, No. 3 in the U.S. local-phone market, said profit fell 24 percent and sales slipped 2.3 percent. Both stocks dropped in New York.

The carriers are losing subscribers to Verizon Wireless and AT&T Inc. and looking for ways to revive growth. Denver-based Qwest's home-phone users are scrapping service and switching to mobile phones, and Sprint clients left for competitors amid dropped calls and complaints.

``The challenge for the telcos is that wireless growth is slowing down at the exact same time that the wheels on the wireline business are beginning to fall off,'' said Craig Moffett, an analyst at Sanford C. Bernstein in New York. ``They're between a rock and a hard place.''

Sprint, based in Overland Park, Kansas, fell $1.21, or 14 percent, to $7.34 in New York Stock Exchange composite trading. The decline was the most in seven months. Qwest dropped 14 cents, or 3.9 percent, to $3.45.

Sprint reported a loss of 12 cents a share, its third straight quarterly loss, compared with net income of $19 million, or 1 cent, a year earlier. Sales declined to $9.06 billion, trailing the $9.14 billion average of estimates compiled by Bloomberg.

IPhone Sales

About 776,000 contract subscribers left last quarter and Sprint predicted higher defections in the next three months. The average monthly bill from contract customers fell 9 percent as Chief Executive Officer Dan Hesse cut prices to woo clients back from Verizon and AT&T, which sells Apple Inc.'s iPhone.

Sprint, which has been promoting Samsung Electronics Co.'s Instinct handset to fight the iPhone, also said today it plans to raise $3 billion by selling convertible preferred shares, with part of the proceeds going to pay back debt.

Qwest's net income fell to $188 million, or 11 cents a share, from $246 million, or 13 cents, a year earlier. Sales declined to $3.38 billion, in line with the average estimate in a Bloomberg survey.

Qwest has been unable to make up for the defections among home-phone users with growth in areas such as wireless, said Wachovia Securities Inc. analyst Jennifer Fritzsche. More customers ended service last quarter than she expected, and CEO Edward Mueller said today a rivalry with cable companies also held back Internet sales.

Qwest lost 1.08 million phone lines from a year earlier, an 8.2 percent drop. Fritzsche predicted a decline of 8 percent. Internet subscriptions grew 14 percent to 2.73 million customers, the company said.

The phone industry's growth in high-speed Internet and wireless customers is slowing because the majority of Americans already have both services. Wireless subscriber growth for AT&T, Verizon and Sprint combined was down about 40 percent from a year earlier, Bernstein's Moffett said.

To contact the reporter on this story: Crayton Harrison in Dallas at tharrison5@bloomberg.net; Amy Thomson in New York at athomson6@bloomberg.net

Last Updated: August 6, 2008 16:17 EDT