Sprint Nextel Corp said it lost fewer valuable contract customers in the second quarter than analysts expected, helped by its most advanced smartphone, the EVO from HTC Corp <2498.TW>.

But while, the No. 3 U.S. mobile provider promised more improvements in customer numbers for the rest of the year, it said growth would be stunted by shortages of the EVO, which is key to Sprint's ability to fight rivals Verizon Wireless and AT&T Inc , which sells Apple Inc's iPhone.

The supply issues on the EVO are a big deal because it could have a significant impact on mitigating the iPhone impact, if it were more plentiful, Chief Executive Dan Hesse told reporters in a conference call.

Sprint shares finished up 0.21 percent, having pared gains of as much as 8 percent in early trading. Sprint shares have risen 16 percent since early July.

Its loss of 228,000 monthly bill-paying subscribers in the quarter was much better than the average expectation for a loss of 355,000 from eight analysts contacted by Reuters, and a loss of 991,000 postpaid customers in the year-ago quarter.

Pacific Crest analyst Steve Clement said Sprint was going in the right direction, but would not be able to improve its results at as fast a pace over the next year due to factors such as an growth slowdown in the maturing U.S. market.

They've made big moves over the last year, said Clement, who doesn't expect Sprint postpaid growth until the end of 2011. Going forward its going to be much more incremental.

Including less valuable prepaid customers who do not commit to a contract, Sprint boasted that total subscribers grew for the first time in three years, with 111,000 net additions.

It also forecast growth in overall subscriber numbers for the remainder of 2010, helped by an expectation of fewer postpaid losses compared with the first half of the year.

But meanwhile, Verizon Wireless, a Verizon Communications Inc and Vodafone Group Plc venture, reported an additional 665,000 postpaid customers alone for the second quarter, while AT&T added 496,000.

PREPAID MISS

Sprint also posted weaker-than-expected net additions of 173,000 prepaid customers, on which the company has depended for growth in the last year. This compared with an expectation for about 400,000 from Stifel Nicolaus analyst Chris King.

Sprint promised better results in the current quarter in prepaid, where it competes with a wider set of rivals including Leap Wireless International Inc and MetroPCS Communications Inc , as well as America Movil unit Tracfonem which rents capacity from Verizon and AT&T.

But King was less than impressed.

I don't see anything to rocket the stock upward, he said. I don't think they're ever going to be in a position to grow postpaid net additions meaningfully.

Sprint's second-quarter net loss widened to $760 million, or 25 cents per share, from a net loss of $384 million, or 13 cents per share, a year earlier. The latest quarter included a charge of 10 cents per share for deferred tax assets.

Revenue fell to $8.025 billion from $8.141 billion and was slightly lower than the average estimate of $8.027 billion from analysts polled by Thomson Reuters I/B/E/S.

Sprint said it expected to end the year with $4 billion in cash. Hesse said this could be enough for him to consider acquisitions, if this made sense for the company.

It really depends what presents itself in 2010, Hesse told CNBC in a television interview on Wednesday. We have, if you will, the dry powder if we so choose to use it.

BTIG analyst Walt Piecyk said a purchase of publicly owned shares of Clearwire Corp could make sense for Sprint.

Sprint, which is depending on Clearwire's network for high-speed mobile services, already owns about 54 percent of the company whose minority owners include some of the biggest U.S. cable providers as well as Google Inc and Intel Corp .

The acquisition that clearly makes most sense for Sprint is Clearwire, said Piecyk who estimated that it could buy Clearwire's publicly traded shares for $10 each in cash. Clearwire stock closed up 0.7 percent or 5 cents to $7.15 on Nasdaq.

On a call with analysts earlier in the day Sprint had declined comment on a questions about future financing for Clearwire. Clearwire is expected to look for more funding in 2011 to continue expanding the mobile network it is building.

Sprint shares closed up one cent to $4.84.

(Reporting by Sinead Carew; editing by Lisa Von Ahn, Maureen Bavdek, Andre Grenon and Carol Bishopric)

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