Sprint Nextel Corp's fourth-quarter revenue fell 7 percent and missed Wall Street expectations as the No. 3 U.S. mobile service offered more price discounts to curb subscriber losses.

Sprint, whose shares fell 4 percent in early trading on Wednesday, said it lost 504,000 customers who pay monthly bills. But that was better than the average estimate for a loss of 668,000 from six analysts contacted by Reuters.

Analysts said the improvement came at a price, since Sprint did not have any hit phones to lure consumers -- unlike Verizon Wireless, which has the Motorola Droid, or AT&T Inc with Apple Inc's iPhone.

A lot of the growth is driven by the fact that they're being more aggressive on price. Upfront you're going to have to live with a little pain, Piper Jaffray analyst Christopher Larsen said of Sprint.

Sprint posted a loss of $980 million, or 34 cents per share, compared with a loss of $1.6 billion, or 57 cents per share, in the same quarter the year before. The latest quarter included a noncash tax related charge of $306 million.

Excluding the charge, the loss was 23 cents per share, compared with the average analyst expectation for a loss of 19 cents, according to Thomson Reuters I/B/E/S.

Revenue fell to $7.87 billion from $8.43 billion, and compared with the average forecast for $8.03 billion.

Sprint said it expects to lose fewer subscribers in 2010 than it did in 2009, but would not say when it would see net additions in postpaid customers -- who pay monthly bills and tend to sign up for two-year service contracts -- or revenue growth again.

Executives said Sprint would take more action to cut costs though it did not expect any more job cuts.

Chief Financial officer Robert Brust said Sprint's revenue was hurt by a recently launched pricing promotion, but added that part of the drop was related to seasonal usage trends.

We do not expect further deterioration of this magnitude, Brust said on a conference call.

Sprint's average revenue per user fell a sequential $4 in the fourth quarter, and the company forecast a decline of $2 to $4 in the current quarter.

CEO SAYS CONSOLIDATION GOOD FOR INDUSTRY

Chief Executive Dan Hesse acknowledged that Sprint was having a tougher time competing with its bigger rivals, as well as T-Mobile USA, owned by Deutsche Telekom .

It is getting more competitive, there's no question, from a pricing perspective, Hesse said on a conference call.

The CEO said some consolidation would be good for the industry, and that mergers and acquisitions were absolutely a way to grow if the price was right and the synergies significant.

But he declined to comment specifically on Leap Wireless International Inc , which has hired advisers for a possible sale. While many analysts see MetroPCS

as the most logical buyer of Leap, some have speculated that it could make sense for Sprint to make a bid for Leap.

Sprint forecast full-year capital spending of $2 billion and said it would generate positive free cash flow in 2010.

Its iDen network added 483,500 prepaid customers, who pay for calls in advance but do not commit to a contract, which was below Larsen's expectation for 575,000.

These customers are less valuable than postpaid subscribers, and Sprint has been depending on this segment for growth in the last year.

In total, Sprint said it lost 69,000 retail subscribers in the quarter.

Sprint shares fell to $3.50 in early trade on the New York Stock Exchange.

(Reporting by Sinead Carew and Tiffany Wu; editing by Derek Caney, Maureen Bavdek and Bernard Orr)

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