By Marina Lopes
(Reuters) - Sprint Corp, the No. 3 U.S. mobile provider on Tuesday reported fewer subscribers leaving than expected and strong tablet additions, as the company undergoes a massive network overhaul in a highly competitive market.
Sprint shares were up 7 percent, as the company cut costs to offset subscriber losses due to a network overhaul and competitor price cuts.
"Network is obviously a crucial foundation for being competitive," Sprint's chief executive, Dan Hesse told analysts in a post-earnings call.
"We are beginning to see churn improvements after a few months but it takes longer to see improvements in gross adds," he said.
The company, 80 percent owned by Japan's SoftBank Corp, said it lost 231,000 net postpaid subscribers in the first quarter, compared with Wall Street estimates of 244,000 losses. Yet excluding 516,000 tablet additions, handset additions were the worst in five years.
"Handsets have a higher lifetime value than tablets, so if they continue to lose handset subscriptions, it will have a higher value impact in the long term," said Felix Wai, an analyst at New Street Research.
The company reported an increase in quarterly revenue in line with analysts' expectations, due to a new billing plan that lowered wireless expenses.
In January, Sprint unveiled a new billing option called the "framily" plan that gives up to 10 family members or friends big service discounts if they sign up as a group, following aggressive discounts by Sprint's smaller rival T-Mobile US that sparked a new wave of competition.
The plan requires each customer to pay for his own cellphone, whether with a one-time payment or on an installment plan, saving Sprint money on phone subsidies.
Sprint has attempted to convince U.S. regulators that consolidation in the industry would allow for greater competition against the two top players, Verizon Communications Inc and AT&T Inc.
The company is eyeing T-mobile as an acquisition target.
"If you really want effective competition you have to level the playing field, you have to get players of same elk. That's the benefit of consolidation, "Joe Euteneuer, Sprint's chief financial officer told Reuters.
Its quarterly adjusted net income loss narrowed to $151 million, or 0.04 cents per share, in the first quarter, from $643 million, or 21 cents per share, in the year-ago quarter.
Revenue rose to $8.88 billion from $8.8 billion, matching the average analyst estimate according to Thomson Reuters
Wireless customer defections, known in the industry as churn, increased slightly from a year ago, as the company continues an overhaul of its 3G and voice network, which is expected to be completed by mid-year.
(Reporting by Marina Lopes; Editing by Sofina Mirza-Reid)