Sprint’s attempts to reposition itself in the wireless market and improve customer care hadn’t yet born any fruit in the third quarter, as the company shed another 60,000 subscribers, mainly from its Nextel iDEN network. But Sprint stayed in the black for the quarter, offsetting wireless losses with improved performance in the wireline business and scaling down its capital spending, including reducing its WiMAX investment.

The responsibility of delivering Sprint’s less-than-stellar results fell to Chief Financial Officer Paul Saleh, who took over as acting CEO after Gary Forsee resigned under mounting pressure over Sprint’s poor financial and operational performance. Saleh led off Sprint’s earning’s call by assuring analysts that the search for his replacement was well under way.

“I can only say the board is active in its process to select the most capable and qualified individual,” Saleh said. “Of course, I cannot provide any details on candidates, timing or selection criteria, but the board is looking to fill the roles as quickly as possible.”

But Sprint is not waiting for a new CEO to fix its customer retention problems, Saleh said. In the last quarter, Sprint added more customer service representatives, simplified its supply chain and new customer provisioning, improved its Web site to better support online customer care and account management and ramped up its “Sprint Speed” advertising and branding.

The focus, Saleh said, is on retaining existing customers and reducing its dismal post-paid churn rate of 2.3%. While the results from those initiatives were apparent in CDMA customer gains in the third quarter, Nextel losses drove total post-paid customer losses to 337,000. Saleh said that Sprint has been selling the Nextel services less aggressively during its rebanding in the 800 MHz frequencies, which is now almost complete. Higher credit requirements coupled with deactivations of existing customers have led to a huge shift in Sprint’s customer base from the iDEN to the CDMA platform. iDEN customers accounted for 44% of Sprint’s subscribers in the third quarter of 2006; at the end of the last quarter, iDEN customers had fallen to 35% of overall subscribers. As rebanding is completed and iDEN call quality has improved, Saleh said, Sprint expects that trend to reverse, but the impact will continue to effect Sprint’s net adds in the fourth quarter.

“The most pressing care issues are now behind us,” Saleh said. “Having said that, there is still more work to do to further improve the customer service and the end-to-end customer experience.”

The wireless market in the U.S. is quickly maturing, with more than 80% penetration, the stage at which, in most countries, net growth in wireless subscribers begins to drastically slow. Much of future competition for customers won’t be in new subscriber gains, but rather in luring existing customers away from other operators. Verizon Wireless and AT&T have been adept at doing just that. AT&T Mobility added 2 million net subs last quarter, stealing many customers away from other service providers thanks to the iPhone. Meanwhile VZW added 1.6 million in the same period.

Sprint has been facing pressure to both continue growth in its traditional cellular business as well as focus on profitability. While its third-quarter revenue fell only 4% year-over-year to $10 billion, its net income plummeted 77%, from $279 million to $64 million. Its post-paid average revenue per user (ARPU) fell 2% year-over-year to $59 a month, but its data post-paid data ARPU breached the $10 a month mark, bringing it even with Verizon Wireless and AT&T. Sprint also reported its CDMA subscriber ARPU exceeded $13 a month, making its CDMA network the most used data network in the country.

Sprint cut back on capex in the quarter, spending only $813 million, which went primarily to capacity improvements on the CDMA network as well as upgrading more 3G markets to EV-DO revision A in preparation of its VoIP push-to-talk service next year. The increases in capex due to its upcoming WiMAX rollout failed to materialize. Saleh said Sprint spent only $73 million on the WiMAX rollout in its two launch markets and initial development in future markets, less than it expected to spend. Sprint’s rollout plans are on schedule, he said, but gave no insight into when Sprint would begin its spending push to support its commercial launch of the Xohm personal broadband service in the second quarter.

“We’re running slightly behind in our network equipment purchases,” Saleh said. “We’re still on track to launch in D.C.-Baltimore and Chicago by the end of the year.”

Sprint and partner Clearwire are planning to roll out a WiMAX network covering 100 million people in large and mid-sized cities by the end of next year. Sprint originally forecast it would spend $2.5 billion to $3 billion in 2007 and 2008 on the network, but the partnership with Clearwire could substantially reduce those numbers.

One bright spot for Sprint in the third quarter was its wireline division. Revenue fell slightly year-over year, but its operating profits grew from $86 million to $156 million in the same period, driven by 43% growth in its IP services business. Sprint doubled the amount of cable subscribers to whom it provides VoIP services and now commands 2.6 million IP telephony connections through its cable partners.

But the wireless aspects of its cable venture Pivot didn’t perform so well. Pivot has stopped expanding beyond its initial market launches, due to complexity in provisioning the service to customers, Saleh said. The initial launch of the single-bill, converged services offering between Sprint its five cable partners has resulted in too many problems in setting up initial service as well as too many follow-up calls to customer service afterwards, he said. The company is adding more Pivot-trained customer service reps and streamlining the supply chain and provisioning process, though Saleh did not set a timeline for resuming expansion of the service.