(Credit: Andrew Harrer/Bloomberg/Getty Images)

Sprint Nextel CEO Dan Hesse says losing over 400,000 contract customers was "by design," but that's not because the telecom is thrilled to be rid of its customers.

Sprint reported that it lost a total of 423,000 subscribers in its third quarter as its loss widened to $767 million from a loss of $301 million in the same period a year ago.

The country's third-largest wireless carrier said it lost overall subscribers for the first time in two and a half years as customers are leaving the network of Nextel, which Sprint (NYSE:S) acquired in 2005. The company has failed to sign up enough of those customers to Sprint, AP reported.

"These customer losses have been expected. It's by design," Hesse explained to CNET. "Because of the value of this spectrum we have to move people off it, and re-purpose that spectrum, so it can be used for Network Vision."

Scott Sloat, spokesman for Sprint, explained to ABC News that Hesse was referring to Sprint shutting down a network used by Nextel, called iDEN.

Sloat said the company is in the process of notifying those customers on the network to migrate them before it is turned off, likely by mid-2013.

"While we would obviously love to for all of them to move to the Sprint network, our expectation that we have shared with media and analysts is that we would be able to 'recapture' approximately 30 percent of those leaving," Sloat said. "In fact, during the last two quarters we have recaptured approximately 60 percent of those leaving the Nextel network."

Sprint is competing in the tight telecom industry against giants Verizon and AT&T. Verizon Wireless added 1.8 million overall subscribers while AT&T added 228,000.

Just last week, Japanese firm Softbank Corp. announced it was buying 70 percent of Sprint Nextel for $20.1 billion, the largest foreign acquisition by a Japanese company ever. The deal will help Sprint with its debt and a long-term contract to buy $15.5 billion worth of iPhones from Apple Inc. over four years, AP reported.