Despite $1.6B loss, Sprint investors like what they see

— -- Sprint Nextel s shares surged 20% Thursday, despite a $1.6 billion loss in the fourth quarter, on investors' hopes that the troubled company is finally on the mend.

The financial results were slightly better than expected. And investors were cheered by Sprint's prediction that subscriber losses would diminish this year.

The USA's third-largest wireless carrier lost 1.4 million customers in the quarter, leaving it with 49.3 million overall. Verizon and AT&T, the No. 1 and No. 2 carriers, have more than 70 million subscribers each.

In the same 2007 period, Sprint reported a loss of $29.3 billion, which included a $29 billion write-down of the value of Nextel. Fourth-quarter revenue declined 14% to $8.43 billion.

"There are signs for hope," said Roger Entner, head of telecom research for Nielsen.

Subscriber "churn" — industry lingo for the number of people who dump service each month — is also on a better track. Sprint's churn is still high — around 2.16% a month — but "at least it didn't increase," Entner noted.

Investors have been hunting for any indication that the carrier had finally turned the corner. Based on Thursday's results, it appears Sprint has finally stabilized, Entner says.

Still, the company is not out of the woods. The deep dive in the U.S. economy has forced stable companies such as AT&T and Verizon to cut prices and get creative to keep adding customers. For Sprint, the downturn could hit even harder, says Maribel Lopez, principal analyst at Lopez Research. "There's still a chance they're going to continue to bleed subscribers," she warns.

Sprint has spent billions trying to lure back customers. As part of that campaign, it's been making improvements to customer service and rolling out new phones.

On the way: the new Palm Pre, a smartphone that could prove to be a worthy rival to the Apple iPhone. Sprint hasn't announced a launch date, but Palm has said the device would be available by midyear. On its website, Sprint is taking contact information for people who want to be alerted when it becomes available.

Sprint is also on track to roll out a smartphone based on Android, the new wireless operating system developed by Google. The Web giant worked with a number of carriers, including Sprint, but retained control over Android's design, engineering and other specifications.

Sprint hasn't said when it expects to bring out an Android-based phone, but Entner says such a device could be available by summer. "That could be a blockbuster" for Sprint, he predicts.

Sprint's shares increased 19.9%, or 54 cents, closing at $3.25.