Image source: Sprint.

National telecom Sprint (NYSE:S) reported results this morning for the third-quarter of fiscal 2014. The company added subscribers in every product category, as already reported in a preliminary announcement. The final results, though, contained some surprises for analysts and investors -- both good and bad.

Analysts had expected a net loss of $0.24 per share on sales of $8.7 billion. Sprint beat the revenue consensus with a $9 billion sales performance, but fell short on the bottom line with a $0.60 loss per share.

The company also disclosed a pair of large, unexpected items pulling the earnings figure in opposite directions. A one-time tax credit amounted to additional profit of $0.18 per share, but Sprint also recorded a $0.54-per-share impairment charge. That $2.1 billion charge included a $1.9 billion value reduction of the Sprint trade name.

Backing these one-time items out of the earnings equation, you'd land at an adjusted $0.24 net loss per share, right in line with Wall Street's estimate.

Sprint added nearly 1 million net new connections to its services in the quarter, including 30,000 postpaid phone subscribers and 410,000 prepaid customers. These positive subscriber additions are a welcome break from Sprint's long history of losing accounts to the other major carriers. Still, Sprint is playing catch up to all of its major rivals.

In the comparable quarter, AT&T (NYSE:T) added 1.9 million net new subscribers, including 854,000 of the gold-standard postpaid variety. Verizon (NYSE:VZ) gained 2.1 million customers with 672,000 net postpaid wins. And smallest nationwide rival T-Mobile (NASDAQ:TMUS) stole a march on the others, matching Verizon's total subscriber additions in a preliminary report but with a beefy 1.3 million new postpaid subscribers.

Sprint Chairman Masayoshi Son has big ambitions for Sprint, but lots of work to do. Image source: SoftBank.

So Sprint is lagging behind, but progress is progress. "We acknowledge there is a long way to go to reach our goals, including lowering our postpaid churn rates to competitive levels," said Sprint CEO Marcelo Claure in a prepared statement. "I am encouraged by the progress and improving trends in the Sprint business," added Japanese billionaire and Sprint Chairman Masayoshi Son.

Management also liked the improving credit quality of Sprint's customer base. Healthy gross additions continue to be marred by high churn rates, as Sprint's network quality often fails to impress new customers. However, the company is making headway in network performance studies, and should improve further by converting outdated 3G and voice networks to modern 4G LTE systems.

Sprint sat out the recently completed FCC auction of medium-quality AWS-3 spectrum licenses, saving its bidding capital for another auction of more attractive, lower-frequency licenses in 2016. That's the real make-or-break moment for Sprint (and T-Mobile), but in the meantime Claure and Son must work with the assets they already have.

The company has a long way to go, but is at least going somewhere. The improving customer quality is certainly a step in the right direction.

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