(Reuters) - Sprint Nextel said it would need $7 billion in new financing agreements over the next few years to cover a cash shortfall created by Apple Inc's iPhone and a network upgrade.
"If we want to maintain a cash balance as high as $2 billion minimum at any point in time, we would want to extend the maturities of $4 billion that come due in 2012 and 2013 and raise between $1 billion to $3 billion, primarily from vendor financing," Chief Executive Dan Hesse told Reuters on Wednesday.
The company, whose shares were down 10 percent in Wednesday's trading, also said it is negotiating a new commercial contract with Clearwire Corp. Sprint is Clearwire's majority owner and its biggest customer.
Sprint said that while the iPhone would cost the company $15 billion in the next four years, it would generate $7 billion to $8 billion in projected future value for Sprint over that period.
Sprint said it will pay Apple an iPhone subsidy that is 40 percent higher, or $200 more per device, than the subsidies it pays for other phones.
But the company's executives said it should be worth the extra cost as the device is bringing in new customers.
"IPhone has an expensive contract but is worth every penny," Hesse said.
The No. 3 U.S. mobile operator forecast 2011 free cash flow in a range of a loss of $200 million to a gain of $100 million. It had previously promised positive 2011 free cash flow. Free cash flow generally refers to earnings including capital spending but excluding interest, taxes, depreciation and amortization.
Sprint said it still expects to report net subscriber growth for 2011 but it did not give specific numbers because it was too early to say how many iPhone customers it would add after just two weeks of sales.
The phone company, which has been struggling for years to stem subscriber defections, lost 44,000 customers in the quarter compared with the average expectation for a loss of about 11,000 from nine analysts contacted by Reuters.
Sprint's quarterly loss decreased to $301 million, or 10 cents per share, compared with Wall Street expectations for a loss of 22 cents per share, according to Thomson Reuters I/B/E/S.
A year earlier, it posted a loss of $911 million, or 30 cents per share.
Net operating revenue rose to $8.33 billion from $8.15 billion in the year ago quarter but was slightly below Wall Street expectations for $8.379 billion.
Sprint shares were down 24 cents at $2.46.
(Reporting by Sinead Carew and Yinka Adegoke; editing by Derek Caney)