Sprint Nextel Corp. (S), the No. 3 U.S. wireless service, posted higher quarterly profit and sales Wednesday, but its shares fell because some investors were disappointed by its forecast for 2005 earnings.

The company, formed in August when Sprint Corp. bought Nextel Communications (search) for $35 billion, said earnings rose 32 percent to 41 cents per share, excluding certain charges and assuming it owned Nextel last year.

This compares to average analyst targets earnings of 39 cents a share, according to Reuters Estimates. Revenue rose 8 percent to $11.21 billion.

Sprint Nextel said it expects 2005 earnings before interest, tax, depreciation and amortization of $14 billion, including about $360 million of stock option expenses, below some analyst targets for around $14.5 billion.

Its shares were down 35 cents, or more than 1 percent, at $23.30 on the New York Stock Exchange.

Some analysts said investors were selling the stock as a result of the guidance. But others focused on the stronger than expected third-quarter numbers in spite of concerns about slowing customer growth.

"What they reported this morning beat my expectations, but it's hard to overlook the slowing customer growth," said Surterre Research analyst Todd Rethemeier, who had expected 37 cents a share on revenue of $11 billion.

Sprint's No. 1 rival, Cingular Wireless (search), a venture created by BellSouth Corp. (BLS) and SBC Communications Inc. (SBC), also reported slowing third-quarter customer growth. The No. 2 U.S. mobile service Verizon Wireless, a venture of Verizon Communications (VZ) and Vodafone Group Plc, plans to report Thursday.

Chief financial officer Paul Saleh said in a telephone interview that growth trends should not be judged on one quarter.

"Overall, I believe our results are better than what most people anticipated," Saleh said. "We were able to do well because, across the board, our businesses are doing well."

Its customer additions of about 1.3 million customers were in line with its earlier forecast, but disappointed some investors. Some analysts were pleased with its forecast for 1.4 million new direct customers in the fourth quarter.

Average revenue per user (ARPU) fell to $65 in the third quarter for customers who are billed monthly, from $67 a year ago, assuming it owned Nextel last year, but churn, or customer cancellations, fell to 2.1 percent from 2.2 percent.

Chief Operating Officer Len Lauer said in a call with analysts that ARPU was down due to a service option that helps customers avoid paying high fees if they use more minutes than their agreed limit. This option helped reduce churn rates, but would continue to hurt ARPU into next year, Lauer said.

Sprint Nextel posted net profit of $516 million, or 23 cents a share, for the third quarter, compared with a net loss of $1.9 billion, or $1.32 a share, a year earlier.

It forecast consolidated revenue for the full year of $44 billion, up 8 percent from 2004, assuming it owned Nextel both years. On this basis it expects wireless revenue growth of 12 percent to 13 percent, long-distance wireline telephone revenue down about 6 percent and local telephone revenue up slightly.

The shares, which rose 24 percent in the months before the merger, have fallen about 13 percent since August on investor worries about slowing growth and Sprint's need to resolve disputes with its affiliates while it integrates Nextel.

The Dow Jones Telecommunications Index has fallen 5 percent in the past three months. REUTERS