Sprint Corp. (FON), the fourth-largest U.S. wireless and long-distance phone company, said on Wednesday that second-quarter earnings soared on a 17 percent increase in its mobile phone business.

The company raised its earnings guidance for 2004, saying growing wireless revenue would offset weaker sales of local telephone service and steeper than anticipated declines in its long distance services. Its shares rose nearly 3 percent in early trading.

Sprint said it earned $233 million in the quarter, or 16 cents a share, compared with $7 million in the same period a year ago. Revenues rose 6.3 percent to $6.9 billion

Excluding one-time charges, including the costs of job cuts, Sprint said its earnings rose to $300 million, or 20 cents per share, compared with $238 million, or 17 cents a share, a year earlier.

Analysts on average had expected earnings of 19 cents a share before one-time items, on revenues of $6.7 billion, according to Reuters Estimates.

Sprint's wireless business reported a 56 percent increase in operating income to $407 million, with wireless revenues up 17 percent. Sprint added 505,000 net new customers to its service, at the high end of analyst estimates, along with 392,000 new customers at wholesalers and affiliates such as Virgin Mobile (search).

Wireless revenues were also boosted by increasing downloads of ring tones, games and other data.

The average monthly revenue per wireless user was steady at $62 during the second quarter The percentage of subscribers canceling Sprint service during the quarter decreased to 2.3 percent of the customer base, as Sprint signed more customers to two-year contracts.

"Clearly there's a trend in the quarter of saying 'we're going to make our numbers, but we're going to make it more on wireless and less on long distance,"' said Jeffries & Co. analyst Richard Klugman.

Sprint's long-distance business posted an operating loss of $139 million on a 7 percent drop in revenues. Sprint and other long-distance players such as AT&T Corp. (T) have been hit in recent months by increased competition from the Baby Bells, who have won over millions of residential subscribers and made inroads into business long-distance services.

To hold onto their business clients, AT&T and MCI have launched a long-distance price war, pushing down revenues across the industry. Sprint said it expected a "very high single digit" percentage decrease in long-distance revenues this year, but would maintain its profit margins.

"What we see in the market is not that those declines are picking up pace, but that they are staying at the pace that we have seen over the previous six months," said Howard Janzen, president of Sprint Business Solutions.

Sprint's local phone business reported a 2 percent decrease in operating earnings to $445 million, with a slight decline in revenues to $1.5 billion. While overall lines in use fell, Sprint added 34,000 high-speed data customers.

To maintain profits, Sprint has since November announced about 3,500 job cuts, or about 7 percent of its workforce. The cuts are part of a bid to lower annual costs by $1 billion over three years, a target Sprint said was on track.

Sprint said it was raising its forecast for 2004 earnings per share before one-time items to a range of 74 cents to 78 cents. It had previously forecast earnings before items of 70 cents to 75 cents a share for all of 2004.

Analysts had predicted earnings of 76 cents per share on average, according to Reuters Estimates.

Sprint shares rose 52 cents, or 2.9 percent, at $18.54 in early trading on the New York Stock Exchange.