Sprint Nextel has posted its quarterly earnings this morning and as envisaged, it wasn’t pretty. The company has reported a 12% decline in revenue for the opening quarter of the year and a net loss of $594 million ($.21 per share). This marks a further descent from the year-ago quarter which saw a $505 million loss ($.18 per share). Other expenses contributing to their bleak financial results included $327 million in severance and other exit costs associated with its 8,000 layoffs back in January. The slump is mostly attributed to the substantial departure of contract-bearing subscribers.

The phone giant says 182,000 customers have left the carrier in the first quarter this year, which is an improvement upon the 1.3 million that set sail during the closing quarter last year. In addition, Sprint dropped 1.25 million customers signing long-term contracts, a sure product of the pale economy. In comparison, competitor Verizon added 1.3 million new subscribers in the first quarter. Similarly, AT&T, the second largest wireless carrier, added 1.2 million fresh enrollees during the same time.

Prior to any announcements, the spotlight was on Boost Mobile’s prepaid service, and rightfully so. Prepaid and wholesale subscriptions virtually carried the quarter, adding 674,000 prepaid customers. Acknowledging the shift, the company’s chief executive, Daniel R. Hesse said “There’s no question that there is a movement in this country toward prepaid”, and that they were “going to ride that horse”.

Hesse is optimistic about the company’s efforts to regain traction and move forward. The Kansas-based company is undergoing a series of drastic changes to cut costs and trim down. Speculation surrounding the possible outsourcing of its network to Ericsson is anticipated to bring a 20% savings. Investors share a similar outlook, driving Sprint’s stock up almost 13% after the announcement.