When Sprint Nextel Corp. (S) Chief Executive Dan Hesse expressed commitment to the quality of customer service in the midst of a massive layoff on Monday, he words didn't ring hollow.

That's a far cry from years past, when the Overland Park, Kan., company was saddled with a reputation for treating its customerspoorly. "Quality" wasn't typically associated with Sprint.

But the No. 3 U.S. wireless carrier in terms of subscribers has improved its service over the last several months, a crucial bit of progress as it looks to reverse subscriber losses. It will be even more important as the company looks to introduce service offerings such as the $50 flat-rate Boost Mobile plan. While job cuts help the bottom line, they won't generate sales. As a result, Sprint will have to continue to cut costs, but be mindful of keeping up customer service.

"They're not going to cut into customer service," said Walter Piecyk, an analyst at Pali Capital. Instead, he sees an opportunity for additional improvements.

Even with improved customer care, Sprint faces a challenging environment in which the market for new subscribers is shrinking. Given the pressure, the company needs to slash costs as its revenue base deflates.

Sprint plans to cut 8,000 jobs, or roughly 14% of its work force, but it is believed that cuts in the customer service area will be minimal. Maintaining the perceived improvements in customer service is crucial, observers say, because the company's unfriendly reputation is one of the reasons customers regularly cite for leaving the carrier. Analysts expect the carrier to have lost as many as 1.3 million subscribers in the fourth quarter, with further losses early this year.

Sprint shares were up 1.2%, or 3 cents, to $2.49 in recent trading. The stock has lost nearly three quarters of its value over the last six months.

 
   Progress Made

Sprint has made a concerted effort to improve customer service since Hesse joined the company at the end of 2007.

The volume of complaints and length of calls are dropping, allowing existing service representatives to be more efficient. According to an internal Sprint report, average call times for resolving problems fell by 11% after a change in the billing system in the middle of last year.

Sprint's "Ready Now" program, where customers receive training about their phone at the store, and the "Simply Everything" plan has resulted in less confusion over the plans and devices.

The progress has allowed the company to close outsourced call centers without overburdening the call representatives, analysts said.

The work is starting to gain attention. In October, Sprint was named the top performer in customer-care response by Pali Capital, a surprising jump in the standings. J.D. Power named Sprint a top performer in call quality in one geographic region.

The company is looking to keep the momentum going.

"We are committed to ensuring that the high level of customer care we've achieve is not impacted [by the cuts]," said spokesman James Fisher.

 
   Reversing Subscriber Losses

Sprint is likely pinning its hopes on subscriber growth through new programs and rates, Piecyk said. Among them is its Boost Mobile division, which launched a $50 flat-rate plan this month that aggressively goes after the budget-conscious customer. Other new programs are likely coming into place, the analyst said.

Those changes will require customer service representatives to handle additional questions or confusion over the new plans, he said. As a result, Sprint will be reluctant to cut resources in customer care.

The carrier is expected to get aggressive in stopping the bleeding of subscribers and getting back on track toward growth. Piecyk said that instead of providing its employees with incentives to keep customers, the bonuses will be awarded for adding new subscribers.

There are significant challenges. Roughly five million net new contract subscribers are expected to sign up to the big four national carriers - Sprint, AT&T Inc. (T), Verizon Wireless and T-Mobile USA, according to UBS analyst John Hodulik. The figure represents a 38% decline from the 7.9 million added a year ago.

Verizon Wireless is jointly owned by Verizon Communications Inc. (VZ) and Vodafone Group PLC (VOD), while T-Mobile is owned by Deutsche Telekom AG (DT).

Hodulik noted that Sprint has already offered attractive deals, including offering the Instinct, from Samsung Electronics Ltd. (005930.SE), and Research In Motion Ltd.'s (RIMM) Blackberry Curve for $40 each at RadioShack Corp. (RSH).

-By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary. You can use this link on the day this article is published and the following day.