Sprint Nextel Corp. reported a wider loss in the second quarter, but saw its lowest turnover rate ever in terms contract customers as the wireless carrier also confirmed a 15-year agreement with privately held LightSquared Inc. to build and operate a high-speed wireless network.

Sprint is racing to get its business back in shape as it faces a widening gap between it and its larger rivals, Verizon and AT&T. The carrier still isn’t profitable, but added 1.1 million net new customers, largely driven by its prepaid and wholesale businesses.

The company reported second quarter consolidated net operating revenues of $8.3 billion, and operating income of $79 million. Additionally, the company reported a net loss of $847 million (a diluted loss per share of 28 cents for the quarter), which includes $588 million in equity losses of unconsolidated investments, and a $52 million charge to tax expense related to recently enacted state law changes in Michigan.

Sprint also has the option to buy LTE capacity from LightSquared, which could allow Sprint to move beyond its current commitment to Wimax as a fast 4G network service. And the deal allows LightSquared to use Sprint’s existing 3G network to provide roaming data services to LightSquared’s wholesale 4G customers. In an e-mailed statement, LightSquared said it would launch 4G LTE services.

“Only when there is a comprehensive solution in place that satisfies federal agencies and protects millions of consumers who use GPS every day… LightSquared has proactively decided to move the launch of its network to a new slice of spectrum which resolves the GPS interference issue for 99.5% of all commercial GPS devices.”

Per the terms of the LightSquared partnership, Sprint will build and deploy a nationwide 4G LTE network using L-Band spectrum available for LightSquared’s use. In return, LightSquared will pay Sprint as much as $9 billion in cash and $4.5 billion in credits over 11 years, which it can use to buy network capacity for LightSquared on a wholesale basis.

LightSquared faces intense opposition from the GPS industry after a report found that its network interferes with some satellite communications. On a conference call with analysts after the earnings announcement, Sprint CEO Dan Hesse addressed the issue.

“As a provider of GPS services, Sprint wants this issue to be resolved and we will not turn on the network until this issue is resolved,” Hesse said. Sprint has the right to terminate the LightSquared agreement if the GPS interference issues aren’t resolved by the end of the year, company officials said.

Sprint’s struggles highlight the fierce competition in the mobile space. AT&T has proposed a $39 billion dollar merger with T-Mobile, which is currently under review by federal regulators. Sprint reiterated its opposition to the deal, saying it would stifle competition and innovation, and lead to higher costs for consumers.  4G is the big battle amongst carriers, as AT&T and Verizon both do their best to dominate this sector.  Sprint will have to strengthen its network and data capacities in order to survive.