Sprint Nextel continued to lose customers in the second quarter, tallying 257,000 in postpaid customer losses, but it gained in the prepaid arena.

Churn in the second quarter was 2.05 percent compared with 2.25 percent in the first quarter and 1.98 percent in the year-ago second quarter. Sprint blamed the year-over-year uptick in churn to primarily deactivations on business lines due to the economy.

The company’s net loss was $384 million, but it generated free cash flow of $676 million in the quarter and $1.5 billion in the first half of 2009. As of June 30, the company had $4.6 billion of cash and cash equivalents and $1.5 billion of borrowing capacity available, for a total liquidity of $6.1 billion.

On Tuesday, Sprint announced it will acquire Virgin Mobile USA for $483 million, beefing up its prepaid offerings alongside the Boost Mobile unit.

President and CEO Dan Hesse pointed out in a press release today that the June launch of the Palm Pre gave the company a chance to showcase the improvements it has made as a “new Sprint.” While he ticked off several major accomplishments, “we are not satisfied that we lost a quarter of a million customers in the quarter,” he said.

Sprint has not seen a quarterly net gain in subscribers since the second quarter of 2007. Meanwhile, Verizon Wireless gained 1.1 million net subscribers in the second quarter of this year and AT&T added 1.4 million net subs.

On the plus side, Sprint’s postpaid ARPU has been stable the past six quarters at around $56. Data revenues contributed greater than $15.50 to overall postpaid ARPU in the second quarter, led by growth in CDMA data ARPU. Prepaid ARPU in the quarter was about $34 compared to $31 in the first quarter of 2009 and $30 in the year-ago period.

Wireless capital expenditures were $227 million in the second quarter of 2009 compared with almost $200 million in the first quarter of 2009 and almost $400 million spent in the second quarter of 2008.

Analyst Julien Blin of JBB Research says overall, Sprint’s second-quarter results were disappointing, but the company did a nice job weathering the effect of the iPhone 3G S launch over at AT&T. “Sprint Nextel is a different company than a year ago, but the reality is that Sprint Nextel still has a long way to go,” he says.

Sprint finished the quarter with 48.8 million subscribers.