Sprint Nextel has signed a technology deal costing up to $5 billion with Alcatel-Lucent , Ericsson and Samsung <005930.KS> as it phases out an older network and looks to cut costs and pave the way toward easier future technology upgrades.

Shares of the No. 3 U.S. mobile service rose nearly 6 percent after it promised savings of $11 billion over seven years from the project, which includes phasing out the aging iDen network that came from its 2005 purchase of Nextel.

The company which offers services on three different networks is looking to consolidate the number of different technologies it uses and to save money by having to manage fewer networks.

Along with consolidating different technologies into a smaller amount of network equipment, the company also aims to transfer some spectrum now used by iDen to improve the performance of its more advanced services.

Fundamentally the network performance improves dramatically, Bob Azzi, a senior vice president for Sprint, told Reuters. Customers will notice the difference.

Azzi said new network equipment it plans to install in its wireless broadcast towers will take up as much as 75 percent less space at its cellular broadcast towers, allowing Sprint to save money on electricity.

For its high speed wireless data services Sprint now depends on the WiMax network of Clearwire Corp , in which Sprint has a 54 percent stake. The new gear will also allow Sprint more flexibility in its wireless technology choice and in the landline network technology it chooses to connect wireless towers. Because of this flexibility, Sprint could potentially offer WiMax services and services based on LTE, a technology its biggest rival is using, from one piece of equipment in each wireless tower, Azzi said.

After losing customers for years, after poor integration of the Nextel merger, Sprint has slowly been turning around the business and has started adding customers in some segments in recent quarter.

On CNBC earlier on Monday, Greenlight Capital CEO David Einhorn said Sprint Nextel was a good long-term bet.

Aside from Clearwire, Sprint currently offers services on two different networks. Its iDen network carries walkie-talkie services as well as traditional phone calls but this network has been losing customers as it uses an older technology that is too slow to support data services such as mobile Web. About 11 million Sprint customers use the iDen network.

While Sprint's CDMA network is faster than the iDen network and supports data services it is not at the cutting edge of technology anymore. The CDMA network supports about 34 million customers.

It said that part of the new project would include adding walkie-talkie services on the CDMA network so that it will be able to start phasing out the iDen network in 2013. That network is often used by blue-collar workers in industries such as construction or transportation.

According to reports companies that competed for the network project also included Huawei ZTE <0763.HK>.

(Reporting by Sinead Carew; editing by Derek Caney, Dave Zimmerman)

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