Sprint Nextel Corp plans to upgrade its high-speed wireless services network faster than it previously expected.
Shares in Clearwire, which Sprint owns most of, fell more than 26 percent after Sprint said at an investor event in New York on Friday that it hopes to use spectrum from Clearwire's rival LightSquared to bolster its network capacity.
Sprint's shares rose more than 4 percent before being halted, then fell 7 percent to $2.80 after they resumed trading on Friday morning. Clearwire shares were down to $1.50.
The company declined to comment on any commitments that it made to Apple Inc regarding the iPhone, and also said that must raise money in the markets.
Sprint, the No. 3 U.S. mobile service, said it will launch its high-speed service by the middle of 2012 and expects to complete its upgrade by the end of 2013.
Sprint talked about a five-year plan for upgrading its network when it first discussed the project in December.
The company still expects its network upgrade to save about $11 billion, mostly through closing its older iDen network.
It also said that its operating income before depreciation and amortization should improve about 4 percent to 6 percent from current levels by 2014.
Confirmation of savings targets is good news, analysts said, but some questioned whether Sprint would be able to handle building the new network and shutting the other one down at the same time.
Seeing all these balls in the air is a little scary, said Evercore analyst Jonathan Schildkraut.
Another analyst, Craig Moffett of Bernstein Research, worried that Sprint could have problems with its service while it sets aside spectrum for the network upgrade.
It is not clear how they would avoid creating a capacity gap when there will be big demands on their network, he said, particularly from users of the Apple iPhone.
Sprint, which started taking orders for the iPhone on Friday, said that while the phone is more expensive than others, it will be quite accretive to its profits over time.
Chief Executive Dan Hesse expects the device to be one of Sprint's most profitable, but he did not give specifics.
Sprint plans to upgrade its network using Long Term Evolution, the same high-speed wireless technology used by its two bigger rivals AT&T Inc and Verizon Wireless, a venture of Verizon Communications Inc and Vodafone Group Plc.
LightSquared, which is backed by hedge fund manager Phil Falcone, needs regulatory approval to build a network using the spectrum Sprint hopes to use.
(Reporting by Sinead Carew and Supantha Mukherjee. Editing by Gerald E. McCormick and Robert MacMillan)