Sprint Nextel Corp. plans to offer debt in a private transaction and could use the proceeds to fund Clearwire Corp.

Sprint said it could also use the proceeds to pay back existing debt or fund its network upgrade. But that didn't stop Clearwire shares from rising 23 percent, because Sprint had previously refused to discuss whether it would help Clearwire's current efforts to raise cash.

It provides a glimmer of hope. The fact they put it in there means that its under consideration despite Sprint's posturing at its analyst day, said Mizuho analyst Michael Nelson.

Sprint executives had triggered a 32 percent drop in Clearwire's shares on October 7 when they told an investor conference it would stop selling phones using Clearwire's current service at the end of 2012.

They also suggested a Clearwire bankruptcy could be constructive.

Clearwire, which is majority owned by Sprint, is seeking almost $1 billion in new financing. It said earlier this week that the companies were in talks but that they had gaps due to differing strategic goals.

Sprint said on Friday it plans to offer notes due 2021 and 2018 without saying how much money it would raise through the offering. It said that the 2018 notes would be guaranteed by its wholly-owned subsidiaries that guarantee its existing credit agreements.

The company said on October 26 that it could need to raise up to $7 billion in financing over the next few years as it looks to upgrade its network and pay for the high cost of its agreement with Apple Inc to sell iPhone.

Sprint is Clearwire's biggest customer. Clearwire shares rose 40 cents to $2.15 after the news.

(Reporting by Sinead Carew; editing by Gerald E. McCormick and Derek Caney)