Sprint Nextel reduced its voting rights in Clearwire Corp to 49.8 percent from 54 percent, potentially giving it more flexibility to raise new debt or refinance existing debt.

Under their previous ownership structure Sprint would have risked breaching its own debt agreements in the event of a default by Clearwire, which was viewed by debtholders as a Sprint subsidiary.

Sprint, which is keeping its 54 percent economic interest in Clearwire, said on Wednesday it surrendered some voting shares to eliminate investor concerns about the default issue but its relationship with the company was otherwise unchanged.

The move could also put Sprint in a better position to raise money in debt markets to help pay for a massive $5 billion network upgrade it plans to kick off later this year, one analyst said.

Clearly, the debt markets are open and Sprint is close to announcing plans for its network modernization initiative, Wells Fargo analyst Jennifer Fritzsche said in a research note.

The move may also eliminate the risk of Sprint being forced to consolidate Clearwire's results into its own financial reports, Credit Suisse analyst Jonathan Chaplin said in a research report.

Some investors had worried that consolidating Clearwire numbers would make Sprint's results look a lot worse.

Clearwire still needs billions more in funding to finish building its high-speed wireless network, on which Sprint depends for its own advanced wireless offering.

Some analysts have speculated that Sprint will eventually end up buying Clearwire outright.

But Sprint's surrender of voting shares now suggests that Sprint is less likely to make a bid to buy the rest of Clearwire at least in the near future, Chaplin said.

Clearwire said it does not comment on actions taken by its investors as a matter of course but, it said that both companies enjoy a productive working relationship.

Clearwire shares were down 5 cents or more than 1 percent at $4.06 on Nasdaq while Sprint shares were down 7 cents or more than 1 percent at $5.42 on New York Stock Exchange.

(Reporting by Sinead Carew; editing by Derek Caney)