With increasing competition as the backdrop, Verizon Wireless is suing Nextel ( NXTL), charging its rival with industrial espionage.

In a suit filed Friday in federal District Court in Alexandria, Va., Verizon alleges that Nextel obtained a prototype of a forthcoming phone, and then used it to obtain "unauthorized access" to the Verizon network to check out its walkie-talkie feature.

Verizon Wireless is expected to launch its own version of Nextel's popular "Direct Connect" service, which lets cell-phone users connect via a two-way radio feature.

"Nextel's unauthorized testing of Verizon Wireless' prototype push to talk handsets and network allowed Nextel to improperly obtain valuable, confidential, and proprietary business information," the suit claims.

Nextel replied in a written statement saying: "We are baffled by the claims made by Verizon Wireless. We are still in the process of reviewing the filing, but we believe it is entirely without merit and we will defend Nextel vigorously."

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