HELSINKI, Tue Oct 23, 2012 - Mobile phone maker Nokia plans to raise 750 million euros ($980 million) by issuing convertible bonds to bolster its cash position as it battles to claw back market share lost to Apple and Samsung.

With its net cash falling to 3.6 billion euros in September from 4.2 billion in June, and its credit ratings cut to junk over the past year, analysts have said the company needs to show a turnaround in the next several months if it is to survive.

"It is a rather cheap way to get extra financing," said Evli analyst Mikko Ervasti of the plan to issue convertible bonds, which are potentially most lucrative to investors when they are converted into shares several years after they are issued.

"They need buffers (and) their 2014 bond also requires financing," he added.

Nokia finished the third quarter with 3.8 billion euros in interest-bearing liabilities, with 1.75 billion in bonds and loans maturing in 2014. The company also owns half of network equipment venture Nokia Siemens Networks, which finished the quarter with 1.4 billion euros in liabilities.

The convertible bonds will be due in 2017 and will pay a coupon between 4.25 percent and 5.00 percent. The initial price for conversion into ordinary shares is expected to be 28-33 percent above the average price of Nokia shares between the launch and pricing of the offering.

At 0905 GMT, Nokia shares, which have been volatile in recent sessions, were down 5.1 percent at 2.05 euros.

LUMIA 510

Nokia's fortunes hinge on its top-of-the-range Lumia 820 and 920 models, which run on Microsoft's new Windows Phone 8 software, come in vivid colours, have high-resolution cameras, and will hit the stores in November.

On Tuesday, the group unveiled the lower price Lumia 510, which is an update of the Lumia 610 but does not use the newest version of Windows software. The 510 has a larger screen and will be sold for around $199, excluding taxes and subsidies.

ING analysts welcomed the convertible bonds plan as reducing uncertainty around Nokia's short-term debt maturities and bolstering its capital.

"It also shows that the company is taking the question marks around its credit quality seriously and is willing to take the steps necessary to improve this," they said in a research note.

Nokia's five-year credit default swaps were trading around 2.8 percent tighter in early trading, signalling a reduction in the cost of insuring the company against default.

The final terms of the convertible bonds, including the conversion price and maximum number of shares which may be issued upon conversion, will be announced later in the day. Trading in the bonds are due to start around October 26.