* Convertible bonds due 2017 with coupon of 5.0 pct
* Initial conversion price set at 28 pct premium
* Unveils lower price Lumia 510 phone
* Key launches are Lumia 820 and 920 next month
* Shares fall 5 pct
By Ritsuko Ando
HELSINKI, Oct 23 (Reuters) - Mobile phone maker Nokia plans to raise 750 million euros ($972 million) from bonds convertible into shares, seeking a cheap way to help finance its fight to claw back market share lost to Apple and Samsung.
Once the world's biggest mobile phone maker, the Finnish firm has fallen far behind Apple's iPhone and Samsung's Galaxy phones in the lucrative smartphone market, and is pinning its hopes for recovery on new models that go on sale next month.
With its cash reserves falling and its credit ratings cut to junk over the past year, analysts have said Nokia needs to show a turnaround in the next several months if it is to survive.
Its shares fell 5.09 percent to 2.05 euros on Tuesday as investors worried the eventual conversion of the bonds into stocks would reduce earnings per share. The bonds may be converted into a maximum 287.2 million shares, or 7.74 percent of current shares.
But analysts said the choice of convertible bonds - which normally pay lower interest rates than ordinary bonds while offering investors the chance to profit when they are converted into shares - was a smart one.
"It is a rather cheap way to get extra financing," said Evli analyst Mikko Ervasti. "They need buffers (and) their 2014 bond also requires financing."
Nokia's net cash fell to 3.6 billion euros in September from 4.2 billion in June. It also finished the third quarter with 3.8 billion euros in interest-bearing liabilities, with 1.75 billion in bonds and loans maturing in 2014.
Additionally, the company 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 pay a coupon of 5.00 percent. The initial price for conversion into ordinary shares was set at 2.6116 euros, 28 percent above the average price of Nokia shares between the launch and pricing.
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. The phones, which come in vivid colours and have high-resolution cameras, 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.
Trading in the bonds are due to start around Oct. 26.
BofA Merrill Lynch, Barclays, Citi and Deutsche are the joint bookrunners.