NOKIA shares surged yesterday after it unveiled plans to buy out partner Siemens AG's share of their valuable network equipment joint venture, betting on the technology to run 4G networks after it stumbled as a maker of smartphones.

Loss-making Nokia gains full control of the profitable venture Nokia Siemens Networks for US$2.2 billion, a cheaper-than-expected price, analysts said, although they also noted the acquisition would put pressure on Nokia's balance sheet.

"With this transaction, Nokia buys itself a future, whatever happens in smartphones and feature phones," Bernstein analyst Pierre Ferragu wrote in a note to clients.

Nokia's stock was up around 5 percent, having earlier hit a five-month high, a rally fuelled in part by short covering.

However, the cash cost is still a risk for a company that is burning money to keep its handset business running.

Nokia fell behind rivals Apple Inc and Samsung Electronics Co Ltd in the smartphone race. Nokia's smartphones and mobile phones have reported declining sales since the first quarter of 2011. The devices and services unit posted an underlying loss of 703 million euros in 2012 down from a profit of 1.7 billion euros in 2011.

In contrast to Nokia's phone business, NSN turned profitable in the second quarter of 2012 after slashing costs and as its focus on fourth-generation Long Term Evolution networks began to pay off.

NSN's adjusted earnings before interest and taxes amounted to 196 million euros in the first quarter of this year.

Nokia will pay 1.2 billion euros in cash and the other 0.5 billion euros in the form of a secured loan from Siemens that will be repaid later.

"Nokia Siemens Networks has established a clear leadership position in LTE, which provides an attractive growth opportunity," Nokia Chief Executive Stephen Elop said in a statement.