Ericsson has reported a Q2 loss - but that's what the market expected.

Pre-tax losses in the period ending 30 June were SKr5.3 billion ($498 million). It had enjoyed profits of SKr6.7 billion ($629.55 million) a year earlier.

Customers holding back on expanding their networks are mainly to blame. Ericsson's mobile network systems unit saw margins slashed to one per cent, where they'd been 21 per cent a year earlier. But CEO Kurt Hellstrom said 50 operators had launched GPRS already and thought this would stimulate the market later this year.

"Regardless of how the Mobile Internet market develops in the short term, it is only a matter of time before additional network capacity is required to support the continuing subscriber growth and increasing voice traffic," he said.

The company said the development of the 3G market remains on track for volume business from 2003.

But the handset business is in the toilet and that unit lost SKr4.6 billion ($432.2 million). Ericsson has now cut its worldwide annual sales estimates for handsets down to 400-440 million, from a previous forecast of 430-480 million. Inventory build up with distributors is blamed.

Revenues fell three per cent to SKr62.8 billion ($5.9 billion) for the quarter. Ericsson also took a SKr15 billion ($1.41 billion) restructuring charge in the period. ®