Firms are updating their networks to cope with increased demand

Operating profit in the three months to 31 December was 9.5bn kronor (�722m; $1.3bn) against 6.3bn kronor last year.

Shares tumbled, however, as the company reported a profit margin of 45.6%, less than the 47.3% forecast by analysts and down from 47.1% in the third quarter.

Ericsson shares dropped 5.9% to 20.7 kronor in early trading on Thursday.

However, the company remained optimistic about its earnings outlook after sales in the fourth quarter rose 9% to 39.4bn kronor.

"Long-term growth drivers of the industry remain solid," Ericsson said in a statement.

Quicker take-up

Chief executive Carl-Henric Svanberg explained that about "27% of the world's population now has access to mobile communications".

"This is exciting for a company with a vision of an all-communicating world," he added.

Mr Svanberg, however, warned that the extra demand that had driven 2004 sales had already dissipated and it was "business as usual".

He added that sales in the first three months of 2005 would be subject to "normal seasonality".

For the whole of 2004, Ericsson returned a net profit of 19bn kronor, compared with a loss of 10.8bn kronor in 2003.