UPDATE 1-Sony Ericsson Q3 loss narrows on cost cuts, margin

* Sony Ericsson Q3 loss smaller than expected

* Cost cuts, better gross margin boost result

* Says has signed loan facilities of 455 million euros

STOCKHOLM, Oct 16 - Mobile phone maker Sony Ericsson posted a smaller than expected third-quarter pretax loss on Friday due to cost savings and improving margins, adding it had strengthened its capital position.

Sony Ericsson, owned by Swedish Ericsson and Japan's Sony Corp., reported a quarterly pretax loss of 199 million euros ($297 million), an improvement on the 283 million euro loss in the second quarter.

"The reduced loss was due to better gross margin, as well as reduced operating expenses," Sony Ericsson said in a statement.

The mean forecast in a Reuters poll of 16 analysts had been for a 274 million euro loss.

Restructuring charges in the third quarter were 2 million euros against an average forecast of 70 million euros. The company had a gross margin of 16 percent against a forecast of 13.9 percent and 12 percent in the second quarter of this year.

The global handset market has been slammed by recession across most of the world over the last year, and Sony Ericsson has reported steep losses in past quarters. Its market share was 5 percent in the third quarter.

The company stuck by its gloomy prognosis for the market this year, saying it expected a contraction of about 10 percent.

This compared to rival Nokia's upbeat picture of the market given when it published its results on Thursday.

Nokia expects industry mobile sales to be down approximately 7 percent from 2008 against its previous estimate of around 10 percent.

Sony Ericsson, which has been burning through cash, said it signed loan facilities of 455 million euros to strengthen its balance sheet and improve liquidity.

It said 155 million euros had been drawn down by the end of September and 100 million euros were drawn down at the beginning of October. ($1=.6702 Euro)