Demand for smartphones has helped O2's contract numbers to hit an all-time high, accounting for 52% of its base.
The operator improved its profits for the third quarter in a row, although operating income was still down 10.2% on 2011 to €454m (£364.5m). While profits fell, it was an improvement on its previous two quarters when operating income fell by 20.3% year on year in Q2 and by 33.2% in Q1. The operator's margins also increased quarter on quarter from 23.4% to 25.4%.
Sales continued to be hit by the effects of changes to mobile termination rates. Total revenues were down 5.4% to €1.80bn (£1.45bn), with service revenues down 9.6% to €1.55bn (£1.24bn). Increasing smartphone use - with 44% of customers owning a high spec device, an increase of 22% - lead to a small increase in data revenue, up 1.6% to €795m (£638.3m).
O2 said smartphone penetration increased off the back of its On & On offer, with almost 89% of contract handset sales in the yeat to date being smartphones. Its contract base increased by 206,000 customers to 11.6 million and contract customers now account for 52% of its base, an all-time high.
Like its rivals, prepay customers continued to fall, with O2 losing 95,000 customers during the quarter, a drop of 5.1% to 10.9 million. By comparison, EE's prepay numbers fell by 10% during its third quarter. The overall customer base increased slightly, up 1% to 22.5 million.
Average revenue per user (ARPU) fell by 9.2% to €22.70 (£18.22), with prepay ARPU down 12.5% to €9.70 (£7.79) and contract ARPU down 11.6% to €35.50 (£28.50).
The Tesco Mobile MVNO had strong growth in its contract customers, doubling year on year to 1.1 million. It had 113,000 net adds during the quarter to hit a base of 3.3 million, up 20% on 2011.
Ronan Dunne [pictured], CEO of O2 UK, said: 'We're pleased to have maintained our commercial momentum in Q3, building on our performance during the first half of the year, in what continues to be an extremely competitive market.'
Editor: Graeme Neill