O2's UK business signed up 295,000 net new customers in the final quarter of 2006, of which 136,000 were contract customers.
At the end of the year, 6.2 million contract customers made up 35.3% of the total base of 17.6 million customers, compared with 34.4% the previous year.
O2 said its own UK channels accounted for around 60% of gross connections in the quarter as it moved towards increased direct distribution and focused on retention of customers.
The business also completed the rebranding of 96 Link stores, acquired in September, to expand its retail network to around 400 stores.
The operator claimed its sixth consecutive quarter of churn reduction. 12-month rolling contract churn was 23%, compared to 27% for the same period last year.
Quarterly monthly average post-pay ARPU was flat at £43 throughout the year. But 12-month rolling contract ARPU fell £4 to £513 compared with the fourth quarter of 2005.
159,000 new pre-pay customers were added in the quarter, with ARPU of £143 up £7 on the same quarter last year, driven by promotions such as O2 Long Weekends which offers free calls from Saturday to Monday.
12-month rolling blended ARPU of £273 was £6 higher than the fourth quarter last year.
Fourth quarter net service revenue grew by 13.7% year-on-year, and for the 11 months to 31 December reached a total of £3.9bn, an increase of 14.7% compared to the same period of 2005.
The UK broadband unit Be rolled out to over 500 exchanges between July 2006 and February 2007, giving it a population coverage of a third. The business plans to launch an integrated mobile and broadband service from mid-2007.
Chairman and CEO Peter Erskine said: 'In the UK we added 295,000 net new customers, driven by our customer focused propositions and our best ever handset lineup for the Christmas period. Contract churn was again reduced and monthly minutes of use in the quarter grew 9% year on year to 180 minutes. Service revenue for the 11 months to 31 December grew by 14.7%, at the high end of our upgraded guidance range.'
Ireland's net customer based grew by 29,000, ending the year with 1.6 million customers, 2% higher than at the same time last year. But service revenue fell by 1.5% in the final quarter due to termination rate regulation and competition.
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