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By Jo Best, 27 January 2005 16:50

NEWS mmO2 has released its third quarter key performance indicators (KPIs) in an upbeat mood - and is claiming that being last out of the blocks on a commercial 3G launch has done it no harm.

Across its businesses in Germany, Ireland and the UK, mmO2 has clocked up an additional 1.2 million customers, bringing the total to around 23 million. The UK is still the company's biggest subscriber base with an extra 360,000 users joining the fold to make a UK total of 14.2 million.

mmO2 has however done some creative pruning on its user numbers. A quarter of a million users have been trimmed from the bottom line UK figure to remove what CEO Peter Erskine called "skimmers" - subscribers who buy a new handset and SIM card, meaning they have two active O2 SIMs for a short time - four to 11 weeks - before letting the second one die.

mmo2 also lost a contract to supply BT's employees in the quarter.

Data usage is still on the up though, with SMS numbers rising 13.6 per cent quarter on quarter, to 3.8 billion. mmO2 is also currently putting in a new SMS platform that will quadruple the network's capacity, CTO David Williams said.

Data revenues now make up 24 per cent of mmO2's revenues as a whole. While texting still makes up the lion's share of the data cash, non-SMS is progressing - albeit at a snail's pace - to contribute to the company's bottom line. Non-SMS now makes up almost three per cent of data revenues.

ARPU (average revenue per user) was also on the rise - UK blended ARPU grew to £282 from £264 in the third quarter of 2004.

Contract ARPU grew in the UK, with pre-pay ARPU rising by £8 year-on-year to £145, with pay-monthly ARPU going up by £40 year-on-year to £541, although both were largely stable quarter-on-quarter.

There was one notable absence from the mmO2 portfolio - the company still hasn't launched its commercial 3G offering, despite the pre-Christmas launches by rivals Orange, T-Mobile and Vodafone.

Erskine said: "We felt we were taking the right gamble when we said 'it won't be a 3G Christmas'," adding that over the festive period users had preferred to snap up 2.5G phones and camera phones.

The operator will launch its 3G product in February for contract customers, with the pre-pay following shortly afterwards. O2 is aiming to have 50 per cent population coverage by June - a slight increase on its 32 per cent at launch.

Analysts were divided on whether O2 would win the waiting game. Phil Taylor, analyst at Strategy Analytics, said: "They're trying to put a brave face on it, put on a positive spin.... They've lost several months to Vodafone and Orange and I don't think it will do them any favours."

Gartner research Stephanie Pittet said: "I can't see the medium user being fed a lot of information about Vodafone 3G... [Mobile operators] have been focusing on the services, not the technology. Consumers won't have the feeling [O2] are late."

Despite the positive outlook on the 3G launch, mmO2 is admitting it has concerns about the churn level - which cost European mobile operators €5.6bn in 2003 - and is aiming to cut it down in the future.

"We want to be strong in retention," Erskine said. "We want to make the brand more about loyalty."