Mobile phone users are getting younger

But analysis by Coleago Research suggests a different picture.

Many operators are about to see a "dramatic" improvement in their finances thanks to reduced competition, claims the research.

There was little point in spending money to acquire new customers when there were no new customers to acquire, said Stefan Zehle, chief executive of Coleago. "To get a new customer is very expensive," he said.

Mr Zehle estimates that Europe's mobile phone operators have been spending up to �200 to acquire every new customer.

This amount is divided between handset subsidies, marketing, advertising and money paid to dealers every time a customer is signed up.

Cash call

In some mobile firms, customer acquisition costs had reached almost a quarter of all operating expenses, said Mr Zehle.

But now, with competition cooling and phone penetration peaking, mobile operators no longer have to spend money to sign up subscribers.

By cutting handset subsidy costs, Spanish mobile operator Telefonica has already produced a 33% reduction in its operating expenses during the first six months of 2001.

Coleago expects similar changes in fortune for many other European operators.

Many operators are expected to use the cash they are generating to reduce debts, to build future third-generation networks or to persuade existing customers to do more with their phones.

"It is a marketing truism or rule that it is much cheaper to sell something more to an existing customer than it is to acquire a new one," said Mr Zehle.

This could reap dividends as Europe's mobile firms prepare to launch third-generation (3G) services. Introducing subscribers to a variety of new services on existing handsets should make it easier to convince people to upgrade to a 3G phone.

Many operators will do well even if there are delays to the launch of 3G services because they generate so much cash from voice calls, SMS and existing services.

"The financial health of the many mobile operators should improve quite a bit," said Mr Zehle, "unless they do something really stupid and enter a destructive competition phase."