London's leading share index tumbled to its lowest level for eight weeks as investors marked telecoms stocks lower following disappointing revenue figures from Vodafone, Europe's biggest mobile phone firm.

Vodafone said it gained 1.3 million customers in the three months from January to March, taking its global customer base above 101.1 million.

But investors were unimpressed by news that the amount that Vodafone's mobile subscribers spend on making calls had remained "stable", rather than rising.

In London, the FTSE 100 index of leading shares had dropped 1.7% to 5,128.2 by mid-morning, its lowest level since 1 March, though by 11.20 local time (1020 GMT) it had recovered slightly to stand at 5134.4.

Vodafone's share price had dropped almost 6% to a fresh four year low of just above 101p by mid-morning, although they regained some ground to stand at 103.75p at 1020 GMT.

But the company's shares latter rallied to close 5p up on the day at 112.75p.

Rival suffers

Another mobile phone stock in trouble was MMO2, the wireless operation spun off by British Telecom.

Its shares plunged 10% after it the business was slated as "worthless" in its current form by brokerage house Collins Stewart.

Between them the two mobile operators knocked as much as 23 points off the FTSE 100.

Test of strategy

Investors had been keenly awaiting Vodafone's trading update, particularly what it would say on average revenue per user (ARPU), which is a key measure of business growth and efficiency for the mobile phone industry.

In recent months, phone firms have shifted away from targeting pre-paid customers, who tend to spend less, to concentrate on higher spending customers on year-long contracts.

Vodafone chief executive Sir Christopher Gent said the past 12 months had "seen ARPU stabilise in our major markets, ahead of our previous expectations, even though customer growth has been better than anticipated. "

Although ARPU held steady at �276 ($400) for the UK and slightly less for Italy, figures for Germany have dipped since the end of last year.

Optimistic

Sir Christopher was upbeat about the future, saying an increase in "higher quality" customers had given Vodafone "a solid base" improvement in ARPU in most of its major European markets in the year ahead.

Furthermore, customers are increasingly using their hand phones to transmit data.

For the three months to 31 March, revenue from mobile data services rose to 13% of service revenues, a 4% improvement on the same period a year earlier.

Overall the mobile phone giant acquired 18.1 million subscribers worldwide in the 12 months to 31 March 2002, an increase of 22%.

"The negative news is not particularly bad, but the good news is also not wildly exciting," said telecoms analyst Benedict Evans at WestLB Panmure in London.