MMO2 has seen strong growth in the number of UK customers

In a trading update, MMO2 said it now expected UK revenue to grow by 9-12% in the year to the end of March, compared with a previous forecast of 7-10%.

The rise comes despite regulators forcing it and other mobile firms to cut connection fees for calls from landlines by about 30%.

The company also saw a rise in average revenue per customer.

O2 UK continues to perform well in a highly competitive market Peter Erskine, MMO2 chief executive See MMO2's latest share price

It said that its other businesses - O2 Ireland and O2 Airwave - continued to perform well.

Fighting competition

"The strong growth that we reported across all our businesses in the first quarter was sustained into the second quarter, and this will be reflected in our first-half results," said chief executive Peter Erskine.

"O2 UK continues to perform well in a highly competitive market," said Mr Erskine.

MMO2 added its German business was set to report "strong" first-half growth.

The company announced a joint venture between its German operation and the German retail group Tchibo.

The pre-pay service, due to start on 4 October, will enable users to call landlines and all mobile networks for a flat rate charge of 35 euro cents per minute, at any time of the day.

"The co-operation with Tchibo gives O2 Germany access to new, strong distribution channels and is an ideal way to reach additional customer groups," said Mr Erskine.