MMO2 chief Peter Erskine is forecasting strong growth

Half-year revenues to October rose by 23% to �3.29bn ($6bn), and pre-tax profits soared from �26m to �239m.

The firm also announced it would be accelerating the rollout of its high-speed, third-generation (3G) network.

MM02, which is now Europe's sixth biggest mobile phone group, said it had been transformed since its demerger from BT in 2001.

MMO2 shares closed up 5.5p, or 5.2%, at 111.5p.

Earlier this year MMO2 said it would not be rushing to launch third generation (3G) services for Christmas, saying the market would remain small until early 2006.

On Wednesday, chief executive Peter Erskine said MMO2 is "on track" to have third-generation mobile services available in 20 British cities some time next year.

No merger talks

Mr Erskine rejected recent speculation that the company might grow by combining with a rival.

We are very pleased now to be able to establish a policy of sustainable dividends Peter Erskine. MMO2 chief executive See MMO2's share price

He said recent discussions with Telefonica, the largest carrier in the Spanish-speaking world, had not involved merger talks.

"No mergers have been discussed with anybody," he said.

Mr Erskine said MMO2 would pay a maiden dividend at the end of the current financial year, as the start of a policy that would see it return half of its profits to shareholders.

"Over the past three years there has been a transformation in the group's operational and financial performance," he said.

"We are very pleased now to be able to establish a policy of sustainable dividends."

Gearing up in Germany

The group, which operates in the UK, Ireland and Germany, has also raised its UK growth forecasts to 15%, from 12%.

And it has increased its planned investment in its other top market of Germany, to 3.5bn euros over five years.

"The big news is that, because of its improving performance in Germany, MMO2 has decided to invest in its own 3G network in Germany, rather than rely on a roaming agreement with T-Mobile," said Julian Hewitt of consultants Ovum.

He noted that whereas Vodafone grew by just 6% in Germany, MMO2 has turned round an ailing business to deliver a revenue increase there of 29%.

"The jewel in O2 Germany's crown is its unique Genion 'home zone' service, which offers tariffs equivalent to fixed-line tariffs. Genion represents 70% of 02 Germany's post-paid business," Mr Hewitt said.

Having its own 3G network will enable MMO2 to expand capacity for German mobile voice calls, as well as for data.