Mobile phone operator MMO2 has celebrated its first anniversary since spinning off from BT Group with a strong set of half-year results.

The firm reported better-than-expected earnings figures, higher customer numbers and smaller losses.

Core earnings for the six months to the end of September were �378m, up from last year's figure of �135m and higher than analysts' forecasts of about �360m.

And MMO2 said it was making "significant progress" in the UK and German markets, with its German business reporting an underlying profit for the first time.

'Challenging' market

"The UK showed a significant improvement - while there is still much to do the turnaround is significant," said chief executive Peter Erskine.

Mr Erskine is after "good quality" customers

But he added that the British market remained "challenging", and the Competition Commission's inquiry into mobile termination rates remained an area of uncertainty.

The Commission has been looking into whether termination charges - the fees that mobile phone operators charge to other telecoms companies for connecting calls to their networks - are excessive.

In preliminary findings announced in July, the Commission said they were too high, and it is now considering whether to impose caps on the charges.

Better quality

Mr Erskine said he expected a "biggish" Christmas for sales of handsets with photo-messaging.

But he said MMO2 would not be "customer chasing" over the festive period.

"We are after good quality customers who will spend money with us."

MMO2 has been focusing on customers who pay by contract, instead of the less lucrative pre-pay method.

Of its recent new customers, only 30% have been pre-pay.

Average revenue per user (ARPU) in the UK has risen 3% since the start of the year to �238, while in Germany ARPU has climbed 7.7% to �210.

Rival operator T-Mobile said on Tuesday that it had now moved ahead of MMO2 in the UK market.

It said that it had 11,758,000 active subscribers in the UK as at 30 September, while MMO2's latest results showed it had 11,449,000 users in the UK.

But a spokesman for MMO2 said these numbers were less important now as the company was more interested in growing its number of high-value contract customers.

Lower debt

While attention was focused on MMO2's 180% increase in earnings before interest, tax, depreciation and amortisation (Ebitda) to �378m, analysts were also impressed by the trimming of net debt by �8m to �609m.

MMO2's customer base grew by 8.9% to 18.3 million, and total revenues increased 11.5% to �2.34bn.

The pre-tax loss shrank to �259m from �368m in the same period last year.

"At first sight these MMO2 figures look OK. Revenue is higher than expected," said Tim Hogman at Cantor Index.

"The great thing is that their debt has come in lower than expected," he added.

Shares in MMO2 were 3.4% higher at 53.5p when the stock market closed on Tuesday.