Battle for market share hits Cellnet

CELLNET, the country's second-largest mobile-phone operator, yesterday revealed the cost of its battle for UK customers as it reported a drop in first-half profits.

In the six months to September, Cellnet's operating profits fell 8 per cent to pounds 98m while revenues jumped 19 per cent to pounds 666m.

Peter Erskine, the managing director, said the decline reflected the costs of setting up First, the company's loyalty package, and Easylife, its pay-as-you-go mobile-phone service. The two services cost pounds 32m to launch.

However, he stressed that the investment had allowed Cellnet, which is 60 per cent owned by British Telecom, to re-establish its position as the second player in the UK market, which was under threat from rival operators One2One and Orange.

Mr Erskine added that Cellnet was likely to sign up more than 500,000 new customers in the final quarter of the year, taking its customer base to 3.89m.

The growth was being driven by pre-paid mobile-phone services, although Mr Erskine admitted that the company was having trouble supplying enough phones to retailers.

Cellnet plans to spend pounds 350m improving its network in the full year, with a similar level of investment going forward.