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Outlook: Mobile phones

T FIRST glance the prediction - made yesterday by Continental Research - that the number of mobile phone subscribers in the UK will double over the next five years, is good news for mobile phone operators.

More worrying for shareholders in Orange and Vodafone is the revelation that pre-paid phone users spend just pounds 20 a month - about a third less than conventional subscribers. Pre-paid phones make users pay for their calls up front, allowing operators to dispense with cumbersome contracts and monthly bills, and opening up the market to cash-strapped students and those with tainted credit histories.

Since they arrived on the scene a year ago, roughly one in every two mobile phones sold is a pre-paid one. And with retailers such as Asda flogging the devices for as little as pounds 69.99 in the run-up to Christmas, demand is bound to carry on growing.

Until now, the City view has been the more subscribers, the better. But yesterday's figures suggest that new customers will only sign up if they can spend less. This means the next 10 million mobile phone users will be a lot less profitable than the current lot. Add in the fact that British Telecom is unlikely to stand by and let mobile phone operators take its traditional fixed line subscribers without a serious price war, and you have all the makings of a bloodbath. That will be good for all phone users. Shareholders are unlikely to be so fortunate.