MOBILE OPERATOR O2 Ireland has reported a small increase in subscribers which has enabled it to overtake Vodafone in the bill- pay market but which also saw a significant year-on-year drop in average monthly spend by subscribers.

The monthly average revenue per user (Arpu) from mobile customers fell 7.9 per cent during the year to the end of June from €42.19 to €39.76.

O2’s total customer base at the end of June was 1.717 million, up 1.7 per cent, compared to the same period in 2008, and up by 6,093 customers when compared with the first quarter of this year.

During the second quarter O2 gained 11,444 new contract customers to give it a total post-pay customer base of 662,604.

The number of prepay subscribers fell by 5,351 customers over the period, a significant improvement on the previous quarter when a decline of 25,202 prepay subscribers was reported.

Paul Whelan, chief financial officer with Telefonica-owned O2 Ireland, said it had been a “good” quarter but that he didn’t “see the mobile or telco industry being any different” than the rest of the economy and it was likely to be a tough year.

He said tough trading was likely to continue into the first half of 2010 but the company “will continue to maintain our emphasis on cost management and improving cash flow performance”.

Mr Whelan highlighted the growth in bill-pay customers who had a higher monthly spend. Arpu for contract customers was €62.51, down 3.1 per cent from €64.51 in the prior quarter.

Sales to consumers were buoyed by the introduction of the new Apple iPhone 3GS, which O2 has an exclusive contract to sell in the Republic. Service revenue rose in the quarter, up to €211 million from €210 million in the first three months of 2009.

The data suggests that in the face of the recession, customers are switching from making calls to sending texts. In the second quarter, 782 million text messages were sent by 02 customers, up 4.4 per cent on the first three months of the year.

O2 said it had almost 112,000 mobile broadband customers at the end of the second quarter.

O2 parent Telefonica said first-half net profit rose 0.7 per cent to €3.62 billion, as the Spanish company’s booming Latin American units helped offset a sagging European market and the group cut costs by 4.5 per cent.