Mobile phone group mm02 said today it expects to outshine industry rivals by growing UK revenues by up to 8% this year.

The Slough-based company said the improved performance reflected demand from new customers to its UK network, who topped 13 million in the final quarter last year.

But mm02 was braced for a "substantial cut" in termination revenues during the next financial year which is expected to wipe £50 million from its balance sheet.

Industry regulator Oftel ruled in 2003 that mobile phone groups must lower charges to customers terminating calls on rival networks.

Chief executive Peter Erskine said: "Although we expect further intense competition in all our markets, we are confident that we can continue to deliver profitable growth in all our businesses."

In a trading update ahead of its full-year results, mm02 also put investors on stand-by for further service revenue growth from its key German market in the coming financial year.

The upbeat outlook came as mm02 confirmed that it expected to meet market forecasts for the 12 months to March 31.

"In the second half we continued to achieve significant growth and performance improvement across the group, and we are on track to deliver all our financial targets for the full year," Mr Erskine added.

Revenue growth of around 15% was expected at 02 UK - ahead of the target established at the beginning of the year.

The group added that its 02 Airwave network was expected to post a substantial increase in revenue after the service was delivered to 35 police forces on schedule.

Around 50,000 police officers in the UK currently use Airwave, which provides combined radio, mobile phone and data technology to replace their outdated radios.

This figure is expected to double over the next 12 months as the new national police communications system in the UK nears completion.

A total of 16 police forces are waiting to be hooked up to the network in a process expected to be completed over the next 15 months, mm02 said.

Outside the UK, mm02 said revenue growth in Ireland for the current financial year would be similar to momentum generated in the first half.

The group told investors last month that its worldwide customer base had topped 20 million for the first time.

Wednesday March 31, 2004