By the end of the second quarter of this year, Vodafone, Ireland's largest mobile operator, had added 97,000 new customers year-on-year to bring its total Irish user base to 2.2m. O2, its nearest competitor, added a net 32,000 to bring its customer base to just over 1.6m.

But behind the gross customer numbers there's a different story, as the two big mobile operators appear to be moving in opposite directions when it comes to how much each customer delivers to the top line. Vodafone may have gained ground on O2 in the past year by adding more Irish customers, but O2 has managed to overtake its chief rival in terms of revenue per customer.

While Vodafone appears to be pulling away in the race for mobile users, O2 reported a healthier second quarter average monthly revenue of 46.70 per customer, compared to Vodafone's 45.40. Perhaps more significantly, while O2's revenue was up 2% from 45.80 in the second quarter of 2006, Vodafone's figure declined by a more dramatic 6.9% from 48.80.

The reason for the divergent fortunes appears to lie in the kind of customer each company is attracting. Bill paying customers are far more lucrative for both operators than users of pre-pay phones and O2 is achieving a more favourable balance. On the one hand Vodafone had an average revenue per bill paying customer of 94.30 in the second quarter, while O2's revenue was significantly less at 83.80. Yet although Vodafone extracts a higher level of revenue from each bill pay customer, O2 has succeeded in grabbing a higher proportion of such customers: 32% of its customers are bill paying, but only 27% of Vodafone's fall into this bracket.

Moreover, O2 has been more successful in minimising its proportion of pre-pay users, having dropped 28,000 over the past year, while its bill paying user base grew by 61,000. The number of Vodafone prepay customers grew by 50,000 over the same period, while bill paying customers grew by only 47,000.

O2 Ireland chief financial officer Paul Whelan said last week that revenue-per-earner growth had gone up on the back of a rise in average monthly minutes being used and an increase in the number of bill-pay customers. But last week several independent mobile retailers complained that O2 was not supplying them with upgrade handsets for pre-pay users, a move commentators speculated was intended to control costs and possibly to shift pre-pay customers onto bill pay schemes.

Whelan told the Sunday Tribune, however, that O2 was not trying to squeeze customers from pre-pay to post-pay. "The pre-pay market is very competitive and we are still as focused on it as anyone else. Pre-pay customers are very discerning and they are looking for a value across the board and it isn't a balanced view if you are just looking at handset upgrades, " he said.

Vodafone strategy director Gerry Fahy said his company was not concerned about its declining average user revenues and suggested that O2's performance was the result of switching attention from pre-pay. "What has been striking to us is that O2 appears to be standing back from the pre-pay market to a certain extent. You might consider that it is a profit-maximisation strategy, " he said.

KEY FIGURES
Q2, 2006 Q2, 2007

O2
Pre-pay customers 1,147,000 1,119,000
Bill pay customers 452,000 513,000
Total Customers 1,599,000 1,631,000

Pre-pay ARPU /29.40 /30.00
Bill Pay ARPU /88.20 /83.80
Total ARPU /45.80 /46.70

Vodafone
Pre-pay customers 1,544,000 1,594,000
Bill pay customers 545,000 592,000
Total Customers 2,090,000 2,187,000
Pre-pay ARPU /29.30 /27.10
Bill Pay ARPU /102.80 /94.30
Total ARPU /48.80 /45.40