O2 Ireland increased its bill-pay customers last year, adding 6,700 in the final quarter of the year.

The bill-pay subscriber base increased by 5.4 per cent, or 38,000, in the 12 months to the end of December 2010, the mobile operator said. This annual rise was driven by increased uptake in mobile broadband and smartphones, O2 said.

Mobile broadband customers rose to 164,000 by the end of the year, rising by 29 per cent in the period between October and December, compared to the same period a year earlier.

The company said it now has 170,000 mobile broadband customers.

However, total mobile customers fell from 1.714 million at the end of 2009 to 1.696 million a year later, indicating that the number of pre-pay users on its network declined.

Service revenue also fell, totalling €191 million for the fourth quarter. This was down from €198 million in the preceding quarter and €207 million for the same period last year.

Despite monthly average blended revenue per user falling to €37 for the 12 months, the average monthly minutes of use in the quarter was 237.7, up from 229.8 for the same period last year.

“2010 was a very difficult year for the telecommunications industry, with the Irish economy still struggling to recover. Competition in the sector also increased significantly,” O2 Ireland’s chief financial officer Paul Whelan said.

“In response to the low levels of consumer and business confidence throughout the year, O2 continued to offer better value for money across our products and services. So while our customers used more of our services - with minutes of usage, texts messages sent and data usage all increasing - they spent less.”

O2 said it was seeing an increase in the use of smartphones on its network, growing 44 per cent year on year and driving data traffic on the O2 network in the final quarter of 2010.

The mobile operator has turned its attention to the rollout of a new high-speed mobile broadband network, known as HSPA+. The new network claims to offer speeds of up to 21Mpbs, and is currently available to those in urban centres including Dublin, Cork, Limerick, Galway, Waterford and Sligo.

The company said there were significant growth opportunities in data in the year ahead as smartphones and mobile broadband proved popular with consumers.

O2 is also examining opportunities outside the mobile communications sector, and recently announced its expansion into the financial services market with its prepaid “O2 Money” card.

On a group basis, Telefonica posted worse-than-expected results as its performance in its home market dragged down results.

The telecoms company posted a 30.8 per cent rise in full-year net profit to make €10.17 billion, below the €11.3 billion forecast by analysts.

Revenue rose 7.1 per cent to €60.74 billion and operating income before depreciation and amortisation rose 14 per cent to €25.78 billion.

Telefonica's domestic business has been pummelled by the collapse of Spain's property boom, saddling Spaniards with debt and intensifying competition in telecoms.

Additional reporting: Reuters