O2 plans jobs revamp as growth stalls

The mobile phone group O ₂ warned that its UK revenue growth would slow this year as it announced plans to hire 2,000 workers to handle its retail and customer service operations over the next two years.

The mobile phone group O ₂ warned that its UK revenue growth would slow this year as it announced plans to hire 2,000 workers to handle its retail and customer service operations over the next two years.

The shake-up of its UK operations would result in 500 job losses, the company said, as it made room for the new jobs by axing administrative staff.

Announcing a trading statement before the end of its financial year on 31 March, O ₂ said it was on track to meet City expectations for earnings, which on average were £1.75bn. But it said underlying earnings per share would be below the mid point of the 8p-9p estimates published by City analysts, which reflected higher depreciation and amortisation charges.

The cautious outlook for the new financial year on sales caused the company's shares to fall 4.9 per cent.

Peter Erskine, the chief executive, said: "Looking ahead to 2005-06 in the UK we expect mid single-digit service revenue growth, as new customer growth slows across the market." He said full-year results due to be published in May would show that in the second half of the year revenue growth started to slow, which it blamed on price controls over termination rates. These are the charges that mobile operators can levy for handling calls from other networks. These were cut by 30 per cent last September.

O ₂ also said revenues in the second half were hit by the loss of a contract to operate BT Group's new mobile phone service across its network. This business went to Vodafone.

But a bright spot remains Germany, where the company said revenue growth would be "strong" for the full year.

The company's investments in new, third generation technologies meant that capital expenditure would be at the top end of the £1.3bn to £1.4bn range that it had indicated to the City.