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Last Updated: Tuesday, 30 January 2007, 16:45 GMT
Mobile firms 'in profit squeeze'
Nokia N73 X-Series phone, using Slingbox to watch BBC Two
Only new services will boost profits, the report suggests
Mobile phone firms are seeing their profits squeezed as customers switch providers to get the best deal available, research suggests.

Profits per customer among UK mobile operators fell nearly 10% in 2006, a report by Group 1 Software found.

The findings mean the UK had the lowest profitability rate per customer in Europe, below Germany, Spain and Italy.

Mobile phone firms face an increasingly tough market, as demand grows for other services such as e-mail.

Targeted offers

The research found that preventing customers from "defecting" to other providers would be the main challenge for firms in the future.

The industry already has a reputation for a high churn rate - the term used to describe customer turnover - with one in three customers regularly switching providers.

In the UK, profitability per customer was 57 euros (39) versus 60.10 euros in Germany, 69.10 euros in Spain, 81.8 euros in Italy and 82.30 euros in France.

Group 1 said falling profits per customer could imply that the cost of acquiring and retaining customers was becoming "unaffordable".

Mobile firms would need to offer other services to increase their profit per customer, it added.

Group 1's Andrew Greenyer said providers "driven to providing a customer-centric approach to deliver targeted offers to different customer segments will benefit".

The research looked at the big mobile operators including Vodafone, Orange, O2, T-Mobile and Three.

Combined, the firms had 68.4 million users at the end of 2006.

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