After the slowdown, are we witnessing the return of mobile phone mania?

Recent data from the UK's mobile phone operators would suggest the industry is rising to the challenge of proving there is still plenty of growth to be had.

Orange yesterday became the latest of the UK's four mobile phone operators, after rival mmO2, to announce improving financial trends across the board.

"Orange continues to deliver an improving profile of new customer growth, as well as rapidly growing voice and non-voice revenues," Graham Howe, the deputy chief executive, said.

Anecdotal evidence would seem to back up the industry's new-found optimism. High street phone retailers have, apparently, never been busier.

Signing up the tennis stars Steffi Graf and Andre Agassi to advertise the T-Mobile service, owned by Deutsche Telekom, has obviously been worth it while O2's general advertising campaign and sponsorship of Big Brother, the Channel 4 television programme, also looks to be paying off.

Consumers are champing at the bit to get their hands on the latest phones with some new gadgets, such as camera phones, selling out before they have even hit the stores.

That can only be good for the operators, who need consumers to start using the new services those gadgets offer – such as taking and sending photos, to boost sales.

But with the industry on the cusp of another major shake-up, as the operators prepare to launch third-generation, or 3G, mobile services, the battle has barely begun, let alone been won.

And the UK market, in particular, is about to get even more competitive thanks to the impending launch of a fifth player – 3, formerly Hutchison 3G – in November.

Given that mobile phone penetration is now at more than 70 per cent in the UK market, implying the major growth phase is over, the mobile operators have to find other ways of increasing revenues.

They also have to prove that the billions of pounds they spent on buying up 3G mobile phone licences, to launch new services, will pay off.

And so the battle is on not only to get the most lucrative customers but also to make them spend even more, thereby increasing their so-called average revenue per user figures.

"Longer term if they [mobile phone operators] don't want to be viewed, and valued, as utilities then they are going to have to grow," said one analyst who did not want to be named. "And if mobile operators want to grow they must increase average revenue per user."

Orange yesterday showed it was making headway on that score. In the second quarter to 30 June, its average revenue per user in the UK increased 2 per cent to £252 from £247.

"We have now had two successive quarters of increasing average customer revenue in the UK," Mr Howe said. Of Orange's 12.8 million UK customers, about a third are the more lucrative 'contract' customers as opposed to those on pre-pay, or pay-as-you-go, deals.

It is not alone. Last week, mmO2, formerly BT Cellnet, said its average revenue per user in the UK in the same quarter rose to £234 from £231 in the previous quarter. It has about 11.2 million UK users.

And Vodafone, which reports its quarterly performance data on Monday, is also expected to announce improvements. "We expect average revenue per user to show improved trends, helped by seasonality and improving customer mix," analysts at Goldman Sachs said.

Furthermore, all the operators believe their improving performance is not just a one-off and that the growth can be maintained going forward.

"The building blocks for further revenue growth beyond voice, including the new generation of handsets and a diversity of new services that meet the customer needs, are beginning to drop in place and their impact will build progressively over the next year," Mr Howe said.

Mr Howe says he has "no doubt" there will be "huge growth" in new-fangled mobile services in the future. "It's just a question of when that will happen."

Orange said yesterday that usage of non-voice services, such as text messaging continued to grow and contributed 13.9 per cent of its UK GSM network revenues in the first half, up from 9.6 per cent a year before.

But to keep the average revenue per user numbers going the right way, the mobile phone companies have, very simply, got to hang on to the customers they already have as well as persuade them to spend more.

"The only way they can do that [increase average revenue per user] is to increase the services they offer. To do that they must go to 3G and the mobile internet," one analyst said.

The operators are convinced that customers will, over time, be prepared to spend more on 'mobile data'. To that end, they are all launching, or have launched, picture messaging services that allow users to take photos with a mobile phone and send them to other phones or to e-mail addresses.

Other services, such as watching video clips on mobile handsets and sending video messages, are expected to follow once 3G networks are up and running.

The problem is that many analysts believe that while consumers might be keen to buy the new gadgets and try out the new services, the services may not prove as popular as, for example, text messaging has.

"Our review of the mobile data market suggests that while technical issues are gradually being resolved, there still seems to be significant confusion as to how mobile data will deliver the kind of growth operators and equipment manufacturers desperately require," analysts at Credit Suisse First Boston said.

The new mobile services are also likely to take much longer to reach mass-market status than people expect and they will also require users to upgrade their handsets. The latter will not happen overnight.

Indeed the CSFB analysts reckon a mass mobile data market, in usage terms, is unlikely to appear beyond South Korea or Japan before 2005-06.

And against that backdrop, the UK's mobile phone industry is left facing significant regulatory issues, which could see them have to adopt hefty price controls.

The Competition Commission indicated earlier this week that it was minded to side with the telecoms regulator Oftel by clamping down on the cost of making calls to mobile phones.

But for the time being, the performance of the operators looks undoubtedly to be on the up. How long it will stay that way is another matter. The only sure thing seems to be that the battle for the big-spending customers is likely to intensify further still and that, in itself, will surely have an impact.