THE telecoms watchdog's intervention on mobile phone charges may slow mmO2's revenue growth.

The firm, formerly known as BT Cellnet, said growth would slow significantly in the next six months as a cut in termination rates - the price mobile firms charge each other and landline operators for putting callers through to their customers - takes effect.

Mobile phone operators were ordered to cut their charges after a report from the Competition Commission was accepted by telecoms watchdog Oftel in January.

Rival networks Vodafone, Orange and T-Mobile contested the decision in the high court in June but lost the case.

MmO2 said it was still likely to meet its target of a ten per cent increase in call revenues in the UK during the current financial year, after seeing growth in the mid-teens during the first half, which ends today.

Strong revenue growth in the first half had been driven by success in building up its customer base as well as getting them to spend more.

As a result, first-half figures, due out in November, are expected to show further growth in Average Revenue Per User (ARPU), the key industry measure.

In a trading update, mmO2 said margins were expected to have demonstrated steady progress towards its full year target of 30 per cent.

The company said that, although the termination rate cuts would have an impact on margins, it was still on course to meet the target.

Chief executive Peter Erskine said: "The strong customer and ARPU growth that we reported across the group in the first quarter was sustained into the second quarter, and our first-half results will reflect this."