O2, BT's offspring, overtakes its parent and becomes UK's biggest telco

Yesterday BT reported a 45 per cent decline in pre-tax profits and now, just 24 hours later, comes the news that O2, (the company formerly known as BT Cellnet and currently owned by Telefonica of Spain) has grown to such an extent that it now has more UK subscribers than it's former parent. O2 has 21 million customers in Britain for its mobile service whilst BT has 19.4 million landline subscribers.

BT, of course, has no mobile presence in Britain having divested itself of such interests in November 2001 when, not for the first time, and certainly not for the last, found itself strapped for cash.

Telefonica stepped in and bought O2 in 2006 - for £17.7 billion. At the time it was the biggest all-cash acquisition ever seen in the telecoms sector.

When BT decided to sell its mobile arm, analysts were divided as to the likely effects on the company. The cash helped the big incumbent telco to weather some hard times back then but now they those bad days seem to be on their way back and BT is keenly feeling the lack of a mobile division.

Yesterday, BT's current CEO, Ian Livingston, acknowledged the problems his company faces by not having a mobile business when he said that BT "may explore" the notion a getting back into the mobile market in 2010 when the UK government holds a new round of spectrum auctions.

The chief executive also said that proposals by the UK government that operators, who paid out £22.5 billion for 3G spectrum in a ludicrously overblown bidding frenzy back in 2000, should be allowed to keep the bandwidth indefinitely, would be wasteful because a new round of bidding would provide the administration with a handy pecuniary boost. And, oh yes and incidentally, it would also allow BT to use some of its cash pile to parlay its way back into mobile telephony.

O2 has had a very good year and made a lot of hay while the sun was shining.  The company's subscriber base has grown by more than a million  mainly on the back of O2's exclusive deal with Apple to sell the iPhone. Meanwhile, O2's main rivals (Orange, 3, T-Mobile and Vodafone) have managed to add a mere 400,000 between them in an intensely competitive and super-saturated market.

Matthew Key, chief executive of Telefonica Europe, says O2 was the only UK mobile operator to grow revenues over Q3 and bagged the lion’s share of new customers over that period.