O2, the British mobile phones group about to be taken over by Telefonica of Spain, beat City forecasts in its third quarter - a key period that includes Christmas - to add 1.75 million new customers and take its total customer base to 27.4 million.

In its last trading update before the £17.7 billion Telefonica deal goes through, O2 said it was "particularly pleased" with its performance in the highly competitive UK market and promised to maintain its momentum once it is part of the Spanish phones group.

Today's trading update came as Telefonica declared its offer for O2 wholly unconditional - in a move that will see O2 delisted from the London stock market.

With the takeover all but sealed, O2 shares were barely moved this morning - up 0.5p at 199.75p - although trading volume was heavy with more than 65 million shares changing hands very early on.

Peter Erskine, the chief executive of O2, said: "As we approach completion of the acquisition of O2 by Telefonica, all our businesses are performing well, and we look forward to maintaining momentum as part of Telefonica."

Although some observers argued ahead of today's update that O2's numbers were academic to shareholders because of the imminence of the takeover, the strong showing in UK suggests the domestic market for mobile phones is not yet at saturation point, despite a huge percentage of the population owning a mobile.

Mr Erskine said 895,000 new customers joined O2 in the UK over the three-month period, including pre-pay and contract payers, and that its customer base here had reached 15.981 million - a 12.4 per cent improvement on the same time last year.

Although O2's average revenue per user (ARPU) fell £3 to £272 during the quarter compared with the previous year, this was still £1 a user ahead of the second quarter.

O2 said this showed an underlying growth in ARPU that was no longer being offset by its 30 per cent cut in termination rates in September 2004. Termination rates represent the price mobile operators charge each other to put callers through to their various networks.

As well as the healthy growth in the UK, O2 also grew rapidly in Germany, increasing its customer base by 823,000 to 9.77 million during the quarter - representing year-on-year growth of 32 per cent.

Today's share price values O2 at £17.48 billion.

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