Virgin Mobile yesterday admitted that the number of new customers had nearly halved in the first quarter - but insisted its move into the contract market had proved successful.
The UK's fifth largest mobile phone company attracted 77,000 active new users - those who have used their mobile phone SIM cards in the last 90 days - in the three months to June 30, compared with 150,000 during the same period last year.
Virgin was hit by factors such as the increasing tendency for people to switch from operator to operator, as well as its decision to focus on more "quality" customer additions.
But the firm, which had until recently only offered pre-pay deals, said its new contract service had made a strong start since it was launched earlier this year.
Virgin differs from rivals such as Vodafone and O2 in that it operates as a " virtual operator" which uses the network of T-Mobile. Most of its business comes from customers buying pre-pay vouchers to top up the credit on their mobile phones.
The company employs 1,400 staff at three sites in London, Trowbridge and Daventry.
Chief executive Tom Alexander yesterday said that it was too early to give specific figures, but insisted Virgin Mobile Pay Monthly had made a " powerful start" and provided a "substantial source" of growth.
Annual revenues per user fell to £123 from £127 the previous quarter, in line with expectations following a recent cut in call charges imposed on mobile phone operators by regulator Ofcom.
Growth in service revenues slowed to 6.8 per cent, although the underlying figure excluding the Ofcom move was 18.3 per cent.
The company said it remained confident of achieving full-year service revenues growth in the mid- teens for the full financial year. It pointed out the seasonal nature of its business, which is traditionally stronger in the second half of the year.
Mr Alexander said the results showed that Virgin Mobile continued to grow strongly and thrive in a competitive market.
He said: "We are confident our performance and momentum will deliver another successful year."
Corporate affairs director Stephen Day also said: "We're very comfortable with the subscriber growth figure.
"We do think there is a bit of a slowdown across the market in terms of net adds, but there is no slowdown on the high street."
With as many mobile phone cards as people, the UK has become one of Europe's most mature mobile phone markets. Growth now hinges in part on luring customers from other service providers and convincing subscribers to upgrade phone models.
Virgin Mobile, which is majority-owned by UK entrepreneur Sir Richard Branson, is smaller than rivals such as O2 and Vodafone Group with 4.1 million active subscribers, but some analysts expect it to have topped its larger peers in terms of customer additions.
"The absolute level of customer growth for Virgin is probably below what the consensus was looking for - but they were very confident," said Christian Maher, telecoms analyst at Investec.
He added that new contract phone deals would make more of an impact in the second half of the year, ARPU appeared to be on the rise and regulatory price cuts of about 30 per cent on the prices mobile phone companies charge for delivering calls from other UK networks would no longer apply.