There are now more mobile phones in the UK than people, according to a report from management consultants Analysys.

Mobile penetration in the UK, Sweden and Italy rose to 101 per cent, 103 per cent and 104 per cent respectively in 2005. The company expects the rest of Europe to reach 100 per cent by 2007, largely due to customers with more than one phone.

Attempts by some countries to move customers from pre-pay to contract services have hurt growth, and the report suggests that pre-pay customers may give as good financial returns as contract customers once growth rates in the market are factored in.

"In countries such as France and Germany operators have an opportunity to increase penetration by marketing pre-paid offerings, which is often the best way to attract certain segments of the population. But they should not lose sight of profitability," said Alex Zadvorny, co-author of the Analysys report.

"Average revenue per user [ARPU] in Italy has been in line with the western European market average and registered the slowest decline among the major European countries between 2000 and 2004. It is a good example of how the prevalence of pre-pay does not necessarily suppress ARPU."

The report will make encouraging reading for mobile phone providers. Revenues are forecast to rise by nine per cent a year until 2007 as people access more data services from their phones.

Analysys also found that 3G phones are effective at increasing revenue, but warned that more work is needed on improving ease of use and making pricing more transparent.