MOBILE phone group Vodafone has grown its customer base to 139.2 million despite reporting tougher conditions in many of its markets.

The Newbury group said it had attracted 3.1 million users in the three months to June 30, including a seven per cent increase in the UK.

Its customer base was also boosted by 2.7 million customers in Japan from its buy-out of minority investors.

Reporting its performance indicators for the quarter, Vodafone said the 12-month rolling average revenue per user (Arpu) -a key industry measure -was ahead by £5 to £314 in the UK.

The group said Singlepoint, the mobile phone service operation it bought for £405m from millionaire entrepreneur John Caudwell last year, contributed 80 per cent of this increase.

But lower spending by new users meant the Arpu in Germany declined, while higher market penetration and growth in pre-paid customers kept revenues under pressure in Japan.

Shares in the company fell to a ten-month low of 116.25p on Friday as investors fretted about the weak Japanese market and the impact of expanding third-generation services on profitability.

Analysts hoped the company would use yesterday's statement to announce a restructuring of its operations in Japan, where service revenues fell by six per cent during the quarter.

But Vodafone remained tight-lipped on its plans in Japan, although it confirmed its outlook for the company during the year to March.

Chief executive Arun Sarin said Vodafone had made a very strong start to the year, with good performances in customer and revenues growth.

He said: "With over 139 million proportionate customers, our business is progressing well, despite a tougher competitive environment in some markets."

Vodafone has faced increased competition in the UK and Germany from mobile network 3, which is owned by Hong Kong conglomerate Hutchison.