MOBILE phone group mmO2 yesterday said it had a winning year in 2003 thanks to sponsorship of the England rugby team and Premiership champions Arsenal, which built awareness of the brand.

The group posted maiden full-year profits of £95m.

The profits performance is in sharp contrast to a year ago, when mmO2 reported losses of £10.2bn after writing down the value of third generation licences bought at the height of the telecoms boom.

In the UK, mmO2 said sports sponsorships had built awareness of its brand and helped to increase its customer base by ten per cent to 13.3 million.

But mmO2 has warned of an impact from a reduction in termination rates - the price that mobile phone companies charge each other and landline operators for connecting callers to their customers.

James Rainbow, director at investment managers Wise Speke, said: "At the time of the de-merger from BT, no dividend payments were forecast in the short term because the management expected all available funds would be used to finance the development of the company.

"Even though the mobile market is highly competitive, all targets were met and in some cases beaten. Average revenue per user rose, net debt has been reduced and the number of customers is increasing nicely.

"That said, there is still work to do - mmO2 is launching 3G later this year and this will mean costs will increase and margins will be squeezed."