Declining ARPU from its post-paid customers helped squeeze revenues at Telefonica Germany’s mobile operations (O2), which fell by 3.3 per cent to €733 million for the three months ended 31 March.

As contract customers have sought cheaper tariff deals in an increasingly competitive market, post-paid monthly ARPU slumped by 9.5 per cent, to €19.3, compared with Q1 2012.

Overall ARPU, which includes pre-paid customers, fell by 7.1 per cent, to €12.5.

Regulatory pressures have taken their toll, too. Recently-listed Telefonica Germany is keen to point out that, were it not for cuts in mobile termination rates (MTRs), year-on-year wireless revenues would have increased by 0.5 per cent during Q1, rather than fallen.

More encouragingly for shareholders, mobile data revenue is growing steadily, reaching €354 million during Q1, up 5.5 per cent year-on-year.

And as a result of increased smartphones penetration, non-SMS data revenues grew by 24.1 per cent year-on-year. Non-SMS traffic now generates 63.4 per cent of mobile data revenue, up 9.5 points.

Handset revenues reached €180 million, a year-on-year increase of 23.5 per cent. An increasing mix of high-end smartphones sold has helped here. By the end of Q1 2013, 27.9 per cent of O2’s customers were smartphone users, compared with 21.1 per cent a year ago.

As of 31 March 2013, Telefonica O2 had 19.3 million mobile subscribers, up 3.9 per cent. Of that number, 10.2 million were post-paid, up a healthy 7 per cent.

When including its fixed-line operations, total Q1 sales at Telefonica Germany fell by 2.3 per cent, to €1.23 billion.

The Germany operation as a whole managed to slightly increase its operating income margin, from 22.3 per cent to 22.6 per cent. But operating income before depreciation and amortisation fell 0.7 percent, to €278 million, which, according to a Reuters report, missed average analysts’ expectations of €293 million.

In separate news, Telefonica Germany has signed a Memorandum of Understanding with Deutsche Telekom to access the high-speed fixed-line network of the incumbent.

“High-speed internet is the future,” said René Schuste, Telefonica Germany’s chief executive in a statement. “Together with our heavy duty mobile data network, we will be able to further advance our convergence strategy.”

Telefonica Germany, which is 79.86 percent-owned by Telefonica, was listed on the Frankfurt stock exchange late last year.

The Telefonica Group will announce its Q1 2013 results on 8 May.