The number of mobile phones in the UK has continued to surge as they maintained their position as the most popular Christmas present for the second year running.

More than four million phones were sold in the last three months of 1999, with the majority sold in the last few weeks before Christmas.

The third largest network, Orange, topped the network table with 1.4m new customers added in the three months between September and December to take its total customer base to more than 5m.

The UK's largest mobile phone provider Vodafone saw 1.075m new customers subscribe to its network, bringing its total customer base in the UK to 8m.

The second-largest network BT Cellnet reported an increase of 1.001m new customers. Its customer base now totals 7m.

And One2One, the smallest mobile network, added 900,000 new users in that period, taking its total customer base to 4m.

An additional 100,000 customers bought a Virgin mobile phone. Virgin has a joint marketing deal with One2One.

The majority of customers signing up to both the Orange and One2One networks bought pre-pay phones. More than half of One2One's customers use pre-pay rates, which allow teenagers and others who do not have access to a bank account or credit card to use mobile phones.

Discounts on the pre-paid rates, announced in October, helped stimulate sales.

Orange also said that the churn rate - the number of people who cancel mobile phone contracts with the company each year - had declined to 15.8%.

Orange chief executive officer Hans Snook said: "1999 has been a phenomenal year for Orange. Our strengths in network quality, overall value for money and innovation are increasingly recognised and one in 12 people are now Orange customers."

More phones than houses

The total number of mobile phones in Britain - 24m - now exceeds the number of separate households. About 40% of the population now owns a mobile phone.

The rapid spread of mobile phone ownership has boosted the shares of companies like Vodafone, now the largest in the stock market, and led to a struggle for control of mobile phone markets across Europe.

Orange has been bought by Germany's Mannesmann, which is itself the subject of a fierce takeover battle from the UK's biggest mobile phone operator Vodafone.

The battle is likely to intensify in the next few years, when the next generation of mobile phones are introduced, which are capable of receiving a full internet service, including video and audio.

Free calls

For some new customers, their mobile phones came with an unexpected bonus - free calls.

A glitch in some Motorola phones sold at the Link to BT Cellnet customers who bought pay-as-you-go services meant that they could use the phones for free, without having to buy any airtime.

More than 500 people have contacted BT and the company was in the process of tracing the rest and replacing the affected phones, a spokesman said.

"Most customers have already rang in because it appears on the handset that it is a fault," he said. "Many do not realise that another consequence is that they can make free calls."