Asda, the UK’s second-largest supermarket chain, is to start selling branded mobile phones to its shoppers through a deal struck with Vodafone.

The deal will be similar to the agreement between Tesco and Telefonica’s O2, under which the UK’s biggest grocer rents airtime on the O2 network. More than one million Tesco customers have so far signed up to the service.

Vodafone, the world’s largest mobile phone carrier, has been looking for ways to increase revenues in western Europe, where many markets have reached saturation point.

News of the deal between Vodafone and Asda, which is owned by Wal-Mart, the world’s largest retailer, came ahead of a presentation on the mobile operator’s businesses in the UK and Germany, its two biggest, and toughest, markets

The company has been looking for new ways to increase revenues, such as selling additional services to its customers, in these markets.

Vodafone said these measures had more than offset the effects of competition and regulatory price cuts, with European revenues up 2.1 per cent in the fourth quarter of 2006.

In the UK, underlying revenues grew 4.8 per cent in the two-month period to the end of February, compared with a 3.3 per cent growth rating for the final three months of 2006.

However, Vodafone warned profitability would be lower in the second half of its fiscal year. The margin on earnings before interest, taxation, depreciation and amortisation for the five months to the end of February was 26.6 per cent, down from 34 per cent for the second half of last year.

Vodafone also announced a deal with DSG International to sell mobile phone services to small businesses through the retailer’s PC World shops.

The partnership will initially see 30 Vodafone Connectivity Centres integrated into PC World stores, with the intention to roll out to further stores.

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