Everything Everywhere, the owner of Orange and T-Mobile, says it has a record number of users on contract.
It said the three months to 31 December saw its strongest quarter of new contract customers to date, with a record 313,000 net additions.
The company, which is the UK's biggest mobile operator, said the increase was due to customers upgrading to smartphones with data packages.
These are largely sold on more profitable pay-monthly contracts.
These generate five times the amount of revenue that comes from pay-as-you-go contracts.
The company also said it was making good progress in cutting costs.
Late last year, it announced it would cut 550 jobs across the UK.
Everything Everywhere made £278m of savings last year, leaving it on track to meet its cost-cutting target by 2014.
Underlying service revenue growth was driven by a 7.5% year-on-year increase in the contract customer base.
The joint venture, which is not publicly quoted, was created by a tie-up between France Telecom and Deutsche Telekom.
Everything Everywhere's chief executive, Olaf Swantee, said the network sharing between T-Mobile and Orange was bringing rewards: "As a result of network sharing and customer experience improvements, we are seeing good commercial momentum and are capitalising on the smartphone and data opportunity to drive underlying growth.