Like AT&T, O2 Pays the Price for Heavy iPhone Usage

AT&T (s t) isn’t the only operator whose network shortcomings have been exposed by data-hungry iPhone users. O2 — which until recently was the only UK operator to carry Apple’s (s aapl) gadget — said it will spend $166 million over the next several months to shore up its network to meet ever-increasing demands from smartphone users. Additionally, the carrier said it will build 40 new cell sites in and around London in advance of the holiday season.

Like AT&T, O2 has drawn criticism regarding its network performance as smartphone usage increases. The increased traffic is directly attributable to the iPhone 3G S and the Palm (s palm) Pre, which are the best-selling devices on its network, CTO Derek McManus said in a release:

“World-class smartphones have brought about an unprecedented demand on mobile data networks,” according to McManus. “Data on our network has increased 20-fold in the last year alone. As a result, we have recently experienced some isolated pressures in London where there is the highest concentration of smartphone users.”

O2 has effectively leveraged its exclusive iPhone deal, gaining nearly 300,000 net mobile subscribers in the third quarter and emerging as the only UK operator to increase revenue in the first nine months of the year. The company isn’t likely to keep up that pace as rival carriers begin to offer the iconic device, but if O2 can address its network problems it could retain its crown as the top carrier in the region — until Orange (s fte) and T-Mobile consummate their merger, anyway.