O2 is embarking on a massive upgrade of its network, in response to burgeoning demand for internet services from smartphone users.
The program of improvement is intended to upgrade the network's capacity for handling data and will commence in London with the installation of 40 new hotspots by the end of 2009.
A further 160 will be set up in the capital over the next 12 months, with 1,500 also planned in locations across the UK.
Derek McManus, chief technology officer at the Telefonica subsidiary, said: "Anticipating growth in demand for mobile services, we have quarter on quarter increased investment in our voice and data networks.
"Our £500 million investment over the past two years has enabled us to offer the best products in the world, including the Apple iPhone and Palm Pre. In the past 12 months the mobile industry has seen an unprecedented change in demand."
Mr McManus claimed that viewing a YouTube video on a smartphone equates to the same drain on the network as sending 500,000 text messages simultaneously.
O2’s announcement comes as rival Orange iPhone carrier announced a new advertising campaign for the handset. This will focus on the carrier's industry-leading, extensive 3G mobile network coverage and the superior mobile internet experience this provides for its customers.