Vodafone unveils share buyback

By Kate Holton

LONDON (Reuters) - Mobile phone group Vodafone (VOD.L) moved quickly to defend its share price on Wednesday, announcing a surprise 1 billion-pound buyback programme after its stock crashed a day earlier on a weaker-than-expected trading update.

Vodafone shares slumped almost 14 percent on Tuesday, wiping nearly 11 billion pounds off its market value, after the group said its full-year revenue would be at the bottom of a previously stated forecast range.

The news dented hopes the firm would be relatively resilient to an economic downturn and cast a shadow over the whole telecoms sector.

"The board of Vodafone Group Plc has considered the market reaction ... and has decided to introduce a 1 billion-pound share repurchase programme with immediate effect," the world's biggest mobile phone group by revenue said in a statement.

"This action reflects the board's belief that the share price significantly undervalues Vodafone."

Shares in the group were 0.8 percent higher in afternoon trading, in an overall higher market, valuing the company at about 80 billion pounds.

Collins Stewart analyst Mark James said he expected a relief rally in the telecoms sector on Wednesday, helped by the Vodafone buyback and positive news from Dutch telecoms group KPN (KPN.AS), but he remained concerned about the future.

"We believe that the medium-term outlook for telco cash generation is deteriorating," he said in a note to clients.