Vodafone's £2.5bn share buyback

Vodafone wants to concentrate on mobiles

British mobile phone operator Vodafone has responded to demands to return more cash to shareholders.

The company has increased its dividend by 20% and launched a share buyback programme.

The news came as Vodafone unveiled a 26% rise in pre-tax profits before one-off items to £5.4bn for the six months to 30 September.

But after allowing for the revaluation of assets, the firm reported a pre-tax loss of £1.99bn.

Share buyback 'no one-off'

Chief executive Arun Sarin - who replaced Sir Christopher Gent in the summer - said the results were "outstanding".

And he told reporters that the share buyback should take about a year and that there could be more in the long run.

"It's neither a one-off and nor is it a steady thing," he said.

"The board wants to indicate that we've opened up a new way of returning capital to our shareholders."

Earnings before interest, tax, depreciation and amortisation (EBITDA) rose to £6.62bn.

Sales rose by 13% to £16.9bn and the company's customer base grew by 3.2 million to 125.3 million.

Christmas pressure

Turnover in its UK and Ireland business rose 10% to £2.53bn while operating profits climbed 8% to £685m.

Echoing comments made by rival operator MMO2 on Monday, Vodafone said its profit margins could come under pressure in the second half of the year.

This was down to fierce price competition over the crucial Christmas trading period, and also regulator-enforced price cuts in termination charges.

Investors welcomed the results, which were better than expected, and Vodafone shares were trading up 5.75 pence, or 4.6%, at 131.25p by Tuesday lunchtime.