Vodafone in surprise share move

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Vodafone has said it will buy £1bn of its own shares after a disappointing trading update prompted a sharp fall in its share price on Tuesday.

Its shares fell 14% to 129 pence on Tuesday after it warned revenue would be hit by an economic downturn. They rose 1.9% to 131.4 on Wednesday's news.

The buyback plan is subject to approval from shareholders.

Vodafone said the buyback "reflects the board's belief that the share price significantly undervalues" the firm.

On Tuesday, Vodafone's chief executive Arun Sarin, due to step down later this month, said the company faced a more "challenging operating environment".

Vodafone said that revenue in the year to 31 March 2009 would be at the bottom of the predicted £39.8bn to £40.7bn range.

However, Vodafone added that cost cutting would mean that its profits for the current financial year were still set to meet its original forecasts.

The company still expects to make operating profit of £11bn to £11.5bn, with emerging markets forecast to perform strongly.

However, the firm is experiencing problems in Europe, particularly in Spain, where its business faces falling revenue and slowing customer growth.

Mr Sarin will be replaced by his deputy Vittorio Colao.