British mobile phone giant Vodafone said yesterday it had launched a program to repurchase shares worth £1 billion (US$2 billion) from investors.
The announcement comes one day after the share price of Vodafone had closed down almost 14 percent on a warning that the group’s full-year sales would disappoint the market.
Following news of the buy-back plan, Vodafone’s share price gained 2.75 percent to stand at 132.55 pence shortly after the opening of trade on London’s FTSE 100 index. The FTSE was up 0.84 percent at 5,409.10 points.
Vodafone said in a statement yesterday: “The board of Vodafone Group has considered the market reaction to the group’s interim management statement, issued on 22 July 2008, and has decided to introduce a one-billion-pound share repurchase program with immediate effect.”
“This action reflects the board’s belief that the share price significantly undervalues Vodafone,” it said.
Vodafone said the maximum price it would pay for any share would be no greater than 105 percent of the stock’s average closing price during the five business days preceding the date of purchase.
The buyback would need shareholder approval at its annual general meeting on July 29. It will pay up to 105 percent of the share’s average closing price on the five business days before the buyback, it said.
The mobile group had on Tuesday warned that its annual revenues would be at the lower end of expectations because of difficult trading conditions, particularly in Spain.
In reaction, the group’s share price plunged 16 percent at one stage on Tuesday, but later recovered some lost ground to finish down 13.57 percent at 129 pence.
Tuesday’s news came exactly one week before the departure of Vodafone chief executive Arun Sarin, who after five years in charge was to hand over to his deputy Vittorio Colao.
Vodafone had said that full-year sales were forecast to be at the bottom end of its guidance range of between £39.8 billion to £40.7 billion.
The company partly blamed the outlook on recent economic weakness, especially in Spain, and lower-than-expected equipment revenue.
Spain, like the rest of the eurozone, has been hit by soaring oil and food prices which are fuelling inflation, while its key building sector has been hurt by rising interest rates and the international credit crunch.
Growth in the first quarter was just 0.3 percent over the previous three months, and some analysts have warned the country could slip into recession, which is defined by two consecutive quarters of negative growth.
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