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LONDON : British mobile phone giant Vodafone said on Wednesday it planned to repurchase 1.0 billion pounds' (1.3 billion euros', 2.0 billion dollars') worth of its shares, saying the company was "significantly" undervalued.
The announcement came after the price of shares in Vodafone had fallen by almost 14 percent on Tuesday in the biggest one-day fall in its history, after warning that full-year sales would disappoint the market.
After news of the buy-back plan, Vodafone's share price gained 1.40 percent to 130.80 pence in midday trade on London's FTSE 100 index, which was up 1.25 percent at 5,431.30 points at about 1110 GMT.
On Wednesday, Broker Collins Stewart downgraded Vodafone, lowering its target price to 129 pence per share.
"As Vodafone's first-quarter has shown, not even telecoms are immune to an economic slowdown," the broker said in a report to clients that was quoted by Dow Jones Newswires.
Vodafone said in a statement on Wednesday: "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 programme with immediate effect.
"This action reflects the board's belief that the share price significantly undervalues Vodafone," it added.
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.
On Tuesday, the group warned that annual sales would be at the lower end of expectations because of difficult trading conditions, particularly in Spain.
In reaction, the group's share price plunged by 16 percent at one stage 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 39.8-40.7 billion pounds (50-51 billion euros, 79-81 billion dollars).
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. - AFP/de
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