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Recession hits Vodafone

The Vodafone group is buying back £1 billion of its own shares, which it claims have been undervalued at 14 per cent.

Vodafone shares collapsed last week, falling by 15 per cent on Tuesday, dragging down other telecom groups throughout Europe and the rest of world.

Vodafone is one of the most widely held stock by Irish investors. There are more than 400,000 Vodafone shareholders in Ireland due to the spin-off of the former Eircell from Eircom in 2001.

The stock dropped in value when chief executive Arun Sarin insisted that, though profit forecasts would be met, they would come in at the bottom end of the group’s forecast range, between £39.8 billion and £40.7 billion.

Vodafone had long been considered recession proof, but is now suffering, with market growth slowing across Europe. The company now faces a recession in a saturated market.

The buyback of shares began last Thursday when Morgan Stanley raised the stock value to “equal weight” from “underweight”.

Vodafone is to buy the shares on the London Stock Exchange and the buyback is the biggest since Vodafone spent £6.5 billion on its own stock in 2006.

The company spoke to the media last week about the buyback. “This action reflects the board's belief that the share price significantly undervalues Vodafone," the company said in its statement. Yesterday, Vodafone said sales may be "around the bottom" of its forecast range of £39.8 billion to £40.7 billion.

Chief executive Arun Sarin is to retire in the next week and successor Vittorio Colao is to take over.

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