Vodafone feels the pressure


Shares in Vodafone fell to a 4½-year low yesterday, as investors reacted to news that J-Phone, the Japanese operator it owns, was increasing subsidies on its high-end handsets. The shares closed down 3½p at 91p sterling, briefly falling below 90p for the first time since January 1998 to touch 88p.

Analysts said pressure on the shares had increased following a revenue warning on Thursday from Sprint in the US and a sector-wide downgrade of US wireless stocks by Merrill Lynch, including AT&T Wireless, Sprint, Nextel and Triton. Sprint had warned that full-year revenues would be lower than expected and wireless subscriber growth in its mobile phone division, Sprint PCS, would be 10-15 per cent lower than anticipated.

But concerns about margins at J-Phone, which reported a 6.7 per cent fall in subscriber numbers earlier this week, also contributed to the falling share price, according to Mr Jamie Mariani, analyst at ABN Amro.

Vodafone raised subsidies on high-end handsets by about 2,000-2,500 yen, to "embed new terminals into customers' hands and then generate higher margin revenue growth", he said.

Mr Mariani said the subsidies at J-Phone were unlikely to affect Vodafone's ability to meet expectations, but could mark the start of a worrying trend of rising customer-acquisition costs for mobile phone operators worldwide.