Dividend pleaser as Voda beats forecasts

Chief executive Arun Sarin said the gains came from rapid growth in emerging markets such as Turkey and India while Europe benefited from people talking more, using data services and tighter cost controls.

"Rigorous execution against our strategic objectives has been key to our performance in the first half of the year," Sarin said.

"We have improved our outlook expectations for the full year, and the board has increased the interim dividend by 6% to 2.49p, enhancing returns to our shareholders."

City analysts had been looking for Vodafone to improve its guidance for the full year. The shares have enjoyed a strong run recently, hitting an all-time peak of 194p at the end of last month. Today they rose 6.7p to 188.7p.

Sarin said Vodafone welcomed Google's move into mobile and the launch of the iPhone, where Vodafone was beaten by O2 for the UK distribution rights. He said: "These are all good things for our industry because they raise the pace of innovation and usage demand. Here at Vodafone Live we will and can compete with them on things like maps, music and other downloads."

Vodafone bought Vodafone Essar in India for £5.5 billion last May, beating local rival Reliance Telecom. The previous year, it spent more than £2 billion buying up Telsim Mobile in Turkey. In the latest six months, Turkey showed 29% growth while India grew by 50%.

Telkom, Vodafone's South Africa partner, will complete a strategic review in the next month. Sarin said he is interested in its 50% stake in their mobile joint venture Vodacom "at the right price", but not in Telkom's fixed-line network. Analysts say the 50% could be worth up to $10 billion (£4.8 billion).

In Europe, Vodafone raised revenues by 2% despite price cuts averaging 19% across the Continent and including average cuts of about 20% in the UK. Sarin said: "For consumers, it remains good news because prices are still headed in one direction, and that is down."

Overall first-half revenues rose 9% to £17 billion, of which 4.4% of the growth was organic and the rest from acquisitions. Operating profits grew 1.6% to £5.2 billion and headline earnings were up 7.4% at 6.42p. The worldwide customer base rose by 35 million to 241 million.

Sarin increased the operating-profits target for the year to next March by about £100 million to between £9.5 billion and £9.9 billion. He also raised the forecast for free cashflow by almost £500 million to between £4.4 billion and £4.9 billion.

Assuming there are no more huge writedowns such as Vodafone incurred in recent years, reflecting takeovers it made in the telecoms boom at the start of the century, the group will report its first full-year pre-tax profit for three years in the year to March 2008.

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