Vodafone shares slumped almost 14% on Tuesday after the group said its full-year revenue would be at the bottom of a previously stated forecast range, denting hopes the Britain-based firm would be relatively resilient to an economic downturn.

“The board of Vodafone Group Plc has considered the market reaction … and has decided to introduce a Ł1 billion share repurchase program with immediate effect,” the world’s biggest mobile phone group by revenue said in a statement.

“This action reflects the board’s belief that the share price significantly undervalues Vodafone.”

Shares in the group were 3.5% higher in early trading on Wednesday, in an overall higher market.

Vodafone said the buyback would need shareholder approval at its annual general meeting on July 29. It will pay up to 105% of the shares’ average closing price on the five business days before the buyback.

Vodafone shares closed at 129 pence on Tuesday, valuing the business at about Ł80 billion.

Analysts at Cazenove said despite the “surprising move,” it was difficult to see the group’s shares staging any immediate and sustained recovery.

“This amounts to around 1.5% of Vodafone’s outstanding share capital or 775 million shares at yesterday’s close; as such, the financial implications are not material with sentiment and management’s confidence being the more important issues to consider,” they wrote.

Vodafone shares fell to a 20-month-low on Tuesday after it said it expected revenues to be around the bottom of its previously forecast range of Ł39.9 billion to Ł40.7 billion due to economic weakness and particular problems in Spain.

The statement hit the entire telecoms sector and cast a shadow over outgoing Chief Executive Arun Sarin’s last results. (Reuters)