Vodafone buy back plan could pose opportunity for investors

Following Vodafone's surprise decision to buy back £1bn of its own shares Nick Raynor, Investment Adviser at The Share Centre, comments on what this means for investors.

"Vodafone has announced plans to buy £1bn of its own shares after a trading update caused a sharp fall in its share price on Tuesday. Whilst sales have slowed in the UK, Vodafone's Spanish operations have been worst hit by a fall in consumer spending and the ongoing bite of the credit crunch.

"The mobile phone giant feels it is currently undervalued after yesterday's falls, and this is why it has decided to implement the buy back scheme. The value of shares it is planning to buy back is only 1.5% of Vodafone's current market capitalisation (company value) so it could be seen as a symbolic gesture to try and stabilise the share price and reassure shareholders.

"After the recent fall in the share price we still feel Vodafone is an attractive prospect for those investors looking for growth or indeed for income seekers, as it is now offering a yield of over 5%".

Vodafone has said that it still expects to hit its forecast for this year, albeit at the lower end of its previous estimates, but stands by its guidance for adjusted operating profit of £11bn-£11.5bn and free cash flow of £5.1bn-£5.6bn.