Europe's biggest mobile phone operator, Vodafone Group, has raised investors' hackles by revealing that its Japanese mobile phone business had raised subsidies on handsets to meet competition.
As cut-throat competition for high-spending mobile customers intensifies, some industry experts fear companies are returning to their old profligate ways and selling handsets for well below their cost price to drum up flagging revenues in mature markets.
Vodafone's Japanese unit, J-Phone, stressed the increase in subsidies fitted within its normal annual budget plans and that it still intended to bring subsidy levels down over time.
But this was not enough to temper the sell-off in Vodafone shares, which hit a fresh four year low of 88 pence with 300 million shares changing hands - a quarter of the entire London market's volume. The overall market was down 2%.
Subsidies on phones have been used to sell mobile phones for years, but indebted operators have sought to shift away from them, focusing on making more money from existing customers rather than selling handsets below cost to lure new business.
Analysts say large subscriber numbers for Japanese players are vital as their technologies are not compatible with each other. But the rate of subscriber numbers is slowing in Japan as the market matures. New Japanese subscriber numbers fell 35% to 422,200 in May from the previous month at the country's top operators, according to data released this month.
J-Phone has been gaining momentum in Japan's mobile market with its popular camera-phones. But competition has intensified as rivals NTT DoCoMo and KDDI have rolled out similar models. J-Phone gained 140,200 new users in May but this was down on April's 173,400.
