Mobile phone group Vodafone announced a surprise £1 billion sterling share buyback programme this morning, saying a big share price fall in the wake of its trading update yesterday left the stock undervalued.

Vodafone shares slumped almost 14% yesterday after the group said its full-year revenue would be at the bottom of a previously stated forecast, denting hopes the it would be relatively resiliant to an economic downturn.

'The board of Vodafone Group has considered the market reaction to the group's Interim Management Statement and has decided to introduce a £1 billion share repurchase programme 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,' the statement added.

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

Vodafone shares were up almost 2% to 131.4p in London this evening.