Vodafone will embark on a £1.5 billion share buyback after receiving a $3.8 billion cash dividend from its stake in Verizon Wireless in the US.

The company will return the capital to shareholders despite revealing £5.9 billion of impairments following a further deterioration in many of Europe's mobile telephony markets resulting in an interim £492 million pre-tax loss.

The company admitted its overall performance in the first half of the 2013 financial year had been “slightly below our expectations” as a result of a further weakening in the macroeconomic environment.

It warned that business conditions would be similar in the second half.

Service revenues adjusted for acquisition activity and foreign exchange declined by 0.4 per cent to £20.2 billion, dragged down by a fall of almost 10 per cent in revenues in southern Europe.

Its business units in Spain, Italy and Greece are fighting against worsening economic conditions.

On a reported basis, group revenue was down 7.4 per cent to £21.8 billion.

In Ireland, where Vodafone does not break out financial performance, the company reported a 6.7 per cent increase in the number of smartphone users in the quarter to 877,600, up from 823,000.

Vodafone Ireland’s contract base stood at 760,600, representing slight growth of 1.1 per cent on the previous quarter. Fixed-line voice and broadband subscribers remained almost unchanged at 242,000 at the end of the quarter.

Shares in the group, which have underperformed the FTSE 100 this year, fell 4.6 per cent in early afternoon trading to 158.98p before rallying toweards the close to end 2.46 per cent weaker.

The pre-tax loss of £492 million compares with an £8 billionn profit last year. Vodafone reported a basic loss per share of 4.01p, mainly because of the impairments. – Copyright The Financial Times Limited 2012