“Confused management and wrong-headed decisions,” one senior Tokyo-based fund manager said, had made what could have been a brilliant strategic move a heavy drag on the overall ambitions of the group.

Vodafone’s embarrassing pullout from the Japanese market comes as a new blast of competition was about to make its life in Japan even harder. Two new entrants have won operator licences and are on the brink of triggering a price war that the British group can ill- afford.

The Japanese Government is also about to upset the cosy status quo by introducing number portability this year, a move certain to create unprecedented customer churn.

In 2004 Arun Sarin, the chief executive, promised that by March 2006 Vodafone would have ten million global third-generation customers, of whom half would be based in Japan. The Japanese unit managed to stem heavy customer losses only last summer, and the pick-up in 3G subscriber numbers has never come close to the required rate.

As the target has loomed, Mr Sarin’s comments have included hints that the future of the Japan unit was bleak: he previously said that he was “not married to any asset”. When Bill Morrow was appointed chief executive of Vodafone Japan this time last year, he was given until this month to fix the company. By summer he unveiled a recovery strategy that few analysts found convincing and which even he admitted contained no “wow factor”.

The industrial logic behind Vodafone’s expensive foray into Japan was that such a vibrant market would give it a technological edge over domestic and European rivals. In the event, Vodafone has proved to be a slow learner and had very little success exporting to the rest of the group the handful of cutting-edge technologies that it has perfected in Japan. In Japan itself, by the company’s own admission, it has never produced a “must have” handset.

The British company has watched helplessly as its big Japanese competitors have beaten it to the introduction of countless innovations, including the Edy or Suica payment systems built into the handsets of rival operators that allow cash-free purchases of anything from canned drinks to a three-course lunch.

Japan has also been the scene of one of Vodafone's most spectacular errors of judgment — the decision to introduce a range of clunky 3G Nokia handsets from the European market. Japanese customers ignored the phones, dealing a heavy blow to Vodafone’s already delayed 3G roll-out.

Marketing techniques that played well for Vodafone in Europe have also not stood up to the rigours of the Japanese market and its well-informed, service-conscious customers. Vodafone trailed its rivals NTT DoCoMo and KDDI in introducing 3G services, and when it did get around to doing so, the services were uninspiring.

Merely keeping pace with DoCoMo has proved to be a cripplingly expensive business. Last year Vodafone was forced to announce the investment of more than £1.3 billion in a desperate bid to bring its often weak-signalled 3G network up to scratch with rivals.

Other elements of Vodafone’s rough ride in Japan have been the product of bad luck. In 2004 the company bet on the Japanese market for pre-paid handsets and managed to claw itself into a leading position. All was going well until the Japanese Government identified such unregistered phones as a boon for organised crime and threatened to regulate the pre-paid market out of business.

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