FOR a small town like Newbury, the growth of Vodafone has been big news indeed. Newbury has a population of only 32,000; about 3,500 work at the mobile-phone giant’s “global headquarters”, a £120m development on the edge of the Berkshire town.

The building of the headquarters even rates a mention in the Wharf mosaic — a Bayeux tapestry-style tableau of local history set into the pavement in the town centre. Judging from this, the construction of the Vodafone HQ was the most exciting thing to happen in Newbury since the row over the bypass in the mid-1990s.

Wags in the mobile-phone industry refer to the Vodafone campus as Planet Newbury — “the only place where it is still possible to believe that bigger is always better”.

This is not a view widely shared by the company’s shareholders, increasingly fed up with Vodafone’s lacklustre share-price performance. The group’s management, led by chief executive Arun Sarin, promises further growth and a bright future, but many investors remain unconvinced.

With little in the way of returns to show for Vodafone’s billions of pounds of investment, investors are losing confidence in the group’s global strategy. Despite this, Sarin has continued the company’s international spending spree, last year shelling out another £6.6 billion for assets in Romania, the Czech Republic, India, South Africa and Turkey.

Some shareholders would like Vodafone to rethink what it is doing. And the appointment of Sir John Bond as chairman from next July could present the perfect opportunity.

Some critics want Vodafone to sell its struggling Japanese business; others want it to pull out of America. A third group believes the chief executive is the problem. “Bond will have a three-month window of opportunity when it will be possible to sack Sarin,” said one analyst.

Vodafone began its global push in earnest in 1999 when, under the leadership of Sir Chris Gent, it bought AirTouch of America. Within a year, the company had combined its US assets with the mobile arm of Bell Atlantic to form Verizon Wireless, and acquired the German giant Mannesmann in a £101 billion takeover.

Even as the telecoms bubble deflated, Vodafone carried on spending, buying into companies in France, Spain, Japan and elsewhere.

Today Vodafone is both financially strong and hugely profitable — it recently reported half-year operating profits of £4.5 billion. But shareholders have seen little reward from the enormous scale of the telecoms giant’s operations.

At 127Åp on Friday, the shares trade at less than a third of their peak in 2000. While much of this reflects the wider decline in telecoms valuations, Vodafone has continued to underperform the FTSE 100, even in the past two years.

John Karidis, an analyst at Man Securities, has attempted to estimate the amount of value destruction since 1999, adjusting for the reduced value of the shares that were issued to acquire AirTouch, Mannesmann and others.

As the top table shows, Vodafone issued £69.1 billion of shares to fund its expansion, and spent another £27.1 billion in cash. This includes the £13.3 billion it paid for “third-generation” mobile licences, and is net of disposal proceeds, principally from the sale of Orange to France Telecom.

Karidis has conservatively valued Vodafone’s original (UK) business at £5.4 billion, making a total shareholder “bet” of £101.6 billion.

For this investment, shareholders have received dividends to date of £7.8 billion, and today hold shares worth £81.8 billion. In other words, the “bigger is better” strategy has destroyed £12 billion.

Karidis said the value Vodafone had destroyed was arguably £5 billion more than this because the strong performance of its British business since 1999 could justify a much higher initial valuation.

Sarin has assured investors that Vodafone will reap the benefits of his One Vodafone project — pulling the numerous operations together to wring out savings and efficiencies. However, Karidis’s analysis raises doubts about this as well.

As the lower table shows, Vodafone has consistently lowered its operating and other direct costs since Sarin took over. Unfortunately, these gains have been overwhelmed by the increased amounts that the group is spending to acquire and retain customers — largely represented by the subsidies on expensive new handsets. Overall expenses are rising.

Charles Butterworth, Vodafone’s investor-relations director, rejected Karidis’s analysis, saying it was “arbitrary” to use today’s share price to calculate the effects of its acquisitions. He said Vodafone should be judged against the weak performance of its rivals, and the full benefits of One Vodafone would not be seen until 2008.

The note from Karidis last week made two more telling observations. The first is that Vodafone’s expansion strategy was supported by the majority of the existing board, which has changed little in the past seven years. Any director who called for a change of strategy — such as the sale of the Japanese business — would have to overturn his or her previous judgments.

Karidis also predicted increasing tensions between Vodafone and Verizon, its joint-venture partner in America. Verizon has just acquired MCI, another telecoms company with strong relationships with big business — the same customers most prized by Vodafone.

In future, Verizon will have an increased interest in retaining corporate customers itself, rather than allowing them to deal with Verizon Wireless, where Vodafone would receive 45% of the benefit.

One hope among Vodafone’s critics is that a breakdown in the relationship with Verizon could trigger the sale of the company’s stake in Verizon Wireless. However, such a move would require Vodafone’s board to start winding the clock back to 1999.

Is Bond prepared to be the catalyst for such a reversal? Investors are keen to find out.