Vodafone received praise from the City today for unveiling a smooth handover at the top of the company, as Arun Sarin, the chief executive, said he would step down in July in favour of Vittorio Colao, his deputy.

Shares in the world's biggest mobile phone company by market value rose by 3 per cent, or 5p, to 168.3p as the market opened, although they slipped in later trading.

Mr Sarin's decision to step down after five years took the market by surprise as the announcement was earlier than expected, but was nevertheless welcomed. The Indian-born chief executive said he was leaving on a high, as he revealed pre-tax profits of £9 billion, compared with a £4.8 billion loss last time.

He said: "I feel that I have accomplished what I set out to achieve, particularly in developing and implementing a new strategy...I know that the business is in capable hands with Vittorio Colao. Having worked with him for many years I know that he has the experience and vision to take Vodafone on to future success."

Rumours over his resignation have circulated for the past year, reigniting a few weeks ago, with Mr Colao widely predicted to take his place.

“Arun Sarin ... leaves with his reputation intact,” analysts at ING said in a note. "The timing ... may have caught the market unaware (maybe a year earlier than expected?), but Arun Sarin’s successor is no surprise."

The departing chief executive is expected to take some time out from business life to travel, taking time to visit countries that he was unable to fully experience while on business meetings.

Mr Sarin battled a shareholder revolt two years ago when more than 10 per cent of the group's investors voted against his re-election to the board, accusing him of being too quick to spend millions of pounds on foreign acquisitions. He also faced opposition from directors who backed the strategy of his predecessor Sir Christopher Gent and disliked Mr Sarin's strategy of selling the Japan business and well as those in Sweden, Switzerland and Belgium.

The Vodafone chief today announced record full-year operating profit of £10 billion, with pre-tax profit of £9 billion compared with a £4.8 billion loss last time. However, free cash flow weakened from £6.1 billion to £5.5 billion and net debt shot up from £15 billion to £25 billion.

The surge in Vodafone’s profits and its growing debts have been fuelled by the group's expansion in emerging markets, particularly in India, thanks to last year’s acquisition of Hutchinson Essar, steered by Mr Sarin.

Analysts said that today’s results vindicated Mr Sarin’s position after the unrest two years ago.

Sources close to Mr Sarin, 53, believe that he could be eyeing a position in the world of private equity. At Vodafone last year he was paid some £5.7 million in basic salary, bonus and shares.

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