Just two years ago Arun Sarin looked on the brink of being ousted. During 2006, Vodafone's share price dropped to 110p as he was forced to write off some £30 billion from the acquisition of Mannesmann, and made three successive warnings over future earnings as demand in Europe stagnated.

Shareholders were loudly agitating for a shake-up in policy, there was confusion over the prospects for the dividend and talk of a boardroom rift between backers of his predecessor Sir Chris Gent and those of Mr Sarin. More than 10 per cent of shareholders voted against Mr Sarin's re-election. There were calls for him to sell the group's 45 per cent stake in Verizon Wireless and return cash to shareholders.

When Vittorio Colao, the former Vodafone executive, was rehired in October that year as deputy chief executive, there was talk that chairman Sir John Bond would replace Mr Sarin with the Italian at once.

Instead Mr Sarin stayed and addressed the problems one by one. As Richard Hunter of Hargreaves Lansdown puts it: "The chief executive has now decided to quit while ahead."

He added: "The Verizon stake has long since confounded the doubters, the dividend policy has become progressive (with a further 11 per cent hike today to an already healthy yield) and the ability of the company to find further areas for growth has contributed to a current customer base of some 250 million."

Mr Sarin's biggest legacy was the shake-up of Vodafone after the turmoil, selling underperforming businesses in Japan, Sweden and Switzerland and buying exposure to fast-growing emerging markets, chiefly in Turkey and India.

Mr Colao, his successor, will still have some big headaches to deal with. He will have to ensure that growth in India and Turkey does not come at the expense of too much cash. Mr Sarin revealed today that capital expenditure next year would rise, mainly to finance investments in India.

Meanwhile European earnings, despite talk that consumers are turning to internet surfing on their mobiles, are slowing. Mr Sarin warned today that margins in Europe would continue to contract next year.

European Union regulators are set to slash fees that operators charge for connecting customers from landlines and other mobile networks - known as mobile termination rates - and Vodafone will be most exposed of the mobile operators to this change, with 12 per cent of its European underlying earnings and a fifth of its free cash flow in Europe coming from these fees, according to Morgan Stanley.

In addition, the problem of the Verizon Wireless stake will not go away. Vodafone's joint venture partner Verizon, which has management control, is not paying a dividend to invest cash in rolling out 3G networks. Vodafone cannot buy out Verizon, since the US group does not want to sell. Mr Sarin has insisted that the value of the asset is appreciating as the US market grows rapidly. But some time soon the US market will become saturated, just as Europe has, and earnings will start to level off or even decline.

Mark James of Collins Stewart said: "Both Mr Sarin's departure and the identity of his successor had been widely anticipated for some time. Key tasks for the new chief executive are no different from those of the old one - resolving the Verizon wireless dividend issue, pursuing growth in emerging markets and cutting costs in developed markets."

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