Vodafone, the UK telecoms giant, today gave warning that its full-year revenues could fall by as much as £1 billion as it embarked on a fresh strategy and a cost-cutting drive.

The world's largest telecoms group said revenues for the calendar year would now fall within a range of between £38.8 billion and £39.7 billion. Its previous guidance was that sales for the 12 months to the end of December would hit £39.9 billion.

At the same time, Vodafone said it would pursue a fresh strategy of trying to give customers what they want rather than chasing revenues growth, and aims to cut operating costs by £1 billion a year by 2011.

The shares gained 7.85 per cent to 116.8p in morning deals. Vodafone is valued by the stock market at about £57 billion.

The company launched its new strategy as it revealed a 17.1 per cent increase in revenues to £19.9 billion for the six months to the end of September, helped by favourable currency movements in the dollar, euro and sterling.

Earnings before interest, tax, depreciation and amortisation reached £7.2 billion, in line with forecasts, but profits at a pre-tax level plunged from £4.5 billion in the first half of last year to £3.3 million in 2008.

Vittorio Colao, the chief executive, said: "Our updated strategy reflects the changing economic and market conditions and it will drive execution with a continuing focus on free cashflow."

Vodafone raised its guidance on available free cashflow by 15.9 per cent today to £3.1 billion.

Today's results and strategic update mark the first big test for Mr Colao, who took charge at Vodafone in July, replacing Arun Sarin.

With revenues coming under pressure in some of Vodafone's key markets, including the UK, analysts have been questioning where the new chief executive would decide to concentrate.

Today, Mr Colao tore up a five-point strategy that has been in place at Vodafone since May 2006. Instead, he said Vodafone would concentrate on three target areas: mobile data, enterprise and broadband.

"We will shift our approach away from unit pricing and unit-based tariffs to propositions that deliver much more value to our customers in return for a greater commitment, incremental penetration of the account or more balanced commercial costs," Mr Colao said.

He also said Vodafone would be happy to chase acquisitions and would be prepared to sell assets to fund growth if the right opportunity arose.

There has been persistent speculation that Vodafone might consider selling its 50 per cent stake in Verizon Wireless in the US.

Mr Colao said Vodafone would prefer to pursue deals in existing markets. He said Vodafone was concentrating on creating value from Verizon.

Richard Hunter, head of UK equities at Hargreaves Lansdown, the stockbroker, said: "If there is some disappointment surrounding the full-year revenue outlook, it seems that this was already reflected in the price. In the last year the shares have dropped some 40 per cent, dispelling the notion that they should be regarded as a defensive stock.

Indeed, given the magnitude of their free cash flow and acquisitive strategy, there could yet be an argument that Vodafone has qualities of a continuing growth stock.

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