Vodafone, Britain's largest telecoms group, moved to reassure the City on its growth prospects as it increased the interim dividend payout by 15 per cent and said it would return an extra £2 billion of cash to shareholders by March next year.

But the mobile group's shares sagged more than 6 per cent in early trading (down 9.25p to 135.75p) as Vodafone sounded a warning note about future revenue growth, particularly in Japan.

Vodafone upped its much-watched dividend to 2.20p a share - promising a payout worth a total of £1.4 billion to shareholders. The group bumped up its share purchase target to £6.5 billion - from the previous £4.5 billion.

Arun Sarin, the chief executive, said the "main feature" of Vodafone's success over the six months to the end of September, had been its ability to both acquire new customers and hold on to existing ones. Mr Sarin said 10 new mobile customers joined Vodafone's network in the first half, representing an organic growth rate of 13 per cent.

But as the group posted a 9 per cent in first half revenue to £18.25 billion, it revealed a near 10 per cent fall in pre-tax profits to just over £4.1 billion - compared with more than £4.5 billion last time. After-tax profits dropped by 23.5 per cent to £2.8 billion.

It blamed the profits fall on a £515 million impairment charge on goodwill at its business in Sweden.

Vodafone also gave warning of a "significant reduction" in pre-tax earnings margins in Japan, a key mobiles market, in its next financial year as its funds growth in the country and tries to "rebuild momentum in the business".

But Mr Sarin said his company was seeing success with its "early push" for 3G customers.

Vodafone said it had seen "take-up" of more than 4.9 million 3G phones - the so-called third-generation network that enables customers to use the internet and other multimedia services on their phones.

Investors had been concerned about Vodafone's ability to sustain growth, particularly in a market such as the UK that many observers say is close to saturation in terms of mobile phone use.

The City had also been keen to hear details about Vodafone's dividend policy, after its promise to return all of the free cashflow it generates to investors this year.

Mr Sarin said: "I am pleased to announce another strong set of results. We have grown our customer base to 171 million and made good progress on 3G and other global products and services.

"We continue to outperform our competitors in most of our markets as we leverage our global scale and remain focused on delivering our strategy for growth. The board is pleased to announce a substantial increase in returns to shareholders."

As he reiterated the group's view that the 3G market offers "significant opportunities for growth in the future" - for competitors as well as for Vodafone itself - Mr Sarin said he was sticking to his guidance about future profits targets.

Organic revenue growth from mobiles should come in at about 7.5 per cent and profit margin growth should be flat to negative by as much as 1 per cent.

Vodafone talked up the prospects of a "mass market" for 3G and said it was beginning to see the benefits of scale in this part of the business - with the price it pays for handsets down by 30 per cent in the past year.

Shares in Vodafone, which slipped yesterday ahead of today's results, closed the day at 145p, valuing the group at nearly £90.7 billion.

Vodafone also said it had signed a group-wide co-operation agreement with America Movil, the Latin American mobile operator covering 53 countries across the Americas, Africa, Europe and Asia.

Under the terms of the agreement America Movil and Vodafone will deliver international roaming services to customers, together with dual-branded market communications.

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