THE City yesterday issued a grim warning to Vodafone investors after the world’s biggest mobile phone group was forced to admit this week to dire Christmas trading in the crucial Far Eastern market.

Over December the group attracted only 900 subscribers in Japan — its second-biggest source of revenue after the US.

In contrast, its rivals, the domestic operators NTT DoCoMo and KDDI, each picked up nearly 300,000 subscribers.

Vodafone’s low penetration in Japan — far below some analysts’ forecasts of about 194,000 new subscribers — was in spite of efforts by Arun Sarin, the chief executive, to revive the group’s fortunes in the country.

Mr Sarin has made Japan a priority and appointed Shiro Tsuda, the former senior vice-president of NTT DoCoMo, to take charge of the division.

Yesterday Fanos Hira, a Bear Stearns analyst, said investors were fast running out of patience with Vodafone’s failure to perform in the Far East. “If things have not picked up by January/February time, after the first quarter’s trading, then it will be crunch time,” he said.

Mr Sarin has already conceded that it will take months, not weeks, to see any change in the market.

Another analyst, who did not want to be named, said: “Japan is a test bed for the company . . . The failure there is discounted in the stock and if things picked up there it would have a positive impact on the stock.”

The figures were telling, too, on the future of third- generation (3G) phones, both for the company and for mobile operators generally.

In November Vodafone became the first of the big UK operators to launch 3G. The bulk of its handsets were shipped to Japan, but its total of 3G customers in Japan, though more than 350,000, does not compare with KDDI, on nearly 17 million, nor with DoCoMo, on 8.5 million.

Ben Wood, analyst with Gartner, the research group, said that Vodafone’s problem was partly that, in Japan, its actions were too little, too late.

Research over the past two quarters showed that even the domestic Japanese operators were struggling to sell phones there, Mr Wood said. “It has got to the point already where Japanese people have all they want from their phones — cameras, games, television and so on,” he said. “They have had 3G phones for a couple of years, so it is nothing new to them now.”

The new technology took UK operators far longer to develop than they imagined and, in its early days, was beset by glitches. Vodafone concedes, however, that it had execution problems in the Japanese market. “The handsets took a little longer to configure for the Japanese people than we had hoped,” it said.

The group also said that the introduction of a new pre-pay registration system in Japan had hindered it.

Vodafone said: “This is only one month’s figures and should not be taken out of context.”

TROUBLED RECORD

The group paid £2.6 billion to take full control of J-Phone

The Japanese market accounts for 15 per cent of Vodafone’s revenue and 10 per cent of earnings before interest, tax, depreciation and amortisation

In the second half of last year margins in Japan tumbled from 31.5 per cent to 27.8 per cent

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