Vodafone warned of a sharper-than-expected reduction in its profit margin in 2009-10, as the world’s largest mobile phone operator by revenue said that fierce competition in India was taking its toll.

The group tried to reassure investors by revealing a new cost-cutting programme worth £1bn.

It also held out the possibility of a dividend from Verizon Wireless, the leading US mobile operator in which Vodafone has a 45 per cent stake, in 2011. Last year Vodafone said a payout was unlikely until 2012.

Shares in Vodafone closed down 2p at 135.95p on Tuesday after it reported revenue of £21.8bn for the six months to September 30, an increase of 9 per cent compared with the same period last year, and pre-tax profit up 73 per cent to £5.75bn.

The first-half performance was boosted by sterling’s weakness, acquisitions and a £1.7bn impairment charge in the equivalent results for 2008-09.

Underlying revenue fell 3 per cent and earnings before interest, tax, depreciation and amortisation dropped 8 per cent. Vodafone said in May that its ebitda margin should decline by 1.8 percentage points in 2009-10, but yesterday it said the deterioration was now expected to be 2.1 percentage points.

The higher-than-expected decline is partly rooted in a fierce price war between mobile operators in India.

Vodafone’s Indian business recorded an ebitda margin of 24 per cent in the first half of 2009-10, compared with 28.4 per cent in the same period last year.

Vittorio Colao, chief executive, said the Indian market had too many mobile operators – the UK group has 11 rivals.

Mr Colao said Vodafone was willing to consider buying rivals, but stressed that Indian government rules currently prevented the company from doing so. “We will look at the opportunities and we will support consolidation,” he said.

Vodafone stuck to its guidance that it will generate £11bn to £11.8bn of operating profit in 2009-10 after saying that depreciation and amortisation charges would be lower than expected. It added it will generate up to £6.5bn of free cash flow.

Vodafone had been seeking to cut its operating expenses by £1bn by 2011, but the group said it was now planning to hit the target by March 2010. It will cut expenses by a further £1bn by March 2012.

The interim dividend rises from 2.57p to 2.66p; earnings per share were 9.14p (4.02p).