Leading Vodafone investors on Tuesday night said Arun Sarin, the chief executive, had bought himself more time after unveiling plans to give £9bn to shareholders on top of the UK mobile operator’s 2006 dividend.

Investors welcomed Vodafone’s 2006 results, but warned that Mr Sarin would be judged on execution of its long awaited strategy statement for dealing with the company’s deteriorating financial performance.

Vodafone broke with its mobile-centric past by announcing plans to provide high speed internet access to customers over landlines under a “Mobile Plus” slogan.

Vodafone reported a record pre tax loss of £14.9bn for 2006, and warned of slowing revenue growth, lower profit margins and reduced free cash flow in 2007.

However, Vodafone increased its dividend pay ratio from 45 per cent of adjusted earnings per share from continuing operations in 2005 to 60 per cent in 2006, and declared it the target for the future. Vodafone said it would return a further £9bn to investors in 2007 after selling its Japan business and increasing its borrowing.

Vodafone saw its core profit, based on its preferred measure of earnings before interest, tax, depreciation and amortisation, increase by 7 per cent to £11.8bn. The record pre tax loss was primarily caused by a £28bn write down of its assets, and resulted in a basic loss per share of 27.7 pence.

Credit rating agencies downgraded Vodafone’s debt after the company said it was increasing borrowing, partly in order to return £3bn to shareholders in 2007 alongside £6bn derived from selling its Japanese business. Vodafone’s shares, which rose to 124 pence during the day’s trading, closed unchanged at 119.75 pence.

Some big shareholders who strongly criticised Mr Sarin after the company warned of slowing growth last November said the 2006 results may have taken the immediate pressure off him. “He is buying time for himself,” said one of Vodafone’s top 10 investors.

Standard Life, another top 10 shareholder, said the changes to Vodafone’s balance sheet structure were “appropriate”.

“However, we …remain sceptical on Vodafone’s ability to realise its earnings potential.”

Vodafone will start meeting its shareholders next week in preparation for July’s annual meeting, and Standard Life said it would be “considering our voting position very carefully”.

Mr Sarin insisted he was the “right man” to lead Vodafone after announcing the company’s plans to deal with slowing growth by cutting costs and offering broadband over landlines in its European markets.

Robert Talbut, chief investment officer at Royal London Mutual, said Vodafone’s “Mobile Plus” plans were “sensible”, adding: “The quality of implementation is crucial.”

The £9bn to be paid to shareholders in 2007 will be done by issuing a second class of shares, which Vodafone said would enable retail investors to take advantage of capital gains tax allowances.

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