May 30 (Bloomberg) -- Vodafone Group Plc, the world's biggest mobile-phone company, plans to increase its dividend and give shareholders another 9 billion pounds ($16.9 billion) after reporting the largest loss in European corporate history.

The net loss in the year through March was 21.9 billion pounds, or 35.01 pence a share, compared with a profit of 6.41 billion pounds, or 9.65 pence, a year earlier, Newbury, England- based Vodafone said today in a statement. The loss stems from a 23.5 billion-pound writedown of assets, mainly in Germany.

Chief Executive Officer Arun Sarin pulled out of Japan and Sweden, unwinding the $300 billion expansion engineered by predecessor Christopher Gent. Vodafone's shares have fallen 14 percent in the past year as Sarin's strategy to counter slowing growth failed to convince investors and the fate of a stake in Verizon Wireless remains unclear.

``To some extent he satisfied investors, but he didn't say how he will grow revenue or what he plans to do with the valuable assets like Verizon,'' said Ted Scott, who holds about $52 million of Vodafone shares in the funds he manages at F&C Asset Management in London. ``In the future he needs to provide better clarity about what he wants to do.''

The company proposed increasing the full-year dividend 49 percent to 6.07 pence a share. The company said it aims to pay out 60 percent of adjusted earnings per share as dividends.

Vodafone shares closed unchanged at 119.75 pence in London, after rising as much as 3.6 percent earlier in the day.

Verizon Wireless?

Investors have said Vodafone should sell its stake in Verizon Wireless. New York-based Verizon Communications Inc., which owns 55 percent of the wireless unit, said this month it wants to buy Vodafone's stake. Verizon Wireless is the No. 2 in the market behind AT&T Inc.'s Cingular Wireless LLC.

Sarin reiterated today the company is ``happy'' with its Verizon Wireless stake.

Vodafone's intentions in the U.S. were brought into question when Sarin joined the bidding for AT&T Wireless Services Inc. in early 2004. After losing out to Atlanta-based Cingular, which won with a $41 billion bid, the U.S. strategy has remained unclear.

``The value of the asset has grown substantially and we see continued growth,'' Sarin said on a conference call. Growth ``won't slow in the next couple of years.'' He declined to give a timeframe for a possible disposal of the Verizon Wireless stake.

Slowing Sales Expansion

Sales rose to 29.4 billion pounds from 26.7 billion pounds, after the comparative figure was restated to exclude Japan. Vodafone reiterated mobile sales growth this year will slow to between 5 percent and 6.5 percent. Growth excluding Japan was forecast to be 8 percent to 9 percent for the year just ended.

Analysts in a Bloomberg survey expected Vodafone to post a net loss of 22.2 billion pounds on sales of 29.4 billion pounds. They had predicted a dividend of 4.7 pence a share.

Deutsche Telekom AG, Europe's largest phone company, reported a 2002 loss of 24.6 billion euros ($31.6 billion), the biggest loss in European history at the time.

Gent led the $186 billion purchase of Germany's Mannesmann AG in 2000. Sarin has spent about $20 billion on acquisitions since he took over in July 2003.

Sarin ``turned the business round to a degree,'' said Christian Maher, an analyst at Investec Securities. ``The problem now is where is this group going to be different in a year's time to where it is now?''

New Revenue Sources

As growth slows, Sarin is overseeing the roll-out of new networks that allow mobile-phone users to send and receive data more than 100 times faster than before. There were more wireless subscriptions in Western Europe last year than inhabitants, according to Stamford, Connecticut-based researcher Gartner Inc.

Vodafone also plans to start offering packages that allow customers to browse the Internet and make calls by merging mobile services with fixed-line access when at home or in the office.

``We'll go after revenue streams with lower margins,'' Sarin said. The company will use partnerships to expand in converged mobile and fixed-line services, he said.

Vodafone anticipates the new services will account for about 10 percent of total sales in three to four years, Sarin said.

``Vodafone will seek to optimize its portfolio of assets, either disposing of assets where we believe we can't earn a superior return or investing in businesses'' where value can be created, Sarin told reporters on a conference call. ``We see a lower level of merger and acquisition activity in the future.''

Returning Cash

Vodafone sold its Japanese unit in March, exiting its biggest market after more than 2 trillion yen ($17 billion) of spending on purchases and equipment failed to increase profitability. Tokyo- based Softbank Corp., Japan's No. 2 Internet company, agreed to buy Vodafone K.K. for 1.8 trillion yen in Asia's biggest leveraged buyout. Vodafone said it would return 6 billion pounds to shareholders after the sale.

Shareholders will get the 9 billion pounds in various ways, including new shares for U.S. owners and cash dividends for non- U.S. holders. Vodafone will also reduce the number of outstanding shares by replacing existing shares with fewer new ordinary shares so the ``special distribution'' doesn't affect the price.

``It's a wise move to give it back to shareholders because the really big acquisitions are not out there at the moment,'' said John van den Berg, a fund manager at AZL Vermogensbeheer in Heerlen, Netherlands, which oversees about $1.3 billion of stock, including Vodafone.

Credit Ratings Cut

Moody's Investors Service cut Vodafone's credit rating one step to A3 from A2, with a ``negative'' outlook, the rating company said today in a statement. Standard & Poor's cut the company's rating two steps to A-, equivalent to the Moody's rating, from A+ with a stable outlook.

Vodafone said it plans to cut costs by as much as 264 million pounds over three to five years through outsourcing of IT services and centralization of some activities. It will also cut more than 400 jobs in the U.K.

``They do appear to be attacking the cost base pretty aggressively,'' said Robert Talbut, a fund manager at Royal London Asset Management, which oversees about $52 billion.

Vodafone reiterated the profit margin before interest, tax, depreciation and amortization this fiscal year will be around 1 percentage point lower than last year, because of lower prices and more investments to keep customers.

In Europe, Vodafone is targeting ``modest'' revenue growth over the ``medium term.'' Vodafone expects operating costs to be little changed in the region, helped by cost cuts, in the fiscal year through March 2008 versus last year. The Ebitda margins are expected to decline ``slightly,'' Vodafone said.

Vodafone expects to reduce fiscal 2008 capital spending by 400 million pounds to 500 million pounds compared with this year.

The U.K. company has minority holdings in French wireless company SFR and Swisscom AG's cellular division, in addition to the Verizon Wireless stake. Sarin said today he's still interested in raising the stake in Paris-based SFR, the country's No. 2 mobile company. Vivendi Universal SA, which owns 56 percent of SFR, has said it isn't selling.

To contact the reporter on this story: Maria Fredriksson in London at mfredriksson@bloomberg.net

Last Updated: May 30, 2006 11:50 EDT