Vodafone shares touched a five-year high of 160.80p (€2.36) after a bullish trading forecast from the mobile giant, the biggest Irish operator with almost 2.18 million subscribers.

With profit margins on the decline in increasingly saturated western European markets such as Ireland, the world's second largest mobile phone company by market value behind China Mobile, aims to exploit growth in developing markets. Vodafone shares are among the most widely held in Ireland as a result of the spin-off of the former Eircell from Eircom in 2001.

The total annual dividend payout to more than 400,000 Irish shareholders will rise by 11.4 per cent to 6.76p per share after an increase in the final dividend to 4.41p. The stock closed 5.5 per cent higher in London last night at 159.70p.

Vodafone Ireland managed to increase its subscriber base by 102,000 to 2.177 million in the year to March, in spite of sustained pressure from Eircom-owned Meteor, the third-largest player in the market.

However, this contrasts with an increase of 123,000 in the previous year. With figures still to come from the second-largest player O2, Meteor revealed yesterday that it had increased its subscriber base by 217,000 to 832,000 in the year to March.

As competition intensifies in the Irish market, Vodafone Ireland said its blended monthly average revenue per user (ARPU), a key indicator, decreased by 8.2 per cent to €44.60 from €48.60. Strategy director Gerry Fahy said the downward trend continued this year but said this was good for subscribers.

"Total penetration is over 100 per cent. We're fighting over the same customers as everyone else . . . I think the [ ARPU] trend is downwards, but what we're really doing is adding value by giving them more minutes at less cost."

In a bid to seize the initiative from Meteor, Vodafone last month committed to a €50 million drive to give prepaid customers free texting services to other Vodafone subscribers or calls and text messages free of charge at weekends. Mr Fahy said more than 450,000 subscribers had signed up for the plan. "That's the best response we've ever had for a proposition launch."

Vodafone chief executive Arun Sarin said the group had "made good progress in the execution of our strategy" which he set out a year ago. Revenues this financial year were expected to rise to £33.3-£34.1 billion, he said. The group was managing to stimulate revenues, with voice usage rising 24 per cent but prices declining by 15-20 per cent.

Total revenues for the 12 months to March rose 6 per cent to £31.1 billion, with organic growth accounting for 4.3 per cent, while group earnings before interest tax depreciation and amortisation (Ebitda) increased 1.6 per cent to £11.96 billion in line with market expectations.

Vodafone intends to focus on adjusted operating profit rather than Ebitda, and Mr Sarin said profit by this measure was expected to be £9.3-£9.8 billion, compared with £9.53 billion in the past year.