Vodafone is the third biggest mobile phone firm in Japan

Shares in Vodafone tumbled by more than 10% on Tuesday amid concerns about its growth prospects and as the firm blamed Japan for eroding its earnings base.

Bill Morrow, head of the troubled unit, said 2005 would see its lowest point in terms of customer numbers.

He added that profit margins would take longer to bounce back, and forecast that they would recover only next year.

The problem facing Vodafone is that it is having to spend to hang on to customers in a market where competition is fierce from rivals such as NTT DoCoMo and KDDI.

Vodafone has been struggling to halt a decline in the Japanese market ever since the 2004 introduction of its third-generation (3G) service flopped.

It lost almost 50,000 customers in the six months to the end of September.

'Hold me to it'

In an effort to revive sales, the group has been cutting rates and offering promotions - all of which have squeezed profit margins as much as six percentage points lower.

Mr Morrow, who was sent to Japan earlier this year, said subscriber numbers in Japan were set to increase from next year.

"You hold me to it," he promised. "We will have more customers, we will be well known for a stronger brand than we have today, and those customers will be delighted."

"I will take responsibility for that," he said.

Mr Morrow said the company would focus on providing specialist services. He pointed to the success of Vodafone's "Love Flat" product, which lets couples talk to each other for as long as they want for a fixed monthly rate.