Vodafone, the world's largest mobile operator by revenue, issued a bullish outlook for 2012 on Tuesday after posting resilient full-year results boosted by customers upgrading to smartphones.

Analysts had expected the British firm to post a cautious outlook after recent weak trading updates from rivals, but instead Vodafone said it was gaining or holding market share in most of its major markets and leading the switch to higher tariff smartphones.

The group did note that it faced tough conditions in southern Europe and also expected regulatory cuts to continue to bite, but issued financial targets for 2012 in line with forecasts.

The upbeat outlook followed solid financial results for 2010/11, with revenues of 45.9 billion pounds ($74.45 billion), up 3.2 percent and compared with a Reuters I/B/E/S poll of analysts predicting 45.5 billion pounds.

Core earnings were in line with forecasts, down 0.4 percent, but free cash flow was at the top of the range at 7.05 billion pounds, compared with a forecast of 6.7 billion pounds.

The closely watched metric of service revenue, which covers ongoing offerings such as voice, data, texts and Internet access but not one-off costs like handsets, was ahead of forecasts in the fourth quarter, up 2.5 percent on an organic basis and in line with third quarter growth.

(Reporting by Kate Holton)

Smartphone