Jeremy Warner's Outlook: Investors fear that rain in Spain will spread to rest of the Vodafone empire

First the banks, then housebuilders, retailers and leisure, and now even telecoms, previously thought largely immune to the slowdown – the chill winds blowing from America's sub-prime lending crisis seem to be descending on an ever-widening array of industries.

The precipitous, near-14 per cent, plunge in the Vodafone share price yesterday nonetheless looks a somewhat harsh reaction to what for the time being are localised problems of revenue shrinkage in just one of the mobile phone giant's global spread of markets – Spain.

Earnings and cash flow guidance for Vodafone as a whole remain unchanged. It is only on revenues, which the group now expect to come in at the bottom end of the previously stated range of £39.8bn to £40.7bn, that there has been any deterioration in prospects, and even here the damage is for now quite limited.

Unfortunately, "for now" are the operative words. The fear is that like Spanish flu, the pain already being felt in Spain will eventually spread to other European markets, shattering the company's presumed defensive qualities. Ominously, the company's statement makes reference to "signs of an economic slowdown" in the UK. Where Spain leads, some say, Britain will soon be following.

Vodafone's outgoing chief executive, Arun Sarin, dismisses these suggestions as largely mistaken, though even he admits that, whereas there might be something he can do about battling it out with the competition, he's powerless to stand in the way of an economic downturn.

It's a bear market out there, so he's even more impotent when it comes to the share price. With investors in no mood for even the slightest disappointment, a statement that remained largely upbeat about prospects in developing markets was read as deeply negative. The shock of what's happened to Spain is all the greater as Vodafone has so far ridden the credit crunch virtually unscathed

In most European markets, Vodafone enjoys premium brand positioning, with strong exposure to the business and corporate market. It's the other way around in Spain, where Telefonica occupies the position Vodafone has carved out for itself elsewhere. Instead, Vodafone is highly exposed to subsections of the market which have been hit hard by the economic slowdown, in particular construction and migrant workers.

As the construction industry has shrunk, many of these workers have either gone home, or cut back on the mobile. The tariff structure of the Spanish market, where contract customers get fewer pre-paid minutes on their deals, may also make mobile telephony more vulnerable to belt-tightening. In any case, there was a 2.5 per cent fall in like-for-like revenues in the three months to the end of June, which, coming after the stellar Spanish growth of recent years, marks quite a turnaround.

Can the rest of Vodafone expect to remain immune to the sort of problems afflicting Spain? For the reasons just given, the read- through from Spain to other European markets is far from clear.

The boom in the housebuilding sector, now turned to bust, was much bigger in Spain than in the UK, though both markets have been supported by strong inflows of migrant labour. But migrant workers in the UK are more likely to be Virgin or T-Mobile subscribers than Vodafone. All the same, it is in the way of these things that when one market goes belly-up, others will soon follow.

It's a shame for Arun Sarin to be the bearer of bad news in his last week in the job. Still, a bad downturn in Europe will at least vindicate his main strategic contribution to Vodafone – taking the company into developing markets, and particularly India, where subscriber numbers grew year on year by an astonishing 60 per cent in the last quarter.