Mobile phone giant Vodafone sought to reassure investors as it posted a €6.1bn (£5.2bn, $6.7bn) loss, amid the merger of its Indian business with a rival.

The loss in the year to the end of March widened from a £5.1bn loss 12 months ago, as the world's second biggest mobile operator invests in its network.

The group, which operates in 26 countries, wrote down the value of its Indian unit by €3.7bn after a major price war broke out last year.

But Vodafone forecasts a growth in future earnings and a jump in free cash flow for the current year, driven by stabilising average revenue from contract customers in Europe and growing its emerging markets.

It predicted a rise in adjusted earnings growth of between 4% and 8%, excluding its Indian unit, and free cash flow of around €5bn, up from €4.1bn compared with a year ago.

Chief executive Vittorio Colao said: "We expect to sustain our momentum in the coming financial year, generating free cash flow of around €5bn. Our confidence in the outlook is demonstrated by another 2% increase in our dividend."

The Newbury-based group will pay total dividends per share of 14.77 euro cents for the year.

Vodafone struck a deal to merge its Indian operations with local rival Idea Cellular in March to create the country's largest mobile phone operator, valued at more than $23bn. The Indian market faces cut-throat competition with a number of rivals offering low tariffs after the entry into the market of the Reliance Industries conglomerate.

Watchdog Ofcom fined Vodafone £4.6m for "serious" breaches of consumer protection rules in October, its largest fine to date for a telecoms operator.

The regulator said Vodafone had misled pay-as-you-go customers, charging them for top-up credit but "providing nothing in return".

Dhananjay Mirchandani, an analyst at Bernstein, said: "2017 numbers were not spectacular, though guidance for 2018 is a strong vote of confidence by the leadership team in Vodafone's business prospects. This a big and rather unwieldy tanker. The good guidance for 2018 has to be interpreted in that context."

Shares lifted more than 3% in early trading.