Tough year ahead for Carphone, says boss

The company's shares fell 221/2p, or 10%, to 2051/4p.

Industry insiders and price comparison websites are all reporting that since March there had been less "churn" - the measure of people switching broadband suppliers - but also fewer additions, Dunstone said.

"One of the principal times that people change their broadband is when they move house. Because at the point they move they realise they have to arrange all the reconnection anyway so they tend to shop around," he explained.

"At the same time, we are have seen much higher sales of mobile access devices and dongles, which means more people are connecting to broadband via mobile rather than fixed line."

Dunstone said it was not yet possible to put numbers on the slowdown in broadband growth, nor say how long the trend might last.

"We remain cautious in our outlook for the year ahead, given the poor economic climate and inflationary pressures on European consumers," he said.

"We have started this year off pretty well but everyone you talk to in retail is pretty gloomy at the moment with the consumer under so much stress. It would be a very brave man who could predict when that ends."

But having signed a £1.1 billion deal to sell half of Carphone's retail operation to US electronics giant Best Buy last month, Dunstone is still confident he can still find new areas for growth.

He said the fixed line and broadband business, under the TalkTalk and AOL brands, would concentrate on improving service with new connections lower than expected so far this year.

"The fixed line business is focused on further improvements to network quality and the customer experience, as we seek to become market leader not only on price but also on service and innovation," he said.

Numbers for last year were within the £215 million £220 million range Dunstone outlined in April but closer to the bottom end at £216 million. That was a rise of 75%, reflecting a lower spend by the business on setting up its free broadband offer. Within that, retail profits were flat and fixed line well ahead.

The Best Buy deal is not due to complete for some weeks. Dunstone said: "We can accelerate the evolution of our existing retail business and enter a major new market where Best Buy has a superb record of value creation."