Carphone Warehouse is having to spend an extra £15 million to cope with the fallout from the chaotic launch of ‘free’ TalkTalk broadband a year ago.

The mobile phone retailer today said that it expected costs to continue to climb this year as it battles to improve customer service and clear the backlog of homes still waiting for a ‘free’ TalkTalk connection.

News of the bill came as Carphone signalled that it was poised to step up its expansion in the US by formalising joint venture talks with the American electricals retailer Best Buy.

Carphone currently has nine mobile phone concessions in Best Buy stores in New York, and is launching Best Buy’s IT home help service - the ‘Geek Squad’ - in the UK.

In a trading statement today, Charles Dunstone, the chief executive, said: “Although no formal agreement has yet been reached, we are now in advanced discussions to put these initiatives on to a more formal commercial footing.”

Carphone sparked an internet price war a year ago when it launched Britain’s self-styled first ‘free’ broadband service under the TalkTalk brand.

The group struggled to cope as thousands rushed to sign up to the service and it was forced to triple customer service staff numbers to 3,000.

Customers fed up with waiting for a connection even launched a high-profile PR campaign to put pressure on Carphone.

Mr Dunstone today said that the extra money earmarked for customer service this year would “work to further build the service levels at TalkTalk”.

He added: “As ever, our goal is not to maximise immediate profitability if it compromises customer experience, but rather to protect the brand and proposition for the longer term.”

In today’s trading statement, Carphone said that it expects results for the financial year which ended on March 31 to be in line with expectations.

The group, which bought AOL’s UK business for £370 million last year, now has 655,000 TalkTalk broadband customers as well as 1.5 million under the AOL brand.

Mobile phone subscriptions at Carphone rose 14 per cent to 1 million in the three months to the end of March.

The group added that it had ‘unbundled’ more than 1,000 telephone exchanges, meaning that it supplies customers directly, rather than feeding its service through a BT line.

Mr Dunstone said: “In the mobile market, the strength of our proposition means we have continued to increase sales and market share.

“As a result, despite the expected slower growth in the overall handset market, particularly in the pre-pay segment, we continue to show good growth year-on-year.”

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