Carphone Warehouse will next week defy fears that it is mired in the gloom enveloping retailers with a robust trading statement revealing a near 20 per cent rise in mobile phone connections.

The group’s third-quarter trading update on Friday is expected to meet expectations with 15 per cent year-on-year growth in mobile phone connections to 3.8 million.

Carphone’s broadband service is also on track with more than 100,000 net additions expected in the quarter.

Last week shares in Europe’s biggest mobile phone retailer suffered a sharp fall as investors offloaded retail stocks after a disappointing trading statement from Marks & Spencer.

Research from Index Explorer, which tracks stock borrowing in the markets, showed that Carphone was one of the top 20 “shorted” shares with 14 per cent of its stock borrowed. Hedge funds had been betting that the statement would disappoint.

Sentiment was further undermined by separate warnings from AT&T, the US communications giant, and Vodafone about the impact of the credit crunch on sales.

But analysts at Bear Steans said Carphone was about to “allay retail slow-down fears”. Cost-conscious customers, it said, were more likely to target offers such as Carphone’s TalkTalk broadband that is free to those taking a £20.99 monthly calls package.

Worries had been stoked by reports that sales of Apple’s iPhone, for which Carphone is the sole UK independent retailer, had not matched expectations. The iPhone is believed to have struggled because of its £269 price and a reluctance by consumers to switch to O2 , Apple’s UK network partner.

Analysts believe that with a new 3G version of the phone due in April, Apple will soon cut prices. It may also offer a better-value package with more call minutes and data for the same price. However, the iPhone is thought to have helped to draw in customers to Carphone stores who then bought rival products.

Carphone, once a pure mobile phone retailer, is in the process of transforming itself to a fully fledged digital goods and gadgets shop. The group is also moving into America through a partnership with BestBuy, the US retailer that owns 3 per cent of Carphone.

The moves are designed to diversify revenue streams away from a reliance on mobile phones, a market which is saturated.

Speculation has been mounting that Charles Dunstone, Carphone’s chief executive and 33 per cent shareholder, might seek to sell out to the US firm.

Despite the poor figures from Marks & Spencer, big retailers such as Sainsbury’s and John Lewis performed strongly over Christmas.

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