Large stores under the Best Buy brand will begin opening in the UK next year after the American retailer yesterday announced a joint venture with Carphone Warehouse to take on the European consumer electronics market.

Best Buy is paying £1.1 billion for half of Carphone Warehouse’s retail business in what the companies hope will develop into a European consumer electronics empire.

The two vowed that the deal, which will create a joint venture that will compete with DSG International, formerly Dixons, and Kesa, owner of Darty, the French group, would transform the electrical goods landscape and change the way people shop in Europe.

The 50-50owned company aims to take a slice of Europe’s estimated $176 billion (£90 billion) consumer electronics market. However, the sector is becoming tougher as hard-pressed consumers have increasingly pulled back from big purchases.

Best Buy, which has annual sales of $40 billion, already commands 22 per cent of America’s $175 billion market.

The American group will be able to use Carphone Warehouse’s 2,400 retail stores across eight European countries, including France, Germany, Spain and Portugal, as well as the UK, to help it to break into the European market. It also plans to open a chain of new large-format stores of 35,000 sq ft each in Europe starting in 2009.

Carphone continues to trade under the Carphone Warehouse brand and retain full ownership of its fixed-line telecoms business in the UK, which includes TalkTalk, AOL Broadband and Opal, as well as its share of the Virgin Mobile France joint venture.

Charles Dunstone, Carphone Warehouse’s chief executive and founder, said that the deal between the two companies was a “perfect match”.

Carphone Warehouse shares closed down 10¼p, or 3.43 per cent, at 289p.

An existing separate joint venture between Carphone Warehouse and Best Buy, set up in 2006, has been rolling out mobile phone retail stores under the Best Buy mobile brand in America and Best Buy bought a 3 per cent stake in Carphone last year.

Carphone already has a presence in 500 Best Buy stores in the US, which it hopes to increase to nearly 1,000 by the end of next year. Mr Dunstone said the group would use the £1.1 billion to pay off £800 million of debt and invest in its fixed-line business and “new areas of growth presented by the transaction”. These could include a bid for the UK operations of Tiscali, the broadband provider. Mr Dunstone confirmed that Carphone is in talks with Tiscali. “I’d like to think at the right price we’d be a potential buyer,” he said.

Far from balking at the consumer downturn, Mr Dunstone said that the poor economic climate was the best time to invest because it is easier to take up retail space in retail parks.

Bob Willett, chief executive of Best Buy International, said: “We have seen great companies fail because they thought they could simply export their current business model to new geographies. We intend to plan our European entry strategy carefully, focused on customer needs, and with on-the-ground help from our trusted partner, Carphone Warehouse.”

David Jeary, retail analyst for Investec, said: “Potentially, it could very much change the UK and the European electronic retail landscape.”

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