HMV today revealed a tie-up with Orange to sell its phones in-store after promising full year profits at the "upper end of expectations."

Britain's biggest music and DVD retailer is to sell Orange products and services in 15 of its stores from June. If the partnership proves successful, it will be rolled out to 100 of HMV’s 255 stores by Christmas, potentially creating up to 300 jobs.

The alliance was unveiled as the group, which has successfully seized market share from bust rivals like Woolworths and Zavvi, posted figures showing a 4.3 per cent rise in like-for-like sales in its UK and Ireland stores over the 16 weeks to April 25.

HMV said that profits before tax and exceptional items will be "towards the upper end of market expectations". Analysts have pencilled in profits of between £50.3 million and £63.7 million. The figures sent HMV shares surging 4.17 per cent or 6.25p to 156.25p in early trading.

But the 88-year-old retailer's success was undermined by sharp falls in its international division — which takes in Canada, Hong Kong and Singapore — where like-for-like sales growth in the quarter to the end of April fell 9.3 per cent.

Hong Kong had been hit, the group said, by the placing of its seven stores all in the battered financial district. It insisted that it was committed to the international businesses though and that all three countries are profitable.

Comparative sales at Waterstones, where trading has been deteriorating for some time, also fell 4.5 per cent in the period. The group has warned that appetite for buying books has been waning since the credit crunch set in.

Simon Fox, the chief executive of HMV, said that trade had been boosted by "maximising the opportunities arising from competitors exiting the market."

The group has focused advertising around Woolworths traditional family market, centring on teen hits like Hannah Montana.

Commenting on the new deal, Tom Alexander, the chief executive of Orange UK, said that he hoped to extend the proportion of sales being driven by use of multimedia and entertainment services. These currently account for just under a quarter of Orange’s UK revenues.

Mr Alexander who, when running Virgin Mobile sold such services through Virgin Megastores, said he was confident that the partnership would prove a hit.

He said: “In my previous life we started to sell mobiles in music stores and I saw how successful it was — at the time, it was seen as quite brave, but it proved to be a huge success. It was the core element to what we were doing — it was the right product, targeting the right customer, at the right time. The whole concept worked really well.

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