A sharp increase in competition for consumer electronics on Britain's high street was signalled today after Carphone Warehouse clinched a £1.1 billion joint venture deal with Best Buy, the US retailer.

The deal is expected to herald a new era for Carphone Warehouse. It has previously focused on the telecoms and broadband market, but is likely to start selling more consumer electronic goods such as laptop computers, DVD players, cameras and camcorders following the Best Buy deal.

Best Buy will be able to utilise Carphone Warehouse’s presence in eight European countries including France, Germany, Spain and Portugal as well as the UK, to break into the European market.

The American group, one of the best known names in US consumer electronic, will own a half stake in Carphone Warehouse’s existing retail business, which operates under the Carphone Warehouse and Phone House brands in Europe.

Stores from the new venture, selling plasma screen televisions alongside mobile phone handsets, will open in Europe in 2009 under the Best Buy name. It is understood that Carphone Warehouse will keep its existing 2,400 stores across Europe under the Carphone Warehouse brand.

A 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 the US and Best Buy bought a 3 per cent stake in Carphone Warehouse in September last year. Carphone Warehouse already has a presence in 500 Best Buy stores in the US, which it hopes to increase to close to 1,000 by the end of next year.

Carphone Warehouse will retain 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.

The company said that it will use the proceeds of the sale to pay down its debt, invest in broadband customer growth and invest in “new areas of growth presented by the transaction.”

These could include a bid for the UK operations of the broadband firm Tiscali, which was put up for sale last month. Carphone Warehouse has been touted as a possible bidder.

A spokesman for the company confirmed today that it was interested in buying the UK arm of Tiscali, which has been valued at up to £650 million, and that the Best Buy deal would give it some cash to fund acquisitions.

He said: "We are part of the process but there's still a long way to go. We are just waiting to hear from them about whether they want to go into further talks."

Charles Dunstone, the chief executive of Carphone, said: “Today's announcement marks the next big step in The Carphone Warehouse's growth story.

“We have been working closely with Best Buy for nearly two years, and it is clear that we have very complementary cultures, skills and assets — it's a perfect match. It is also clear that we have a significant opportunity for incremental growth in our retail business which we can best realise with Best Buy on board.

Bob Willett, the 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, The Carphone Warehouse.”

The business will be overseen by a board made up of equal numbers of Best Buy and The Carphone Warehouse executives, including Mr Dunstone. Bob Willett will be chairman of the new venture, and Roger Taylor, the chief financial officer of Carphone Warehouse, will become chief executive CEO in addition to his existing duties.

Dan Gardiner, telecoms analyst at Landsbanki, said that this was a "positive" move which would help Carphone Warehouse deal with the increasingly tough mobile phone and telecoms market.

However, he said that the move into consumer electronics is unlikely to offer the same returns as the existing handset distribution business but this does effectively reduce the downside valuation risk.

He said: "It also reduces debt, which we think was becoming problematic and frees up capital to invest in telecoms business."

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts