CHARLES DUNSTONE, the chief executive of Carphone Warehouse, is expected to confirm this week that he is considering plans to break up the retail and broadband empire he founded almost 20 years ago.

He has instructed bankers to explore the best route for a demerger that would hive off Talk Talk, his broadband and phone-calls operation, into a separately listed vehicle.

Dunstone wants to release value in the company, which was worth £3.4 billion at its peak in August last year.

However, he will caution that no split of the £1.3 billion company is imminent because of the stock-market turmoil that recently forced Cable & Wireless to postpone its own plan for a demerger until 2009.

Dunstone, who owns 32.6% of Carphone, worth £424m, is keen to maintain an involvement in the separate operations of retail and broadband.

A split could revive talk that Dunstone is preparing to sell the broadband arm, which is Britain’s third-largest supplier, with 2.8m customers, and is forecast to make £300m in underlying earnings this year. This would give it a value of up to £1 billion. The division has been linked in the past to Vodafone, which has 3.9m broadband customers across Europe.

However, Dunstone is understood to think that the current climate makes it a poor time to try to trade assets. Last week, Vittorio Colao, the new chief executive of Vodafone, played down his desire to buy a broadband business in the UK.

A number of Carphone’s big investors have been urging Dunstone to explore a demerger. The company sold a 50% stake in its retail business to American electricals giant Best Buy for £1.1 billion in May, wiping out net debt of £843m.

On top of Carphone’s 2,430 smaller outlets, the pair intend to open 100 out-of-town super-stores together in a bid to double profits over the next five years. Roger Taylor, the group’s finance director, has taken a key role as chief executive of the joint venture.

The expansion plan has been set out just as Carphone reports half-year profits on Tuesday against a backdrop of weakening consumer demand.

Best Buy boss Brad Anderson warned last week of “rapid, seismic changes in consumer behaviour”.

Mobile-phone maker Nokia cautioned that handset sales would fall next year as fewer users upgraded. Meanwhile, most broadband suppliers are reporting that they are recruiting fewer new customers as the market matures and fewer people move house.

Carphone’s shares have fallen 57% in a year, underperforming the FTSE All Share by 34%. BT has called a halt to acquisitions at its troubled Global Services (GS) division. Hanif Lalani, the finance director brought in to tackle runaway costs at the operation, which runs communications networks for multi-national companies, said: “Given the fact I need to streamline, acquisitions in GS are on hold. We don’t need them.”

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