Shares in Carphone Warehouse plunged by 16 per cent to 109p today after it confirmed that it is considering a demerger of its telecoms and retail businesses.

Charles Dunstone, chief executive of Carphone Warehouse, said today that the group had launched a formal review of its structure, which houses its retail stores and TalkTalk, its broadband business.

Mr Dunstone said: "I believe we have reached a watershed in the evolution of the group, with two discrete and focused businesses, with strong market positions and solid financial foundations.

"We recognise, however, that the structure of the group may now no longer be appropriate for the development of the two businesses."

Despite analyst speculation that a demerger would attract bids for its telecoms business from rivals such as BSkyB and Vodafone, both companies said this morning that they were not considering Carphone Warehouse.

A bid is "not on the agenda" for BSkyB, a source familiar with the situation told Reuters. A spokesman for Vodafone said the company was not looking at Carphone Warehouse. BSkyB is 39 per cent owned by News Corporation, parent company of The Times.

Mr Dunstone, who owns 32.6 per cent of Carphone Warehouse, said that he "would remain closely involved in both companies" if TalkTalk and its retail business were to be split. He founded the business in 1989 with £6,000 of his savings.

A demerger would enable Carphone Warehouse to focus on its joint venture with Best Buy, the American electricals giant, which it entered into earlier this year.

It would also release value for the company. Carphone Warehouse is currently valued at £1.3 billion. If sold separately, TalkTalk, Britain's third-largest supplier of broadband with 2.8 million customers, could be worth up to £1 billion.

The company said in a statement that the board believed there was "further scope to unlock shareholder value over time from the constituent parts of the group".

It is thought that a demerger would not be undertaken before the current financial turmoil has eased. Mr Dunstone said the group faced "the most challenging economic climate we have ever operated in", but that it was well positioned to withstand the difficulties.

Last week Cable & Wireless postponed plans for the demerger of its UK and Panama-to-Macau operations because it said could not proceed confidently in the current volatile market conditions.

Best Buy has not been immune to the economic slowdown. Last week its shares tumbled on Wall Street after a warning that weak consumer spending in the run-up to Christmas had forced it to cut its profits forecast for 2009.

Carphone Warehouse's interim results this morning showed that TalkTalk's revenues for the six months to the end of September fell from £711 million to £697 million. Revenues at Best Buy Europe, the retail and distribution arm of the group, rose 12 per cent to £1.6 billion.

However, profits for the six months fell from £44 million to £39 million.

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