VODAFONE is set to end a three-year dispute with Carphone Warehouse by resurrecting a sales agreement with the mobile-phone store chain.

Talks between Charles Dunstone, the Carphone boss, and Vodafone’s senior management are believed to be at an advanced stage, with an announcement expected imminently.

The deal would lead to Vodafone mobile contracts being sold in Carphone’s 800 UK stores for the first time since 2006.

Vodafone ended a previous deal with Carphone and switched to an exclusive agreement with rival Phones4U, which committed to signing up 30,000 Vodafone customers a month.

Dunstone was shocked by the decision at the time, and suggested that Vodafone had walked away from the negotiating table too quickly.

Carphone’s shares fell 14% on the day the contract loss was announced, with analysts estimating the chain could lose about £20m of annual earnings. The independent research house Arete predicted that the company’s shares would halve in value.

Dunstone has remained in on-off talks with Vodafone about resurrecting the deal. Carphone never lost the contract to sell Vodafone’s prepaid mobile phones.

Carphone’s business model has radically changed since the previous deal was agreed. Dunstone has spun off his retail business into a joint venture with the American electrical retailer Best Buy. The new chain will sell consumer electronics as well as mobile phones. As part of the deal, Carphone has a profit-sharing agreement with Best Buy’s American mobile business.

Dunstone has also created a large broadband internet business. Just days before losing the Vodafone contract, Carphone paid £370m to acquire AOL UK, the internet service provider. That business, rebranded Talk Talk, has now expanded into Britain’s second-biggest broadband provider, thanks in part to its £236m acquisition last month of Tiscali UK.

Last week, Dunstone confirmed plans to demerge the two businesses by July 2010. They will be named Best Buy Europe and Talk Talk Group.

He also announced that the group had raised pretax profits to £133m in the year to March 2008, up from only £4m last year.

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