Carphone Warehouse disclosed today that it has been signing up more than 40,000 new users a week to its "free" Talk Talk broadband service as the group reported that pre-tax profits last year jumped almost 34 per cent to £136 million.

Charles Dunstone, the chief executive, said initial demand for broadband had been "significantly ahead of expectations" after admitting recently that his 1,000-staff call centres could not meet the demand of 20,000 calls a day.

Since the launch in April the service has signed up 340,000 customers of which almost a third are now live on the broadband service, which requires customers to pay £11 a month for a line rental and sign up for Talk Talk land line for £9.99 a month.

The group said it expected to lose £50 million on the project in the medium term, but has pencilled in a profit of between £30 and £40 million in two years' time.

Mr Dunstone said: " Our Free Broadband Forever product has exceeded our most optimistic expectations, with 340,000 customers now having applied for the service. Responding to this much greater than anticipated growth, we have answered many more calls and handled many more sales enquiries than had been planned, with the result that we have connected more customers in the first eight weeks than we had planned to do in the first four months."

He said:" When combined with our 2.6 million TalkTalk voice customers, our impact and influence on the UK residential telecoms market is becoming considerable. Our aim was to change the UK broadband market forever, and there is no doubt that we are well on the way to achieving this."

Total revenues are up almost 30 per cent to just over £3 billion, of which its 1,778 stores across 10 European countries and retail online brands account for more than half. These rose 22 per cent in the year to £1.75 million.

In the fixed-line market the acquisition of Onetel and Tele2 last year helped lift the number of customers in the UK from 900,000 to 2.6 million which the group says gives it 10 per cent of the total market.

The total dividend is raised 39 per cent to 2.5p and the shares, which have almost tripled in as many years, eased 1.5p to 330p valuing the group at just under £3 billion.

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