Carphone commits to Germany in £40m deal

Carphone Warehouse, the mobile phone retailer, will this week scotch rumours it is about to pull out of Germany by announcing the purchase of a telecoms provider in Europe's largest economy.

The deal will see Carphone buy the German business of Hutchison Telecommunications for up to £40m.

Carphone bought around 80 retail outlets in 2000 but its operation has since been loss-making although there have been recent improvements. Charles Dunstone, the chief executive, earlier this year told the City that he would sell the operation if he decided that it could be brought into profit.

Buying the Hutchison business will double Carphone's market share in Germany by adding between 650,000 and 700,000 customers, eight stores and a network of 250 dealers.

The acquisition also fits with Carphone's declared strategy of evolving from a retailer into a communications group that can earn ongoing revenues from sales of airtime and billing fees once the commission has been paid at the point of sale. Hutchison, which acts as a middleman between network operators and customers, is part of Orange, the mobile operator owned by France Telecom.

This week Carphone is expected to announce plans to pay a dividend, expected to be around 1p, for the first time in its history. The group is also expected to give a commitment to grow the dividend in line with earnings. Analysts predict pre-tax profits of around £56m for the year to 31 March. The company is thought to have benefited from rivals closing mobile phone stores on the high street and the launch of a proliferation of mobile handsets and services.

Meanwhile, Cable & Wireless refused to comment on reports it might consider a merger with Energis, the telecoms group that was rescued recently by its bankers.