Mobile phones specialist Carphone Warehouse and electricals giant Dixons have unveiled terms of a merger to create a £4bn technology retail giant.

The merged business, to be called Dixons Carphone, will “create a leader in European consumer electricals, mobiles, connectivity and related services” the retailers said.

Dixons chief executive Sebastian James will take up the same role at the enlarged retailer, which will be chaired by Carphone founder Sir Charles Dunstone.

As well as enabling Carphone and Dixons to better exploit their strength in technology retail, the merger is anticipated to deliver cost savings of at least £80m on a recurring basis.

James, who also revealed a group full-year like-for-like advance of 3% at Dixons, said: “It’s good to be in such a strong position as we embark on this adventure.

“The ability to take what we have built in electrical retailing and add the profound expertise of Carphone Warehouse in connectivity would make us a leading force in retailing for a connected world.

“Together we can create a seamless experience for our customers that will enable technology to deliver what it promises - that is, to make their lives better.”

Dunstone said: “We have a deep respect for each other and we see the merger of these two great companies as an opportunity to bring our skills together for the consumer and build a new retailer for the digital age.

“We are also creating jobs and we see many opportunities for further growth.”

The strategic rationale for the merger comprised three main points: the ability to generate incremental value through a “seamless multichannel retail offer across a comprehensive range of products and connectivity services”; delivering “significant revenue growth through incremental service offerings”; and creating “substantial value enhancement by leveraging existing capabilities and providing services to global business partners”.

At some point the two retailers’ head offices will be combined in one place but no decision has been made yet on where that will be.

Oriel analyst Alistair Davies said: “At first glance, the benefits from the deal look positive, and accretive to earnings, raising the possibility of further shareholder returns, particularly as property losses and high coupon bonds unwind in the next three years.”