Carphone Warehouse is to demerge from its Talk Talk fixed line and broadband business by July 2010.

The two businesses will be separate listed companies.

The timing of the decision was confirmed today, when Carphone Warehouse revealed full-year sales fell to £1.39bn from £1.42bn. In the year to March 31, profits before tax were £133m.

Carphone Warehouse chief executive Charles Dunstone said that the demerger would make it easier for shareholders to assess more clearly the value of the group’s businesses.

Dunstone said: “It’s been increasingly obvious that the group is now two businesses.

“Both have reached the point where there are no material synergies between them… they need to operate independently.”

The retailer, which reiterated guidance to generate over £150m in free cash flow and for its acquisition of Tiscali to boost earnings per share by 10 per cent, said it sees signs of a consumer recovery by the end of the year.

Dunstone said: “We said earlier this year that, while we did not see an early end to the economic pressures, we did not see further deterioration and, as far as we can see, that remains the case.”

The retailer is also close to finalising separate banking facilities for Best Buy Europe, its joint venture with the US electricals group. It reiterated that the group’s share of profits from the venture will be between £30m and £40m.

During the year, connections growth at Best Buy Europe rose 8 per cent year on year. It will open five big-box-format Best Buy stores in spring next year.