Carphone Warehouse has confirmed that it will split its retail and telecoms divisions in to two separately listed companies.

The company has not set a timetable for the demerger but said that it would renegotiate £925m of credit facilities with its banks over the coming months with a view to completing the process within nine months of securing a funding plan.

Carphone Warehouse chief financial officer Roger Taylor said that the split of the business, which will comprise the demerger of its TalkTalk telecoms business and its retail joint venture with US electricals giant Best Buy and includes Carphone Warehouse’s 2,400 stores, was a natural move for the business.

Founder and chief executive Charles Dunstone has proposed becoming chairman of both businesses.

The news came as the group said that Carphone Warehouse would meet market expectations for the year to March. The retail division — Best Buy Europe — increased connections by 12 per cent to three million in the fourth quarter, while subscription connections were up 2 per cent to 1.1 million.

Through its venture with Best Buy, Carphone Warehouse will open five big-box electricals stores in early 2010 after delaying Best Buy’ debut to secure more favourable terms with landlords. It will also extend its large format Carphone Warehouse stores – dubbed Wireless Warehouse – to 30 or 40 locations.

Carphone Warehouse said that is has £150m of free cash flow. It added that Best Buy Europe would generate cash flow of around £50m after capex and working capital relating to the opening of its Best Buy branded large format stores. Previously the £50m target was set before capex and working capital.

In a statement Carphone Warehouse said: “We now have increased confidence in the cash generation of Best Buy Europe during 2009/2010”.

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