Carphone Warehouse said profits growth in its UK business stalled after a slide in its pre-pay market.
Pre-pay volumes slumped by as much as 40 per cent in some of its markets but the group is hopeful of reviving demand this year by launching more affordable smartphones to attract shoppers who do not want to sign up to contracts.
It recently started a Deal of the Week promotion, which for the first time offered a Windows operated Nokia handset for under £100, and hopes manufacturers will produce cheaper smartphones this year.
The group, whose Carphone Warehouse Europe division has 2,400 outlets, said underlying earnings rose 0.3 per cent to £135m in the year to the end of March.
The division, which suffered a 5.5 per cent fall in revenues, was also hit by cuts in subsidies from major networks and the recent trend for mobile phone contracts shifting to 24 months instead of 18.
Carphone warned that its markets were set to remain challenging but it would continue to roll out its Wireless World format to help grow sales of tablets, accessories and apps.
It had 392 stores in the format in March and plans to convert the vast majority of UK stores in the next two or three years.
Earnings for the current year are likely to be between £130m and £150m, depending on its success in pre-pay markets.
Meanwhile, its failed BestBuy electronics joint venture in the UK racked up £72.5m in losses as well as a further £120.9m from closing the business, which ran 11 stores.