Mr Dunstone said the retailer was in a much stronger position in the wake of a shake-up in the handset market “A lot of competition has disappeared Stores have closed down and stopped selling mobiles. Nothing has changed to suggest [stronger sales] won’t continue all year,” he said.He said the launch of more new handsets than last year had helped, although he admitted the imminent arrival of third-generation phone services – due to be introduced in the UK by Hutchison 3G in October – was unlikely to have much of an effect this year.Shares in the group, which had rallied sharply ahead of the trading update, fell 6.5p to 79p They were floated less than two years ago at 200p. One analyst, who did not want to be named, said: “The market had been looking for upgrades but the group was being conservative.”The group, which is heavily dependent on sales in its key Christmas trading period, said the trend was up both in the UK and across its operations in mainland Europe. Mr Dunstone said Germany – where the group has shut 30 of its worst performing stores – was still an issue.

“Trading is ahead of plan but it still needs to do better to break even.” He confirmed that the company planned to pull out of Germany if it was still making a loss there by the end of the year.Mr Dunstone said the story of mobile phone raids on his stores had been “over exaggerated” He added: “We get an attack on average once a week We have 470 stores in the UK so that’s 50 stores a year Some are quite serious, some are pathetically amateur. It’s an ongoing battle for anyone in retail.” He said the problem was uninsurable.One analyst, alluding to Carphone’s aim of driving revenues from selling more insurance policies, said: “The challenge might not be at a shop level but at a customer level.” The number of policyholders increased to 975,000, the group said.Mr Dunstone said operators such as Vodafone and Orange were becoming “more aggressive” in reintroducing subsidies on mobile handsets. He said the cost of handsets sold as part of a contract had fallen by about £20 to £30 as “operators try to encourage prepaid customers to move to subscription”.. The spectre of deflation returned to haunt the world stage yesterday as new figures showed prices in Switzerland dropped for the first time in almost four years.

The bank now targets a range of 0.25 to 1.25 per cent.The fall in inflation below zero was driven by the strength of the Swiss franc and an early start to summer shop sales – one-off factors economists said would prevent the European state succumbing to deflation.Prices for clothing and shoes fell 12 per cent while retail sales in May fell for the first time in a year as people cut back on spending.Prices in Japan have fallen for 33 months on the trot as the economy is mired in stagnation. Inflation in Britain is at a 27-year low and is just 1.1 per cent in the US.Last month the Federal Reserve set alarm bells ringing by publishing research into the lessons that could be learned if the Japanese experience were repeated.David Bloom, global economist at HSBC, said: “People think that the whole thing depends on equity markets but we have this very low inflation which is a little bit precarious.” He said falling inflation levels was evidence that companies were extremely limited in their ability to put up prices even when demand was rising, a factor likely to limit both profits and investment.”What it tells you is that if the Fed is going to cut rates it won’t pussy-foot about and cut a quarter-point, it will go the whole hog and cut by a half- or three-quarter point,” he said.. The water regulator announced yesterday that it wanted to extend the notice period required to terminate the licence of a water company, in effect extending the current licences by 15 years. Currently, the regulator is required to give a company 10 years’ notice to terminate its licence. Under the new arrangement, this would be extended to a 25-year notice period.Companies were granted licences for water and sewerage services for at least 25 years following privatisation in 1989. Under the current arrangements notice would have to be given by 2004 for licences to be terminated by 2014 – the licences do not end automatically at the end of the licence term. Ofwat’s director general Philip Fletcher said the approach of 2004 was creating uncertainty for the water industry, which was likely to drive up the costs of raising finance.