Mobile retailer The Carphone Warehouse today expanded its operations by agreeing a £65 million deal to buy fixed-line phones group Opal Telecom.

In addition to the initial payment, in cash and shares, the group will pay up to £18 million to Opal over the next two years subject to performance.

Carphone said the move would allow it to offer domestic fixed-line services through its shops and gave it a platform to expand into the small business market.

Opal provides fixed-line phone services mainly to the corporate and small business market in the UK.

Chairman Hans Snook said: "The acquisition is a logical evolution of The Carphone Warehouse's strategy and enables us to bring Opal's services to the wide retail market as well as reinforcing their strength with corporate customers."

The deal came as Carphone Warehouse reported pre-tax profits, before exceptional items, for the six months to September 28 rose 26 per cent to £12 million.

Turnover grew from £539.6 million to £861.2 million.

Carphone's results showed bottom-line pre-tax profits of £17.7 million against losses of £100,000 last time. Figures this year were boosted by sale and leaseback of the group's freehold offices in London.

Chief executive Charles Dunstone said: "Last year, the volume of mobile handset sales across Europe fell by 40 to 50 per cent.

"Our scale and proposition enabled us to streng-then our position as others withdrew in this difficult environment.

"This year, volumes have stabilised, and with the arrival of new colour screens, new services and new content, the market is now seeing a modest uplift."

The group would wait until after Christmas before launching new fixed-line services.

Mr Dunstone said: "We get over two million people a year through our stores who are talking to us about telecoms and it is a perfect opportunity to introduce products to them."