Carphone's TalkTalk has the real X-Factor

The group yesterday upped its full-year forecast, the second move in as many months.

TalkTalk now has 4.15 million customers, confirming the group's telecoms arm as the second-biggest broadband provider behind BT, after Carphone brought Tiscali in July 2009.

Carphone's share in its joint-venture retail arm, Best Buy Europe, is also expected to net an income of between 40 million and 45m after a 5.5 per cent growth in like-for-like sales in the three months to 31 December.

Strong demand for smart high-end mobile phones, such as Apple's iPhone, spurred retail sales, said Carphone's chief executive, Charles Dunstone.

"What we see is a long run of people migrating from traditional phones to smart phones, and that market is really, really hotting up," he said.

The recent bad weather has also been a boon for the TalkTalk and retail business, Dunstone claimed. "There is a sense people are saying, 'I must improve my phone in case I break down or get stuck.'"

Dunstone also believed the group would gain from a proposed government scheme to extend broadband access in the UK.

"The political will is there to roll out broadband across the country. Ofcom (the regulator] is keen that it is an open environment, and we are very active in the debate."

Morgan Singleton, an analyst from Collins Stewart, said: "Revenue for TalkTalk, 446m, came in at the top end of consensus, boosted by broadband, with 36,000 new subscribers slightly more than expected.

"Non-broadband customers continued to fall, but at a slightly higher take, and we expected a little more from the unbundling process than was achieved."

Carphone's investors were rewarded with a 2 per cent rise in the share price, up by 4.4p to 201.4p at yesterday's close.