Vodafone said in October that it would terminate a 17-year deal selling its contract phones in Carphone Warehouse and sell them exclusively in Phones 4 U.

Vodafone has now agreed that existing contract customers can still upgrade to a new Vodafone contract in Carphone Warehouse stores.

It is understood that the upgrade business accounts for about 40 per cent of the value of the total business Carphone lost in October.

Although winning back the work will have no impact on Carphone’s numbers, analysts said that Vodafone’s turn-around was “positive as a sentiment shift”. They noted that Vodafone’s volte-face has come at a particularly good time — just before the key Christmas sales period.

Shares in Carphone closed up 20¾ at 291¾p.

Carphone’s shares tumbled nearly 16 per cent in two days after Vodafone’s move to terminate its contract work.

In October, Carphone’s stock was one of the top ten most “shorted” with traders betting on the share price falling.

The move has created a strong divide between investors who believe the negative reaction to the announcement was overdone and those who believe that the group’s entire retail model has been thrown into doubt.

Separately, Carphone said that it had seen a good start to Christmas trading. It believes that a flat like-for-like sales performance for the Christmas quarter would be a good one.

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