Best Buy, a World-Leading Consumer Electronics Retailer, and The Carphone Warehouse, a World-Leading Independent Mobile Phone Retailer, to Create a New Company

Business Wire, May 8, 2008

New Venture to Accelerate the Development of The Carphone Warehouse's Retail Proposition and to Introduce Best Buy Stores Across Europe

Best Buy to Acquire 50% of The Carphone Warehouse's European and US Retail Interests for a Cash Consideration of PS1.1 Billion or $2.1 Billion

The Carphone Warehouse to Use Proceeds to Pay Down Debt, Invest in Broadband Customer Growth and Infrastructure, and Invest in New Areas of Growth Presented by the Transaction

LONDON -- The Carphone Warehouse Group PLC ("The Carphone Warehouse") (LSE:CPW) and Best Buy Co., Inc. ("Best Buy") (NYSE:BBY) have agreed to form a new venture to accelerate their growth by capitalising on the European consumer's evolving appetite for consumer electronics. The assets of the newly-formed company will comprise The Carphone Warehouse's existing retail business, operating from more than 2,400 stores in nine European countries under the Carphone Warehouse and Phone House brands; and The Carphone Warehouse's share of its existing relationships with Best Buy.

Best Buy is a world-leading consumer electronics retailer, with fiscal 2008 revenues of $40 billion, operating income of $2.2 billion, 150,000 employees and 1,314 stores providing over 48 million square feet of sales space in the United States, Canada and China. Best Buy plans to acquire a 50% stake in the new company for a cash consideration of PS1.1 billion, or $2.1 billion.

Consumer electronics has been the fastest-growing category in European retail over the past five years and represents an estimated market of approximately PS89 billion ($175 billion). The two companies expect growth in consumer electronics to be led by the convergence in entertainment, computing and communications.

Best Buy and The Carphone Warehouse expect wireless information provision, mobility and broadband to create significant new consumer and business opportunities. Demonstrating, advising on, configuring and connecting these services will be key to success in this new market. The two companies believe that the customer focus and passion for impartial advice that they share will be crucial elements of the new venture, and give it the potential to build a substantial presence in European larger format consumer electronics retailing.

On completion of the transaction, The Carphone Warehouse and Best Buy will each own 50% of the retail business, comprising all the 2,400 stores, the web and direct businesses, the insurance operations, and its airtime reselling businesses. The Carphone Warehouse continues to own 100% of its fixed line telecoms business in the U.K., comprising TalkTalk, AOL Broadband and Opal; and its share of the Virgin Mobile France joint venture. Best Buy continues to hold its 2.9% stake in The Carphone Warehouse.

The Carphone Warehouse plans to use the proceeds of the transaction to repay existing debt, to invest in broadband customer growth and infrastructure, and to invest in new areas of growth presented by the transaction.

The transaction is subject to the approval of The Carphone Warehouse's shareholders. The directors of The Carphone Warehouse have unanimously agreed to vote in favour of the resolution to approve the transaction at the extraordinary general meeting scheduled to take place by early August.

The purpose of the new venture is three-fold. Specifically, the new company plans:

* To continue to grow The Carphone Warehouse's existing retail business through further physical expansion in its existing European markets, the acceleration of the current evolution towards mobile and fixed line connectivity, growth in private-label products, and the realisation of benefits from joint purchasing, joint sourcing and merchandising optimization;

* To build a significant market share in consumer electronics retailing in Europe, through the roll-out of Best Buy stores, services and websites in selected markets, beginning in calendar 2009; and

* To bring to Best Buy's core North American operations The Carphone Warehouse's expertise in sourcing mobility products, bundling services and operating smaller stores, thereby enhancing and diversifying Best Buy's skill set for improving its customer experience.

The new venture would also benefit from a long-term commercial agreement with The Carphone Warehouse's fixed line division in the U.K., enabling it to create attractive offerings through the extension of the subsidised hardware model from mobile to fixed line.

Charles Dunstone, CEO of The Carphone Warehouse, said, "Today's announcement marks the next big step in The Carphone Warehouse's growth story. We have built The Carphone Warehouse by anticipating consumers' changing needs and adapting in advance to meet them. Our core principles of full range, impartial advice and best value have underpinned the creation of our leading position in mobile retailing. Our approach to fixed line telecoms and our subsequent launch of free broadband followed these principles by championing choice and value for customers in a traditionally uncompetitive marketplace. Each of these businesses in its own way has changed the market it serves, and each has benefited shareholders as well as customers.