As the U.S. consumer electronics market hits the skids, Best Buy is reaching across the Atlantic in a big way.

The Richfield-based retailer said Thursday that it has sunk $2.1 billion into a joint venture with British mobile phone retail giant Carphone Warehouse, a chain of 2,400 stores in nine countries.

Under the agreement, the two retailers will form a new company in which Best Buy will own a 50 percent stake. The new company will include all of Carphone Warehouse's stores in such countries as Great Britain, Spain, France and Portugal. It also includes Carphone's Web and other businesses.

The stores will continue to operate under the Carphone Warehouse and Phone House names, but plans call for new, large-format stores to open under the Best Buy logo in Europe in 2009.

Best Buy has stores in Canada and China, and has announced plans to expand into Mexico and Turkey in the near future. But with cash-strapped consumers in the United States shying away from discretionary purchases, Best Buy's stretch into Europe may be a timely move.

In a conference call, Best Buy CEO Brad Anderson lauded the deal's "extraordinary" growth potential.

Anderson noted that the $175 billion overseas consumer electronics market has been the fastest growing category for the past five years. The Carphone Warehouse deal "gives us a chance to compete in the European market that gives us a long-term growth horizon that we think is extraordinary," he said.

In Europe, where land is limited and government regulation tight, a partnership appears to be less expensive and less risky than a solo expansion, some analysts observed.

"A significant motivation for Best Buy was speed to market," said Mitchell Kaiser, an analyst with Piper Jaffray & Co. in Minneapolis.

Best Buy, the nation's largest consumer electronics retailer, expects the partnership to boost annual revenue by $5 billion and increase future earnings by 5 to 7 cents per share this year. But the company said it will scrap its $800 million share buyback plan to free up funds for the joint venture.

Wall Street didn't exactly rally behind the deal. Best Buy shares were down a little more than 3 percent, at $42.05. Carphone Warehouse ended the day unchanged at $5.85 in U.S. trading.

Best Buy already had a 3 percent stake in Carphone Warehouse, which it has worked with for four years. The two companies teamed up to open nine freestanding Best Buy Mobile stores in Manhattan as well as a handful of Geek Squad stores in England and Spain. The mobile concept has since been rolled out to 424 of Best Buy's stores, with the goal of having it in all 1,314 outlets in the next 18 months.

Carphone Warehouse, founded in 1989 by Charles Dunstone, is one of Britain's more high profile retailers. It sells all brands of mobile phones and has become the United Kingdom's third-largest broadband provider, Dunstone said in a conference call.

The deal with Best Buy comes after months of rumors in which Dunstone was said to be looking to sell or invest in new ventures, according to the London Telegraph.

Best Buy was coy about details of the new large-format stores, which Dunstone said would open across Europe next year. As Best Buy's U.S. stores tend to be as large as many British supermarkets, its unclear whether European consumers would warm to the big-box concept.

But Dunstone and Anderson say combining the mobile phone business with Best Buy's lines of laptops, DVD players, video game systems and cameras will better serve a consumer who is becoming overwhelmed with the growing choices of consumer electronics.

And of course, it helps Best Buy diversify as the American economy struggles.

"No matter how good Best Buy is, they're going to get caught up in that wave, at least in the immediate term," said Paul Carton, director of research at ChangeWave, whose recent surveys show consumer electronics taking a huge consumer hit. "So anything they can do to diversify outside the U.S. makes a lot of sense. Of course, if they picked the wrong horse to jump on, it could be another story."

The deal still needs the approval of Carphone Warehouse's shareholders, though the company's directors have unanimously backed the deal. A shareholder vote is expected by early August.

Jackie Crosby • 612-673-7335