UPDATE 2-Smartphone sales help Carphone lift earnings view

* Sees year underlying EPS at top end of 14-15 pence range * Q3 Best Buy Europe like-for-like sales up 5.5 pct

* Q3 TalkTalk adds net 36,000 broadband customers

* Cautious on economic environment

* Shares up 0.9 pct, outperforming weaker midcap market

(Adds FD, analyst comments, shares, more detail, background)

By Mark Potter

LONDON, Jan 19 (Reuters) - Carphone Warehouse (CPW.L), Europe's biggest mobile phone retailer, nudged up its full-year earnings forecast following a strong Christmas for hi-tech phones and rising customer numbers at its telecoms business.

The better-than-expected performance adds to signs that Britons splashed out over Christmas, with luxury brand Burberry (BRBY.L) and Penguin books also reporting buoyant trading on Tuesday. [ID:nLDE60H0SK] [ID:nLDE60H248]

Carphone, which is splitting into separate retail and telecoms businesses in March, joined rivals in warning that business could be tough in 2010 as taxes rise and unemployment is set to remain high.

However, finance chief Roger Taylor was confident the group's retail business in particular would benefit from plans to open more stores in the United States, hi-tech Wireless World shops in Europe and electrical goods megastores in Britain.

"We've got some quite exciting things just within our own operational hands... rather than necessarily just being affected by the macroeconomic environment," he told Reuters.

At 0948 GMT, Carphone shares were up 0.9 percent at 198.7 pence, beating a 1.0 percent fall in UK midcap stocks .FTMC.

UBS analysts welcomed the increase in financial forecasts and said the demerger could unlock further value for investors, particularly as it might create bid interest in the telecoms business, TalkTalk.

SMARTPHONES

Carphone said like-for-like revenues at Best Buy Europe, its retail joint venture with U.S. electricals chain Best Buy (BBY.N), rose 5.5 percent in the three months to Dec. 31, beating analysts' mean forecast of 3 percent in a company poll.

Customer connections rose 1.4 percent to 3.75 million, just below forecasts.

But Taylor said there was a higher proportion of more profitable deals for high technology "smartphones," like Apple Inc's (AAPL.O) iPhone, compared with cheaper SIM-only deals.

Demand was particularly strong in Britain, where like-for-like revenues were up 6.3 percent, while Nokia's (NOK1V.HE) Illuvial was one of the strongest performing handsets, he said. [ID:nLDE60I0D6]

Carphone, which has over 2,400 stores in nine countries, said it expected its share of Best Buy Europe's net income for the year ending March 31 to be 40-45 million pounds ($66-74 million), up from close to 40 million previously.

TalkTalk, Britain's second-biggest broadband provider behind BT (BT.L), added a net 36,000 customers in the third quarter, beating analysts' average forecast of 14,000.

For the group as a whole, Carphone expects full-year earnings at the top end of its 14-15 pence forecast range.

Taylor said Best Buy Europe had identified eight to nine sites for its chain of new electrical goods megastores that will open in Britain from the Spring.

Rival DSG DSGI.L last week reported a strong performance at its megastores as it beat forecasts with an 8 percent rise in like-for-like sales in the 12 weeks to Jan. 9. [ID:nLDE60C1GC]

For a FACTBOX on how British retailers fared over Christmas please click on [ID:nLDE6040GZ] (Editing by James Davey and Mike Nesbit) ($1=0.6086 pounds)