UPDATE 2-Carphone to sell Vodafone contracts again

* Ends three-year dispute between the two companies

* Vodafone also extends partnership with Phones4U

(Adds company confirmation, shares)

LONDON, July 2 (Reuters) - British telecoms and retail group Carphone Warehouse (CPW.L) will offer contracts from Vodafone (VOD.L) from next week in its 820 stores, ending a three-year stand-off, Vodafone said on Thursday.

Vodafone switched to an exclusive deal with Carphone rival Phones4U in 2006 in the hope it could pay lower sales commissions. The move knocked Carphone's shares at the time by a sixth.

It regained some contract business a few months after that announcement and Vodafone customers were able to upgrade phones and purchase pay-as-you-go handsets at Carphone Warehouse, but not to sign Vodafone contracts.

"We have always set out our stall to offer the widest possible choice of handsets, networks and tariffs," Carphone Chief Executive Charles Dunstone said in a statement.

"Our new agreement with Vodafone will bring exciting new products and services to our stores and gives our customers the best possible choice in the marketplace for their communication needs."

Vodafone also said on Thursday it was extending its partnership with Phones4U to a multi-year agreement covering both mobile phone and mobile broadband connections.

The company said it now would have a total of 1,650 Vodafone, Carphone Warehouse and Phones4U stores offering Vodafone contracts.

"It is clear that Vodafone's withdrawal from CPW did it no favours," Citigroup analysts said in a note.

"Its UK contract churn (of customers leaving) is now over 20 percent. Vodafone needs the help of this independent to drive share of gross connections up/churn down, in our view."

Carphone shares traded down 2 percent at 156.25 pence by 1335 GMT. Vodafone was down 2.7 percent at 116.25 pence, just below the FTSE 100 Index which was down 2.2 percent. (Reporting by Victoria Bryan and Georgina Prodhan; Editing by Jon Loades-Carter)