Carphone Warehouse yesterday blamed the "lack of attractively priced smartphone products" at the cheap end of the mobile market for hurting sales.
The retail group said the pre-pay market – where consumers pay as they go, rather than receive a monthly bill – continued to be "weak".
Like-for-like sales at its subsidiary, Carphone Europe, fell by 2 per cent to £776m in the three months to June.
Chief executive Roger Taylor said he was hopeful Carphone could turn round the performance in the second half of the year.
Some of the features in high-end smartphones are starting to "cascade" down to lower-priced models.
Carphone said an example would be the sub-£100 Windows Nokia Lumia phone, which it recently started selling.
Sales at Carphone's other smaller business, Virgin Mobile France, did better, with sales up 13 per cent to €122m (£95.6m), thanks in part to having more post-pay contract customers.
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