A £3.7 billion merger between Carphone Warehouse and Dixons is set to be unveiled this week in a move creating a retail giant. 

The new company, which will be called Carphone Dixons, should enable Currys and PC World owner Dixons to boost its exposure to the burgeoning mobile and smartphone market. 

The terms of the combination are expected to be announced on Thursday following two months of talks between the two sides.

Existing brands are unlikely to be affected but there will be savings from head office functions and Carphone supplying Dixons' internet-connected goods.

Charles Dunstone still owns a quarter of Carphone, the firm he founded in 1989, and is in line to become chairman of the newly-merged retailer. 

The firm has around 2,000 stores including more than 800 in the UK and about 90 in Ireland.

Dixons, founded in the 1930s, has about 900 stores, including more than 500 in the UK and several in Ireland. 

Together, the two companies would have annual sales of more than £12 billion, and a market value of about £3.7 billion.

Such a retail giant would be expected to have more power to stand up to upstart online competition from electrical retail rivals such as AO World.

Both companies have weathered tough trading conditions in UK retail with Dixons benefiting from the demise of rival Comet.

Dixons chief executive Sebastian James, who is set for the same role at the merged retailer, is said to be keen to move his company on from a current tie-up in the mobile sector involving Carphone's rival Phones4u.