In a trading update, the retailers confirmed they were in "preliminary discussions" over a merger.
The statement said that discussions are at a "very preliminary stage", and that there is "no certainty" that a merger will go ahead. It added that "no decision" has been taken on the potential structure of such a merger.
Mobile phone retailer Carphone Warehouse operates over 2,000 branches across
Over the past 12 months, the two companies have collaborated over a joint "Tablets for Schools" CSR initiative. Carphone Warehouse chief executive Andrew Harrison and Dixons chief executive Sebastian James claim the scheme will help "bridge the digital divide" in the nation’s schools.
A desire to "optimise" branch networks is behind the merger, according to CSS Insight founder Shaun Collins.
He said: "The rationale for this move is clear: both retail chains offer similar ranges of connected products and are looking to optimise their retail networks. It emphasises our view that devices have become a continuum, differing only in screen size.
"Despite the shift to Internet sales, a presence on the high street will continue to be important, and a new entity has the potential to reshape mobile retailing in
After a rocky period, Dixons has pushed back into profit in recent years on the back of an increased focus on after-sales services.
Last month, the company revealed a five-fold increase in underlying profits in the
Earlier this year, Dixons appointed former O2 marketer Gary Booker as its chief marketing officer, overseeing its brands in