Charles Dunstone, chief executive of The Carphone Warehouse, said it was moved to take the action following last night's broadcast.
He said: "Our concern has rapidly mounted about the broadcast behaviour of individuals within the Big Brother house. We are totally against all forms of racism and bullying and indeed this behaviour is entirely at odds with the brand values of The Carphone Warehouse. As a result we feel that as long as this continues we are unable to associate our brand with the programme."
It is not yet clear if the company will sponsor the eighth series of 'Big Brother' this summer. Channel 4 was unavailable for comment at the time of writing.
Dunstone said: "We had already made it clear to Channel 4 that were this to continue, we would have to consider our position. Nothing we saw last night gave us any comfort. Accordingly we have instructed Channel 4 to remove our sponsorship name and branding with immediate effect."
Carphone Warehouse began sponsoring 'Big Brother' two years ago through its TalkTalk brand. It then moved the sponsorship to the main Carphone Warehouse brand last year.
However, the move comes despite branding experts claiming the negative publicity has not damaged the company's brand image.
John Allert, the chief executive of Interbrand UK, said: "When you're in the eye of the storm it always appears to be larger than it is. I think they have done enough to reassure their customers and dissociate themselves with the more extreme characters on the show."
Having avoided making a detailed statement, Andy Duncan, Channel 4's chief executive, admitted the latest series of 'Celebrity Big Brother', with its racist overtones, had strayed into a particularly controversial territory. He also said that producers have now spoken to Danielle and to Jade.
"The level of complaint and comment shows the programme has touched a real nerve. The debate has been heated, the viewing has at times been uncomfortable but, in my view, it is unquestionably a good thing that the programme has raised these issues and provoked such a debate. These attitudes, however distasteful, do persist -- we need to confront that truth.
"What constitutes racism is a complex question. We have been monitoring extremely carefully events in the house and have reached the view that we cannot with certainty say that the comments directed at Shilpa have been racially motivated or whether they stem from broader cultural and social differences.
"We have already intervened with Danielle and, as viewers will see tonight, again with Jade where we felt their comments might be construed to have racist overtones. Producers also spoke to Shilpa today who said she did not feel that behaviour towards her was racist."
Duncan said that the broadcaster would not hesitate to intervene again if apparently racist behaviour occurs.
"Big Brother's unique strength is that it is ultimately the public who will decide whether or not the behaviour of certain contestants has been unacceptable.
"Tomorrow night Jade and Shilpa will face the public vote. The British public has the opportunity to cut through the claim and counter-claim and pass its judgment on the events of the last week. In the last 25 years, Channel 4 has undoubtedly played a major role as a broadcaster to inform and educate viewers about issues of race. This is a role that I intend Channel 4 to continue playing."
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