BT TOOK a major step yesterday in its battle to stem the rush of users to mobile phones when it outlined plans for a product that merges the mobile phone with the home phone.

The telecoms group, which has been battling a decline in its traditional fixed-line business, unveiled plans for a phone that will bill calls made inside and near the home at a “cheap” landline rate, but automatically switches to the Vodafone mobile network when the user is out of the house.

BT plans to introduce the product from September under the BT Fusion brand.

Ian Livingston, chief executive of BT Retail, heralded the new product as the “best of both worlds”, and said that it would cut the price of calls.

The company said 30 per cent of calls made in the home are made using mobile phones. By giving its customers access to landline prices when calling from home the company claims it can cut overall bills.

But the new product will probably shore up demand for BT’s core fixed-line products because users will have to lease a BT phone line and subscribe to a BT Broadband package.

The telephone, based on a Motorola mobile phone, will wirelessly link to a “hub” using Bluetooth technology when in the home, with calls made over a broadband connection. The hub will also enable users to hook up to the internet using a wireless WiFi connection.

Subscribers will be required to use BT Broadband, although Mr Livingston raised the prospect of widening the requirements to include other broadband providers.

Analysts said the product, which has been called “Bluephone”, should help to drive revenues at the group.

Chris Alliott, an analyst at Nomura, said that although the product seemed “reasonably compelling”, consumer apathy could prove too strong.

“They’re trying to stem the tide of fixed to mobile substitution,” he said. “It’s yet to be seen whether this product will actually do this, but it provides some scope.”

BT will initially target its existing BT Broadband subscribers, who will be limited to just one handset choice, although Motorola will adapt its popular RAZR handset by the end of the year. In time it will be offered to corporate users.

Analysts at Ovum, the technology research group, said BT’s move would enable it to direct more mobile calls on to its fixed-line network, ensuring that the shift to mobile phones works in its favour. Angel Dobardziev, a senior analyst at Ovum, said that although the company was offering “headline grabbing” low-cost calls from home, the cost of making mobile calls, which are in line with similar mobile tariffs, could dampen demand.

He added that the product could accelerate the debate over the availability of broadband without having to pay for a normal landline, potentially knocking future revenues.

The product is also part of a move by BT to distance itself from its creaking image as a mere phone-line fixer and phone-box maintainer and position itself as an innovative player, offering services from broadband to television on demand.

BT’s fixed-line peers around the world, which are suffering from the same problem, will watch the progress of Fusion.