BT will fail to complete a £10 billion project to upgrade its national phone network on time, with only a handful of a planned 350,000 lines already transferred in the pilot area.

The telecoms giant had hoped to complete the ambitious project by 2010, but it has been forced to push the deadline back by a year.

It is understood to have transferred so far only a fraction of the 350,000 lines in Wales that it planned to move to the new network by the end of this summer.

Rivals said that the problems were the result of BT being overly bullish about the highly complicated project, the first of its kind in the world. Questions have also been raised about whether the group placed too much focus on securing the cheapest possible deals with suppliers.

In 2005, BT spurned Marconi, a long-standing supplier that had hoped to seize a significant part of the work, and instead picked suppliers such as Huawei, a Chinese telecoms equipment giant, Fujitsu, of Japan, and Lucent, of the United States. The failure of Marconi to win a share of the contract was blamed for the demise of the business and its sale to Ericsson.

Marconi complained at the time that it had been unable to meet BT’s commercial requirements and that if it had reduced its prices any further it would have been unable to make a return.

BT could seek to win damages from some of its suppliers to the project’s delay, according to some industry insiders.

The new network - known as 21CN – was announced with much fanfare in 2004. BT said that it would allow the group to offer customers a plethora of new services, which could be launched much faster than on the existing network. The network, which will be based on broadband, was also intended to generate considerable savings for BT by significantly simplifying operations. BT predicted that the investment would enable it to deliver cash savings of £1 billion per year by 2008-09.

BT refused to confirm if it was still on track to meet that target, although it is known that savings that BT has made in other areas of its business have been redirected to the 21CN project. An up-date is expected when BT announces third-quarter results next month.

A spokesman for BT confirmed that the project’s completion deadline had moved to 2011. He said: “We are making good progress in some areas whilst other areas are more challenging, as you might expect with a programme of this scale.”

The spokesman said that the telecoms group was “comfortable with progress”, but refused to provide precise figures on BT’s progress in meeting its 350,000-line pilot target. He said only that the number transferred had been “relatively small” in the context of the 30 million lines that need to be switched to complete the project and that “we had planned to have more customers migrated at this stage”.

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