BT Group, the telecoms operator, has unveiled a service that means customers can switch between mobile and fixed-line networks using a single handset.

BT Fusion, new mobile phones which were developed under the "Project Bluephone" codename, will link to BT's fixed-line system when users are at home or in the office.

They will automatically transfer to Vodafone's UK mobile network when customers are on the move.

BT will offer two separate packages, priced at £9.99 or £14.99 a month. Subscribers will have to have both a BT landline and access to BT broadband.

BT will initially seek just 400 customers for BT Fusion, followed by a more widespread consumer launch in September and a corporate package next year.

Ian Livingstone, head of BT Retail, said: "This is going to be a market that grows fantastically over time even though it might take a while to get going. We still expect many millions of converged handsets by the end of the decade."

BT sold its own mobile operator, which now trades as O2, four years ago. The former telecoms monopoly is targeting £1 billion in annual revenues over five years from BT Fusion.

It hopes the new service will stem the flow of customers away from fixed-line services to fiercely competitive mobile competitors. Revenues at the operator’s fixed-line division fell 9 per cent in the first three months of this year.

Along with services such as broadband internet access, Bluephone is a central part of BT’s strategy to maintain revenues as its traditional businesses decline.

In morning trade, BT Group shares lost 2.5p to 220p. Deutsche Bank repeated its "buy" recommendation, though it voiced reservations over the product.

"While we believe BT Fusion is an interesting product longer term, it is likely to be quite a slow pick up," the broker said.

"We feel BT Fusion will not be a compelling offer technically until a Wi-fi product is available."

Investec said that the pricing, technology specification, and handset guidance provided by BT were all more positive than expected, and reiterated its "buy" rating on the telecoms group.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive