Royal Mail, the state-owned operator of the UK?s postal service, launched a home telephone service in a bid to steal customers from BT Group, the country?s former telecoms monopoly.

Royal Mail said it hoped to sign up 1m customers, or about 5 per cent of BT?s residential business, to its own HomePhone service by 2008.

?With the launch of Post Office HomePhone we intend to win a significant slice of the residential telephony market…Our customers have welcomed the telecoms products we have introduced so far, and they want more. Now the legislation, the technology and the infrastructure are in place,? said David Mills, chief executive.

The company is only the latest entrant into the UK?s domestic fixed-line market where BT?s dominance has been under attack in recent years from a string of new competitors such as Carphone Warehouse and Tele2.

A ruling last year by Ofcom, the UK communications watchdog, also benefits BT?s rivals - allowing them to offer a phone service through BT but bill their customers directly. BT?s market share has now fallen to about 65 per cent.

Royal Mail has also had its share of difficulties, cutting jobs, closing post offices and cancelling its second delivery in an effort to return the business to profitability. It has also sought to diversify by branching into new businesses such as banking and insurance.

However, its latest move into telecoms is a return of sorts to one of its core areas of operations. The Post Office ran all the UK?s telecoms services before BT was split off in 1981 ahead of privatisation.

Royal Mail said HomePhone?s line rental would be the same as BT?s at ?11.50 ($21.60) a month but could work out as much as 20 per cent cheaper for some households as there would be no minimum call charge and users would be charged by the second.

Cable and Wireless is supplying networking infrastructure for the new service, while Servista and Inkfish will provide customer care, billing and call centre services.

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