Stick to selling stamps, BT tells new Post Office rivals

The Post Office locked horns with its one-time sister company BT Group yesterday after the Royal Mail subsidiary provided details of its long-awaited launch into the home phone market.

David Mills, the Post Office chief executive, announced average savings for new telephone customers of up to 20 per cent against BT's Option 1 tariff and said he was planning to take 5 per cent of BT's customers by 2008, equal to 1 million households.

BT dismissed the Post Office's launch, telling customers who wanted good value from the Post Office to "stick to buying stamps".

Mr Mills first revealed he was planning to take on BT in the home phone market in March last year and has since been signing up commercial partners for today's formal launch of the service. These include Cable & Wireless, whose network will carry calls for the new service, and Servista, the venture capital-backed business that will handle the new operation's billing system. Inkfish, a business owned by the insurer Domestic & General, will operate a call centre for the new service.

Until 1981, the General Post Office (GPO) was responsible for both the nation's postal service and telecommunications. Then BT was created to operate as a separate commercial business and was floated on the stock market in 1984.

The Post Office's new service, HomePhone, will provide customers with one bill covering both calls and line rental. For UK local and national calls, it will charge 2.5p per minute in the daytime, 1.25p in the evening and 1p at the weekend. Calls to mobiles will cost 13p per minute during the day, 9p in the evening and 5p at weekends.

The table, provided by the independent analysts uSwitch.com, shows that for a typical user making three calls a day, including 15 minutes of international calls, HomePhone would offer savings of £34 a year compared with BT. HomePhone customers will also get discounts on other Post Office products, including travel, car and home insurance.

Mr Mills said: "The legislation, the technology and the infrastructure are in place. Consumer demand is there and our credibility as a trusted supplier is unchallenged."

But Gavin Patterson, the group managing director of BT Consumer and Ventures, brushed off the Post Office's assault. "It's stuck in the dark ages ... If customers are looking for good value from the Post Office, frankly they're better off sticking to stamps," he said. He also warned customers that the Post Office was charging 10p per minute for popular 0845 and 0870 numbers, compared with the 8p per minute recommended by the regulator Ofcom.