June 15 (Bloomberg) -- BT Group Plc, Britain's biggest phone company, introduced a cellular phone that switches between fixed and mobile networks to help win customers from wireless competitors.

The Fusion handset, which cuts call rates when it jumps onto the fixed network, will be ``widely available'' in September, the London-based company said today in a statement. BT will give away for free two phones and the access equipment needed at home.

BT, which forecast a ``very big'' market for Fusion, needs the phone to help reach a target of 1 billion pounds ($1.8 billion) in annual revenue from wireless services by 2009. Last year the figure was 184 million pounds. The handset, made by Motorola Inc., was originally slated for April 2004.

``It looks good on paper,'' said Angel Dobardziev, an analyst at researcher Ovum. ``This is a big step forward for the industry. We're seeing the world's first seamless fixed and mobile handset.''

Shares in BT dropped as much as 3.5 pence, or 1.6 percent, to 219 pence. The stock traded at 219.75 pence at 10:18 a.m. in London.

Switching Networks

To use the Fusion service, the customer needs a high-speed Internet connection from BT and an access point, or hub, to be installed.

``It will take a little bit of a while but we expect there to be many millions of converged handsets by the end of this decade,'' Ian Livingston, chief executive of BT's retail unit, said on a call with reporters.

When a user calls another fixed-line number from home, the Fusion phone switches to the land line and the customer is charged at lower rates. A 10-minute off-peak conversation will cost as much as 95 percent less than the same call made with a rival cellular operator, BT said.

A second Fusion phone from Motorola, the Razr, will be available before March 2006, Livingston said. He declined to give specific customer targets for BT.

BT had previously named the Fusion device ``Bluephone'' because it uses Bluetooth technology to access the fixed network remotely.

BT doesn't own a mobile network, so the company is betting on so-called convergence -- a meeting of fixed and mobile technologies -- to fill the revenue void. BT spun off its mobile unit, which is now called O2 Plc, in November 2001.

The former monopoly's quarterly sales have grown less than 2 percent since September 2002. In the first three months of this year revenue increased 1.7 percent.

New services like Fusion have the potential to erode the revenue of wireless operators; a third of all mobile calls are made from home, according to BT.

Switching a call between networks without losing the connection has proved troublesome for some companies. It's a feat that even mobile operators such as Hutchison Whampoa Ltd.'s 3 have struggled to achieve on wireless systems alone.

Bluetooth technology enables electronic devices to communicate wirelessly over distances up to about 10 meters (30 feet). Vodafone Group Plc, the world's largest cellular operator, supplies the capacity for all BT's wireless services.

To contact the reporter on this story: Angus Whitley in London at awhitley1@bloomberg.net

Last Updated: June 15, 2005 05:23 EDT