BT's return to the mobile phone market has been a damp squib with fewer than 20,000 customers understood to have signed up to the service, aimed at families, despite a £5.5m advertising blitz.

The performance of BT Mobile Home Plan, launched at the end of October, is especially disappointing as the mobile phone industry has enjoyed its most successful Christmas season since the end of the dotcom boom.

When the service was announced, the head of BT's retail division Pierre Danon said he hoped to have 1m mobile phone customers, although he did not specify how long he expected it to take to reach that number.

Just over two years ago BT was forced to demerge its own mobile business mmO2 back to investors to sweeten the bitter pill of a £6bn emergency cash call. Since that time, however, growth at BT's core residential phone business has stagnated and the company has turned its attentions back to the faster growing mobile world.

BT is hoping to generate an extra £300m in annual revenues by March 2006 from mobile services, including its BT Mobile Home Plan, which uses T-Mobile's network to reach customers. The company has been buying up small niche businesses in the mobile sector as it looks to introduce new services to its customers.

BT already provides many of its business customers a mobile phone service using O2's network. That three-year network deal ends this year and BT has already started the tendering process for the contract.

O2 is understood to be battling to retain the multi-million pound contract against interest from T-Mobile and Vodafone. Orange, owned by France Telecom, is understood to have decided not to get involved.

Chris Alliot, analyst at Nomura, believes the mobile market in Britain is reaching maturity and the "landgrab" for customers has largely taken place, making it hard for BT to make headway.

"The jury is still out on BT Mobile, but our view at the time that BT launched the service was that it was generally a pragmatic approach to the mobile market," said Mr Alliot

BT refused to comment on customer numbers as the company is in its closed period before reporting third-quarter results in February.