LONDON (Reuters) - BT Group Plc, Britain's largest fixed-line telecoms provider, said on Friday its BT retail unit would set up two call centres in India, joining a long list of firms moving there to cut costs.

Pierre Danon, chief executive of BT Retail, told reporters the two Indian call centres would not cost UK jobs, and said BT would still spend over 97 percent of its planned 108 million pound ($173 million) investment in call centres in Britain.

"None of BT's permanent employees in the UK will be made redundant as a result of the new centres opening. BT has also made the commitment that no agency people who work for BT Directories in the UK will have their contracts terminated," a BT statement said. The opening of the Indian centres -- where salary costs of around 1.25 pounds an hour compare with 5-10 pounds in the UK -- is part of BT Retail's strategy to consolidate its 104 UK locations into 33 centres in a bid to achieve annual cost savings of 150 million pounds.

The two Indian centres, one in New Delhi and the second in Bangalore, will initially handle parts of BT's directories and phone conferencing work. The centres, which will start with 500 employees by the end of March, rising to around 2,200 by March 2004, will have BT's systems and will be managed by its staff, but will be owned by units of Indian firms HCL Technologies and Infosys Technologies.

BT plans to invest three million pounds in the three centres and have three of its employees initially manage them.

SORE POINT

Moving jobs to countries like India, where salaries are far lower, is a sore point with trade unions in Britian. However, Danon defended the move, saying BT owed it to its shareholders to explore cost-effective options and said the company had not resorted to compulsory redundancies. He said BT was redeploying and retraining employees to do new jobs and said BT had no plans to further increase the number of centres in India.

Transferring work to India is part of BT's plan to retain market share in UK directory inquiry services, a 700 million calls a year business where it lost a monopoly last December. Danon said established providers had lost up to 40 percent market share in Ireland and Germany after deregulation. "We will not allow that to happen to us," Danon said.

Many overseas companies have outsourced back-office functions to Indian firms, or set up their own units to service global clients from India which is a cheaper location with large technically skilled workforce. Britain's largest insurance group Aviva Plc said last month it plans to set up a call and claims processing centre in India, employing about 1,000 by the end of 2003.

Other firms which have shifted their back-office and call centre functions to India include General Electric, HSBC and Citigroup.