It will also invest heavily in its struggling BT Vision television service, which it hopes can pull off a remarkable turnaround now it can offer Premier League football matches.
The news came as BT began the arduous process of turning the titanic, finally arresting its declining revenues. Deep cuts and improvements in service slowed its drop in revenue to just two per cent and the company now predicts a return to growth in 2012-13. Its sales for the year totalled £21bn and it predicts this will fall to around £20bn in the coming year.
BT, led by chief executive Ian Livingston, has been plagued by underperformance at its Global Services unit, which has caused two recent profit warnings at the group.
It is also operating under the cloud of a huge pension deficit, which stands at £5.7bn. The firm is awaiting results of a review by the pension regulator into its proposed 17-year plan to fund the deficit.
BT plans to cut another £900m in costs this year, after £1.75bn worth of cuts last year.
BT has already made huge investments on broadband proliferation, spending £1.5bn on fibre-optic services that can offer internet speeds of up to 100Mb a second.
The extra speeds are vital for users eager to watch HD movies or play next-generation games online.
To cash in on this demand BT will also launch an online video game service after taking a stake in the Silicon Valley techn firm OnLive. The new platform could allow users to play the latest game releases through their broadband connection.