Postal operator UK Mail and courier service DHL are also believed to have competed for the account.
TNT will handle more than 170m items a year delivered to BT's 25m customers with final mile delivery through Royal Mail. It will use its Premier service, which offers flexible pick-up times and two-day delivery.
Gary Parker, BT's procurement chief, said: "TNT's offer on price and service delivers significant benefits for BT and its customers. We have also been impressed by the plans that TNT Post has in place for development and expansion of its services in the UK."
BT's defection from Royal Mail follows last week's decision by the Department for Work and Pensions to switch to UK Mail.
It was the first government client to leave Royal Mail but several major private sector companies have switched to the new market entrants.
TNT has picked up business including T-Mobile and xxx.
Nick Wells, chief executive of TNT Post UK, said: "Thanks to BT, this award of the biggest contract to date in the deregulated postal market to TNT Post is affirmation of our position as the main challenger to Royal Mail."
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