Chief executive William Allan added that BT was getting an easy ride from industry watchdog Oftel.

Mr Allan's comments came as Thus unveiled a reduction in losses for the April to June quarter of £13.9m, nearly 40% lower than the same period last year.

But Thus said fierce competition from rivals meant it would see "slightly lower than expected" revenue growth over the year.

Despite the tough trading conditions, Thus said it remained in a strong financial position.

'Unsustainable' discounts

Thus was founded by Scottish Power in 1994, and floated in 1999 before being fully demerged earlier this year.

It supplies telecoms services to businesses, as well as owning the Demon internet brand.

The downturn in the telecoms sector over the past couple of years has led to aggressive price competition among firms.

"Some of our competitors are offering huge inducements to existing customers and discounts to attract new customers which are unsustainable," said Mr Allan.

"We are walking away from business where we can't make any money," he added.

Market 'abuse'

Mr Allan was particularly critical of BT.

"BT is taking advantage of conditions in the marketplace and using pricing and cost that we have difficulty understanding," Mr Allan told the AFX news agency.

"It is abusing its market position and what we want to see is a heavy touch not a light touch in regulation.

"The regulator has a duty to make sure the market benefits from competition."

"BT is enjoying a regulatory fair wind during the transformation from Oftel to Ofcom," he said.

BT spokesman Michael Wadley said: "BT operates in a fiercely competitive market.

"We compete vigorously, but fairly and within a regulatory environment that is entirely transparent."