BT will install payphones in high street stores

BT will announce this week the first of a series of large deals in which the company will install payphones in high street stores throughout the UK.

Marks & Spencer is expected to be first on the list, allowing BT to site and manage new sophisticated payphones in almost all of its 290 outlets in return for a slice of the revenue generated by the calls.

The multi-million-pound move by BT is the latest in the increasingly heated telephone wars as Mercury expands its presence and mobile communication grows. BT recently announced a deal to install over 1,000 'BT managed' payphones in Post Offices.

Some shops already rent public telephones. But BT believes it can massively expand its high street business by taking on all the costs of installation and maintenance, collecting the revenues, and giving the owner of the site a cut. The retail chain bears no responsibility for the telephone.

The payphones themselves will be a breakthrough in that they accept both coins and credit cards. New versions, to be introduced next year, will accept Phonecards and Chargecards as well.

The first 50 payphones will be installed in Marks & Spencer stores by the end of this month to take advantage of the hoped-for pre-Christmas rush to shops and the sales.

The agreement with M&S lasts initially for seven years.

Although BT declines to say whether its overall public payphone business makes a profit, it expects the high street drive to be extremely lucrative. The company has 110,000 payphones in public places, but many of these are not used sufficiently to cover the cost of maintenance and repair.

It is likely that managed payphones in stores will be less prone to vandalism and so less costly for BT.

Mercury has only 5,000 public payphones at present, of which 2,000 are sited in the street and 3,000 in public locations such as petrol stations.

But the company, which lost out to BT in the Post Office deal, plans to accelerate the installation programme. Mercury has also begun to advertise on London Underground tickets to promote the use of credit cards in MercuryCard phones.

Both BT and Mercury face the prospect of increased competition from Cellnet and Vodafone. The cellular telephone companies are targeting less affluent customers with the introduction of cheap subscription services. These have higher call charges but are designed for those who need to make few calls or want access to a telephone outside the home in the event of an emergency.