GPT Payphone Systems has the market's number and beats the Japanese. Annabella Gabb.
Tucked away on the fringes of the Lancashire mill town of Chorley lies a small '50s factory. At first sight, there's nothing remarkable about it. But the despatch bay reveals activities that extend far beyond the North of England. Boxes marked Kuala Lumpur, Bogota, Seoul, Auckland, Georgetown Guyana and Manama Bahrain lie waiting for export. This is the home of GPT Payphone Systems, one of Britain's most successful exporters, which despatches some 80% of its coin and cardphones overseas and beats the Japanese hands down in their own backyard. Malaysia, Singapore, New Zealand and a number of Middle Eastern countries have all opted for GPT equipment rather than "inferior" Japanese rivals.
Fifteen years ago, the whole payphone industry was a shambles, with the parlous state of UK public phones mirrored worldwide. Payphones appeared to have more in common with public conveniences than a public telephone service: dirty, covered in graffiti, and rarely in working order. They were often more trouble than they were worth to the telephone administrations (PTTs) who provided them. Says Bernard Brooks, GPT Payphones' managing director, "Payphones were the Cinderella service of the PTTs. They were a nuisance until the early '80s when people like us began to ask how we could apply the latest electronics to 'dumb' payphones."
That research coincided with efforts on the part of the PTTs, British Telecom included, to turn the payphone from liability to asset. Until then the putative service tended to be provided at or below cost. Little attempt was made to manage it effectively. Faults resulting from malfunction or vandalism went unreported for days, leaving phones unusable. Coin collection, a costly, labour-intensive activity, was something of a hit-or-miss operation ("Cash collectors collected the cash from the box every Monday morning, regardless of whether there was anything in it," says Brooks). Without the aid of technology, there was little PTTs could do. By the 1980s, it was to hand. In Britain, GPT developed a range of fully networked payphone systems which would allow PTTs to maximise revenues and reduce operating costs through greater reliability and better use of maintenance resources. "We came up with an intelligent phone which could identify coins electronically and report on cash status and availability itself to a central control," says Brooks.
Resistance to fraud and vandalism was strengthened, too, through the electronic validation of coins, the incorporation of a high-security locking system, stronger metal, and the simple separation of the coin box from the telephone itself. "In the 1970s, the performance availability rate was just 40%," says Brooks. "By the late 1980s, BT was boasting in its marketing that 90-95% of payphones were working and the service became part of its public image," he adds, with pride in GPT's role.
MD Brooks, a bluff Plessey man with a strong accent from his native Nottingham, came to the telecoms division's Liverpool head office in 1983 as sales and marketing director with a brief to introduce 10 new products: payphones were one of them. He joined the burgeoning payphones business and masterminded the push into exports, becoming managing director in 1989.
GPT exploited payphone services in other countries. It reckons to have cornered 20-25% of a world market worth some £300-400 million. In the last 10 years it has grown from a small part of Plessey producing coinphones for a single customer, British Telecom, to a world leader, beating the Japanese on their own doorstep with both coin and card options. Deliveries now include 70 customers in nearly 60 countries. In the last two years, sales have doubled to a total of £80 million in 1990 - a performance which will not have escaped the notice of its current owners, GEC and German giant Siemens. (GPT Payphone Systems is an offshoot of GPT Telecommunications Products, which was formed from the merger of Plessey and GEC's telecoms businesses in 1988; Siemens took a 40% stake in the GPT group last year in the wake of GEC's takeover of Plessey).
GPT's success has been part of a world-wide revolution in payphone services. Part of the public's improved perception of public phones was the introduction of cashless calling, first with the pre-paid phonecard, then credit card facilities. Cardphones have several attractions for PTTs. They don't involve cash, hold less attraction for vandals, and encourage longer calls. Pre-paid cards give the PTT money in advance and can be customised for marketing purposes, and the credit card option means premium rates can be charged. When BT wanted to introduce a simple pre-paid card system, GPT had not developed its own technology and the contract went to Landis and Gyr, a Swiss company, which uses holographic technology. Undeterred, GPT went on to develop its own offering, based on a magnetic strip. The liberalisation of telecommunications in the UK gave it a second bite at the home market. GPT seized the opportunity and has supplied its card system to Mercury since 1987, albeit in smaller quantities: Mercury has installed 4,500 as against BT's 22,500. Nevertheless, says Brooks, the Mercury contract was significant: "We needed a successful home base to be successful overseas" - something its work for BT provided in the coinphone business. Currently, coinphones represent 40% of sales to cashless's 60%, but Brooks expects that ratio to widen to 20:80 within two years.
The link with Mercury has proved fruitful. As well as supplying private coinphones, GPT has an agreement with Mercury to supply private cardphones. They rent or sell these to the likes of Forte, Boots, Shell and the Football League for use in hotels, shops, filling stations, etc. The space on the card can be used to promote sales. Like any GPT payphone, they can offer innovations like "hot line" buttons which the operator can program to any frequent use number and rent out.
Private payphones are a much larger market than on-street phones: BT, for example, operates 340,000 as against 110,000 on-street phones, but Mercury and GPT reckon there's plenty of room for more. Cashless calling is the path to the future. Rivals have established the smart card in Europe: BT alone has yet to adopt it. GPT launched its multi-application smart card at the Geneva 91 telecoms exhibition in October. The smart card is programmable and "refreshable" and would take GPT technology into other areas, such as parking meters and public transport ticketing.
There will be demand for coinphones for some time to come. "The poorer countries don't have the card mentality yet," Brooks points out. For GPT, the process of developing a coinphone system is a relatively arduous one. Stan Edwards, site manager at the Chorley factory, explains why: "It takes five weeks to characterise a coinset. It involves putting 200 coins into an automatic machine thousands and thousands of times and gradually adapting the 'windows' as close as possible. We can close up pretty exactly for perfect coins. The problems arise when coins become worn." Edwards, who bears more than a passing resemblance to Sean Connery, joined in 1950 as an apprentice at Chorley, then a feeder factory for Strowger telephone exchanges. Production was switched to payphones in 1985 and Edwards returned in his current role in 1989, after years of service overseas.
The Chorley factory has coins from mints all over the world to enable it to program phones for different markets. To get a good coin validator is a costly, time-consuming exercise. Validation involves passing an electronic signal through each coin to measure metal content and is a crucial element in combatting fraud. But slip-ups can happen: in Ireland (where else?), the new £1 coin was made to the specification of the old penny. It became common to see kids hanging around phone booths and vending machines, selling old pennies for 20p - the phones were not GPT's, Brooks adds.
The big push overseas came in 1985 when Plessey's payphones business was formed into a separate company, Plessey Telecoms Products. Stan Edwards says: "Our strategy was to grow from supplier to a single customer to become world leader. Bernard (Brooks) and the sales force went overseas and attacked a lot of markets. Now we deliver to 10 countries a month from Chorley." Singapore and Malaysia are currently GPT's biggest customers and symbolic of the fight against the Japanese. Says Brooks, "They can undercut us on price so we have to have better products and know our customer."
Among the packages for export at Chorley, a consignment for embattled Zagreb languishes, evidence of early ventures into Eastern Europe, where Brooks sees the biggest potential. GPT has already supplied international cardphones to the Moscow Telephone Network. Sited at the international airport, hotels and key city centre locations, their use is restricted to foreigners. In Bulgaria, a joint venture with the local PTT is installing cardphones available to local and foreign customers in Sofia, the Black Sea, and ski resorts, and trials are going well in Poland. Brooks admits it's a risky business but considers the potential justifies cautious progress: "The main thing they lack in Eastern Europe is money, so we prefer a joint venture where we share the revenue. We go in in a small way and only grow if the venture earns enough." Another problem in Eastern Europe is priority access to the international exchange; Brooks admits that "we slipped up in Moscow and didn't get it at first". Such oversights could have a significant effect on revenues: in Poland, phones using the special network earn £29 a day; those on the public network earn £9 a day.
Access to international networks plays its part in other areas of the world, too. In Mexico, GPT's largest customer last year, observers in the centre of Mexico City saw boys and girls standing beside businessmen with bags full of tokens queuing to phone the US on the new public phones (inflation makes using local currency impractical): the attraction was direct access to the international network. The Mexican government has decreed that every village should have a payphone by 1998, an initiative with potentially rich pickings for GPT.
With India bringing its villages into the 20th century (GPT has a joint venture with a local firm to assemble payphones from kits made at Chorley), the less developed countries hold considerable potential. GPT is also pushing hard in Europe, where liberalisation is gradually opening new avenues, if not with the PTTs then with private distribution companies. Says Brooks, "I've got one ambition at the moment and that's a major order in France" - which he considers has protectionist parallels with Japan. Evidently, there's no shortage of connections still to be made.