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Calling Card Firms to Merge

Telecom: L.A.-based SmarTalk will acquire privately held SmarTel for an undisclosed amount.


In a move to broaden its reach, fast-growing SmarTalk Teleservices Inc. of Los Angeles said Wednesday that it will acquire SmarTel Communications Inc. of Boston for an undisclosed sum.

SmarTalk, founded in a room over a Bel-Air garage two years ago, focuses on the retail segment of the booming prepaid calling card industry. SmarTel, a privately held company, specializes in selling prepaid calling cards to companies to use in promotions.

The difficulty in creating a satisfactory distribution system is considered by analysts to be one of the major impediments to growth in the nation's $1-billion prepaid calling card industry, where about 500 vendors jostle for name recognition. By some estimates, 85% of Americans have yet to buy a prepaid calling card.

"A lot of people have thought about buying a prepaid calling card but have never bought one. If they get a SmarTalk card as part of a promotion, they will be more likely to buy one in one of our stores," said Bob Lorsch, SmarTalk chairman and chief executive.

Research shows the majority of those who used one of the 300 million prepaid calling cards issued in the United States last year got the card free as some sort of promotion or as a gift.

SmarTalk, which logged $15 million in sales last year, distributes its prepaid calling cards through more than 9,000 locations, including Office Depot, Best Buy, Sav-On, Robinsons-May and Good Guys in Southern California. The firm has about 60 employees.

Terms of the deal were not released. The acquisition, which allows each firm to retain its chief executive and does not call for layoffs, was announced after the close of the stock market. SmarTalk closed down 12.5 cents at $13.125 on Nasdaq.

SmarTel, which was founded in 1991, is considered a prepaid calling card industry pioneer and has developed promotions with Gillette, Hewlett-Packard, Wells Fargo and Nabisco, among others.

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