business with a new subsidiary. A pilot test with the U.S. Postal Service to sell prepaid telephone cards in post offices is the first project of American Express Telecom Inc., a division of American Express Travel Related Services Inc. The new unit began issuing and servicing the cards this month. American Express joins a host of prepaid phone card marketers - among them, banks, telecommunications companies, and retailers that see their growth potential. By one estimate, sales of phone cards are expected to surpass $850 million, up 260% over 1994. American Express' alliance with the Postal Service gives the card giant a leg up in this burgeoning market, noted John McCabe, chief executive of New York-based Global Telecommunications Solutions Inc. "The name of this game is distribution," he said. David L. Boyles, American Express' senior vice president of new business ventures, said that the postal service is a "very important partner," but that "American Express did not get into the telecommunications business only to issue one type of product." In fact, American Express Telecom Inc. has other, smaller initiatives in the works, about which Mr. Boyles would not elaborate. He suggested that American Express might explore marketing prepaid phone cards to companies that want to reduce the telephone charges of its employees. Other potential partners for American Express include banks. "We want to expand our partnerships with the banks that sell our traveler checks," said Mr. Boyles. Each of the Postal Service cards sports one of eight stamp designs on the front and the American Express logo on the back. American Express, however, is limited in its ability to cross-sell other of its products to people who buy the postal card. Because consumers pay for the phone cards with cash, "there is no easy way to build a data base to see who is buying these cards," said Mr. Boyles. American Express believes that it is the only phone card issuer that replaces the remaining value on lost or stolen cards. Cardholders who report missing cards receive a new access code and caller identification code from American Express, which activates the account with the remaining time. Cardholders call a toll-free number to access their accounts, and American Express manages the amount of time used, providing activity reports, multilingual voice prompts, and 24-hour customer service. Customers pay $5 to $100 for such phone cards, which cost either 33 cents a minute for more expensive cards, or 55 cents a minute for less expensive cards. The pilot in eight cities across the country is expected to run 18 months.

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