CardCall jumps on Lottery bandwagon

The first fruit of Camelot’s drive for joint marketing initiatives is a deal with US-based CardCall to produce pre-paid phone cards. The pact will be a make or break attempt to establish CardCall in the UK.

Six years ago Michael Zwebner, then chairman of the Land Development Corporation (LDC), fled the UK with his girlfriend to Miami, Florida. He reportedly left the company with debts of between 600,000 and 1.5m and plans for an 18m “golden city” development in ruins.

He had set up the privately owned LDC to develop a site near Oldham, Lancashire with the promise of creating 2,000 new jobs.

Last week, Zwebner in the new guise of vice president marketing and founder of phone card issuer CardCall Communications, an-nounced to journalists in London that his new company will float on the alternative investment market (AIM) to raise 2.3m. He told the media the money – net of expenses – would be used to fund a 1m advertising campaign through Team Saatchi, and that 200,000 would go to fund its Canadian subsidiary Cardcaller Canada run by Zwebner’s brother Charles.

He also announced that the company had signed a deal with National Lottery operator, Camelot. It will distribute an expected 5 million National Lottery branded ANYphone cards (pre-paid memory cards that can be used on tone dialling phones) in September.

The licensing deal will help CardCall’s credibility in the market and fulfils Camelot’s brief to raise extra money. Zwebner says the Camelot deal involves distribution through 28,000 outlets including Sainsbury’s, Safeway and Waitrose.

According to a CardCall brochure: “Recognising the need for corporate credibility and in order to get market recognition, the company has entered into an exclusive licensing agreement with National Lottery Enterprises.” The Camelot deal is an essential prerequisite of the CardCall flotation.

The success of the Camelot deal could have a knock-on effect on other proposals, one of which is believed to be with The Sun newspaper. Editor Stuart Higgins has apparently agreed in principle to convert ANYphone cards into Sun newspaper cards if CardCall can gain a national roll out.

CardCall was established in the UK in April 1995 and began trading 12 months ago. It had no borrowings and is entirely funded by two companies registered in the British Virgin Islands – Timber Participation and Overseas Communications – subsidiaries of CardCall America.

Initially the company targeted corporate clients and confectioners tobacconists and newsagents (CTNs) with the ANYphone card. The company had little success with individual CTNs until it signed a deal with De Services, a subsidiary of WH Smith, giving it access to independent newsagents (though not WH Smith).

A significant shareholder of the parent company is film producer John Daley, who includes among his credits the Arnold Schwarzenegger film Terminator. Daley is understood to have funded the UK operation with $1m (600,000).

According to company files the company secretary is John Greenwood, who also acts as the firm’s solicitor. Since it only registered as a UK company in August 1995 it has not yet issued an audited set of accounts. There are indications that CardCall has had some cashflow problems.

One other problem has been the technology it uses. This has meant that, unlike rivals such as World Telecom, its cards could not be used outside the UK. It has been unable, unlike many of its competitors, to offer recharging over the phone. A new card has had to be bought. However, the company has found US backers to buy out the previous holding company and has invested in digital technology. Much of the money raised from the AIM float will be spent on investment in the new technology.

The flotation will also give the company, which has a UK staff of eight, a market capitalisation of 12m.

Zwebner says his departure from LDC is unconnected to the AIM float of his new company. “We {LDC} were caught out by the collapse of the property market,” he explains, “that matter has been cleared up to a great extent.”

He adds that press reports of a 1.5m debt were exaggerated, “it was more like 600,000”. Saying that LDC had always intended to sell on the site, not develop it. But it is understood that there are still a number of outstanding creditors.

Though the company has promoted itself heavily to companies to use the cards as merchandise it has had little success. Instead it has attempted PR stunts such as one in Bristol last Christmas where it issued 10,000 free cards with a photograph of a missing girl who was later found murdered.

This appeared to be a great gesture, although most of the cards remained unused.

In normal commercial circumstances, in fact , the company makes its money from the number of unused units on cards. Many people buy the cards, use them once, then forget about them.

Zwebner also managed to strike deals with Millwall Football Club to produce phone cards featuring players, and with Warner Brothers to sell licensed Batman Forever cards.

But licensing agreements can be expensive. Warner Brothers forced CardCall to pay a hefty sum for use of its images. According to former insiders, the company charged 30-35p a minute on each call to recoup the loss.

The current ANYphone offer is expensive. It charges between 20p and 35p per minute. It also has a built in problem, if the receiver is not lifted after six rings, 20p is automatically deducted from the card. Charges are not displayed on the cards. Zwebner says CardCall has already paid for the airtime and is justified in charging for rings. But he says the company will stop the practice once the Camelot card is introduced in September.

National Lottery Enterprises sales and marketing manager Robin Bowler says: “We negotiated with CardCall to ensure the card cuts off after nine rings.” He also says the price of the minute rates will be displayed with the card at the point of sale.

The phone card market is largely unregulated. According to telecoms consultant Andy Emerson, CardCall is not doing anything illegal by operating a service which charges before the receiver is picked up. There are also no regulations dictating what it can charge.

In the US – where Zwebner got the idea for CardCall – there are hundreds of such operators who make money selling cards to people who cannot get phone accounts. Though Camelot is now throwing its lot in with CardCall, there has not been the expected rush into the market.

The National Lottery ANYphone deal is one of the first licensing agreements to be signed by Camelot. Whether it appreciates it or not, Camelot is lending its name to establish CardCall in the UK.

That is why it is CardCall, rather than Camelot, which has most to gain from this deal. But Camelot’s attempt to sign marketing partnerships with brand owners are all on hold because of difficulties in securing deals with companies that don’t target the under 16s.

So, ironically at the moment both enterprises need each other even if it is for very different reasons.

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