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The Ultimate Captive Market
Gores Technology Group has bought up about 10% of a lucrative and growing niche of the otherwise dwindling US payphone market, the part that serves prison inmates.
Through Gores' subsidiary, Global Tel*Link (GTL), Gores acquired AT&T's National Public Markets unit (NPM) for about $120M, using about $100M of debt and $22M in equity to finance the deal. GTL sells pay phone systems equipped to handle the various sorts of abuses that inmates may visit upon them. So in addition to durability, such phones offer user identification, eavesdropping, payment and call control technologies.
For its part, AT&T has been busy divesting entities that don't serve what it now considers its core market -- supplying large businesses with VOIP technology.
Buying NPM was a big step for Gores: it had only bought GTL from another downsizing giant, Schlumberger, for a tiny $7.5M last year. Now its combined payphone business is expected to generate about $250M in annual sales.
Unlike GTL, NPM supports other captive venues in addition to prisons, like airports and hotels, though these don't deliver the sort of margins associated with that most captive of markets, prisoners.
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