FORM 10-Q

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


              [X] Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934


               For the Quarterly Period Ended: September 30, 1996

                                       or

              [ ] Transition Report Pursuant to Section 13 or 15(d)
                     Of the Securities Exchange Act of 1934

                         Commission File Number: 0-16479
 

                         PEOPLES TELEPHONE COMPANY, INC.
             (Exact Name of registrant as specified in its charter)


                       NEW YORK                        13-2626435
            (State or other jurisdiction of         (I.R.S. Employer
             incorporation or organization)             I.D. No.)

                 2300 NORTHWEST 89TH PLACE, MIAMI, FLORIDA 33172
               (Address of principal executive offices) (Zip Code)
 
                                 (305) 593-9667
              (Registrant's telephone number, including area code)
                              ____________________

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest  practicable  date. Common Stock, $.01 Par Value,
outstanding at November 5, 1996: 16,194,684 shares.


<PAGE>

Part I.  FINANCIAL INFORMATION
Item 1.  FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                  PEOPLES TELEPHONE COMPANY, INC.
                    CONSOLIDATED BALANCE SHEET
                          (in thousands)

                                                 September 30,    December 31,
            Assets                                  1996              1995 
                                                --------------   --------------
                                                 (Unaudited)
<S>                                             <C>              <C>
Current assets
  Cash and cash equivalents....................   $ 10,354         $ 12,366
  Accounts receivable, net of allowance 
   for doubtful accounts of $4,116 and $5,013 .      8,602            6,848
  Inventory ...................................      1,801            1,990
  Prepaid expenses  and other current assets ..      2,634            3,764
                                                  --------         --------
      Total current assets ....................     23,391           24,968
Property and equipment, net ...................     68,759           78,201
Location contracts, net .......................     28,574           29,270
Goodwill, net .................................      6,686            8,904
Intangible assets, net ........................      1,981            2,620
Other assets, net .............................      8,144            8,965
Deferred income taxes .........................      3,407            3,407
Investments ...................................      1,313            3,736
                                                  --------         --------
     Total assets..............................   $142,255         $160,071
                                                  ========         ========
   Liabilities and Shareholders' Equity

Current liabilities
  Notes payable and current maturities of long-
    term debt..................................   $    532         $    506
  Current portion of obligations under capital 
    leases.....................................      1,038            1,156
  Accounts payable and accrued expenses .......     19,498           19,603
  Accrued interest payable ....................      2,637            5,603
  Taxes payable ...............................      2,634            2,452
                                                  --------          --------
     Total current liabilities ................     26,339           29,320
Notes payable and long-term debt ..............    100,808          101,259
Obligations under capital leases ..............        732            1,318
                                                  --------        ---------
     Total liabilities ........................    127,879          131,897
 Commitments and contingencies ................       --               --
 Preferred Stock
 Cumulative convertible preferred stock, Series 
    C, $.01 par value, 160 shares authorized; 
    150 shares issued and outstanding .........     13,517           13,413
 Preferred stock dividends payable ............      1,260              473
                                                   -------         --------
      Total preferred stock ...................     14,777           13,886
Shareholders' equity
  Preferred stock; $.01 par value; 4,100 shares 
    authorized; none issued and outstanding ...       --              --
  Convertible preferred stock; Series B, $.01 
    par value; 600 shares authorized; none 
    issued and outstanding.....................       --              --
  Common stock; $.01 par value; 25,000 shares 
    authorized; 16,194 and 16,108 shares issued 
    and outstanding ...........................        162             161
  Capital in excess of par value ..............     60,754          61,573
  Accumulated deficit .........................    (59,529)        (47,446)
  Unrealized loss on investments ..............     (1,788)           --   
                                                  ---------       ---------          
     Total shareholders' (deficit) equity .....       (401)         14,288
                                                  ---------       ---------
     Total liabilities and shareholders' equity   $142,255        $160,071
                                                  =========       =========

</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                 2
<PAGE>
<TABLE>
<CAPTION>
                  PEOPLES TELEPHONE COMPANY, INC.
              CONSOLIDATED STATEMENTS OF OPERATIONS
         (unaudited, in thousands, except per share data)

                                                   For the three months ended   
                                                          September 30,
                                                       1996           1995 
                                                   -----------     ----------
<S>                                                <C>             <C>
Revenues
  Coin calls ....................................   $ 20,093        $ 19,923
  Non-coin calls ................................     10,901          13,560
                                                    --------        --------
      Total revenues ............................     30,994          33,483

Costs and expenses
  Telephone charges .............................     10,038          12,037
  Commissions ...................................      8,317           9,066
  Field service and collection ..................      5,155           6,530
  Selling, general and administrative ...........      3,089           3,066
  Depreciation and amortization .................      6,042           5,647
                                                    --------        --------
     Total costs and expenses ...................     32,641          36,346
                                                    --------        --------

Operating loss ..................................     (1,647)         (2,863)

Other income and expenses
  Interest expense, net .........................      3,257           3,216
  Provision for impairment of inmate assets......       --             4,350
 (Gain) loss on disposal of prepaid calling card
    and international telephone centers .........       --               566
  Other (income) expense.........................     (1,500)            101
                                                    ---------       --------
     Total other income and expenses, net .......      1,757           8,233
                                                    ---------       --------
Loss from continuing operations before income 
   taxes ........................................     (3,404)        (11,096)
Benefit from income taxes .......................       --             1,500
                                                    ---------       ---------
Loss from continuing operations .................     (3,404)         (9,596)
                                                    ---------       --------- 

Discontinued operations
  Loss from operations ...........................      --               --
  Loss on disposition ............................      --           (12,100)
                                                    ---------       --------- 
Loss from discontinued operations ................      --           (12,100)
Extraordinary loss from extinguishment of debt, net     --              (121)
                                                    ---------       ---------
    Net loss......................................  $ (3,404)       $(21,817)
                                                    =========       ========= 

Earnings (loss) per common share
 Loss from continuing operations...................  $  (.23)         $ (.61)
 Loss from discontinued operations ................     --              (.75)
 Extraordinary loss from extinguishment of debt, net    --              (.01)
                                                    ---------       ---------
     Net loss......................................  $  (.23)       $  (1.37)
                                                    =========       ========= 

Weighted average common and common equivalent shares
 outstanding .......................................  16,195          16,107
                                                    =========       ========= 
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

 
                                 3

<PAGE>
<TABLE>
<CAPTION>

                    PEOPLES TELEPHONE COMPANY, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS
           (unaudited, in thousands, except per share data)

                                                    For the nine months ended
                                                           September 30,
                                                       1996            1995
                                                    ----------      ----------
<S>                                                 <C>             <C>
Revenues
  Coin calls  ...................................    $ 58,229        $ 58,855
  Non-con calls..................................      35,220          46,897
  Service and other..............................        --               122
                                                    ----------       ---------
     Total revenues..............................      93,449         105,874

Costs and expenses
  Telephone charges..............................      29,784          37,554
  Commissions....................................      25,430          26,264
  Field service and collection...................      14,965          17,319
  Selling, general and administrative ...........       9,335           8,455
  Depreciation and amortization..................      17,846          16,710
                                                    ----------       ---------
      Total costs and expenses...................      97,360         106,302
                                                    ----------       ---------
Operating loss...................................      (3,911)           (428)

Other income and expenses
  Interest expense, net..........................       9,667           7,297
  Provision for impairment of inmate assets......        --             4,350
  (Gain) loss on disposal of prepaid calling card 
    and international telephone centers..........        (545)            566
   Other (income) expense........................        (950)          1,162
                                                    ----------       ---------
       Total other income and expenses, net......       8,172          13,375
                                                    ----------       ---------
Loss from continuing operations before income taxes   (12,083)        (13,803)
Benefit from income taxes........................        --             1,737
                                                    ----------       ---------
Loss from continuing operations .................     (12,083)        (12,066)
                                                    ----------       ---------
Discontinued operations
  Loss from operations...........................        --              --
  Loss on disposition............................        --           (12,066)
                                                    ----------       ---------
Loss from discontinued operations................        --           (12,066)
Extraordinary loss from extinguishment of debt, net      --            (3,015)
                                                    ----------       ---------
      Net loss...................................   $ (12,083)       $(27,147)
                                                    ==========       ========= 

Earnings (loss) per common share
 Loss from continuing operations.................      $ (.79)         $ (.76)
 Loss from discontinued operations...............        --              (.75)
 Extraordinary loss from extinguishment of debt, net     --              (.19)
                                                    ----------       ---------
     Net loss....................................      $ (.79)        $ (1.70)
                                                    ==========       ========= 

Weighted average common and common equivalent shares
 outstanding.....................................      16,185          16,085
                                                    ==========       ========= 
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

 
                                  4

<PAGE>
<TABLE>
<CAPTION>

                    PEOPLES TELEPHONE COMPANY, INC.
                STATEMENTS OF CONSOLIDATED CASH FLOWS
                       (Unaudited, in thousands)

                                                    For the nine months ended,
                                                           September 30,
                                                      1996            1995
                                                   ----------      ----------
<S>                                                <C>             <C>
Cash flow from operating activities:
  Net loss........................................  $(12,083)       $(27,147)
  Adjustments to reconcile net loss to net cash
      provided by operating activities:
    Depreciation and amortization ................    17,846          16,710
    Amortization of deferred financing costs......       657             178
    Equity in losses of unconsolidated affiliate..      --               237
    Deferred income taxes ........................      --            (1,954)
    Extraordinary loss from extinguishment of debt      --             4,752
    (Gain) loss on sale of assets ................      (545)         15,516
    Change in assets and liabilities:
        (Increase) decrease in accounts receivable    (1,354)          4,833
        Increase in inventory ....................       (12)           (215)
        Increase in prepaid expenses and other 
           current assets.........................      (376)            (85)
        Decrease in other assets .................       203             658
        Increase (decrease) in accounts payable
           and accrued expenses ...................      887          (2,022)
        (Decrease) increase in accrued  interest...   (2,966)          1,584
        Increase (decrease) increase in taxes 
           payable.................................      182            (414)
        Net effect of discontinued operations 
           and assets held for sale ...............     --            (6,579)
                                                    ---------       --------- 

Net cash provided by  operating activities.........    2,439           6,052

Cash flow from investing activities:
    Payments for acquisitions and certain contracts   (3,045)         (1,282)
    Property and equipment additions...............   (1,895)         (4,735)
    Proceeds from sale of assets ..................    1,746           1,500
    Decrease in investment in unconsolidated 
           affiliate ..............................       31             307
                                                    ---------       --------- 
Net cash used in investing activities..............   (3,163)         (4,210)

Cash flow from financing activities:
    Net payments under note payable to bank........     (426)       (108,944)
    Borrowings under long-term debt................     --           101,600
    Debt and preferred stock issuance costs........     --            (5,527)
    Principal payments under capital lease 
           obligations.............................     (862)         (2,551)
    Proceeds of preferred stock issuance...........     --            15,100
    Exercise of stock options and warrants.........     --               201
    Officer loans .................................     --              (277)
                                                    ---------       --------- 
Net cash used in  financing activities ............   (1,288)           (398)
                                                    ---------       --------- 
Net (decrease) increase in cash and cash equivalents  (2,012)          1,444
Cash and cash equivalents at beginning of period ..   12,366           7,663
                                                    ---------       --------- 
Cash and cash equivalents at end of period......... $ 10,354        $  9,107
                                                    =========       =========

</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

 
                                  5
<PAGE>

                    PEOPLES TELEPHONE COMPANY, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               SEPTEMBER 30, 1996 AND SEPTEMBER  30, 1995
                              (unaudited)


NOTE 1 - UNAUDITED INTERIM INFORMATION
 
The accompanying interim consolidated financial data are unaudited;  however, in
the opinion of management,  the interim data include all  adjustments  necessary
for a fair presentation of the results for the interim periods.  The preparation
of  financial  statements  in  conformity  with  generally  accepted  accounting
principles requires management to make estimates and assumptions that affect the
reported  amounts  of  assets  and  liabilities  at the  date  of the  financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

The results of operations  for the three months and nine months ended  September
30, 1996 are not  necessarily  indicative  of the results to be expected for the
year ending December 31, 1996.

The  interim  unaudited  consolidated  financial  statements  should  be read in
conjunction with the audited consolidated financial statements and notes thereto
for the year ended December 31, 1995 as set forth in the Company's Form 10-K.

NOTE 2 - CHANGES IN ACCOUNTING POLICIES

Intangible Assets

During the first quarter of 1996, the Company  adopted  Statement No. 121 ("SFAS
121"),  Accounting  for the  Impairment of Long-Lived  Assets and for Long-Lived
Assets to Be Disposed Of,  which  requires  impairment  losses to be recorded on
long-lived  assets used in operations  when indicators of impairment are present
and the  undiscounted  cash flows  estimated to be generated by those assets are
less than the assets'  carrying  amount.  SFAS 121 also addresses the accounting
for  long-lived  assets  that are  expected  to be  disposed  of.  The effect of
adoption did not have a material impact on the financial  results of the Company
for the three months or the nine months ended September 30, 1996.

Stock Options

In October 1995, the FASB issued Statement No. 123 ("SFAS 123"),  Accounting for
Stock-Based  Compensation,  which requires companies to either recognize expense
for stock-based awards based on their fair value on the date of grant or provide
footnote  disclosures  regarding the impact of such changes. The Company adopted
the  provisions of SFAS 123 on January 1, 1996, but will continue to account for
options issued to employees or directors under the Company's non-qualified stock
option plans in accordance with Accounting Principles Board Opinion No. 25 ("APB
25"),  Accounting  for Stock  Issued to  Employees.  The  exercise  price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant; therefore, no compensation expense is recognized under APB
25.






 
                                  6
<PAGE>


Depreciation and Amortization

Effective January 1, 1996, the Company revised its depreciation and amortization
policy for certain  fixed and  intangible  assets  used in the inmate  telephone
operations.  Based on increased competition and certain other changes within the
inmate  telephone  industry,  the Company  reduced  the useful  lives of various
assets to five years. This change in accounting estimate resulted in an increase
in depreciation and  amortization  expense and net loss for the three months and
nine months  ended  September  30, 1996 of  approximately  $0.3 million and $0.9
million or $.02 and $.06 per common share, respectively.

NOTE 3 - PREPAID CALLING CARD AND INTERNATIONAL TELEPHONE CENTERS

On September  28,  1995,  the Company sold its  international  telephone  center
operations  for  $2.0  million  in cash  and  notes  receivable.  For  financial
accounting purposes, the recovery of $2.0 million previously written off will be
recognized  as the cash is  received.  During  the first  quarter  of 1996,  the
Company  received a payment of  approximately  $0.3 million which is included in
"Gain on disposal of prepaid calling card and international  telephone  centers"
in the accompanying Consolidated Statement of Operations.

On March 1, 1996, Global Link Teleco  Corporation  ("Global Link") consummated a
merger transaction (the "Merger") with Global Telecommunications Solutions, Inc.
("GTS").  The Company  exchanged  its  outstanding  notes and other  receivables
including  accrued interest for shares of GTS Common stock, $0.6 million in cash
and $1.5 million of notes  receivables with various due dates through  September
1997. The Company's  19.99% equity  interest in Global Link was converted in the
Merger  into  GTS  shares.  For  financial  accounting  purposes,  a net gain of
approximately  $1.0 million will be deferred  until the  outstanding  receivable
balances are collected.  In addition,  a gain of approximately  $0.3 million was
recorded in the first  quarter of 1996 related to amounts  collected at the time
of this transaction.

NOTE 4 - INVESTMENTS

The Company's  investment in GTS is accounted for in accordance  with  Statement
No. 115 ("SFAS  115"),  Accounting  for Certain  Investments  in Debt and Equity
Securities.  Investments  in debt  and  equity  securities  , other  than  those
accounted  for  under  the  equity  method,  are  reported  at fair  value  with
unrealized  gains or losses,  net of tax,  recorded as a separate  component  of
Shareholders'  Equity.  As of the merger date,  the fair value of the investment
was approximately  $3.1 million.  The fair value of the Company's  investment in
GTS common stock at September 30, 1996 was  approximately  $1.3 million which is
net of approximately $1.8 million of unrealized investment losses.

NOTE 5 - EARNINGS PER SHARE

The treasury  stock method was used to determine the dilutive  effect of options
and  warrants  on  earnings  per share  data.  For 1996 and 1995,  common  stock
equivalents were excluded since the effect would be anti-dilutive.
 
See primary and fully dilutive  earnings (loss) per common share  calculation as
summarized on pages 9-10.



 
                                  7
<PAGE>

NOTE 6 - LONG-TERM DEBT
 
During  April 1996,  the Company  amended the Fourth  Amended  Loan and Security
Agreement  (the  "Amendment")  with  Creditanstalt-Bankverein  (the "Bank").  In
connection with the Amendment, the Bank waived the Company's non-compliance with
certain  restrictive  covenants  contained in the  agreement for the three month
period ended December 31, 1995. The Amendment, among other things, decreased the
facility  to  $10.0  million  and  reduced  the  requirements  of the  financial
covenants.  The amended credit  facility bears interest at the Bank's prime rate
plus  2% and  requires  all  outstanding  principal  balances  to be  repaid  in
September  1997. At the same time,  the Company  decreased to $5.25 the exercise
price of the warrants  held by  Creditanstalt  American  Corporation  to acquire
Common  Stock or Series B Preferred  Stock of the  Company  that had not already
been  repriced.  At September 30, 1996,  the Company was in compliance  with the
amended covenants and had no amounts borrowed under the facility.

NOTE 7 - INCOME TAXES

At  September  30,  1996,   the  Company   recorded   valuation   allowances  of
approximately  $1.3  million  and  $4.6  million  against  deferred  tax  assets
generated  during the three  months and nine months  ended  September  30, 1996,
respectively.  A valuation  allowance  was  provided to reduce the  deferred tax
assets to a level which, more likely than not, will be realized.

NOTE 8 - COMMITMENT AND CONTINGENCIES

In July 1996,  litigation with BellSouth  Telecommunications,  Inc. was amicably
resolved to the satisfaction of the parties.

NOTE 9 - OTHER

Other  (income)  expense is comprised of amounts  recorded in  connection  with
settlements of employment  contracts with former officers,  the Company's equity
interest in an unconsolidated affiliate and amounts related to the resolution of
outstanding litigation.


 
                                  8
<PAGE>
<TABLE>
<CAPTION>


                    PEOPLES TELEPHONE COMPANY, INC.
        COMPUTATION OF PRIMARY EARNINGS (LOSS) PER COMMON SHARE
           (unaudited, in thousands, except per share data)

                                                                For The
                                                         Three Months Ended
                                                            September 30,
                                                          1996           1995
                                                       ---------      ---------
<S>                                                    <C>            <C>      
Loss from continuing operations....................    $ (3,404)      $ (9,596)
Less:
 Cumulative preferred stock dividends..............        (262)          (210)
                                                       ---------      --------- 
Loss from continuing operations for per share 
   computations....................................      (3,666)        (9,806)
Loss from discontinued operations..................        --          (12,100)
Extraordinary loss from extinguishment of debt, net        --             (121)
                                                       ---------      --------- 
   Net loss for per share computations.............    $ (3,666)     $ (22,027)
                                                       =========     ========== 
Number of shares:
Weighted average shares used in the per share 
   computation....................................       16,195         16,107
                                                       ========      =========
Earnings (loss) per common and common equivalent 
    share:
Loss from continuing operations...................     $   (.23)     $   (.61)
Loss from discontinued operations.................         --            (.75)
Extraordinary loss from extinguishment of debt, net        --            (.01)
                                                       ---------      --------- 
   Net loss ......................................     $   (.23)     $  (1.37)
                                                       =========     ========== 
</TABLE>

<TABLE>
<CAPTION>

                                                                For The
                                                          Nine Months Ended
                                                            September 30,
                                                          1996         1995
                                                       ---------    ----------
 
<S>                                                    <C>          <C>       
Loss from continuing operations...................     $ (12,083)   $ (12,066)
Less:
 Cumulative preferred stock dividends.............          (788)        (210)
                                                       ---------     --------- 
Loss from continuing operations for per share 
   computations...................................       (12,871)     (12,276)
Loss from discontinued operations.................         --         (12,066)
Extraordinary loss from extinguishment of debt, net        --          (3,015)
                                                       ---------    ---------- 
   Net loss for per share computations............     $ (12,871)   $ (27,357)
                                                       ==========   ========== 
Number of shares:
Weighted average shares used in the per share 
   computation...................................         16,185       16,085
                                                       =========    ========== 
Earnings (loss) per common and common equivalent
   share:
Loss from continuing operations..................      $    (.79)    $   (.76)
Loss from discontinued operations................          --            (.75)
Extraordinary loss from extinguishment of debt, net        --            (.19)
                                                       ----------    --------- 
   Net loss .....................................      $    (.79)    $  (1.70)
                                                       ==========    ========= 
</TABLE>



 
                                  9
<PAGE>
<TABLE>
<CAPTION>

                    PEOPLES TELEPHONE COMPANY, INC.
     COMPUTATION OF FULLY-DILUTED EARNING (LOSS) PER COMMON SHARE
           (unaudited, in thousands, except per share data)

                                                                For The
                                                         Three Months Ended
                                                            September 30,
                                                          1996           1995
                                                       ---------      ---------
<S>                                                    <C>            <C>      
Loss from continuing operations..................      $ (3,404)      $ (9,596)
Less:
 Cumulative preferred stock dividends............          (262)          (210)
                                                       ---------      ---------
Loss from continuing operations for per share 
   computations..................................        (3,666)        (9,806)
Loss from discontinued operations................         --           (12,100)
Extraordinary loss from extinguishment of debt, net       --              (121)
                                                       ---------      ---------
   Net loss for per share computations...........      $ (3,666)      $(22,027)
                                                       =========      ========= 
Number of shares:
Weighted average shares used in the per share 
   computation...................................        16,195         16,107
                                                       ==========     ========= 
Earnings (loss) per common and common equivalent 
  share:
Loss from continuing operations..................      $   (.23)     $   (.61)
Loss from discontinued operations................         --             (.75)
Extraordinary loss from extinguishment of debt, net       --             (.01)
                                                       ---------     ---------
   Net loss .....................................      $   (.23)     $  (1.37)
                                                       =========     ========= 
</TABLE>

<TABLE>
<CAPTION>
                                                                For The
                                                         Three Months Ended
                                                            September 30,
                                                          1996           1995
                                                       ---------      ---------
<S>                                                    <C>           <C>       
Loss from continuing operations..................      $(12,083)     $ (12,066)
Less:
 Cumulative preferred stock dividends............          (788)          (210)
                                                       ---------     ----------
Loss from continuing operations for per share 
  computations...................................       (12,871)       (12,276)
Loss from discontinued operations................         --           (12,066)
Extraordinary loss from extinguishment of debt, net       --            (3,015)
                                                       ---------     ----------
   Net loss for per share computations...........      $(12,871)     $ (27,357)
                                                       =========     ========== 
Number of shares:
Weighted average shares used in the per share 
  computation....................................      $ 16,185      $  16,085
                                                       =========     ========= 
Earnings (loss) per common and common equivalent 
  share:
Loss from continuing operations.................       $   (.79)     $    (.76)
Loss from discontinued operations...............          --              (.75)
Extraordinary loss from extinguishment of debt, net       --              (.19)
                                                       ---------     ----------
   Net loss ....................................       $   (.79)     $   (1.70)
                                                       =========     ========== 
</TABLE>



 
                                  10
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

     The following  discussion and analysis compares the quarter and nine months
ended September 30, 1996 to the quarter and nine months ended September 30, 1995
and should be read in conjunction with the consolidated financial statements and
notes  thereto  appearing  elsewhere in this Form 10-Q and in  conjunction  with
Management's  Discussion  and Analysis  appearing in the Company's Form 10-K for
the year ended December 31, 1995.

     Statements in Management's Discussion and Analysis relating to matters that
are not historical facts are forward-looking  statements.  Such  forward-looking
statements  involve known and unknown  risks,  uncertainties  and other factors,
which may cause the actual  results,  performances  or  achievements  of Peoples
Telephone  Company,  Inc. to be materially  different  from any future  results,
performance  or  achievements  expressed  or  implied  by  such  forward-looking
statements.  Such  known and  unknown  risks,  uncertainties  and other  factors
include,  but are not  limited  to, the  following:  the impact of  competition,
especially  in a  deregulated  environment,  uncertainties  with  respect to the
implementation  and  effect  of the  Telecommunications  Act of 1996,  including
potential  litigation  seeking  to modify  or  overturn  the  order or  portions
thereof,  the ongoing  ability of the Company to deploy its phones in  favorable
locations  and the  Company's  ability  to  continue  to  implement  operational
improvements.  Such factors and others are set forth more fully in the Company's
1995  Annual  Report  on Form  10-K,  Quarterly  Reports  on Form  10-Q  and the
consolidated financial statements and notes there to appearing elsewhere in this
report.

     The financial results discussed below relate to continuing operations which
primarily  consist of the public pay  telephone  business  and inmate  telephone
operations.

Revenues
 
     The Company  primarily  derives its revenues from coin and non-coin  calls.
Coin revenue is generated exclusively from calls made by depositing coins in the
Company's public pay telephones.  Coin revenue represented  approximately 64.8 %
and 59.5% of total  revenues from  continuing  operations for the quarters ended
September  30,  1996 and 1995  and  62.3%  and  55.6%  of  total  revenues  from
continuing  operations  for the nine months ended  September  30, 1996 and 1995,
respectively.  Coin revenue  increased 0.9 % to $20.1 million during the quarter
ended September 30, 1996 and decreased  approximately  1.1% to $58.2 million for
the nine months ended September 30, 1996,  compared to the same periods in 1995.
The Company's  average  installed  public pay telephone  base was  approximately
38,400  phones and 39,400  phones for the nine month period ended  September 30,
1996 and 1995, respectively. Coin revenue on a per phone basis increased by 1.7%
and 1.6% for the quarter and nine months ended September 30, 1996, respectively,
as compared to the same periods in 1995. The Company believes that this increase
can be  attributed,  in part,  to emphasis on  maintenance  programs  which have
improved the up-time of the Company's phones,  the  implementation and promotion
of new coin calling programs and the Company's  continued  efforts to remove low
revenue phones.

     While the Company is currently experiencing positive trends in coin revenue
on a per phone basis, the Company believes that the number of coin calls made at
its public pay  telephones  may remain flat or decrease  over time.  The Company
believes that, among other things,  the decreases will primarily result from the
increased usage of alternative  methods of calling such as prepaid calling cards
and wireless  technologies  and the  operation of more public pay  telephones in
closer  proximity to the  Company's  telephones.  The Company also believes that
these decreases may be offset,  over time, by increases in local coin call rates
as  a  result  of  potential  regulatory  changes,  although  there  can  be  no
assurances.

     On November  8, 1996,  the Federal  Communications  Commission  (the "FCC")
issued  its final  order on  reconsideration  (the  "Order")  setting  forth and
affirming regulations implementing Section 276 of the federal Telecommunications
Act of 1996,  previously issued on September 20, 1996. These regulations,  among
other things,  set forth a plan for the deregulation of local coin calling rates
by November 1997. The Order allows states to request  modification  or exemption
from  deregulation  upon a detailed  showing  in support of such  request by the
state.  Although  neither the Company nor the industry can predict  exactly what
will happen in such a deregulated environment, trends indicate that there should
be a move by the public pay  telephone  operators  toward  increased  local coin
calling  rates in  states  where  deregulation  is  implemented.  This  trend is
evidenced by the fact that five states (Iowa,  Nebraska,  Wyoming,  Michigan and
South Dakota) have  deregulated  local coin calling rates and four of those five
states now have local coin calling  rates of $0.35.  In  addition,  Illinois and
Wisconsin, although still under regulation, have also increased their local coin
calling rates to $0.35 through approval of rate/tariff applications filed by pay
telephone operators in such states.


 
                                  11
<PAGE>

     Non-coin  revenue is derived from  calling  card calls,  credit card calls,
collect calls and third-party  billed calls placed from the Company's public pay
telephones and inmate telephones. During the second quarter of 1995, the Company
signed a contract  with AT&T to act as its  primary  national  operator  service
provider.  Prior to the execution of this agreement,  non-coin calls were routed
through the Company's  private label operator service program.  The Company uses
its private label operator  service or a third-party  operator  service provider
based on which  service the Company  believes  nets it the highest  gross margin
from the call. The Company records as revenue the total amount the end user pays
for the call (net of taxes) when the call is  completed  through  the  Company's
private label operator service. In contrast,  when the call is completed through
the third-party  operator service  provider,  the Company records as revenue the
amount  it  receives  from  the  third-party  operator  service  provider  which
represents a negotiated  percentage  of the total amount the caller pays for the
call.  In May 1996,  AT&T began paying a specified per call amount for interLATA
(800) dial around calls as opposed to a percentage  of the revenue  generated by
those calls.  The Company  estimates that the impact on non-coin  revenue of the
change in the compensation  structure under the AT&T contract was  approximately
$1.4  million  and $2.3 million  for the three  months  and nine  months  ended
September 30, 1996.

     In  addition to the change in  compensation  under the AT&T  contract,  the
Company is continuing  to experience a shift in call traffic from 0+ calls,  for
which the Company receives a percentage of the revenue generated by those calls,
to access code calls for which the Company receives a flat rate per phone or per
call  compensation   amount.   Due  to  aggressive   advertising   campaigns  by
long-distance  companies  promoting  the use of access code  calls,  the Company
believes  that the  decrease  in  non-coin  revenue  due to the  changes in call
traffic patterns is likely to continue.  The Company believes that this decrease
in  non-coin  revenue  will be offset by changes  in the amount of  compensation
received by the Company for such calls,  as required  under the Order  issued by
the FCC on  November  8, 1996.  Under the Order,  in  addition  to the change in
compensation  received by the Company  for access code calls,  the Company  will
also begin receiving compensation for (800) subscriber calls. The Order mandates
dial around  compensation to public pay telephone providers for both access code
and (800)  subscriber calls at a flat-rate of $45.85 per pay telephone per month
begining  November 6, 1996.  This flat rate will be effective  through  November
1997,  at which time,  compensation  will begin on a per call basis at a rate of
$0.35 per call or such other rate  negotiated by the pay telephone  provider and
the carriers. The Company estimates the impact of this flat-rate compensation on
the Company's earnings before interest,  taxes, depreciation and amoritzation to
be in excess of $12 million for the period November 1996 through November 1997.

     Non-coin  revenue  represented  approximately  35.2 % and  40.5%  of  total
revenues from  continuing  operations for the quarters ended  September 30, 1996
and 1995, respectively.  For the quarter ended September 30, 1996, revenues from
non-coin calls decreased 19.6% to approximately  $10.9 million,  compared to the
quarter ended  September 30, 1995. For the nine months ended  September 30, 1996
non-coin revenue decreased approximately $11.7 million or 24.9% to approximately
$35.2  million as compared to the same period of the prior year.  This  decrease
was primary  attributable  to: (i) the method of  recording  revenue for certain
non-coin  calls as a  result  of the  change  to AT&T as the  Company's  primary
national   operator  service   provider;   (ii)  the  change  in  the  Company's
compensation  structure  under the AT&T contract;  and (iii) the decrease in the
number of inmate telephone lines operated by the Company.  During the nine month
period ended September 30, 1996, the Company operated an average of 2,040 inmate
telephone lines compared to approximately 3,080 during the same period of 1995.

     Operating Expenses
 
     Operating  expenses include telephone charges,  commissions,  field service
and  collection  expenses  and  selling,  general and  administrative  expenses.
Telephone  charges consist of local line charges paid to Local Exchange Carriers
which  include  costs of basic  service  and  transport  of  local  coin  calls,
long-distance transmission charges and network costs and billing, collection and
validation  costs.   Commissions  represent  payments  to  property  owners  and
correctional  facilities  for  revenues  generated by the  Company's  telephones
located on their properties. Field service and collection expenses represent the
costs of servicing and maintaining the telephones on an ongoing basis,  costs of
collecting  coin  from the  telephones  and  other  related  operational  costs.
Selling,  general and  administrative  expenses primarily consist of payroll and
related costs,  legal and other  professional  fees,  promotion and  advertising
expenses, property, gross receipts and certain other taxes, corporate travel and
entertainment  and  various  other  expenses.   Total  operating  expenses  were
approximately  85.8% and 91.7% of total revenues from continuing  operations for
the  quarters  ended  September  30, 1996 and 1995,  respectively.  For the nine
months ended  September  30, 1996 total  operating  expenses were 85.0% of total
revenues from continued  operations as compared to 84.6% for the same period in
1995.
 
                                  12
<PAGE>


     The switch by the Company to a third-party  operator  service resulted in a
decreased  revenue  base due to the method of  recording  revenue for calls made
through that service as compared to calls placed  through the Company's  private
label  operator  service  program (see above).  As a result,  certain  operating
expenses as a percentage  of revenues for the nine months  ended  September  30,
1996 increased compared to the same periods in 1995.

     Telephone  charges  decreased  as  a  percentage  of  total  revenues  from
continuing  operations  to 32.4 % for the  quarter  ended  September  30,  1996,
compared to 35.9% for the same period in 1995.  Telephone  charges for the third
quarter of 1995  included  approximately  $1.0  million of  additional  bad debt
reserves  related to both the inmate and pay telephone  operations.  The Company
also  continues  to  experience  decreased  telephone  charges  as a  result  of
regulatory  changes and competition  within the  local/intraLATA  service market
which began in the third  quarter of 1995.  For the nine months ended  September
30, 1996 and 1995 telephone  charges were 31.9% and 35.5% of total revenues from
continuing operations,  respectively. 

     In addition  to the items  previously  noted,  the  decrease  in  telephone
charges for the nine months ended September 30, 1996 can also be attributed to a
decline  in the number of calls  placed  through  the  Company's  private  label
operator service program. The Company paid the costs incurred to transmit, bill,
collect and  validate the call when the call was  completed  through its private
label operator services. In contrast,  the Company incurred no such costs when a
third-party  operator service provider completed the call. Telephone charges for
the nine months ended  September  30, 1995 include a reduction of  interexchange
carrier  expenses  related to the settlement with a service provider for certain
billing errors and  underpayment of operator  service  revenue of  approximately
$1.3  million  which  was  partially  off set by the  $1.0  million  of bad debt
reserves noted above.

     Commissions  as a percentage of total revenues from  continuing  operations
for the three  months  ended  September  30, 1996 and 1995  remained  relatively
consistent at approximately  26.8% and 27.1%,  respectively.  For the nine month
periods ended September 30, 1996 and 1995, commissions were approximately 27.2 %
and 24.8% of revenues from continuing operations,  respectively. The increase in
commissions  as a  percentage  of  revenues  for the nine  months was  primarily
attributable  to: (i) the reduced  revenue  base due to the method of  recording
revenue  for  certain  non-coin  calls as a result of the  change to AT&T as the
Company's  primary national  operator service  provider;  (ii) higher commission
rates paid in  connection  with the  Atlanta  Hartsfield  International  Airport
account;  and (iii) higher commission rates for new and renewed contracts due to
increasing competition in the public pay telephone and inmate telephone markets.
 
     Field service and  collection  expenses as a percentage  of total  revenues
from  continuing  operations  were 16.6% and 19.5% for the third quarter of 1996
and 1995,  respectively.  For the nine  months  ended  September  30, 1996 field
service and  collection  expenses  were 16.0%  compared  with 16.4% for the same
period in 1995. Field service and collection  expenses  decreased  approximately
21.1%  to  approximately  $5.2  million  for  the  third  quarter  of  1996  and
approximately  13.6% to $14.9  million for the nine months ended  September  30,
1996,  as compared  to the same  period in 1995.  This  decrease  was  primarily
attributable to cost savings resulting from office and route  consolidations and
a focus on achieving further operating  efficiencies.  In addition,  included in
field,  service  and  collection  expense  for the  third  quarter  of 1995  was
approximately $0.7 million of inventory obsolescence reserves.  Selling, general
and administrative expenses were constant at approximately $3.1 million for both
the third  quarter of 1996 and 1995.  For the nine months  ended  September  30,
1996, selling, general and administrative expenses increased approximately 10.4%
to $9.3  million as  compared  to the same  period of 1995.  This  increase  was
primarily  attributable  to an  increase in  insurance  premiums,  the  salaries
associated  with the  addition  of an  internal  sales  force and  increases  in
industry association dues and filing fees.

Depreciation and Amortization
 
     Depreciation is based on the cost of the telephones,  booths, pedestals and
other enclosures,  related installation costs and line  interconnection  charges
and is calculated  on a  straight-line  method using a ten-year  useful life for
public  pay  telephones  and a  five-year  useful  life for  inmate  telephones.
Amortization  is  primarily  based  on  acquisition  costs  including   location
contracts,  goodwill  and  non-competition  provisions  and is  calculated  on a
straight-line  method using  estimated  useful lives ranging from five to twenty
years.  Depreciation and amortization  increased to $6.0 million for the quarter
ended September 30, 1996,  compared to $5.6 million for the same period in 1995.
For the nine  months  ended  September  30,  1996  and  1995,  depreciation  and
amortization   expense  was  approximately  $17.8  million  and  $16.7  million,
respectively.  




                                  13
<PAGE>

The increase in depreciation and  amortization is primarily  attributable to the
revision of the depreciation and amortization  policy for certain inmate assets.
Based on  increased  competition  and certain  other  changes  within the inmate
telephone  industry,  the Company  reduced the useful lives of various assets to
five years. As a result of this change in accounting estimate,  depreciation and
amortization  expense increased  approximately $0.3 million and $0.9 million for
the three month and nine month periods ended  September 30, 1996,  respectively.
Operating Loss

     Operating  losses  for the  three  months  ended  September  30,  1996 were
approximately  $1.6 million as compared to $2.9 million for the third quarter of
1995. For the nine months ended  September 30, 1996 and 1995,  operating  losses
were approximately $3.9 million and $0.4 million, respectively.

Interest Expense
 
     For the third  quarter of 1996,  interest  expense was  approximately  $3.3
million which is relatively consistent with interest expense in the same quarter
in 1995 of $3.2  million.  Interest  expense  increased  approximately  32.5% to
approximately  $9.6 million for the nine months  ended  September  30, 1996,  as
compared  to the same  period of the prior  year.  This  increase  is  primarily
attributable to: (i) the higher interest rate on the Company's $100.0 million of
Senior Notes as compared to the rates in effect on the Company's  revolving line
of credit  during the  comparable  periods of 1995;  and (ii) the  inclusion  of
interest expense in continuing  operations which was previously allocated to the
Company's cellular operations which were included in discontinued operations.
 
Gain on Disposal of Prepaid Calling Card and International Telephone Centers

     The nine months  ended  September  30, 1996  includes a gain on disposal of
prepaid calling card and international  telephone centers of approximately  $0.3
million  received in  connection  with the sale of the  Company's  international
telephone  center  operations  and  approximately  $0.3  million  recognized  in
connection  with the  merger  of  Global  Link  Teleco  Corporation  and  Global
Telecommunications  Solutions, Inc. (see Note 3 to the accompanying consolidated
financial statements).

Other

     Other  expense  for the nine  months  ended  September  30,  1996  includes
approximately  $0.6 million of severance  obligations  incurred under employment
agreements with certain key executives  offset by amounts received in connection
with the  settlement  of  outstanding  litigation.  Other  expenses for the nine
months ended September 30, 1995 included  approximately $0.9 million incurred in
connection with the settlement of a lawsuit brought by two shareholders  against
the Company and  certain  officers  and the  Company's  equity in the  operating
losses of its unconsolidated affiliate.

Benefit from Income Taxes
 
     The  Company's  benefit  from income  taxes  decreased  approximately  $1.5
million for the quarter ended  September  30, 1996 and  decreased  approximately
$1.7 million for the nine months ended September 30, 1996,  compared to the same
periods in 1995. These decreases are primarily attributable to the fact that for
the 1996  periods  the Company  recorded  valuation  allowances  for 100% of the
deferred  tax assets  generated  from  operating  losses.  The Company  recorded
deferred tax assets and deferred tax asset valuation allowances of approximately
$1.3  million  and $4.6  million  for the three  months  and nine  months  ended
September 30, 1996.

Net Loss from Continuing Operations before Extraordinary Item
 
     The  Company had a net loss from  continuing  operations  of  approximately
$(3.4)  million and $(12.1)  million for the three  months and nine months ended
September  30,  1996,  compared  to a net loss  from  continuing  operations  of
approximately  $(9.6) million and $(12.1)  million for the same periods in 1995,
respectively.



 
                                  14
<PAGE>


Extraordinary Loss
 
     As a  result  of the  March  and  July  1995  amendments  to the  Company's
revolving line of credit agreement,  the Company recorded  extraordinary  losses
from the  write-off  of  deferred  financing  costs  associated  with the  early
extinguishment of debt of approximately $4.7 million,  before the related income
tax benefit of $1.7 million,  which is included in the financial  results of the
Company  for  the  nine  months  ended   September   30,  1995.   There  was  no
extinguishment of debt in 1996.

Earnings Before Interest, Taxes, Depreciation and Amortization

     EBITDA is not presented as an alternative to operating results or cash flow
from  operations  as  determined  by Generally  Accepted  Accounting  Principles
("GAAP"), but rather to provide additional information related to the ability of
the Company to meet current  trade  obligations  and debt service  requirements.
EBITDA  should not be  considered  in  isolation  from,  or  construed as having
greater  importance than, GAAP operating income or cash flows from operations as
a measure of an entity's performance.
 
     EBITDA from continuing  operations was  approximately  $5.9 million for the
quarter ended September 30, 1996, compared to $(2.2) million for the same period
in 1995.  EBITDA  for the third  quarter  of 1996  includes  approximately  $1.5
million  of one time  income.  EBITDA for the third  quarter  of 1995,  included
approximately  $6.8 million of one-time  expense items related to the impairment
of  inmate  telephone  assets,   additional  bad  debt  reserves  and  inventory
obsolescence  reserves.  EBITDA for the nine months ended September 30, 1996 and
1995 were  approximately  $15.4  million  and $10.2  million,  respectively.  In
addition to the one time expense  items noted above,  EBITDA for the nine months
ended September 30, 1995 included  approximately $1.3 million of one time income
and $0.9 million of one time expense items related to a settlement with a vendor
and outstanding  litigation,  respectively.  After giving effect to the one time
income and expense  items,  the decreases in EBITDA for the three month and nine
month  periods  are  primarily  attributable  to a  decrease  in  the  Company's
installed base of inmate  telephone lines and public pay  telephones,  increased
commissions and higher selling,  general and  administrative  expenses offset in
part by  decreases  in  telephone  charges  and  field  service  and  collection
expenses, as noted above. 

Liquidity and Capital Resources
 
     During the third  quarter of 1996,  the  Company  continued  to finance its
operations  from operating  cash flow.  For the nine months ended  September 30,
1996,  the  Company's  operating  cash flow was $2.4  million  compared  to $6.1
million for the same period in 1995.  The  decrease in the  Company's  operating
cash flow is primarily  attributable to approximately  $12.1 million of interest
payments on the Company's senior debt during the nine months ended September 30,
1996 as compared to approximately $5.9 million in the prior year.
 
     The Company's net working capital deficit was approximately $(2.9) million,
with a current ratio of .89 to 1, at September  30, 1996.  This is compared to a
net working capital deficit of $(4.1) million and a current ratio of .86 to 1 at
December 31, 1995.

     In April 1996, the Company  amended  certain terms  contained in the Fourth
Amended Loan and Security  Agreement (the  "Amendment").  In connection with the
Amendment, the Bank waived the Company's non-compliance with certain restrictive
covenants  contained in the agreement for the three month period ended  December
31, 1995.  The  Amendment,  among other things,  decreased the facility to $10.0
million and reduced the  requirements  of the financial  covenants.  The amended
credit facility bears interest at the Bank's prime rate plus 2% and requires all
outstanding principal balances to be repaid in September 1997. At the same time,
the Company decreased to $5.25


 
                                  15
<PAGE>


the exercise price of the warrants held by Creditanstalt American Corporation to
acquire  Common  Stock or Series B Preferred  Stock of the Company  that had not
already been repriced. At September 30, 1996, the Company was in compliance with
the amended covenants and had no amounts borrowed under the facility.

     Based upon current  expectations,  the Company believes that cash flow from
operations, together with amounts which may be borrowed under the amended credit
facility,  will be  adequate  for it to meet its working  capital  requirements,
pursue its  business  strategy and service its  obligations  with respect to its
121/4% Senior Notes,  although there can be no assurance that it will be able to
do so.



 
                                  16
<PAGE>


Part II  OTHER INFORMATION

Item 4. The Company has been approved for listing on the American Stock Exchange
under the symbol "PHO" effective November 13, 1996.

Item 6.  Exhibits and Reports on Form 8-K
 
(a)Exhibits:

Exhibit  Description

27   Financial Data Schedule

10   Employment  Agreement dated August 15, 1996 between the Company and Neil
N. Snyder, III.

(b)Reports on Form 8-K:

     (i) A current report on Form 8-K dated October 24, 1996 related to Item 5 -
Other Events.



 
                                  17
<PAGE>

                               SIGNATURE

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                      PEOPLES TELEPHONE COMPANY, INC.
                                      Registrant


Date:  November 14, 1996              /s/  Bonnie S. Biumi           
                                      Bonnie S. Biumi
                                      Chief Financial Officer


<PAGE>


                              EMPLOYMENT AGREEMENT

     Employment  Agreement dated as of August 15, 1996 between Peoples Telephone
Company, Inc., a Florida corporation (the "Company") and Neil N. Snyder III (the
"Employee").

                                    Recitals

     A. The Company is presently engaged in the business of owning and operating
telephone and wire  communication  systems within the state of Florida and other
businesses (the "Businesses").
 
     B. The Company  desires to employ the  Employee for the period set forth in
this  Agreement  to obtain the  services of the  Employee,  and the  Employee is
willing  to be  employed  by the  Company  for  that  period  on the  terms  and
conditions set forth below.

                                    Agreement

     1. Term of Employment.  The Company employs the Employee,  and the Employee
accepts  employment by the Company,  for a term commencing as soon as reasonably
practicable  after the due  execution of this  Agreement,  but in no event later
than October 1, 1996 (the "Commencement  Date"), and ending on December 31, 1999
(the "Term"), subject to the termination provisions of Section 5.

     2. Services Provided by Employee.
 
          (a) The Employee and the Company  agree that the Employee  shall serve
     as Executive Vice President and Chief Operating Officer of the Company.  In
     that  capacity,  he shall,  under  supervision  of the  President and Chief
     Executive Officer (the "President"), have responsibility for the day to day
     operations of the Company's  Businesses and perform other duties reasonably
     assigned  to him from time to time by the  President  provided  the  duties
     relate  to  the  business  of the  Company  and  are  consistent  with  the
     Employee's  position  as  Executive  Vice  President  and  Chief  Operating
     Officer,  as well as Employee's  background  and  experience.  The Employee
     shall devote his full  business  time to the  operations of the Company and
     shall use his best  efforts,  skills and abilities to promote the interests
     of the Company.

          (b)  During  the Term,  the  Employee  shall not serve as an  officer,
     director, partner or employee, or act in an advisory or other capacity for,
     an individual,  firm, corporation or other person without the prior written
     consent of the President, which consent shall not be unreasonably withheld.

     3.  Place of  Performance.  The  Employee  shall be based at the  Company's
principal  executive  offices  located  at 2300  Northwest  89th  Place,  Miami,
Florida,  except for required travel relating to the Company's  Businesses to an
extent substantially consistent with the Employee's travel obligations.

     4. Compensation. From and after the Commencement Date:

          (a) Base Salary. The Company shall pay compensation every two weeks to
     the  Employee  at a rate of  $150,000  per year (the  "Salary")  subject to
     increase  from  time to time  upon  the  review  and  determination  of the
     Compensation  Committee  (the  "Compensation  Committee")  of the  Board of
     Directors of the Company (the "Board of Directors"),  which review shall be
     conducted no less frequently than annually.

          (b) Bonus  Compensation.  The Company shall pay to the Employee  bonus
     compensation  ("Bonus  Compensation") of up to 65% of the Salary based upon
     attainment  of  performance  targets  which shall be  mutually  agreed upon
     between  the  Company  and the  Employee  and set forth as an annex to this
     Agreement   within  30  days  from  the  date  of  this  Agreement.   Bonus
     Compensation shall be paid within 10 business days after the earlier (i) of
     the public  release of fiscal year  earnings for the fiscal year in respect
     of which such Bonus Compensation is being paid and (ii) the issuance of the
     audited  financial  statements  in respect of such year.  In addition,  the
     Compensation

<PAGE>

Committee  shall consider the payment of additional  bonus  compensation  in the
event that Bonus Compensation maximum performance targets are exceeded.

          (c) Stock Options.  Within 30 days after the Commencement Date (or, in
     the event of a Change in Control (as defined  below)  after the date hereof
     but prior to the  Commencement  Date,  within 30 days after such  Change in
     Control),  the Company agrees to grant to the Employee  options to purchase
     an aggregate 200,000 shares of the Company's Common Stock as follows:
<TABLE>
<CAPTION>

     Number of Shares        Exercise Price             Vesting/Exercisable

<S>  <C>                     <C>                        <C>
        33,333               fair market value               12/31/97
                             at the date of grant
 
        33,333                   $4.25                       12/31/97
 
        33,333                   $5.25                       12/31/98
 
        33,333                   $6.25                       12/31/98
 
        66,668                   $7.25                       12/31/99
</TABLE>
 
Such  options  shall be subject to all terms and  conditions  of the  applicable
stock option  agreement  (which  agreements  shall be reasonable and customary).
Notwithstanding  the  foregoing,  in the event of a Change in  Control  all such
options shall vest in full automatically.  All shares to be issued upon exercise
of  such  options  shall  be  registered  under  applicable  federal  and  state
securities laws.

          (d) Employee  Benefits.  The Company shall provide to Employee  health
     and dental  insurance,  a 401(k) plan and all other benefits at a level and
     on a basis  consistent  with  that  provided  by the  Company  to its other
     executive officers.  The Company at its cost shall provide to Employee term
     life  insurance  providing  an  aggregate  death  benefit  payable  to  his
     designated beneficiary of $250,000.

          (e)  Vacation.  The  Employee  shall be  entitled to one (1) week paid
     vacation  in 1996 and four (4) weeks paid  vacation in each  calendar  year
     thereafter  and shall be entitled to all paid holidays given by the Company
     to its  employees  generally.  Upon  any  termination  of  this  Agreement,
     Employee shall be paid the value, based upon his then Salary, of any unused
     and accrued  vacation time for the year in which such  termination  occurs.
     Vacation  time  shall be  deemed  to  accrue  on a  monthly  basis for this
     purpose.

          (f) Expenses.  The Company shall reimburse the Employee, in accordance
     with its standard  practice after the Employee  submits expense receipts to
     the Company, for all reasonable out-of-pocket expenses that are paid by the
     Employee in performing the services set forth in Section 2.

          (g) Moving Expenses.  The Company shall pay the Employee's  reasonable
     out-of-pocket  expenses in  connection  with  Employee's  relocation to the
     Miami  area.   Reasonable   out-of-pocket  moving  expenses  shall  include
     reasonable  sales agent fees and legal fees in connection  with the sale of
     Employee's  Fairfax,  Virginia residence,  reasonable mortgage  application
     fees,  origination  points,  legal fees in connection  with the purchase or
     lease of a residence  in the Miami area,  packing  and  unpacking  charges,
     out-of-pocket costs of hotel  accommodations or other temporary housing for
     a period of three (3) months in a furnished  apartment in the Miami area in
     an aggregate amount not to exceed $2,300.00 per month and coach airfare for
     Employee and Employee's  spouse for three (3) round trips between  Virginia
     and Miami for the  purpose  of  Employee's  housing  search and move to the
     Miami area. To the extent that any reimbursement under this Section 4(g) is
     includable in Employee's income for income tax purposes, such reimbursement
     shall be  "grossed" up for the payment of the income tax payable in respect
     of such  reimbursement  and in respect of such gross up so that the benefit
     to  Employee  of such  reimbursement  shall be on an after  tax  basis.  In
     addition,  the Company  shall pay  Employee  one  month's  base salary as a
     non-allocable expense reimbursement (which

<PAGE>

payment will not be subject to the gross up  provision  of the prior  sentence).
Notwithstanding the foregoing, the Company shall only pay the foregoing expenses
incurred by Employee prior to the first anniversary of the Commencement Date.

     5. Termination. This Agreement may be terminated prior to the expiration of
the Term as follows:

          (a) This Agreement shall terminate upon the death of the Employee.

          (b) The  Company  has the right to  terminate  this  Agreement  if, by
     reason of  Disability,  the  Employee has been unable to perform his duties
     under this Agreement for a period of 90 consecutive days or 120 days in any
     180 day period. For purposes of this Agreement, "Disability" means physical
     or mental disability of the Employee, which disability is expected to be of
     long or indefinite  duration and prevents the Employee from  performing his
     duties under this Agreement.  All  determinations of Disability made by the
     Company pursuant to the Company's Long Term Disability Insurance Policy, if
     any, shall be  determinative  of Disability  under this  Agreement.  If the
     Company does not have a Long Term Disability  Insurance Policy,  Disability
     shall be determined  by the  Compensation  Committee  upon the basis of the
     evidence the Compensation Committee deems appropriate.

          (c) The Employee may terminate his employment  under this Agreement if
     his health (either  physical or mental) becomes  impaired to an extent that
     makes  the  continued  performance  of  his  duties  under  this  Agreement
     materially harmful to his physical or mental health or his life.

          (d) The Company may terminate  the  Employee's  employment  under this
     Agreement  for Cause at any time.  For purposes of this Section  5(d),  the
     Company shall have "Cause" to terminate the Employee's employment if he (i)
     is  convicted  of a  felony;  (ii)  willfully  engages  in one or more acts
     involving  fraud or moral  turpitude;  (iii)(x)  willfully  misappropriates
     Company  assets or (y)  willfully  engages in gross  misconduct  materially
     injurious  to the  Company  or its  subsidiaries;  or (iv) if the  Board of
     Directors  determines that the Employee has materially and willfully failed
     to perform his duties under this Agreement,  such  determination to be made
     in good faith after having given  Employee a  reasonably  detailed  written
     explanation  of such  failure  and the  opportunity  for  Employee  and his
     counsel to be heard. For purposes of this Section 5(d),  "willful" means an
     act done,  or omitted to be done,  by the  Employee in bad faith,  provided
     that the Employee knew or  reasonably  should have known that the action or
     omission was not in the best interest of the Company.  Notwithstanding  the
     foregoing,  a  termination  for Cause as  described  in clause (iii) (y) or
     (iv),  shall not occur unless  Employee shall have been given notice of the
     existence  of the basis for  termination  thereunder  and shall have had 30
     calendar  days to cure such  basis to the  reasonable  satisfaction  of the
     Board of Directors.

          (e) The Company may terminate  the  Employee's  employment  under this
     Agreement  without cause by providing  the Employee with written  notice of
     such termination.

          (f) The Employee may terminate his employment under this Agreement for
     "Good  Reason".  For purposes of this Section 5(f), the Employee shall have
     "Good Reason" to terminate his  employment any time during the Term of this
     Agreement if, after a Change in Control of the Company (as defined  below),
     the Company (i)  requests  the  Employee  not to  commence  his  employment
     hereunder  in the case of a Change  in  Control  occurring  after  the date
     hereof but prior to the Commencement Date, (ii) assigns to the Employee any
     duties that are inconsistent  with the positions  described in Section 2 of
     this Agreement,  (iii) diminishes significantly the then existing duties of
     the Employee without the written consent of the Employee,  (iv) removes the
     Employee from or fails to re-elect the Employee to the positions  described
     in Section  2(a) of this  Agreement,  (v) reduces his Salary or the maximum
     percentage of Salary payable as Bonus  Compensation,  (vi) materially fails
     to comply with Section 4 of this Agreement,  (vii) requires the Employee to
     be based at any office or location  other than that  described in Section 3
     hereof  which  change of location  would  require the Employee to commute a
     distance  from his  primary  residence  in excess of the  greater of (x) 50
     miles and (y) 125  percent of the  distance of such  commute  prior to such
     change  of  location  or  (viii)  fails to obtain  the  assumption  of this
     Agreement by a Successor (as hereinafter defined) as provided in Section 17
     of this Agreement.


<PAGE>

          For purposes of this Agreement, a "Change in Control" means:

               (1) the acquisition of beneficial ownership,  direct or indirect,
          of equity  securities  of the  Company  by any person (as that term is
          defined in Sections 13(d) and 14(d) of the Securities  Exchange Act of
          1934, as amended (the "Exchange  Act")) which,  when combined with all
          other  securities  of the  Company  beneficially  owned,  directly  or
          indirectly  by that  person,  equals or exceeds  50% of (i) either the
          then   outstanding   shares  of  common  stock  of  the  Company  (the
          "Outstanding  Company Common Stock") or (ii) the combined voting power
          of the then outstanding  voting  securities of the Company entitled to
          vote generally in the election of directors (the "Outstanding  Company
          Voting   Securities");   provided,   however,   that   the   following
          acquisitions  shall  not  constitute  a  Change  of  Control:  (i) any
          acquisition  by the  Company  or any of  its  subsidiaries,  (ii)  any
          acquisition by any employee  benefit plan (or related trust) sponsored
          or maintained by the Company or any of its  subsidiaries  or (iii) any
          acquisition by any corporation  with respect to which,  following such
          acquisition,  more  than 75% of,  respectively,  the then  outstanding
          shares of common stock of such  corporation  and the  combined  voting
          power of the then  outstanding  voting  securities of such corporation
          entitled  to vote  generally  in the  election  of  directors  is then
          beneficially  owned,  directly or indirectly,  by all or substantially
          all of the  individuals  and entities who were the beneficial  owners,
          respectively,  of the Outstanding Company Common Stock and Outstanding
          Company Voting  Securities  immediately  prior to such  acquisition in
          substantially  the same  proportions as their  ownership,  immediately
          prior to such acquisition, of the Outstanding Company Common Stock and
          Outstanding Company Voting Securities, as the case may be; or

               (2) individuals who, as of the date hereof,  constitute the Board
          of  Directors  (the  "Incumbent   Board")  cease  for  any  reason  to
          constitute  at least a majority of the Board of  Directors;  provided,
          however,  that any  individual  becoming a director  subsequent to the
          date  hereof  whose  election,  or  nomination  for  election  by  the
          Company's shareholders,  was approved by a vote of at least a majority
          of  the  directors  then  comprising  the  Incumbent  Board  shall  be
          considered  as though such  individual  were a member of the Incumbent
          Board,  but  excluding  for this  purpose  any such  individual  whose
          initial assumption of office occurs as a result of either an actual or
          threatened  solicitation  to  which  Rule  14a-11  of  Regulation  14A
          promulgated  under  the  Exchange  Act  applies  or  other  actual  or
          threatened solicitation of proxies or consents; or

               (3)   approval   by  the   shareholders   of  the  Company  of  a
          reorganization, merger or consolidation, in each case, with respect to
          which all or  substantially  all of the  individuals  and entities who
          were the beneficial owners,  respectively,  of the Outstanding Company
          Common Stock and  Outstanding  Company Voting  Securities  immediately
          prior  to  such  reorganization,   merger  or  consolidation  do  not,
          following such reorganization,  merger or consolidation,  beneficially
          own, directly or indirectly, more than 75% of, respectively,  the then
          outstanding  shares of common stock and the  combined  voting power of
          the then outstanding  voting securities  entitled to vote generally in
          the  election  of  directors,  as the case may be, of the  corporation
          resulting  from  such  reorganization,   merger  or  consolidation  in
          substantially  the same  proportions as their  ownership,  immediately
          prior  to  such   reorganization,   merger  or  consolidation  of  the
          Outstanding  Company  Common  Stock  and  Outstanding  Company  Voting
          Securities, as the case may be; or

               (4) approval by the shareholders of the Company of (i) a complete
          liquidation  or  dissolution  of the Company or (ii) the sale or other
          disposition of all or substantially  all of the assets of the Company,
          other than to a corporation, with respect to which following such sale
          or  other  disposition,  more  than  75% of,  respectively,  the  then
          outstanding  shares  of  common  stock  of  such  corporation  and the
          combined  voting power of the then  outstanding  voting  securities of
          such  corporation  entitled  to  vote  generally  in the  election  of
          directors is then beneficially owned,  directly or indirectly,  by all
          or  substantially  all of the  individuals  and  entities who were the
          beneficial  owners,  respectively,  of the Outstanding  Company Common
          Stock and Outstanding  Company Voting Securities  immediately prior to
          such sale or other disposition in substantially the same proportion as
          their ownership,  immediately prior to such sale or other disposition,
          of the Outstanding Company Common Stock and Outstanding Company Voting
          Securities, as the case may be.

<PAGE>

     The term "the sale or  disposition  by the Company of all or  substantially
all of the  assets  of the  Company"  shall  mean a sale  or  other  disposition
transaction or series of related transactions involving assets of the Company or
of any direct or indirect  subsidiary of the Company (including the stock of any
direct or indirect  subsidiary  of the Company) in which the value of the assets
or stock being sold or otherwise  disposed of (as measured by the purchase price
being paid therefor or by such other method as the Board of Directors determines
is appropriate in a case where there is no readily ascertainable purchase price)
constitutes  more than  two-thirds  of the fair market  value of the Company (as
hereinafter  defined).  The  "fair  market  value of the  Company"  shall be the
aggregate market value of the then outstanding  Company Common Stock (on a fully
diluted basis) plus the aggregated  market value of Company's other  outstanding
equity  securities.  The  aggregate  market  value of the shares of  Outstanding
Company Common Stock shall be determined by multiplying  the number of shares of
Outstanding  Company Common Stock (on a fully diluted basis)  outstanding on the
date of the execution and delivery of a definitive agreement with respect to the
transaction or series of related  transactions (the  "Transaction  Date") by the
average closing price of the shares of Outstanding  Company Common Stock for the
ten trading days  immediately  preceding  the  Transaction  Date.  The aggregate
market value of any other equity  securities  of the Company shall be determined
in a manner similar to that prescribed in the immediately preceding sentence for
determining  the  aggregate  market value of the shares of  Outstanding  Company
Common Stock or by such other method as the Board of Directors  shall  determine
is appropriate.

               (g)  A  termination  of  the  Employee's  employment  under  this
          Agreement shall be  communicated  by the terminating  party by written
          notice of termination ("Notice of Termination") that shall include (i)
          the date  such  termination  is to be  effective;  (ii)  the  specific
          termination  provision in Section 5 upon which the  terminating  party
          has relied; and (iii) except for a termination under Section 5(a), the
          facts and circumstances  claimed by the terminating party that provide
          a basis for the  termination  of the Employee's  employment  under the
          provision  indicated in the Notice of Termination.  Any termination of
          this Agreement shall,  without further action on the part of Employee,
          constitute   Employee's   simultaneous   resignation  from  all  other
          positions  and  offices of the Company  and its  Subsidiaries  held by
          Employee.

     6. Compensation Upon Termination.

               (a) Upon  termination of the Employee's  employment under Section
          5(a), 5(b), 5(c) or 5(d), the Company shall have no further obligation
          under this Agreement to make any payments to or bestow any benefits on
          the Employee after the Termination Date (as defined below), other than
          payments  and  benefits  accrued and due and  payable to the  Employee
          prior  to the  Termination  Date.  For  purposes  of  this  Agreement,
          "Termination   Date"  means  (i)  if  the  Employee's   employment  is
          terminated pursuant to Section 5(a) of this Agreement, the date of the
          Employee's death;  (ii) if the Employee's  employment is terminated by
          virtue of the  expiration of this  Agreement,  the end of the Term; or
          (iii) if the Employee's employment is terminated for any other reason,
          the date  specified  in the Notice of  Termination  which shall not be
          earlier than the date such notice is sent or given to Employee.

               (b) Upon termination of the Employee's  employment by the Company
          without Cause, either before or after the Commencement Date (except in
          the  situation  where  Section 6(c)  applies),  the Company  shall pay
          Employee,  in addition to all payments and benefits  accrued,  due and
          payable prior to the  Termination  Date, a lump sum payment,  within 5
          business  day after the  Termination  Date,  in an amount equal to 150
          percent  of his  Salary  as in  effect on the  Termination  Date.  The
          Company shall also provide  Employee with all fringe benefits  enjoyed
          by him at the Termination  Date (on a basis  consistent with the basis
          upon which such  benefits  were  provided  prior to such  termination)
          until the second anniversary of the Termination Date or, to the extent
          that  Employee is not eligible to  participate  in any Company  fringe
          benefit plans (by the terms of any such plan),  the after tax value of
          providing   such  benefits   until  the  second   anniversary  of  the
          Termination Date.

               (c) If after a Change in Control (i) the Employee's employment is
          terminated  by the Company  without Cause or (ii) is terminated by the
          Employee for Good Reason, in addition to payments and benefits accrued
          and due and payable to the Employee prior to the Termination Date, the
          Company  shall pay to the  Employee,  within 5 business days after the
          Termination  Date, a lump sum payment  equal to 150 percent of the sum
          of (x) his Salary as then in effect (or such salary to which  Employee
          would have been entitled at the Commencement Date if such

<PAGE>

termination  occurs  after  the  execution  of this  Agreement  but prior to the
Commencement  Date) plus (y) the maximum Bonus Compensation which Employee would
have been  eligible to earn  pursuant  to Section  4(b) hereof as if the Company
achieved  100  percent  of the  performance  targets  for the year in which such
termination  occurs.  The Company  shall also provide  Employee  with all fringe
benefits  enjoyed by him at the Termination Date (on a basis consistent with the
basis upon which such benefits were provided prior to such  termination) or such
fringe  benefits to which Employee would have been entitled at the  Commencement
Date if such termination  occurs after the execution of this Agreement but prior
to the Commencement  Date, until the second  anniversary of the Termination Date
or, to the extent that  Employee is not eligible to  participate  in any Company
fringe  benefit  plans (by the terms of any such  plan),  the after tax value of
providing such benefits until the second anniversary of the Termination Date. In
the event it shall be determined that any payment or distribution by the Company
pursuant to this agreement  following a Change in Control (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the  Internal  Revenue Code
of 1986,  as amended,  or any interest or penalties are incurred by the Employee
with  respect  to such  excise  tax (such  excise  tax,  together  with any such
interest and penalties,  are hereinafter collectively referred to as the "Excise
Tax"),  then the Employee shall be entitled to receive an additional  payment (a
"Gross-Up  Payment") in an amount such that after payment by the Employee of all
taxes (including any interest or penalties  imposed with respect to such taxes),
including,  without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up  Payment,
the  Employee  retains  an amount of  Gross-Up  Payment  equal to the Excise Tax
imposed upon the Payments.

               (d) The Company shall maintain in full force and effect until the
          Termination  Date all group insurance plans (the "Plans") in which the
          Employee was a participant immediately prior to the date of the Notice
          of  Termination.  If the  Employee's  continued  participation  is not
          permitted  under the terms of a Plan,  the  Company  shall  arrange to
          provide the Employee with alternative benefits  substantially  similar
          to those provided under that Plan.

               (e) For the  purposes  of all  retirement  plans  of the  Company
          applicable  to the Employee and in effect on the date of the Notice of
          Termination,  the Company  shall  provide for payment of retirement or
          death  benefits  to the  Employee  or his  surviving  spouse  that are
          calculated  to reflect  service  credits for the period  ending on the
          Date of  Termination,  as though the Employee  were an employee of the
          Company throughout this period.

               (f) The Employee  shall not be required to mitigate the amount of
          any  payment  provided  for in Section  6(b) or 6(c) by seeking  other
          employment or otherwise,  nor shall the amount of any payment provided
          for in Section 6(b) or 6(c) be reduced by any  compensation  earned by
          the Employee as the result of employment by another employer after the
          Termination  Date,  or  otherwise.  Fifty percent (50%) of any payment
          under Section 6(b) or 6(c) shall be deemed to be in  consideration  of
          Employee's covenant not to compete set forth in Section 9 hereof.

     7.  Representations by Employee.  The Employee represents and warrants that
he is not a party to any  agreement  or  subject to any  restriction  (including
agreements   containing   confidentiality  or  noncompete  covenants)  that  may
adversely  affect the business of the Company or restrict the performance by the
Employee of his duties under this Agreement.

     8. Confidentiality.

               (a) The Employee  acknowledges that as a result of the Employee's
          employment by the Company,  the Employee will become  informed of, and
          have access to, valuable and confidential  information of the Company,
          including inventions, trade secrets, technical information,  know-how,
          plans,  specifications,  and the identity of customers  and  suppliers
          (collectively,   the  "Confidential   Information"),   and  that  this
          Confidential Information, even though it may be contributed, developed
          or acquired by the Employee,  is the exclusive property of the Company
          to be held by the  Employee  in trust  and  solely  for the  Company's
          benefit.  Accordingly,  the  Employee  shall not at any time during or
          subsequent to the Term,  use,  reveal,  report,  publish,  transfer or
          otherwise disclose to any person,  corporation or other entity, any of
          the Confidential  Information without the prior written consent of the
          Company,  except to responsible  officers and employees of the Company
          and other  responsible  persons whom the Company agrees in writing are
          in a  contractual  or fiduciary  relationship  with the Company or who
          have a need for this  information  for purposes  which are in the best
          interests of the Company. This provision does not prohibit the

<PAGE>

Employee  from  disclosing  information  which  legally is or becomes of general
public knowledge from authorized  sources other than the Employee or as required
by legal  process  or  subpoena,  provided  that  Employee  shall have given the
Company a reasonable opportunity to object to such process or subpoena.

               (b) Upon the  termination of this  Agreement,  the Employee shall
          promptly deliver to the Company all customer lists, drawings, manuals,
          letters,  notes,  notebooks,  reports and copies thereof and all other
          materials,  including  those  of  a  secret  or  confidential  nature,
          relating  to the  Company's  business  which  are  in  the  Employee's
          possession or control. The Employee agrees to represent to the Company
          that he has complied  with the  provisions of this Section at the time
          he ceases to be an employee of the Company.

     9.  Noncompetition.  The  Employee  agrees that during the Term and for one
year after the Termination Date, the Employee shall not (a) participate directly
or as an employee, agent, owner, consultant, director, shareholder or partner of
any person which is engaged in the pay telephone  business in  competition  with
the Company in a geographic  area in which the Company  conducts  such  business
during  that time;  (b)  recruit or  otherwise  solicit or induce any person who
during that time is an employee of the Company to terminate his employment with,
or otherwise cease his relationship with the Company,  or hire any such employee
who has left the employ of the Company within 90 days after  termination of that
employee's  employment with the Company; or (c) solicit any owner or operator of
property  upon  which  Company  pay  telephones  are  located,  to  install  pay
telephones of a competitor of the Company; provided, however, that the foregoing
shall not prohibit Employee from owning not more than five percent of the voting
securities of any publicly traded entity.

     The restrictions  against competition set forth above are considered by the
parties to be  reasonable  for the  purposes of  protecting  the business of the
Company. If any restriction is found by a court of competent  jurisdiction to be
unenforceable because it extends for too long a period of time, over too broad a
range of activities or in too large a geographic area, that restriction shall be
interpreted to extend only over the maximum period of time,  range of activities
or geographic area as to which it may be enforceable.

     10.  Remedies.  The Company and the Employee  acknowledge  that the Company
would not have an  adequate  remedy at law for money  damages  if the  covenants
contained  in Section 8 or 9 were not  complied  with in  accordance  with their
terms.  Because the breach of any of the covenants in Section 8 or 9 will result
in immediate and irreparable injury to the Company, the Employee agrees that the
Company  shall be  entitled  to an  injunction  restraining  him from  violating
Section 8 and 9 to the fullest extent allowed by law.  Nothing in this Agreement
shall  prohibit the Company from pursuing all other legal or equitable  remedies
that may be available to it for a breach or  threatened  breach,  including  the
recovery of damages.

     11. Federal Income Tax Withholding.  The Company may withhold from benefits
payable under this  Agreement,  or arrange for the payment of,  federal,  state,
local or other taxes as required  pursuant to law or governmental  regulation or
ruling.

     12.  Survival.  The  provisions  of Sections 8, 9 and 10 shall  survive the
termination  of this Agreement and shall inure to the benefit of the Company and
its Successors.

     13. Counterparts.  This Agreement may be executed in counterparts,  each of
which shall be deemed an original and all of which  together shall be deemed one
and the same instrument.

     14. Waiver.  No term or condition of this Agreement shall be deemed to have
been waived,  nor shall there be any  estoppel  against the  enforcement  of any
provision of this Agreement,  except by written  instrument of the party charged
with the waiver or  estoppel.  No written  waiver  shall be deemed a  continuing
waiver unless specifically stated therein, and each waiver shall operate only as
to the specific  term or condition  waived and shall not  constitute a waiver of
the  term  or  condition  for  the  future  or as to any  act  other  than  that
specifically waived.

     15.  Governing  Law. This  Agreement  shall be governed by and construed in
accordance  with  the laws of the  State of  Florida  without  reference  to its
conflicts of law principles.

<PAGE>

     16. Notices. Notices required or permitted to be given under this Agreement
shall be in  writing  and  effective  upon  delivery  in  person or  mailing  by
certified mail, return receipt requested,  to the parties at the addresses below
or to another address as either party shall direct by notice to the other party.


            (a)      If to the Company:

                     Peoples Telephone Company, Inc.
                     2300 N.W. 89th Place
                     Miami, FL 33172
                     Attention: E. Craig Sanders
                     President and Chief Executive Officer
 
                     with a copy to:

                     Peoples Telephone Company, Inc.
                     2300 N.W. 89th Place
                     Miami, FL 33172
                     Attention: Bruce Renard
                     Executive Vice President,
                     General Counsel

            (b)      If to Employee:

                     Mr. Neil N. Snyder III
                     6310 Yosemite Drive
                     Alexandria, Virginia 22312
 
     17. Assignment.

               (a) This Agreement and all of the Employee's  rights,  duties and
          obligations  under this Agreement are personal in nature and shall not
          be  assignable by the Employee.  A purported  assignment  shall not be
          valid or binding on the  Company.  The  Company  shall not assign this
          Agreement,  its rights,  duties and obligations  except to a Successor
          (as defined below).

               (b) This  Agreement  shall inure to the benefit of and be legally
          binding upon all Successors of the Company. The Company will require a
          Successor   (whether   direct  or  indirect,   by  purchase,   merger,
          consolidation  or  otherwise)  to  all  or  substantially  all  of the
          business and/or assets of the Company (a "Successor"), by agreement in
          form and substance  satisfactory to the Employee,  to expressly assume
          and agree to perform this Agreement in the same manner and to the same
          extent  that the  Company  would be  required to perform it if no such
          succession had taken place. For purposes of this Section 17, "Company"
          shall  mean the  Company  as defined  above and any  Successor  to its
          business  and/or  assets that  executes  and  delivers  the  agreement
          provided for in this Section 17 or that otherwise becomes bound by all
          the terms and provisions of this Agreement by operation of law.

     18. Entire Agreement.  This Agreement  constitutes the entire understanding
of the parties and supersedes all prior  discussions,  negotiations,  agreements
and understandings, whether oral or written, with respect to its subject matter.
This Agreement can be modified only by a written instrument properly executed by
the Employee and the Company.

     19. Severability. If any one or more of the provisions of this Agreement is
held  invalid,  illegal  or  unenforceable,  the  remaining  provisions  of this
Agreement shall be unimpaired, and the invalid, illegal or

<PAGE>

unenforceable  provision shall be replaced by a mutually acceptable valid, legal
and enforceable provision which comes closest to the intent of the parties.

     The parties have executed this Agreement as of the day and year first above
written.


                                   PEOPLES TELEPHONE COMPANY, INC.


                                   By: /s/ E. Craig Sanders        
                                       E. Craig Sanders
                                       President and Chief Executive Officer
 


                                       /s/ Neil N. Snyder, III     
                                       Neil N. Snyder, III