Wherever the Internet goes,

British Telecommunications

(BTY)

is sure to follow, like a donkey trailing the dangled carrot.

Flush with success from its various Internet ventures, which helped push up pretax profits 34% in 1998, British Telecom has now entered into a somewhat bizarre venture with passport-photo-booth company

Photo-Me International

to take the Internet onto the U.K.'s High Street.

Say "Cheese"

The agreement, announced Monday, involves replacing many of Photo-Me's 4,300 curtained photo booths that are dotted around the country with high-tech, Internet-capable photo booths.

The new booths will allow customers to have their photo taken and to send these normally ill-lit and unflattering snaps to whomever they want. Not only that, but the booths will also allow customers to send email, surf the Internet, print out digital camera photos and eventually engage in e-commerce.

"There's lots of new things we will be able to offer people while they're waiting for a train or plane," says a spokesman for Photo-Me.

The market seemed to embrace this idea, promptly bidding up Photo-Me's shares 22% Monday to give the company a market capitalization of about 509 million pounds ($815 million). The shares closed up 1.8% Tuesday at 715 pence.

Under the terms of the deal, British Telecom will provide the Internet access and software, while Photo-Me will build and maintain the booths. Revenue from the Internet side of the business will be split evenly between British Telecom and Photo-Me, but revenue from the photo service will go strictly to Photo-Me.

The Photo-Me spokesman says the two firms are sharing the expense of replacing the booths, which are each expected to cost between $16,000 and $24,000. Photo-Me plans to have 1,000 of these new booths operating by the end of 2000. If taken at the cheaper end, Photo-Me's outlay would be about $8 million, a fair whack for a company with pretax profits of $24.6 million in 1998, but it'd be a drop in the bucket for British Telecom.

E-commerce's Track Record

This outlay will, of course, be offset by the increase in revenue from the Internet side. However, revenue from Internet ventures are notoriously elusive -- and probably especially so when the place where all this is happening is inside a curtained booth in

Heathrow Airport

.

The connection charge to the Internet will, according to the spokesman, likely be British Telecom's standard 10 pence a minute. Currently, the average use of the booths comes to 30 minutes a day. Should the firms manage to double the time of use, that's an extra 10 pounds a day, which works out to a not-so-huge 3,650 pounds a year that the two firms can split between them.

E-commerce? Well, as people are waiting for trains and planes, the preferred means of whiling away the time is to visit the large number of attractive duty-free shops, restaurants and bookshops.

Actually, Heathrow Airport has tried this e-commerce thing before in 1993, when it installed a number of touch-screen machines that allowed customers to purchase anything from paintings by rock stars to perfume. After a mere six months, these machines disappeared, never to be seen again.

British Telecom says the photo-booth venture is a part of its commitment to make the U.K. a multimedia society. This venture is likely to play a very small part in that, indeed.