THOUSANDS of owners of private payphones are facing financial loss because the phones mistake some one penny coins for a 20p piece. More recent penny coins are copper-plated steel rather than bronze and, according to BT, have a different density that allows them to be mistaken for 20p.

Although the plated coins have been in circulation since late 1992, the problem of people using them for cheap telephone calls has only recently come to light. BT said: 'It is fraud, but it is not a problem for BT. The people who are losing out are those with private payphones.'

The company estimates that there are up to 70,000 private payphones, many in pubs and shops. Some large families also use them to avoid running up huge bills. BT charges the owners for the use of the line, but does not get any of the coins inserted by those who make the calls.

BT said that it had been aware of the problem for some time and was adjusting payphones free of charge by changing the software. The spokesman said the adjustment itself was no problem, but that the company did not necessarily know all those who operated private payphones. BT said that one reason the problem affected private rather than public payphones was that they were often cheaper and less sophisticated or robust. It added that the Royal Mint was careful to warn in advance of changes to coins that could affect public telephones and other coin-operated equipment.

University unions, which often obtain revenues from campus services including payphones, are likely to be among the main victims. The union at Surrey has asked the National Westminster bank on the campus to be wary of students asking for large quantities of pennies or asking cashiers to sort out new ones from old.