Dec. 3 (Bloomberg) -- AT&T Inc., the biggest U.S. phone company, plans to leave the pay-phone business after 129 years as more people use wireless handsets to make calls on the go.

The first pay phone, installed in 1878, had an attendant who took callers' money, AT&T spokesman Michael Coe said. Inventor William Gray set up the first coin-operated phone in 1889 at a bank in Hartford, Connecticut. Both devices were operated by AT&T predecessor companies.

At their peak in 1998, there were 2.6 million pay phones in the U.S., San Antonio-based AT&T said today in a statement. That number fell to 1 million this year, including the 65,000 phones AT&T has in 13 states, the company said. BellSouth Corp., which AT&T took over in 2006, had already exited the business in the nine states where it operated.

Wireless subscribers have quadrupled in the past decade and about 80 percent of people in the U.S. now have mobile phones, according to CTIA-The Wireless Association, an industry group. AT&T added 2 million mobile subscribers in the third quarter to reach 66 million.

Pay phones, especially those in booths, have played a role in U.S. pop culture for decades. Clark Kent started using them to change into Superman in the 1940s. In the 1989 movie ``Bill & Ted's Excellent Adventure,'' a phone booth doubled as a time machine. In 2002, actor Colin Farrell played a man trapped at a phone by a sniper in the film ``Phone Booth.''

Museum Pieces

Now it's getting difficult to find a pay phone on the street, said Jody L. Georgeson, executive director of the Telecommunications History Group Inc., which operates museums in Denver and Seattle and has booths in its collections.

``We can show kids how to put the coin in the slot,'' Georgeson said.

Independent operators will take over AT&T's pay-phone business. About a thousand such companies, most with two or three employees, maintain more than half of the pay phones in the U.S., collecting roughly $400 million in sales each year, said Willard R. Nichols, president of the American Public Communications Council Inc., an industry group in Alexandria, Virginia.

The companies will probably be able to absorb most of AT&T's lines, Nichols said. They can make a higher profit than the large carriers because their costs are lower, he said. The unit AT&T is closing also provides phones to prisons and jails. Independent companies will pursue that business, too, Nichols said.

Coe wouldn't disclose how much AT&T expects to save, saying only that pay phones represent ``a very small part of our overall business.''

AT&T rose 7 cents to $38.28 at 4 p.m. in New York Stock Exchange composite trading. The shares have climbed 7.1 percent this year.

Still in Business

Verizon Communications Inc., the second-biggest U.S. carrier, still operates about 250,000 pay phones and has no plans to exit the business, spokesman Jim Smith said. The company will shut down an unprofitable line unless the location pays a fee to keep it operating, he said.

``There are people who still need them, and so we still sell them,'' Smith said.

The pay-phone division still makes a cash profit with help from advertising in New York kiosks and a collect-call service, Smith said. He wouldn't disclose the unit's sales figures.

Pay phones still serve a purpose for people who don't have a home phone or can't get their mobile phone to function, Nichols said. After the Sept. 11 terrorist attacks and Hurricane Katrina, some people relied on pay phones because newer technology didn't work, he said.

``Anytime a technology is supplanted by something else, we lose something,'' said Georgeson, the historian. ``We do hate to see them go.''

To contact the reporter on this story: Crayton Harrison in Dallas at tharrison5@bloomberg.net

Last Updated: December 3, 2007 16:09 EST