Abstract: A novel telephone system and method for activating a speakerphone in response to an incoming call based upon the presence or absence of a subscriber within a predetermined proximity zone. The telephone system has a ring detector for detecting a ring signal in response to an incoming call received via a central switching network, a proximity sensor for sensing the presence or absence of a subscriber within a predetermined proximity zone of the telephone system, and a control unit for automatically activating the speakerphone to establish communication with the caller when the subscriber is within the predetermined proximity zone and deactivating the speakerphone in response to detecting a busy tone generated by the central switching network when the call is terminated.