Abstract: Two wire phone exchange system which provides signalling, intercom and paging functions. The system monitors and detects either a dual tone multi-frequency tone or a single tone generated on the line at the local telephone, activates a relay and places a calling party on hold and connects music to the incoming line. A party on hold is reconnected to the answering telephone by depressing a tone signal generating key button. There is an audible warning tone reminder for calls placed on hold which are not picked up after some desired time. The system also provides in-house intercom and paging functions and a release from these functions. When several local telephone instruments are connected on the same line, this system allows the recipient of a call to receive the call at any of the telephones by depressing a tone generating key button.