One of the panels of the booth is covered by a full-length advert, while another is up against a hedge – meaning the view passers-by have of what is going on inside is obscured.
Mr Sarwar said BT had cut off his complaints over the matter.
The Local Democracy Reporting Service understands Preston City Council has raised the issue with BT’s chief executive.
The authority has warned it could use the enforcement powers it has to deal with anti-social behaviour.
The council has also suggested relocating the phone box to nearby Deepdale Road, where it would be within sight of a CCTV camera.
A BT Group spokesperson said: “The payphone sees a high number of calls made from it and, under guidance set out by Ofcom, we’re required to provide public call boxes to meet the reasonable needs of the public.”
The company urged anyone witnessing criminal behaviour to contact the police.