How Pre-Owned Phones Can Benefit You And Your MVNO Customers

This past May, I wrote about why consumers purchase certain handsets to go along with their wireless service plan.  I received quite a few comments, one of the main areas being the risks or benefits of buying a used phone.

Call them pre-owned, used, renewed, refurbished, certified or a half dozen other monikers, a “used” phone is just that; it has been owned by someone previous to you and has been flashed, cleared of its previous contents, cleaned up and sold at a discount vs. the same model brand new.  But, like I’ve said before, “caveat emptor,” let the buyer beware.  Today let’s talk about the types of previously owned phones (I hate the word “used”) and how to know what you’re buying.

I had the opportunity last week at the All Wireless and Prepaid Show in Las Vegas to sit down with Ehsan Gharatappeh, CEO of Cellpoint Corporation (cellpointcorp.com) a US reclamation company that buys C stock handsets from carriers and at auction and through their innovative process called ‘organic reclamation’ in their 300 person facility, converts them to A Stock.

I asked Ehsan about his company and why the need for renewed phones.  Ehsan started the conversation by stating that, 

EG: “We’re making something that was previously only available to the affluent.  Apple phones and other high-end handsets were never available to the value segment.  When you walk into a Target or Walmart pre-paid section the limited selection of handsets becomes painfully apparent (ie low-end handsets).  We want to “democratize iPhones,” or make them accessible to everyone. MVNO customers can’t always afford a $1,300 phone.  But these customers want the same technology.  Where are Apple products sold?  Mostly in affluent markets; they’re not serving a lot of the prepaid markets. What we can give to the MVNOs who want to offer discounted Apple phones is a great, recognizable brand with a warranty, like models that are a few years old….. the iPhone 8, 8+, XR, or iPhone 11, and a certified solution backed by standardized processes that deliver real value to the mass market.”

JH: You seem to have a very good handle on the used phone market.  What do you see as the key to acquiring and retaining wireless subscribers?

EG: In our industry, we talk a lot about having three things that will satisfy your customers:

• A powerful network

• A great rate plan

• An amazing phone

If you give your customers these three things, you have given them a reason to never leave you.

First, as an MVNO, you really can’t improve the network so the question to ask yourself is if the network that you sell meets all of the requirements of your niche, or differentiator (there’s that word again!).  Are your customers travelers?  Do they need Big Buckets of data or just a few MBs?  Is price the most important factor or is it having extensive coverage and never getting throttled?  Having your subscribers on the right network benefits not only you and the customer, but the carrier as well.  No one wants churn because the MVNO is putting customers on a network or plan that doesn’t meet their customer’s needs.

With regards to service, a “great” rate plan for one may not be the best option for someone else.  Ask your customer questions; everyone gets unlimited talk & text but how much data do they need?  Do they need a family plan?  What about paying three to six months in advance to get a lower price (Mint Mobile)?  Again, it comes down to knowing your market and exploiting your differentiation.

Finally, everybody wants an amazing phone.  Amazing to me is having an iconic Apple or Samsung with a camera that delivers professional shots, whereas to someone else, it might be a flip phone or a phone that caters to older individuals that don’t need all of the bells and whistles, or elderly folks that don’t have the physical or mental capabilities that they used to have and need a handset that is tailored to their needs.  

This is where we can start to see the difference and affordability of new vs. renewed phones.  Let’s take a look at the “used phone” market.  Today, the used phone secondary market in the United States is a $30 billion market ($67 billion worldwide).  Yes, BILLION! Here’s the issue:  90% of the supply is “C” grade while 90% of the demand is “A” grade.  How do we bridge this gap?

JH: You used the term “organic reclamation.”  Can you expand on that and what it means?

EG: Organic Reclamation means that we do not buy parts to renew our devices and use the same parts that the OEM originally shipped with the device upon first sale. We take C grade devices and polish the front, back and remove small scratches on the middle frame to upgrade into an A Grade device.  We also certify that the battery is original using automated Phonecheck testing software and since the number 1 complaint of consumers is short talk time, we ensure each phone has a minimum 80% battery state of health.

JH: What is the opportunity today for previously used, or as you say, renewed phones?

EG: Phones sold on the secondary market have traditionally been available in the independent dealer channel, but we are now seeing many models being made available on the websites of the carriers and larger MVNOs.  There is not a lot for customers to worry about with regards to quality, warranty, etc. when buying from these newer channels as the carriers and MVNOs have large customer service departments and usually stand behind their products with a warranty or replacement.  Customers should be careful when buying any phone from an unknown entity and stay with the dealer that they’ve done business with, a carrier-owned or branded location, or a big box retailer.  Remember, if the price or deal is too good to be true, it probably is!  Do your homework!

I asked Ehsan to riff a little bit on the carrier’s current state with CPO phones.  Here are his thoughts:

A case that went all the way to the United States Supreme Court says the whole point of having intellectual property is to receive an economic benefit and once you receive that benefit (aka money) you have exhausted your IP protection.  As in, I don’t get to sell you a product today for money and then come back a year later and tell you cannot use that product in a way I don’t approve or agree with.  That goes against the very fabric of our system of laws, government, and free markets.  

Most MVNOs currently buy an iPhone 11 for $499 and could buy Certified Pre-Owned phones at around $315 thereby offering customers a $185 savings over the status quo!  

Models like the Apple iPhone XR and 8+ are even cheaper and address a customer segment not currently being addressed by any institutional player.

Verizon has a lot of CPO phones and I consider them the industry leaders in offering CPO Apple smartphones | Verizon.

T-Mobile Wholesale, says how MVNO’s come up with their device strategy is one of the most important items and costs to your business PowerPoint Presentation (t-mobile.com) .

It is a known fact that the 3 major network operators fill most of their insurance claims with renewed/CPO devices.

Ehsan went on to tell me that his company is currently shipping thousands of renewed handsets to US-based MVNOs and Carriers every week with great customer satisfaction and very few returns or complaints.

In closing, here’s a key takeaway from my earlier discussion on pre-owned phones:

There are two reasons why you should consider purchasing pre-owned equipment: money and value for money.

In their July 2021 edition, Consumer Reports gave examples of buying new or CPO Apple and Galaxy products with average savings between $250-$300 per phone.  And not surprisingly, according to a spring 2018 survey, Consumer Reports members have been generally satisfied with purchases like those, not to mention their overall shopping experience:

“Among the 3,211 people who reported buying a refurbished phone since Jan. 1, 2016, 82 percent said they were highly satisfied with the product. In fact, in our survey, 67 percent of the owners of refurbished phones said they had no complaints. That’s just a hair less than the 69 percent of new smartphone owners who said the same thing.” Should You Buy a Refurbished Phone? – Consumer Reports

Atrium Unlimited Consulting (AtriumUnlimited.com) has clients and strong relationships with legitimate and trustworthy providers of CPO smartphones.  Give us a call and I’ll put you in touch with the right people so you can start offering quality phones at a great price to your customers.

Good Selling!

Jon