The increasing weight of smartphone subsidies on mobile operators’ profitability and the growing demand for used smartphones in emerging markets create fertile land for buy-back and trade-in programmes, according a new Analyst Insight, released Wednesday by Pyramid Research.
“Through these programmes mobile customers are encouraged to sell back their old smartphones to the operator in exchange for cash, service vouchers, gift cards and such,” explained Stela Bokun, senior analyst at Pyramid Research.
These second-hand devices, which must be in decent shape, are subsequently refurbished and sold back to other customers, typically in secondary (that is emerging) markets, instead of just being recycled.
“The set-up helps improve operators’ churn metrics, since customers often opt to use the reimbursement received in the store for the returned handset to cover the upfront cost of acquiring a more recent model of the same handset brand,” Bokun said.
“In essence, the programme provides the incentive for customers to upgrade or renew their contract before the previous one expires,” she added.
The Analyst Insight draws on Pyramid’s recent report, ‘Smartphone Strategies: How Devices Can Revitalise the Role of Operators in the Mobile Ecosystem’, which shows how a mobile operator can use its device strategy to re-position its business in order to both defend itself against damage from the smartphone revolution and to make the most of the many opportunities the revolution has ushered in.
It examined strategies such as device portfolios, smartphone distribution, subsidies, buy-backs, trade-ins, reverse subsidies, own-branded devices, handset financing, data-sharing, tablets and over-the-top (OTT) services.
Noting that revolution has been sweeping the mobile telecom world for the past few years, Pyramid Research said: “Despite being characterised by fast-paced change from its infancy, the industry has been shaken to its foundations by the rise of a new ruler: the smartphone.
“Under its reign, traffic has moved from voice to data, and power has shifted from the mobile operators to application developers, OTT service providers and most of all the leading OS providers,” it said.
This report examined device strategies of five mobile operators in depth and noted that, in terms of their business environment and device strategy, each of the five had specific experience that “provides valuable insights from which providers from around the globe can learn when drawing up their own strategies: AT&T, MTS, Telefonica, China Unicom and Orange.”
Among its key findings, the report said: Mobile operators suffered the greatest collateral damage from the smartphone revolution; mobile operators can benefit from being closely involved in handset distribution, not only in developed markets but also in emerging ones; and that there were specific service areas in which mobile operators have advantages over OTT service providers in terms of provisioning data services.