by Kate Pearce
In addition, these new leasing plans and promotions do showcase the change in attitude in the market around smartphone reclamation or recovery. These devices have residual value for the carrier (but at what point is it a loss?) so it is important to reclaim them. Sprint has even launched a Direct to You program that allows, in part, the customer agent to go straight to the source to collect the old devices.
Another question is around device collection overall. T-Mobile noted that its trade-in rates have increased dramatically and the company does use reclaimed smartphones for its prepaid and postpaid channels and warranty claims. Jump On Demand may increase its inventory of newly-collected, gently-used flagship phones. Currently, the U.S. market has not embraced buying pre-owned devices. Compass Intelligence estimates about 41 million pre-owned devices in the market today (about 14% of survey respondents tell us they have purchased pre-owned smartphones). This number may grow as more gently-used phones in very good condition enter the market. It remains unclear if anyone in the U.S. market will buy them.
Many in the industry are pondering how--from a financial soundness (i.e., handset costs) perspective--T-Mobile can sustain this program as there seems to be little financial impact to the customer who may want to upgrade three times in one year. As with the auto industry, a new smartphone depreciates in value once it's taken out of the box. T-Mobile may allow a customer to do this three times a year! This is a very different business model than the one we used to know that was comprised of subsidies and tying customers to two-year contracts to ensure the carrier was “paid back” for the one phone it activated. With generous plans like Jump On Demand, T-Mobile better hope this brings in new additions and those customer do not churn in 18 months. You can bet we are keeping a close eye on it all as this part of the market continues to heat up.