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February 10, 1998


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Ring in the old!

A market for second-hand cell phones is emerging.
Is this good news for the service providers?

Will Airtel or Essar do an Akai in the mobile phone market? With increasingly sophisticated GSM phones being launched every month, a market for second-hand mobile phones is emerging as subscribers discard and upgrade.

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Internationally, the lifecycle of a cellular phone is 18 months. But given the price-sensitivity of the Indian market operators have assumed the cycle to be around 24 months, says Hemant Sachdev, vice-president, marketing and corporate communications, Bharti Cellular.

Now, two years after cellular services were launched in late 1995, a market for second-hand handsets is developing.

Estimates of the market size vary from 4 per cent of a 200,000-strong Delhi subscriber base (according to Bharti Cellular) to 10-20 per cent (according to Essar Cellphone).

It is expected to grow substantially in 1998 and according to Essar's Chief of Marketing and Advertising Peter Stok, it will grow faster if refurbishers get into the game.

According to Stok, refurbishing companies are keen to enter India and a few of them are already tailing to service providers.

The second-hand market is growing partly at the expense of the grey market because some cellular subscribers who purchased handsets in the grey market are now exchanging them for handsets legitimately marketed in India.

This is partly because while sophisticated handsets are now available in India they are also getting much cheaper. According to a dealer, the more important reason is the additional expense incurred in servicing grey market handsets.

Service providers in Delhi usually demand a proof of purchase when handsets are brought in for servicing.

Service providers are looking at two kinds of subscribers who may want to exchange their handsets - those who want to buy a better phone that they can now afford and those who are dissatisfied or just plain bored with their old phones.

An important driver for those belonging to the latter category is the fact that features such as 'caller line identification' are not available in early models. Such subscribers are likely to opt for a phone in the same price range as their first models, while those wanting to upgrade are likely to shell out more.

Prices of second-hand phones start in the region of Rs 1,500-2,000 for a Nokia 8110 or Ericsson 788. This is what a dealer will pay for an early Motorola d7500 and d5200 and could go up to Rs 10,000-15,000 depending on the condition.

Dealers say that margins are low in a resale, with the profit clearly lying in the commission earned from the sale of an additional connection.

Companies are willing to support re-sale simply because it will lead to new connections purchased by subscribers for whom a cellular is now affordable.

But Sachdev maintains that Bharti Cellular does not involve itself with the exchange process, leaving the logistics to dealers since "a franchise must offer a customer the best handsets available in the market".

Stok says that Essar also desists from directly supporting the process since the company cannot give guarantees on old phones.

Not all resale may lead to new connections though. Service agents who fan them out to subscribers whose own phones are being serviced are picking up a number of second-hand phones. Some phones also make their way to nearby cellular circle markets.

- Compile from the Indian market

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