Apple cooks up iPhone trade-in scheme to boost sales

Used phones collected in the US to be resold in emerging markets, according to plan

PUBLISHED : Saturday, 08 June, 2013, 12:00am
UPDATED : Saturday, 08 June, 2013, 4:09am

Apple is starting an iPhone trade-in programme this month aimed at getting users to upgrade to the iPhone 5 and turn in older models, people with knowledge of the plans said.

Apple has teamed up with Brightstar Corp, a mobile-phone distributor, to run the exchange programme, said the people, who asked not to be identified because Apple has not publicly announced the plan.

Brightstar also handles trade-ins for AT&T and T-Mobile US, as well as other carriers and device makers, amid brisk demand for refurbished iPhone 4s and 4Ss in emerging markets. By offering money for older smartphones, Apple chief executive Tim Cook is seeking to entice consumers to upgrade to the latest models, part of the company's efforts to reignite sales growth and combat declining shares.

AT&T is currently paying as much as US$200 for working iPhone 4s and 4Ss, which could let some customers buy an entry-level iPhone 5 for no money down.

Until now, Apple paid little attention to the refurbished iPhone market. That is changing as Apple's growth has slowed in recent quarters. Samsung Electronics became the best-selling smartphone brand in the US in May, T Michael Walkley, an analyst at Canaccord Genuity, wrote in a report this week.

Apple sold 37.4 million units of the iPhone in the latest quarter, compared with 35.1 million a year earlier. Apple shares have declined 38 per cent from a record in September, weighed down by investor concerns that the company's era of rapid growth, fuelled by the 2007 debut of the iPhone, may be over.

While Cook has said some "game changer" consumer electronics products are in development, Apple is still trading at an 18 per cent discount to Samsung on a price-earnings basis. Apple shares are down 18 per cent this year.

Samsung has become a market leader by offering smartphones based on Google's Android mobile operating system, which captured 75 per cent of the market in the first quarter, compared with 17 per cent for phones running Apple's iOS software, according to IDC.

Trade-in programmes are used to support sales of new hardware in mature markets such as the US, where many prospective customers already own a smartphone. Used iPhones collected in the US will only be resold in emerging markets, where Apple's share is lower and demand for cheap devices is greater, said one of the people. That way, the resale of Apple's older models will not hurt iPhone 5 sales in the US, the person said.

Selling used iPhones in emerging markets may also keep first-time smartphone buyers around the world from committing to Android, buying time for Apple to introduce new models.