Handset and accessory distributor Brightpoint Inc. said it plans to increase its presence in the outsourcing business by providing handset repair and refurbishment services.
“This is a value-added service people have historically tried to avoid,” said John Sullivan, executive vice president with Brightpoint. “At times it is painful and not perceived as a glamorous part of the business. But it’s absolutely critical to the success of carriers and manufacturers that this area be dealt with.”
Harry Blount, director of equity research with CIBC Oppenheimer, said the repair and refurbishment business is an area manufacturers want to exit. “Manufacturers make money on long product runs. Individual handset repair operations is not a game manufacturers want to get into or are good at,” he said.
Sullivan said Brightpoint already handles about 30,000 handset returns per month for some of its select customers and dealers. Walter Giera, newly appointed vice president of technical services, will be in charge of expanding the business. Indianapolis-based Brightpoint already offers value-added services that include purchasing, inventory management, prepaid services and end-user fulfillment.
Digital technology and the vast number of mobile phone operators have complicated the repair and refurbishment business for manufacturers. New digital technology has caused a higher rate of handset problems. Customers also are trading in older handsets at a faster rate.
“We think technology plays a big role, not only because there is going to be higher rates of failure, but also the continual introduction of new technology,” said Sullivan.
Smaller phones, improved battery life and enhanced data services will cause customers to trade up phones faster, said Blount. He expects the rate of handset turnover to increase in the coming years, from customers trading up phones every three years to every two to two-and-a-half years.
“One of the big undiscussed issues in the industry is: How do you take care of the handsets that people dispose of for new ones? Carriers and manufacturers don’t have a good way to dispose of them,” said Blount.
A number of private companies exist that provide refurbishment and repair services, but there is plenty of business to go around as the vast majority of handsets are thrown away rather than recycled, Blount commented. And there is big business in sending refurbished phones to international markets, he said. Carriers also will have a bigger opportunity to sell cheap recycled phones to lower-end customers without having to incur incremental costs.