Company Proposes Smartphone Leasing Programs

By Joseph Palenchar -- TWICE, 2/1/2012

Overland Park, Kan. - A company that provides consulting services and software solutions in the communications industry wants to put cellular carriers, handset suppliers, and retailers into the cellphone-leasing business.

 TMNG Global has developed what it calls the industry's first lease administration and accounting system, which carriers and MVNOs can integrate into their billing systems to make smartphone leasing practical.

 Leasing programs enabled by TMNG's Mobile Device LeaseXchange (MDLx) system would benefit carriers that want to reduce their smartphone subsidy costs, consumers who want to replace their smartphones more frequently to keep up with accelerating technology advances, and handset suppliers who want to sell more products, said  TMNG CEO Don Klumb.

 Carriers' handset subsidies have risen from about $125 for feature phones to more than $300 per smartphone, Klumb noted. The high subsidies force postpaid carriers to sell smartphones with two-year contracts to recoup their investment, but high-end subscribers want to replace their smartphones more often than that without penalty to step up to new technologies that now come out every six to 12 months, he said. Leasing would also enable handset suppliers to sell more phones and develop new technology "with less concern for carrier subsidy constraints," he said.

 Leasing profits would be shared by the handset supplier, TMNG, and "other companies in the ecosystem who took on risk," Klumb said.

 Under the program, smartphones could be leased for a minimum of $20/month for 12 months, excluding required insurance that high-end users already likely have, he said. A total cost of $25 to $35/month with insurance is "amenable" to premier subscribers interested in "technology assurance," added MDLx chief marketing officer Tom Murphy.

  Carriers could also offer to replace a leased phone in less than 12 months.

  When the phones come off lease, they would be refurbished and sold into secondary markets overseas or in the U.S. to step up feature-phone users to low-cost smartphones. The refurbished phones could also be used by U.S. carriers to target prepaid customers and credit-challenged consumers, Murphy said.

 "The rapidly advancing sophistication of smartphones gives them attractive residual values," Klumb said.

 Handsets leased for a year could be worth as much as 50 percent of their original retail price in the U.S. if minimal refurbishment is needed, Murphy said.  Carriers could also offer to replace a leased phone before a year is up.

 During the lease, the phone's title would be held by a finance company. Leasing profits after paying financing and refurbishment costs would be shared by the handset supplier, TMNG, and "other companies in the ecosystem who took on risk," said Klumb.

  For retailers, participation in a carrier's leasing program would increase store traffic, Murphy said. TMNG proactively reaches out to a carrier's subscribers to give them leased-phone options, and current leased-phone users would be guided back to the store that sold them the device, he explained.

 Murphy said he expects carriers would offer participating retailers the same profit levels that they get now.

  For carriers, TMNG would manage the program, which includes administration, finance, insurance, handset recovery and handset redeployment. The company's platform also monitors the going rate for refurbished resales.

 The company is initially targeting tier-one carriers and their handset suppliers and could put the carriers in the leasing business in 120 days, Murphy said.