Do we sell too many new phones? How to create more value out of fewer devices and hit net zero targets
During a panel hosted by The GSMA, Hastings Singh took to the stage alongside Maya Ormazabal Herrero to share perspectives on how the mobile industry can create more value from fewer devices. Exploring:
- What it means to have a sustainable mobile device
- How to move to a more circular economy for devices
- The need to incentivise and elevate awareness of second-life options for consumers
- Current supply and demand challenges
- The importance of collaborating as an industry
"Because 1.5 billion new phones this year is too many phones. Ultimately, we should be moving towards that one-to-one future. The industry's not set up to fully support that yet, but it's hopefully going in that direction."— Hastings Singh , CCO
Read the full transcript below
Welcome and Introduction
Hello, I would like to invite GSMA's Head of Climate Action, steven Moore, who's going to start the session.
Steven Moore - GSMA: Thank you for joining us this afternoon. I appreciate, we're right at the end of the day, so it's great to see a really packed, room for this discussion. By way of introduction, I’m going to talk through a couple of slides opening this topic. The first one is on what we mean by a circular economy.
In terms of context, what we're talking about for this session and it's moving away from a linear system where we take materials out the ground, we manufacture something with them, we use that product, and then effectively we throw those products back into the ground. So, at the moment, as you can see from one of the stats on the slide, more than 90% of the materials and products that we use globally, is in this linear system.
So, we are effectively only 8.6% circular, the whole global economy. So, I think it's quite useful as context for this discussion. We looked at this issue about 18 months ago, and we produced a strategy paper after doing a lot of research and looking to understand what was happening across the industry at the moment.
What we found was that there is quite a big and growing refurbishment market, and the predictions are that the phone refurbishment market could reach 140 billion dollars by 2030, so really sizable. We also found that increasing the lifetime of a phone by just one year would be the equivalent of taking almost 5 million cars off the road. So again, a really good potential environmental benefit of extending the lifetime of phones.
The other thing that we found through research, was that there are actually around 30 million people at the moment that are affected by e-waste and particularly things like open waste burning of e-waste. There's a lot of negative social impacts of some of the current system that we have at the moment.
So, I thought that was useful to have as a bit of context for the discussion and then the other thing that we included in the strategy paper that we published was a vision for how we think mobile phones could be different in the future.
So, the vision for 2050 that we detailed in the paper is phones with as long a lifetime as possible, they are a hundred percent recyclable they have a hundred percent recycled content, they're made using a hundred percent renewable energy and no device goes down the linear economy route and ends up as waste. So, every single device is recycled, refurbished, reused and you can see there's some of the two key tenants of this is around increasing the longevity of devices, so having them to be used for as long as possible, and the other one is zero waste.
So, making sure as I say that no device actually ends up going into the ground. And I guess you could look at this and say, well, there's no phone at the moment that conforms to this.
There is no phone that meets all of these criteria, which is very true, and I think we're going to discuss actually perhaps why that is and some of the challenges to that at the moment. But what I'd also like to flag is that we are seeing things go in this direction. So, we had Samsung make quite a big environmental announcement back in September. Committing to using a hundred percent renewable electricity.
We've seen, apple already do this and effectively say they'll produce a zero-carbon phone by 2030. Across Apple's entire product range there, they've calculated they're using about 20% recycled content, so I think we're starting to see that being as something that manufacturers will look to measure. And then Fairphone obviously has made a focus of its whole business model looking at, a phone that's entirely upgradeable as well, so much more aligned to principles of the circular economy. So, I thought that was useful just as context, but we want to hear from the experts.
So, Hastings and Maya, if you'd like to come up on stage, I'd like to first introduce Hasting Singh, who's the Chief Customer Officer at Kingfisher, and also Maya Ormazabal, who's the Head of Environment and Climate at Telefónica. Hastings, would you like to say a couple of words, just introducing yourself and what Kingfisher does?
Hastings Singh - Kingfisher: Sure. Thanks Steven. Really good to be here and, and I love the provocative question as well, so that's great. So, I'm Hastings. I work at Kingfisher and I'm the Chief Customer Officer. Kingfisher has been built to be a mobile experience company, helping carriers and customers upgrade devices more frequently and then using those devices for second and third lives.
Through certified pre-owned types of programs. So that's what we do and a young company, about six years old. But working hard to try and solve some of the questions that we're going to answer today.
Steven Moore - GSMA: Thanks very much Hastings and Maya. Obviously, I think everyone in the room knows Telefónica, but perhaps you can explain a little bit more about your focus.
Maya Ormazabal – Telefónica: Well, thank you. Thank you for inviting us and congratulations for this provocative question and topic. And thank you all for being here. So, my name is Maya Ormazabal, I'm Director of Environment. And other sustainability topics at Telefónica. I'm in charge of things like circular economy in the company, so I'm working very much with the topic that is going to be the conversation for today.
I think what we are seeing now for, from a network operator's perspective is that this is a key topic for our clients, for the regulator, and that we have to be well at the forefront of the innovation that, that we need to do as a sector. So very happy to be here.
Q: Let's think about the current problems with the system that we have at the moment. And Hastings, if I come to you because I understand Kingfisher has produced it's own thought leadership paper recently touching on this issue. Could you tell us what you see as being some of the big issues of the environmental impact of mobile phones at the moment?
A: Hastings Singh - Kingfisher: Sure. There are about 5.5 billion smartphones out in the world, so most people who are adults have one. The challenge that we see is not enough of these devices are actually being reused, which means a lot of them are ending up either in landfill or draws and, you know, we think that's a challenge.
When produced [phones] consume about 80 kilos of CO2 equivalent. So, they, they're quite carbon intensive or a carbon equivalent intensive. And so, and the entire industry's really been driven by a model of afford logistics. You know, for 15 years, smartphone have been around, the industry's very good at selling them, but as more and more focuses on the environmental cost, how do we actually change with carriers especially, and help carriers you know, drive better outcomes, get those phones reused, which would mean a reduction in sales in some respects, probably in the mid-range.
So, a whole bunch of things need to happen.
"The challenge that we see is not enough of these devices are actually being reused, which means a lot of them are ending up either in landfill or draws"— Hastings Singh , CCO
Q: Thanks very much. Maya, from your point of view and Telefónica's point of view, obviously you do a huge amount of reporting on sustainability impacts and specifically the environmental impacts of Telefónica. Have you looked at how phones are part of that? Is that something that Telefónica has looked at to measure?
A: Maya Ormazabal – Telefónica: So far, yes, I mean, what we are, we are reporting now on our carbon footprint. So, Scope 1, Scope 2, and also Scope 3. And here is where the, the mobile phones come into a place in a telecom operator, so it's part of what we sell to our clients, and it's also part of what we buy from our procurements for our vendors. So, we know that we are, I mean, not just Telefónica, but us as a sector, we are selling 2 billion phones every year. And we know that the carbon footprint comes not only from the energy sector, but also from the manufacturing.
And, and 45% of the total carbon footprint comes from manufacturing. So, we know that part of it, is also coming from our scope three emissions as a company. So, we are really sure measuring this. And also, there’s some problems coming from the old environmental side, but also from the social side we know that part of the materials that are inside a telephone are coming from conflict areas and, and so on. So, we know that there's also social responsibility here and we need to cover this, and we are trying to manage and disclose all this information that comes from the environmental impact and also from the social impact and really trying to show how we are managing this internally and with our stakeholders.
"Not just Telefónica, but us as a sector, we are selling 2 billion phones every year. And we know that the carbon footprint comes not only from the energy sector, but also from the manufacturing."— Maya Ormazabal , Head of Environment and Climate
Q: Great. So, cutting to the question that we did pose for this particular session, do you think the problem is that we're selling too many phones. Do you think the problem is that we're selling too many new phones? Do you think the problem is that we perhaps can sell just as many new phones, but we need to perhaps manufacture them in a different way?
How do you look at this challenge and look at the potential solution? Maybe Hastings, you want to go first?
A: Hastings Singh - Kingfisher: I think we are selling too many phones, specifically new phones. These smartphones are the world's most successful consumer category. I think it's the first trillion-dollar category in history, in anything.
And how is it that these devices actually aren't engineered and effectively resold? When car manufacturers do it quite well. You know, these assets have lives beyond, that first owner, but the vast majority of these devices don't have a second owner.
Apple has about a billion iPhones, 950 million iOS users at the moment. Approximately maybe 200 million of those devices have a second owner or a second sim card inside them. And for Android is, it's much less so you have literally 20% of these devices that are being given a second life. And that's a huge amount of waste that that is represented most don't get recycled, most are not disposed of effectively. So, you know, there’s a whole bunch of structural reasons why that's sort of taking place.
We think fundamentally that carriers are in the best position to make this change. We can actually incentivize and help carriers to do that. And that's part of the reason why Kingfisher has come about and what we're trying to do.
"And how is it that these devices actually aren't engineered and effectively resold? When car manufacturers do it quite well. You know, these assets have lives beyond, that first owner, but the vast majority of these devices don't have a second owner."— Hastings Singh , CCO
Q: Maya, as a carrier, to be in the key position for this. How you, how do you respond?
A: Maya Ormazabal – Telefónica: Okay. So actually, I think we are selling too many phones. And we are recovering not as much phones as we need. Only 17% of mobiles are recovery. And from the mobiles that we sell, not only Telefónica, but as a sector, only 11% come from second hand. We, have a lot of room for improvement here. We need to not just choose to sell less phones because we are going to have more population to be connected. We wouldn't want to leave anyone outside of the digital area. We need to connect everyone, but we need to do it in a better way. We need to decrease the impact of each mobile phone.
The four ideas that you put there, the first one is the most important one, we need to make every phone last longer. And, for that we need to make a lot of things because it's not about keeping the phone, it's keep keeping the service that it provides. For that we need our suppliers to be more active in the equity side, but also in how these mobile devices can last longer in terms of software and hardware and all things related with the spare parts.
There's a lot of regulation coming here in the European Commission, for instance, that probably will help to give more incentives for this to happen because we know that business is business, and we also need regulation to help us to make this transformation.
But for sure this sector needs to transform because we know that the kind of waste that we are generating as a sector is huge and we need to take responsibility.
"We need to connect everyone, but we need to do it in a better way. We need to decrease the impact of each mobile phone."— Maya Ormazabal , Head of Environment and Climate
Q: Let’s pick up on this point around regulation because I guess there's different levers for making change. Regulation is one. There are business model changes. There's engaging the consumer as well. There are other levers perhaps as well. Hastings, to go back to you, picking up on Maya's point, how important is regulation, from where you see it, from Kingfisher, in terms of the things that you are looking to do?
A: Hastings Singh - Kingfisher: Look, I think the danger is that if the industry doesn't figure this out, that regulation will be imposed. And often regulation can be blunt. I mean, just look at some of the data regulation in the EU recently. Again, probably a different controversial topic, but it tried to do good things, but it was executed in a way that wasn't possibly as nimble or as workable as what the industry would like. There is a risk there. So how do we actually move back?
What Maya was saying about incentives to drive behaviour and outcomes. And we think, look, there are customers of carriers that if they had a valid choice, a trusted choice, they would buy a second life device that was in good condition with a warranty with support and they knew what they were going to get.
Carriers are definitely the best placed party because the current solution is fragmented. You don't know where to buy from necessarily. You don't know necessarily the condition or the quality. You don't know if it's really representing true value. You know, there's a bunch of players out there and it hasn't been structured or formulated in a way to inspire trust and certainty.
We think if you can do that, then the industry will start to have a viable solution for these second and third customers to own a device. Ultimately then you need a consistent supply of these devices. That's another challenge. No OEM brand really has any consistent second life brand or even a strategy to create one.
If a carrier can generate some of this available stock in a consistent way they have supply chain and logistics requirements. We think that then you know, offering those to customers, a lot of people will make that choice that they'd be happy with a two-year-old phone that somebody else has owned you know, that's trusted and, and effective.
"There are customers of carriers that if they had a valid choice, a trusted choice, they would buy a second life device that was in good condition with a warranty with support and they knew what they were going to get."— Hastings Singh , CCO
Q: Picking up on that, because of Telefónica's relationship with customers is it something that Telefónica is offering refurbished phones? Do you see much of a demand from your customers? Are you looking to create that demand with your customers? How do you see it from, from your point of view?
A: Maya Ormazabal – Telefónica: Well, we already are selling, second-hand devices, but the market is not very much aware of it. And this is a problem, I think as companies, we need to raise awareness in our clients to make them make better decisions.
The eco rating for mobile devices we have launched from Telefónica and another for companies some years ago. And that helps our clients to make better decisions when buying a mobile device.
So, they can note how impactful is a mobile device in their whole complete lifetime. I think we have to raise awareness and this second-hand market is there, but there's also not only second-hand devices, but also leasing. So why not? Moving to a product from a product market to a service market.
There’s a lot of different innovation that has to be developing in this mobile market because we need to do something. And, and I think there are a lot of opportunities.
"Well, we already are selling, second-hand devices, but the market is not very much aware of it. And this is a problem, I think as companies, we need to raise awareness in our clients to make them make better decisions."— Maya Ormazabal , Head of Environment and Climate
Q: Picking up on Hasting's other point around the supply of phones that are refurbished, actually getting phones back in that you can repair and refurbish. Maya, presumably you have take-back schemes at Telefónica in your different markets. Do you have a consistent flow of phones that come in is it a bit patchy from one month to the next? Do you have that kind of supply that therefore you can meet the potential demand from your customers for refurbished devices?
A: Maya Ormazabal – Telefónica: We do have these programs in place, for buyback and they are increasing, but sometimes we feel like the clients keep the mobile as they were treasurer. And it's difficult for them to give the mobile back. So, we have to incentivize that, and we do that.
We really buy the mobile and we put it in the new and then we sell it again. And that works but we need to scale up. The thing is it’s about giving our clients information, giving incentives, and also having partners. Because in the end it's not only about us but having all the supply chain to be prepared for this second-hand. We are increasing here, already in the last year we have collected 328,000 in our different markets. And this is increasing year by year, so, yes.
"It’s about giving our clients information, giving incentives, and also having partners. Because in the end it's not only about us but having all the supply chain to be prepared for this second-hand."— Maya Ormazabal , Head of Environment and Climate
Q: Picking up that point with you, Hastings, just on the collection and take back. I put my hand up, I’m guilty for having a drawer full of phones at home. I'm sure perhaps I'm not the only one in the in this room. Is it difficult to get people to engage, taking those phones out of drawers? Perhaps they keep one for as a backup, perhaps they just think, oh, I've got to wipe my data off this, so it's kind of a bit of a hassle? What are you seeing as some of the barriers on the incentives to change that deadlock?
A: Hastings Singh - Kingfisher: Definitely, and I think everyone in this room probably has some phones in drawers. I would assume it's a pretty standard situation. And part of this is driven by customers having an inflexible process, one that's not transparent, easy and simple.
It possibly could be concerns about what happens to my data and personal information. If I hand that phone back or trade it in or obtain value. We've developed a solution that's live in a tier one market that tries to address all of those things and gives the customer the ability to actually understand real value via an app or via a portal that communicates it very effectively. Containing very clear statements about exactly what happens with the device and also the benefits from an environmental perspective as well. So we're trying to break down each of these challenges to actually accelerate the adoption of or at least the willingness for people to actually take these devices and return them so that they can be reused, and reused, not recycled.
This, I think is another important point. Recycling these devices does give benefit. It's better than nothing, but it's challenging to actually sort of disassemble these devices into raw components and there isn't a great secondary market for those either. So, if you can reuse the device, it's much better.
From an environmental perspective, the 80 kilo of CO2 equivalent impact of a new phone. I think it's about, it's 83% of that is actually in the manufacturer. So that's about 50 kilos or 55 kilos equivalent in order to reuse a device, even with grading and wiping and repackaging and logistics that adds up to about 10 kilos. So again, significant benefits of reuse if you can do that. And getting these devices out of drawers is a significant part of the supply opportunity that that we all have.
"We're trying to break down each of these challenges to actually accelerate the adoption of or at least the willingness for people to actually take these devices and return them so that they can be reused, and reused, not recycled."— Hastings Singh , CCO
A: And are you finding in terms of what you're offering that people are engaging with it, is it hitting the right buttons – referencing the points that you made around wiping and the environmental, etc?
A: Hastings Singh - Kingfisher: Devices in drawers are one source of supply. Another source of supply is if I'm actually buying a second life device, I'd like something that's sort of two to three years, maybe 18 months old, not four or five years old. From a battery performance perspective, how do you get a reliable supply of devices as a carrier that are 12, 18, 24 months old?
The OEMs don't sell them, obviously, that would be impactful to their core business model. So again, what we've tried to do is actually increase the ability and the simplicity of upgrading.
Some customers are tech savvy or early adopters, whatever you want to call them. They don't want a second life device, but they're willing to upgrade frequently.
We can take those upgraded devices and sell them as an 18 month or 24 month old device as a really viable option for people who might be looking for a 300 to 500 dollar device. So there's a huge opportunity in the existing base of a carrier. To enable tech savvy customers to get their phones back into the system for second and third lives, we think, in addition to the ones in drawers.
Q: Absolutely. Maya, thinking about that and the business model for Telefónica, presumably you make money by selling new phones is it a threat to your business model if you are focusing a little bit more on selling refurbished phones.
A: Maya Ormazabal – Telefónica: Yeah, we can make the same business. It's about margin. You can maintain the same business margin [whilst still selling] refurbished phones. You can sell second-hand; you can do listing. This is what we are doing actually. So, we have to increase that by having better marketing, better engagement with our clients, showing the environmental and social benefits of these different options.
Indeed, our clients are more prepared for making this transition. I mean, not all segments are the same, but I think the increase of the of population regarding the environmental impact of making better decisions when procuring everything?
Nothing it’s clear, there are some sectors that are very visible so far, but I think it's a starting note to make them aware of what is the impact behind a mobile device. We know that 11% of the mobiles that we sell are second-hand. So, there's a lot of room for improvement here. And, indeed it's not about losing margin, it's about doing business in a different way.
"It's not about losing margin, it's about doing business in a different way."— Maya Ormazabal , Head of Environment and Climate
Q: There’s one mobile phone manufacturer Nokia, who recently announced that they're going to make it easy to repair their phone and Hastings from your point of view, presumably that's a good thing. Because that's kind of aligned to some of these principles. Do you see that as being something that we'll perhaps all be doing in two- or three-year’s time? Do you think that's kind of a big part of the solution, a small part of it? How do you see what they're doing?
A: Hastings Singh - Kingfisher: I think it's great. Versus other OEMs, I won't name specifically, but the argument in the industry is that you need any form of modularity to perform. So people say that you need to have a tightly integrated design and manufacturing process in order to get the most performance possible.
Hopefully Nokia can show that doesn't necessarily have to be true in every situation. I think that modularity is great but how many people are going to repair their own phone? Probably a relatively small number. But in three years’ time or two years’ time, if that battery capacity gets to say 70% versus what it was at new, then somebody in that value chain can switch out that battery in a relatively simple way at lower cost.
So, I think that's awesome because Telefónica or the carriers that Kingfisher works with could have a low-cost way to improve the viability of that device two years down the track.
Another thing that they did announce as part of this this update was that they were guaranteeing that it would have two versions of Android software refresh. So at least for three years now, that's a wonderful step forward. Still not enough, you know, I think Apple's sort of supporting most of their devices up to five years with the latest software.
Obviously, Apple's is an integrated business model you know, the Android OEMs aren't so they have less control over Google. But it's a step in the right direction. So, you know, I think Nokia should be congratulated.
Q: And do you think it’s more of a hardware issue or more of a software issue in terms of keeping phones going for longer because we have been talking more about the refurbishment of the physical phone?
A: Maya Ormazabal – Telefónica: I guess the software also. Yeah. So indeed, you need the mobile to last longer in an effective way. It's not only about battery, which is components. We need those components to be modular like Lego. Why not? I mean, maybe this is innovation and probably the first company to do that. Fairfone has begun to do something like that, but we need the bigger ones to be brave and to do it.
It's not only about hardware but software this is the only way to really decrease the impact of the sector.
"It's not only about hardware but software this is the only way to really decrease the impact of the sector."— Maya Ormazabal , Head of Environment and Climate
Q: Thinking about the phone manufacturer and Telefónica, obviously you are a big operator. You're operating in a lot of countries, you have a lot of customers, but then the phone manufacturers are perhaps even larger businesses. So how do you find it is because you've been engaging with them through the eco rating initiative?
Are you starting to have some of these conversations with them about the circular economy, about eco rating? How receptive or not? Do you find they are to those discussions?
A: Maya Ormazabal – Telefónica: Actually, they are very, very receptive. Most of them. And we are already working with all of them, step one. And we are disclosing the operating in all our markets from Telefónica, but also from Orange, Telefónica, Dutch Telecom and Proximo, so many, many others that are joining the initiative.
And I think the conversation with vendors is fantastic. We are trying, this methodology is approach to our customers and also to increase awareness and also in incentivize this eco design in our suppliers. So, we think it's like not being in the middle of these two chains but the conversation with our supplies is good in terms of the methodology and to give them feedback. So how important this is and, and it's quite aligned with all things that is coming from the European Commission in terms of eco design. So with recyclability, reusability and this kind of things it's advancing what it's going to be there and it's putting the effort in what is more harmful in terms of the lifecycle of a mobile device, which is manufacturing. It's not the energy consumption that we do have in our clients' homes because it's not there. The impact of a mobile device is coming from the manufacturing side, and we know that.
And the Eco rating puts a lot of critical information to our clients. So it's working.
Q: Do you do you find you're looking to quantify this, the eco rating is about quantification, isn't it? So, you're looking at the mobile phone against a number of environmental criteria, and you're looking to kind of quantify exactly how those phones are doing against those.
I guess it's still relatively early because the eco rating hasn't been out there for that long. But are you starting to see any kind of quantification of the fact that your phones are getting better environmentally, is that, is that showing up at all in the ratings
A: Maya Ormazabal – Telefónica: So we are getting better in the, in the methodology.
We are seeing everyone getting closer. So we reviewing the methodology to spur the numbers. But yes, we are seeing a little bit of improvement and we want to give more information and advantage, so we are like evolving the methodology. Some of them they're taking this very seriously, the ones that are making it take them more seriously. They are advancing more, and I think we are very proud.
Q: Okay. Excellent. Hastings, I mean, do you have much engagement with the, the phone manufacturers? You've clearly got a bit of a view on. How much do you see that they're doing? Things that are circular are perhaps some of them doing things that don't help or perhaps going in the other direction? Would like to hear from your point of view?
A: Hastings Singh - Kingfisher: Yeah, I do have a bit of experience in with OEMs. I worked for a couple of them before Kingfisher, so I've sort of seen it from that side of the fence. This business model is incentivized by making things and selling them with margin. And ultimately anything that could constrain that is a challenge for that for that industry.
Hence you haven't seen necessarily as much focus on net environmental outcomes. Yet we know, possibly with the maturing of the category, improvements in devices are happening at a less frequent rate versus, say, five years ago. Possibly due to the delivery of ecosystem models.
Apple has just cracked 1 billion subscribers of various forms. They might start to look at the install base number as a driver of their business model with those subscription type of products rather than just depending on new hardware sales.
Because 1.5 billion new phones this year is too many phones. Ultimately, we should be moving towards that one-to-one future that you mentioned. The industry's not set up to fully support that yet, but it's hopefully going in that direction.
"Because 1.5 billion new phones this year is too many phones. Ultimately, we should be moving towards that one-to-one future. The industry's not set up to fully support that yet, but it's hopefully going in that direction."— Hastings Singh , CCO
Q: I wanted to touch on the kind of challenges you see at the moment, because we've talked about some of the opportunities and some of the positive things that are happening across the industry. But what do you see as being kind of the blockages or the challenges the hurdles that we need to overcome or we need to change to accelerate the transition where it looks things are heading in a positive direction, but perhaps things are still moving too slowly.
A: Maya Ormazabal – Telefónica: So first one is consumers: We need them to be more active to through procurement and better decision making. Second one is about the complexity of the value chain. It's very complex so we need to scale this up, it's difficult, if we want to include for instance, recycling materials. This is a global market, but we consume this locally and we have not got the local institutions collecting mobile phones or local companies like us.
You have no local markets. But then we have to give, so it's really complex and we need to solve this.
The other barrier is more on the incentives. We need to incentivise our suppliers to make this happen. And it will happen because of the market. But it can happen also because of us, as their clients, their B2B clients to ask them.
Q: How about you, Hastings?
A: Hastings Singh - Kingfisher: I think that carriers need to be supported by the industry to give devices a second and third life. There's a clear source of supply we mentioned in the carrier base right now.
Customers should be able to upgrade effectively and then the carrier should be able to use those devices as second life stock with OEM support. And right now, there isn't as much support in the industry necessarily for that because it's seen as a bit of a cannibalization risk of new sales.
So it might not have to be a second life brand from an OEM. It might just be support in terms of marketing and communication. Some kind of mark of certification. And also, just in terms of that supply chain of those devices, having readily available spare parts that are at reasonable costs so that these devices can be improved or refurbished and then resold again, generally through the carrier.
Q: Do you find that kind of supply chain of repairers refurbishers, there was discussion of this recently actually in the UK that there there's not an actual qualification you can get to repair a phone. It doesn't exist. So do we actually need to have something where we are training people? To be able to do this type of work or have access to sufficient spare parts? Do you see supply chain, refurbishment, skills as being important? Do you see that as being a blocker at the moment?
Maya, from the volumes that you are doing? Perhaps it isn't at the moment, but perhaps could be in the future.
A: Maya Ormazabal – Telefónica: Well, this kind of accreditation is already available in Spain but I think it's a good idea. But not assuming that a mobile device in the second-hand market has to be treated as a waste because otherwise it's very blocking.
It’s a difficult balance to really avoid moving devices that are not in use from Europe to Africa. We have to, so it's good to have some kind of regulation, but it's good that the second-hand markets are more liquid and are more open.
Q: Steven Moore - GSMA: Fantastic. I wanted to give the audience actually an opportunity to ask any questions that they had.
Q: Audience member: Great, conversation. We talked a lot about the repercussions or the impact of reusing phones from a revenue perspective for the carriers, but I also think you will lose leverage with the OEMs, so it's also from a procurement perspective, so it's like getting squeezed from both sides, revenue as well. Are there any strategies you've tried, or you want to share as you've been increasing the refurb market, any strategies that have worked for you with the OEMs to not lose leverage?
A: Maya Ormazabal – Telefónica: Yeah, I think engaging with them because we want them to be part of the change. So, it's not only about us selling second hand, but we want them to be part of the change. So they have to be part of this somehow. It's not that they will be in the linear way and we will be in the circular side, they have to be part of the circularity. So for leasing, not selling products, but selling services. Why not? Why do we need to change? Why buying a mobile device? This is, working high level. But maybe it can work with other kinds of mobile devices.
They will be part of the market from the beginning. It’s like with the cars and that's working. Why not with the mobile device, which indeed is very expensive. So, these kinds of strategies are already working and probably we have to be more imaginative and think with the marketing guys to increase this kind of strategies.
Q: Audience member: Does it work in some markets and maybe not others?
A: Maya Ormazabal – Telefónica: Maybe not in others, but maybe the ones that are not working, they will work in the future.
Q: Audience member: As a consumer with the smartphone let's say I have a smartphone for a year and I don't want it anymore, I want to upgrade. What, right now is the most environmentally conscious thing to do with that smartphone? Should I try to repair it, should I sell it on the third-party market? Should I bring it to my carrier? What would you tell me as a consumer right now is the best thing to do? I am one of the tech savvy people that Hastings mentioned I want to upgrade my phone. What should I do with it What's the best environmental thing?
A: Maya Ormazabal – Telefónica: Okay, the best way to perform here is to give a second life to a mobile phone. Either give it to anyone else close to you or give it back to a company like Telefónica or any other carrier and to give it a second life.
So recycling is the option if there's nothing else you can do. But not to keep it in the cupboard. Not keep it without any use. That would be the worst option of all.
We have hundreds of thousands of customers exactly like you in our programs. What happens with those devices, you come in, if you still have financing on that device, you can upgrade it to any brand-new device you like. If the device is working, we take that, we do a wipe. We grade it we put it in a sustainable package and then we resell it through the carrier's second brand that we work with and through an e-store. And it's working very well. So again, that device would have a second life.
A: Hastings Singh - Kingfisher: And again, it's got to be good value. It's got to be trusted; it's got to be secure from a data perspective. It's got a warranty on it. All of these basic things that customers expect from devices and get with brand new ones. We've sort of replicated that into this second life. So, you'd be also doing your bit for environmental positive outcomes.
Q: Audience Member: I saw your eco rating system mechanism years ago and I told my colleague, yes, they're doing great, and this time I come here and I go to the mobile shops and I see in the window the echo reading label is not there. How to evaluate in detail that the consumer has an awareness of the eco rating mechanism?
A: Maya Ormazabal – Telefónica: So, disclosing operating is part of what the operators are doing. We have made some surveys, not only Telefónica, but Telia has done some of them and also Dutch Telecom. Really depending on the market, this is starting to be part of the decision making.
We know that it's not the most critical part, but it's it is starting to be part of the decision making. So, I think it's critical we are putting this information in the online side and also in the shops.
And we are training our personal shoppers socially to make them aware if any client asks about the eco rating. So, we evaluate different environmental impacts, but a barrier is also the awareness of our clients.
We are very much used to buying a refrigerator, taking consideration of the energy label. But it's not very much in our mindset, the environmental impact behind a mobile device. But this is going to come, so we as a sector, have voluntarily developed this label and I think it's a very good idea. It's already working, but it will work probably more in the future.
Q: Steven Moore – GSMA: And Maya, are they actually in the shops, in Telefónica shops, the eco rating?
A: Maya Ormazabal – Telefónica: They are. We are now transferring from one version to the other. So maybe in these weeks we can find some. We have changed from version two to version three, they are in the shops and in the online market also.
Q: Audience Member: Do you see the business model having to change? If you compare the auto industry, you have the car manufacturers, that make the cars, they often lease the cars, they have their own finance division. They actually own companies like Avis and Hertz. They actually have pre-approved second-hand, and they're not taking a bite out of the cherry.
If you look at the mobile market at the moment, you are off balance sheet financing for the phone. You have separate companies who are collecting it, separate companies who are refurbishing it, separate companies who are selling it.
It's horribly complicated. Everyone's taking margin and that just makes it unattractive, I think, to go forward. So personally, I would see quite a restructuring to really drive this forward, but be interested in both views from the operator and the provider. Well, John, thank you for the question.
A: Maya Ormazabal – Telefónica: I wish I could tell you that I'm, I am optimistic because I am optimistic indeed. But I think things are not, so this is why said from the beginning to Steven that this was very brave because I think what we need is to have this conversation in a really huge room. And to have the market here and have the sector talking about it.
To have Samsung, to have Apple and to have a poll or whatever. So I think this is critical for the sector. I think when our customers start to think seriously and make decisions we’ll see the change, but the change has already started.
The regulator is already there. We know that. So, we think we know things will change. They will change in six months. They will change in two years, but they will not change in 10 years. This is the thing, the change is now. I agree with you, I mentioned that the supply chain is really complex for the sector and that is not easy. It is not making our lives easy, but but we will manage.
A: Hastings Singh - Kingfisher: Totally agree about the, the state of the industry. It is fragmented, as we mentioned earlier. You know, it's a cottage industry in a sense. There are a lot of players trying to involve themselves in the space. I guess the thing that we tried to do, and we have done so far is to offer a simple solution for carriers where we manage that, and that's sort of part of our core business model on a transparent basis.
So, carriers can understand exactly the sort of cost of the processes. And ultimately, as you mentioned, come out with something that is cost effective, creating real value for customer. Again, in the second and third life. You know, the, the example that I mentioned previously these capabilities that we provide.
So, carriers just have to deal with, one partner, one supplier they don't have to manage it themselves. And it's hopefully simpler. The simpler we can make it for carriers, and we can drive carrier profitability, alongside the customer. That will dictate the speed at which these second and third life devices will be taken up.
Not sure I agree about your point about the auto industry. I think they do clip the ticket on a lot of things as well. But that's a mature industry with a well-known value chain. The mobile side is less clear, less transparent. So far we're trying to work to change that.
Q: Audience Member: Hello, I'm working for a licensed repurposing company. We have regulations, we can refurbish a smartphone under a license that’s given from the ministry. So, what I'm going to ask is in Samsung or Apple in Tokyo, they also, give subsidy for the buyback campaign or they really incentivize the buyback programs. But the main issue is providing an original care for the cost. You give warranty for that price, but you don't have the chance to provide the original spare parts, so the quality is always going to be a problem for us, and we are having some issues. But how do you solve it?
A: Maya Ormazabal – Telefónica: Well, those specific conversation with our vendors we are selling no second-hand devices from iPhone but they have to be part of the business as you mentioned. But you can't provide it and you have to use an equivalent parts, then you can't always guarantee the quality. So it's a really big issue.
A: Hastings Singh – Kingfisher: Yeah, definitely. I mean, the industry needs to support the greater availability of authorized approved parts. But you know, with appropriate markup and profitability for the OEMs, not actually support the economics of that device being resold once it's repaired.
One of the ways that we've tried to do it is that is our products try and drive some upgrades of devices that are relatively young. Between say six months or a 12 month or 18 months. Just because of that fact they're in better condition. They generally don't need refurb.
So, you don't have to open them up and perform those repairs. And they can be resold on, on that basis in a good condition. I agree the economics of refurbishment are challenging if you are always using OEM approved parts. Yet if you don't do that, obviously, then sometimes the challenge can be the quality and the consistency of that.
The other way that we have tried to do it is we offer a warranty. So, a 12 month warranty no questions asked for these second life devices that we are helping the carrier retail. And that does build trust and we stand by those products on that basis.
Circulation isn't a compromise
At Kingfisher, it’s our mission to help carriers deliver sustainable, world-class device experiences to their customers. Together we can make your transition to a circular business model seamless.