Old friends re-emerge

In 1984, when mobile networks had yet to hit the ground, and phones themselves were hardly mobile, this pair were embarking on their first jobs in an industry that was yet to realise its future impact on the world.

Since then, 22 years, numerous ranks, and millions of ever-shrinking handsets have passed. Ex-Vodafone director Ken McGeorge and former Complete Mobile Communications (CMC) boss Geoff Walters have, as in their family roles as parents, seen the industry grow from inception to mass market saturation. Now, they find themselves taking on one of its new, but burgeoning, tangent markets.

Its those millions of handsets that have brought the two together, from indirect business colleagues to bona fide partners, in a venture that is set to cash-in from a product source that has, until recently, been largely overlooked.

Mobile Phone Exchange (MPX), one of the newest handset buy-back schemes, has its roots in two questions: what do people do with their old, still working phones once theyve had an upgrade; and what about people on the other side of the world who cant afford the latest technology?

The answers are revealed in the upstairs lounge of the Royal Lancaster Hotel, in surroundings as stately as the mobile stalwarts themselves.

Devalued handsets

There are around 90 million old mobile phones sitting in peoples drawers. Five years ago they were just thrown in bins or given to charity and they were not being used at all, Walters explains.

After we sold CMC to Avenir Telecom, my two sons, Mark and Paul, and I came up with the idea of a mobile phone exchange. We realised those old phones had a value and we thought this value could be utilised.

And utilised they will be. In emerging markets like Eastern Europe, India, Africa and parts of Asia, year-old handsets casually discarded by high-rolling UK businessmen for the next feature-rich model are likely to be hot property.

Walters idea was so impressive it pulled McGeorge out of retirement on his 100-acre horse haven in Devon to his new role as MPXs non-executive director.

I was immediately impressed because I recognised that old handsets in the marketplace were commonplace, as Geoff said. They were being serviced in a minor way, through recycling operations, but as a whole there was a huge waste of value going on, McGeorge says.

People were being given a mobile phone for free. Theyd have it for a year, and in a years time, they were being given another one. So a handset that was literally only 12 months old was being stuck in a drawer and forgotten, in which case its real value was deteriorating or it was being recycled.

Finding the right market

McGeorge continues: If it was being recycled, the end user, in effect, thought it was worthless  he was literally throwing it in the bin and a small donation was being given to charity. And really that was probably wasting on average of something like £20 per handset.

So the plan Geoff and the guys came up with was along the lines of MPX buying back those handsets for a real value, refurbishing them and reselling them. There are huge parts of the world where there is not the wealth we have in the UK, where there is not the structure we have, where handsets are subsidised to zero.

Walters adds: With these emerging markets they are basically in the first and second generation, whereas were on the third generation. So obviously the phones we are taking back are perfect for them.

The phones that come back are across a whole range, from really advanced and quite recent, right down to pretty ordinary phones of a couple of years ago, says McGeorge. And they appeal to a whole range of potential users, from business people right down to someone who, unless they buy a three-year-old Nokia 3310, are never going to be able to afford a phone.

Involving the networks

There is something in it for the networks as well, with MPX targeting them to offer customer incentives like in-store vouchers valued at the phones true market price. This could range from £10 to £70, depending on make, model, supply and demand.

The aim of the game for networks today is retention, says Walters. This is one of the ways  in offering to buy back the phone, they can give a customer credit on their bill, or a more expensive phone. And by taking the old phone back, theyre reducing the cost of that phone.

Its funny, because weve changed things around  at one time all we wanted to do was go to the networks and try to get as much money as we could off them in commissions and now we want to see if we can help them save money.

Collect and refurbish

Logistics giant Kuehne and Nagel, which McGeorge describes as a high class operation, will then handle the collection and refurbishment of the old phones for reselling to agents overseas.

In these situations, where you have emerging businesses and you have to rely on working with partners, you have to choose the right partners. I think weve done quite well in that wed chosen Kuehne and Nagel from the very beginning, he adds.

Although Walters and McGeorge recognise the majority of customers in emerging markets would opt for pre-paid phones, they are pretty clear in emphasising the quality requirements of the handsets they are both receiving and reselling.

The phone has to be a live, working phone, Walters says.

Were not going to say, theres one for a lower price, where you can talk but you cant text, McGeorge adds. Fortunately, the underdeveloped markets tend to be huge markets, so the demand will be higher than the supply at this point in time.

In light of headaches caused by ongoing VAT fraud issues, McGeorge and Walters say they are on top of it, and have anticipated that, as a secondhand market, there would be less problems than in the retail and wholesale markets.

Friends and family

McGeorge and the Walters family are no strangers to how the other one likes to run their business, after a close connection was forged during the years CMC worked as a distributor of Vodafone, of which McGeorge was head.

My sons and I have been doing it as a family and as a team since day one, so we work together on this, says Walters.

One of my sons is an expert on computers and my other son is an excellent sales person and at organising and putting things together. Both my sons work differently  theyre not competing with one another.

Im very lucky  not everyone can work with their kids. We get on very well together  they tell me what to do and I do it.

McGeorges impression on the Walters family grew over time, with CMC occasionally consulting him with marketing and business ideas.

Sometimes it would be, yeah great idea, other times it would be, dont even think about it, McGeorge recalls.

Perhaps it was this honesty and practicality that brought the retired Vodafone heavyweight straight to Walters mind when searching for a non-executive director for his new venture.

We wanted someone in the industry who had the charisma and the knowledge  and in my mind Ken was the perfect fit, he says.

Ken is very highly respected in the industry, even though he might not say that.

Leaving the golf course behind

As for McGeorge, who retired more than two years ago to the world of salmon fishing, golf and watching his 11-year-old son play football, it seems the door to the mobile world has never really closed.

From the moment I left, I became non-executive chairman of one of the top business-to-business providers, Alternative Networks, so I kind of kept one foot in the marketplace, he says.

So although for the last two years I havent had the everyday high profile, high pressure position in Vodafone, Ive still stayed connected with the industry.

Ive been quite lucky in having been in the mobile phone industry in the UK from the very beginning, so Ive been really involved in what I think has been the most exciting new industry in this country for generations.

I will stay involved and aware in some way or another until I cant do it anymore. But hopefully thats a long way away.

The only way is up

With trials well and truly over, full-

volume production breaking out, and three quarters of the UKs mobile customers

upgrading their handsets each month, the

only place left for MPX to go is up and over its competitors  just a handful in what is still a growing market.

I think theres a number of people operating in the recycling market place, but I would say that its not major volume in terms of, by comparison, how many handsets are sitting out there, McGeorge says.

Until people really do get their heads around the fact its worth something, and until that is spread more widely across the market place, its not going to change a lot.

McGeorge, for his part, regards recycling as an inappropriate description of MPXs operating interests.

He says: I really dont like the word recycling used in the context of our business. For me, recycling is something I do at home  every Tuesday, the recycling man turns up and I throw out all my empty milk containers and tins and things like that because theyre worthless.

Theres an element of the recycling term that is saying to people, your handset is worthless.

Thats very misleading for the end user. I prefer to think of it more as real value buy-back of mobile handsets.

The real value element is what MPXs chiefs tip will make it stand out from the rest  as if what theyve gained from playing the mobile game so well for so long hasnt already put them on the money. n