Recycled cell phones help drive Third World boom in wireless

Monday, October 30, 2006

By DAVID N. GOODMAN

The Associated Press

DEXTER, Mich. -- With the number of cell phones in use worldwide hitting 2.5 billion and rising, recycled phones are playing a growing role in the spread of wireless communications across the developing world, where land lines can be costly or unavailable.

While most used phones in this country still land in a drawer or the trash, a rising number are finding their way to places like Bolivia, Jamaica, Kenya, Ukraine or Yemen, with more than half of them coming from a company named ReCellular Inc.

Based in small-town Michigan, ReCellular gets 75,000 used phones a week -- most collected in charity fund-raisers -- and refurbishes more than half of them for sale around the world. The remainder are salvaged for parts and reusable raw materials.

ReCellular executives say they are doing well for themselves as well as for the March of Dimes and other national charities, which collect used phones to raise money by selling them to ReCellular.

"The fact that you can combine a business -- a profitable business -- with a useful service and a charitable good is a win, win, win," said ReCellular vice president Mike Newman, 32.

Charles Newman, Mike's father, founded the company in 1991 after decades as an entrepreneur in the retail computer business.

That year, there were about 16 million cellular subscribers worldwide, according to the International Telecommunication Union. By 2005, that number had grown to 2.14 billion, outstripping the world's 1.26 billion land lines, the group said.

20-fold growth

Wireless use is nearing ubiquity in the United States, Europe and several Asian nations, so the next phase of rapid growth is expected from emerging markets. In Africa, the number of cell phone subscribers rose 20-fold over five years, from 3.58 million in 2000 to 76 million in 2005, the ITU says.

When ReCellular opened for business 15 years ago, it handled 300 to 400 cell phones a month.

Now, "if we're not doing that many in a few minutes, we're having a bad day," Mike Newman said.

With Americans trading in their phones for fancier models every 18 months on average, the supply of used but perfectly functional phones is enormous, Newman said. Millions, however, end up sitting in drawers or closets because people don't know what to do with them, he said.

"Most people would be glad to donate them if they knew they could," he said.

Manufacturers are increasingly aware of the need to take responsibility for the growing mass of old electronic items, said Peter R. Muscanelli, president of the International Association of Electronics Recyclers. Mandatory electronics recycling laws in California and elsewhere also drive the business.

"It's a little bit of both," said Muscanelli.

ReCellular processes about 53 percent of the used cell phones resold in the U.S., said Michael Blumberg, president of D.F. Blumberg Associates Inc., a consulting firm in Willow Grove, Pa.

Other major players include RMS Communications Inc. in Ocala, Fla., and PaceButler Corp. in Edmond, Okla.

ReCellular outgrew its home in Ann Arbor in 2003 and moved to an industrial park in nearby Dexter. The village of 1,700 is 40 miles west of Detroit.

The company has a work force of 250, about 200 of them local, and again finds itself bursting at the seams. Revenues of the privately held company, about $40 million last year, are shooting higher as well, Newman said.

"We're on track to jump 67 percent this year," said Newman, who found himself drawn to the family business after working as a Washington lobbyist for the Sierra Club and then for Al Gore's 2000 presidential campaign.

ReCellular's loading dock gets a flood of phones in packages large and small. Some come in individual mailers that charities give out to their supporters. Others come in large shipments from collection bins at electronics chains and wireless stores, including Sprint, Verizon Wireless and T-Mobile locations.

The charities generally get $2 to $10 per donated phone, depending on its value, Newman said.

Work crews separate the phones from the "spaghetti" of nonreusable wires and cords that are set aside for recycling. The phones are sorted, tested, fixed and packaged by model for resale.

ReCellular handles about 500 phone models. About 60 percent of the phones that come in are reusable. The rest are used for parts or sold as scrap.

"We squeeze out as much value as possible," Newman said.

The refurbished phones sell wholesale for about $17 to $18. Retailers sell them for $40 or less, he said.

Newman said 55 percent to 60 percent of the refurbished phones it sells to wholesalers end up in the hands of consumers outside the U.S. He said about a quarter of the refurbished phones sold worldwide come from ReCellular.

Refurbished cell phones are opening doors to wireless communication in much of the developing world, where a new cell phone might otherwise be prohibitively expensive, Blumberg said.

"Sometimes, you have someone in a village who has a cell phone and rents out time," he said.

In the U.S., service providers offer cell phones at big discounts and make their money off service contracts or sale of minutes. In the rest of the world, customers generally pay the full retail price, then separately sign up for service.

Despite the focus on flashy, high-priced devices, the world's big cell phone manufacturers also compete fiercely at the low end of the market with entry-level handsets that sell for $40 to $60. By contrast, a refurbished phone might retail for about $30, Newman said.

Refurbished phones may account for just 3 percent or 4 percent of the overall market, Blumberg said. Even so, they help keep prices down and spur the spread of wireless access, Newman and others said.

"The affordability of a new product has increased a lot," said Nokia spokesman Keith Nowak. At the same time, those for whom $50 is a lot of money may want the security of knowing they're getting a freshly made phone.

Today, about 80 percent of the globe's 6.5 billion people live in an area with cell phone reception, according to Newman and Blumberg. And along with education and health care, the spread of cell phones is a leading spur to economic growth, Newman said.

The March of Dimes, which does research and education on birth defect prevention, turned to ReCellular when it decided to launch a cell phone donation program several years ago. The drive brings in about $160,000 a year.

ReCellular tracks incoming phones by donor and generally pays charities a share of the resale price they bring.

"They are an excellent company to deal with," said March of Dimes fundraising executive Bob Perry.

When the Canadian Association of Food Banks decided to set up a cell phone collection program, it shopped around for a company to handle the phones, said spokeswoman Tamara Eberle in Toronto. The umbrella group for 2,000 food banks and other agencies across Canada has collected about 100,000 phones through its Phones for Food program that began in 2003, raising about $140,000.

ReCellular executives made a strong impression in many ways, from their willingness to work closely with a relatively small phone collection program to their commitment to recycling all possible materials that they handle -- from wires to scrap paper and cardboard.

"This is a company that has a lot of integrity," Eberle said.


On the Net:

ReCellular Inc.: http://www.recellular.net

International Telecommunication Union: http://www.itu.int

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