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Wireless providers launch smartphone upgrade programs

Telus says trade-in programs are poised to become more popular in Canada, especially since the life cycles of devices are shrinking amid surging handset innovation.

Fred Lum/The Globe and Mail/Fred Lum/The Globe and Mail

Some of Canada's largest wireless providers are introducing new programs to entice consumers to upgrade their smartphones more frequently during an era of heightened industry competition for those high-end users.

Telus Corp., Canada's third-largest cellular company, introduced a new trade-in program on Wednesday that offers customers a credit toward a new wireless device in exchange for their old handset.

Brent Johnston, vice-president of mobility solutions, says the program will enable gadget-addicted consumers to upgrade their handsets more often – even if they are only part way through a three-year contract.

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"We are allowing Canadians to upgrade faster to the devices that they want at any time," Mr. Johnston said. "And the trade-in program is an essential element to allowing Canadians to do that because it allows them to quickly and conveniently and effortlessly monetize the value that is in their pocket towards getting that new device."

The Vancouver-based company's quest to shore up its customer loyalty comes at a time when Canadians rank among the world's top smartphone users, with many consumers seeking to upgrade their handsets every 18 months.

Smartphones represent 45 per cent of the Canadian mobile market, according to comScore Inc., and carriers of all sizes are vying for the biggest share of those lucrative customers.

Nonetheless, handset upgrades are often a source of frustration for consumers given the onerous costs associated with obtaining a new device prior to the expiration of an existing contract. That's prompted carriers like Telus and larger rival Rogers Communications Inc. to introduce new programs to keep consumers hooked on the latest data-hungry gadgets, while keeping their own costs in check.

Under Telus's program, an older version of the iPhone can fetch up to $200 that could be used to offset a customer's remaining device balance under an existing three-year contract.

The customer, though, bears the responsibility of paying off any remaining device balance once the trade-in credit is applied. Once that occurs, he or she enters a new three-year contract with Telus in order to obtain a new device – a strategy designed to bolster customer retention.

Other trade-in programs exist in Canada, but are generally more popular in the United States and in some European markets. Telus estimates that more than 60 per cent of Canadians have one to five old cellphones collecting dust at home. As a result, Mr. Johnston says trade-in programs are poised to become more popular in Canada, especially since the life cycles of devices are shrinking amid surging handset innovation.

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During the fourth-quarter of 2011, Telus had the lowest churn rate, which reflects the number of customers that leave a company, of the big three incumbents at 1.67 per cent.

Mr. Johnston predicted the new handset trade-in program would fuel a further decline in the company's churn rate, although he could not provide specifics. "It's going to go down," he said.

Other big incumbents, meanwhile, are also focused on reducing their churn rates for lucrative post-paid customers. Rogers, which is Canada's biggest mobile carrier with more than 9.3 million subscribers, has also introduced a new program to encourage consumers to upgrade their handsets more frequently – also with an eye to bolstering client retention.

Its new handset upgrade program allows a customer with only six-months tenure to upgrade their handset to the latest iPhone, for example, as long as that person absorbs the remaining subsidy costs and signs a new contract.

"This will become more and more relevant going forward to ensure that customers have the capability of being on the device when they want to be," said Rob Bruce, president of communications, during a recent conference call with journalists.

About 56 per cent of Rogers' subscriber base was on smartphones as of the fourth quarter of 2011, executives said, noting that number will continue to grow since the company is experiencing ongoing demand for the latest iPhone.

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