Vodafone makes play for UK pre-pay market with Nearly New scheme

The UK has one of the highest levels of smartphone ownership in the world – 58 percent, according to a recent update from telecoms regulator Ofcom – but Vodafone clearly doesn’t think that’s enough. The operator has just launched a ‘Nearly New’ program, employing discounts on barely-used handsets as a way to pull in more first-time smartphone users.

It’s hardly unheard-of for a carrier to offer refurbished devices, but this seems to be quite an extensive scheme. Announced on Wednesday, Nearly New is particularly aimed at pay-as-you-go (PAYG) customers, allowing them to pick up a refurbished, securely wiped handset at any Vodafone store. Those on contract will also be able to sign up in selected Vodafone stores, though.

The savings are pretty good on the PAYG deals, with a slightly used 8GB iPhone 4 coming in at £250 ($407) rather than the £319 you’d pay for a new version of the same device. However, contract customers (who get cheaper monthly plans rather than a lower up-front outlay) get to pick from more recent handsets such as the Samsung Galaxy S III and HTC One X.

“Nearly New is designed to make it even more affordable for people, especially those who prefer pay-as-you-go services, to get their hands on a smartphone and start using the mobile internet,” a Vodafone spokesperson said in a canned statement. “It is part of our ambition to get the internet into the hands of our customers.”

That much is clear. Across the mobile industry, voice and SMS revenues are on the way down, while mobile data is still in its growth phase. Vodafone is playing along with the industry trend here, although it’s not clear how it will benefit in the long term when mobile data revenues also flatline and start to decline – after its failed 360 cloud play, Voda has been relatively quiet on the over-the-top services front, certainly when compared to other major European operators.

But there’s likely more to this than just getting more people to use smartphones. Fact is, the dynamics of smartphone pricing have changed recently, mostly thanks to Google and LG’s Nexus 4. The 8GB Nexus 4 is available directly from Google for just £239 with no contract attached, so it’s hardly a surprise that Voda feels the need to make rival devices look less outrageously pricey.

What’s particularly telling here is the Nearly New scheme’s focus on PAYG – after years of taking up contracts so as to enjoy operator subsidy, perhaps consumers are taking the Nexus 4’s low pricing as a hint that pre-pay can be viable for serious phones too.

It’s hard to overstate how pivotal the current time is for the mobile industry. If we really are going to see smartphone pricing go the way of tablet pricing, then contracts make less and less sense. And with less lock-in, operators will need to make their services more competitive. Nearly New may represent Vodafone trying to both seize the PAYG market in the UK and lay the foundations for its super-value-added, data-driven future – whatever that may be.