One in every five phones sold in Kenya this year will be a used phone from the $17 billion "black market", thus undermining legitimate phone vendors, says a new report.

Deloitte Kenya, in its 2016 Technology Media and Telecommunication (TMT) predictions report launched Tuesday, says Kenya still lacks a well-established used-phone market. However, it will be among the beneficiaries of the 120 million used smartphones sold globally this year.

“The value of sold or traded-in smartphones will likely be about twice that of wearables and 25 times the value of the virtual reality (VR) hardware market,” said East Africa TMT Leader, Erik van der Dussen.

“And the growth rate of the used smartphone market is forecast to be 4-5 times higher than the overall smartphone market.”

Consumers could in the long run prefer used phones over new ones hitting the local market. This will pose stiff competition to vendors like Samsung, Huawei, Techno and Wiko, among others, who thrive on emerging market sales.

Deloitte predicts that the average value of a used smartphone could be Sh14,000. The low pricing would help increase sales by 50 per cent. The report states that rebranding the new phones would make them more appealing than the new devices.

The trend is seen as encouraging smartphone vendors to conduct annual replacements, giving phones a new lease of life.

“The availability of a formal second-hand market could make their (vendors) devices more affordable to customers with smaller budgets, without having to create less profitable, budget variants of their devices,” says the report.

Deloitte expects the practice to surge in 2020, with both consumers and suppliers increasingly embracing it, just like in the used-car market.

Further, Deloitte urges markets like Kenya to explore the advantages of offering used and re-branded phones. Insurers are urged to look at cushioning consumers of the risks of losing the devices.

“One of the risks of leasing devices is uncertainty over the condition of the handsets when returned,” says the report, “Vendors or carriers offering leased devices may oblige consumers to take out insurance so as to mitigate risk.”

As the used smartphone market grows, consumers may end up being confused, because some smartphones are locked to specific networks.

“Customers unaware of this may end up purchasing a device that they cannot use on their current network. Furthermore, there are multiple variants of each device, which may not be obvious to consumers,” says the report.