Prepaid cellphones: terrorist weapon or hot gray market item?

["Richard M. Smith" <rms () bsf-llc com>]

Here's an article I found that talks about the gray market for TracFone
phones that are purchased at Walmart and resold at a profit.
 
Richard

Posted by: Jaime R  <http://profile.typekey.com/Jaime%20R>  at August 10,
2006 02:55 PM

I tend to agree with Lawmans points. Plenty of people engage in buying bulk
cellphones -- especially tracfones. just look on ebay. Most are sold in the
US by the thousands per month. this is legal.

What is going on is tracfones are sold in the US at a substantial subsidy
and low minute intial purchase phones are way cheaper than buying phones
outright.

Tracfone works on GSM and it is easy to remove the chips, unlock the phones
subisidy lock (not in itself illegal) and ship the phones for a good profit.
Indeed a HUGE number of new unlocked tracphones are sold in the US on EBAY
everyday for about $20 over retail. bulk buying in lots of 10 to 20k is at
$25 a unit.
<http://www.alibaba.com/manufacturer/13876937/Buy_Nokia_Tracfone_1100.html>
http://www.alibaba.com/manufacturer/13876937/Buy_Nokia_Tracfone_1100.html

Looking at walmart this week they had a tracfone on sale for an unusually
low $15wiht calling credits -- and this phone is currently on sale on ebay
for $60 new unlocked.

The chips are removed becasue they typcially have a $20 residual value IN
THE US. Just look on ebay.

So yes they are used by drug dealers, terrorists etc but but 99.99% of the
time this exact same scheme on a much larger order of magnitude is used in
the US, stays in the US, and has nothign to do with anything criminal and is
just taking advantage of a price differential caused by the phone subisisdy.
In markets this is called -- arbitrage. 

Indeed on slickdeals and fatwallet such deals on tracfones are noted
regularly some people do it with one or two phones or any othe product, but
ebayers do it by the hundreds and thousands.

A $30 differential on the phone, plus $20 calling credit value on the chips
(for perfecly legal uses in the US) is $50 per phone. fro the scheme it
looks like the kids were getting $5 plus the cards or $25x600 units which
would be $15,000 gross minus gas, minus labor and ebay fees or amaybe $3000
a piece for spending a week driving to different walmarts. this is good
money but not stunning.

The cash is used to make the puchases because walmart, best buy, circuit
city maintain "devil customer" lists and ebayers prefer cash so they don't
get placed on such a list and have their puchases blocked as obvious
ebayers.

Just ask anyone in electronics retail. often chains will put a item on sale
and the first couple of guys in in the morning might buy 100 units at a clip
and drive to the next store in the chain and empty out their stock as well
and so on. they then go up on ebay.

I had to laugh at the sttement by the sheriff on thephones: "They are
digital and can be used to detonate car bombs." Allphones are now digital
and phones pass though amatuer buying groups by the hundreds of thousands
per year.

As far as the airline information the two suspects have said the papers are
old and the vehicle belonged to a relative who works for the airlines. If
that is false then it is suspect. If it is true this is just a bunch of guys
going after a gray market like tens of thousands of ebayers and small
exporters.

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