The government is launching a £1.9bn buyback scheme in England and Wales, after the Conservatives failed to secure the support of the opposition in the autumn.
The scheme aims to buy back unused phones with a maximum value of £2,000.
In 2017, there were a record 1.1m phones on the market, according to the latest data from the Office for National Statistics.
The government said it was investing £1bn to buy phones for its National Household Survey.
The National Household Surveys is the first in the country to take the survey every five years.
The data, released this week, showed a drop in phone purchases in the last year.
There were 3,828,000 phones on sale in the year ending March 2018, down from 3,912,000 the year before.
But the government said that in contrast to previous years, people were buying phones with more than 30 days remaining on the contract, rather than those with one year left.
The new scheme will cover smartphones with a market value of more than £1,000, with a buyback cap of £500.
The programme will also cover phones with prices above that.
The UK’s largest telecoms provider BT, which has more than half a million subscribers in the market for phones, said it had been hit hard by the phones price drop, as a result of the government’s scheme.
It said it planned to sell up to 30,000 of its own phones and that it was considering whether to sell other services as well.
BT said it would also make a commitment to spend up to £500m on technology and services.
The telecoms industry has also been hit by the government policy.
One major provider of wireless services said it expected to see phone sales fall by 15 per cent next year, as the government plans to roll out its own buyback plans.
A spokesperson said the company expected to have to spend “at least as much as the next three years to recover the costs of the scheme”.
Another major provider, Telefonica, said that it would “probably” need to reduce its phone and internet customers in England.
The telcos said they were working to “reinvent” their existing buyback programs.
In a statement, the company said that although it had lost some customers, it had not lost much value.
“This means that we have retained more than 2,000 people over the last five years and our customer retention rate remains extremely high,” it said.