It's "collateral" for the contract. Locking the phone is their way of putting a "lien" on it. Taking people to court over relatively small unsecured debts will

It's "collateral" for the contract. Locking the phone is their way of putting a "lien" on it. Taking people to court over relatively small unsecured debts will eat through a good chunk of the margin that telecom companies are making off of those contracts in the first place. A locked phone is a couple hundred dollars worth of extra leverage to get a debtor to not default on the contract.