If an iPhone has a bad electronic serial number, the phone cannot be activated through the original carrier. If an AT&T iPhone with bad ESN is purchased, the phone cannot be re-verified using AT&T.
A bad ESN can occur on an iPhone if it had been reported stolen or lost. A delinquent payment can also lead to a bad ESN setting on an iPhone. An iPhone with an ESN problem can only be cleared through the original owner of the phone and the phone's carrier. IPhones with bad ESNs are often second-hand phones sold through auction sites, such as eBay.