When a Dapper wallet is created, we cover the gas cost (ie. transaction fees) associated with deploying your wallet's smart contract to the network. To ensure we aren't needlessly paying for illegitimate wallets, we use SMS verification to ensure each wallet is being created by someone unique and not a bot.
We don't do anything further with phone numbers nor do we even store the original number "as is". Instead, we encrypt it into a larger hash of random letters and numbers. We then use this larger hash to check if a number has already been used or not. This allows us to verify if someone is trying to create an account with an existing number.