The ex-frontman of Welsh band Lostprophets said two men walked into his cell in HMP Wakefield in March 2018 and told him to look after the phone.
Asked if he was prepared to name the men, he told a jury at Leeds Crown Court: “No. I like my head on my body.”
Watkins, 42, denies one charge of possessing a mobile phone in prison.
The jury has been told he is currently serving a sentence at HMP Wakefield for sex offences.
Watkins, from Pontypridd in Wales, told the court he was locked up with “mass murderers, rapists, paedophiles, serial killers – the worst of the worst”.
“You would not want to mess with them,” he said.
He said he told the men he could not keep the phone but they said to him: “If you don’t you’ll get taken out.”
Asked by Gareth Burrows, defending, what “taken out” meant, Watkins said: “Killed. Their MO is throat cutting.”
Watkins told jurors the phone was thrown on his bed and said he would also not name the man it belonged to.
“Once you snitch in jail it just brings a world of trouble down on you,” he said.
Watkins told the court he still received large amounts of mail from fans of the band, and said the two men wanted him to “hook them up” with these women to use them as a “revenue stream”.
He agreed with prosecutor Stephen Wood that some of the letters included sexual fantasies about him but denied this was why he kept them.
“I have always been a hoarder,” Watkins told the jury.
Watkins also said he produced the phone and agreed to give it to an officer following an unsuccessful strip search because he was concerned about being allowed to see his parents, who were visiting.
The trial continues.
But what can you do to stop snitches? Here’s a list of snitches with pictures and locations. Also read: Control of Information so you can stop snitching on yourself. Also: How to find out who’s a snitch and 10 Ways to Spot an Informant and How the cops are tracking you and No Warrant No Problem and Criminal defenses (How to beat your court case) And to inspire you: 7 Fugitives who Became Folk Heroes, How I Lost my friends