A phone at Rs 251! The math behind Ringing Bells’ smartphone pricing
You may not have heard of a company named Ringing Bells, but you must have definitely seen full-page advertisements about the smartphone Freedom 251 in newspapers. Everyone is wondering how the company led by Mohit Goel actually sell a smartphone for just Rs 251. We don’t know either. HT spoke to Goel and tried to understand some logical reasons behind the pricing.business Updated: Jul 11, 2016 23:49 IST
You may not have heard of a company named Ringing Bells, but you must have definitely seen full-page advertisements about the smartphone Freedom 251 in newspapers.
Everyone is wondering how the company led by Mohit Goel actually sell a smartphone for just Rs 251.
We don’t know either. HT spoke to Goel and tried to understand some logical reasons behind the pricing.
Firstly, a smartphone as cheap as for Rs 251 is logically impossible as the components are expensive. This means Goel is clearly underselling the phone, but common sense says he must have figured another way of making money.
Goel says he imports all the smartphone components from Taiwan rather than China, and claims that he can make profit only if he increases volumes, or if the phones are subsidised by the government.
To simplify the price equation, Goel says that the phone should be costing between Rs 2,200 and Rs 2,500, including import duties, cost of materials and licensing.
The promoters of Freedom 251 claim that they can bring down the price to approximately Rs 1,349 by manufacturing all the components in India because then the company would be eligible for tax sops offered by the government.
But what about the rest, how does Goel plan to fill the Rs 900 gap. He and Ashok Chadha, another promoter of the company, claim that this gap can be filled by economies of scale, unique marketing, app bundling, and a little bit of help (read: Rs 50,000 crore investment) from the central government.
Let us assume for a minute, we live in a Utopian world and in that case Goel can bundle various app on the phone and get money from the developers by selling them the idea that Freedom 251 phones will sell like hot cakes. Now that takes care of about Rs 750 of the Rs 900 shortfall. But with all the controversy around the company, including an FIR and a lawsuit, only a few app developers are ready to place their bets on Freedom 251.
Goel says he can break even with volumes. As far as volume goes, getting there would call for more investment. He claims he has analysed the risk and that is why he has come up with other products, which he launched a few days back. The products include an HD LED TV for Rs 9,900, four feature phones, and two smartphones.
He claims that he will first make money from these devices and then route it back into the company to manufacture more Freedom 251 phones. That means there are no profits for him or the company. When we asked Goel this conundrum, he amazingly had an answer for that too. It is the Rs 50,000 crore that he wants the government to invest in his company.
Now this fully explains why Goel was unable to cater to 250,000 smartphones that were initially ordered. Simply because he had no money. So, he has sent out the first lot of 2,240 device among the 5,000 promised, and later went on to actually say that he needed the government’s help to make his dream of connected India come true.
But there lies another important question. Where is he getting all the money to make those other devices that his company launched? Well, Goel says that his assembly partner and his distributors have invested in the company.