A Rs 251 phone is possible, but its chances are tough. Here’s why

  • Narayanan Madhavan, Hindustan Times
  • Updated: Feb 20, 2016 18:32 IST
Bookings have stopped for Freedom 251, the phone promised by Ringing Bells Pvt Ltd and unveiled by former science and technology minister Dr. Murli Manohar Joshi. Deliveries are due by June. (PTI)

What do you think of a feature-rich smartphone available for only Rs 251 championed by a previously unheard of commodities trader from small-town Uttar Pradesh?

If you think it is too good to be true, you are in a majority. Bookings have stopped for Freedom 251 , the phone promised by Ringing Bells Pvt Ltd and unveiled by former science and technology minister Dr. Murli Manohar Joshi. Deliveries are due by June. The booking site temporarily crashed under popular demand. Clearly, there are millions who think it is worth a gamble, though a technology writer messages to say “It is a major scam!”

The only bells ringing out loud now seem to be alarm bells.

Newspaper reports have it that alongside wannabe customers, income-tax officials and police are keeping a close eye on the entrepreneur, Mohit Goel, whose Facebook name is “Cutemohit.

Not everybody thinks his ideas are cute. We have the president of the Indian Cellular Association, a handset lobby, Pankaj Mohindroo saying , “This pricing is not possible under any circumstances, even if the components are made in India”

But, despite all this, I say that it is possible to sell a smartphone at Rs 251 in India --- but let me add that it is not easily probable. Certainly not through “Cutemohit” -- unless he is such a genius that a previous track record is not necessary to execute a complex task.

Mohit Goel of Ringing Bells during the launch of Freedom 251 mobile phones, in New Delhi. (Saumya Khandelwal/Hindustan Times)

Look for clues, not in manufacturing but in services and the business model.

A complex set of relationships can make a Rs 251 smartphone possible to sell profitably– and in fact, it is an easy trick in theory. But in practice, such a venture can resemble a Ponzi scheme when more and more people are needed to make it a hit.

Let us first give the benefit of the doubt to the company and understand the plan that might make it work – which has been outlined by the company’s president Ashok Chadha in an interview to NDTV .

With a ruling party MP revealing the handset and praise showered on Prime Minister Narendra Modi’s Digital India and Make In India schemes, the sellers of Freedom 251 (Hold your breath, they are not yet the makers), say that they will pass on the cost cuts resulting from reduced imports, make the phones in large quantities to reduce fixed costs, lower selling costs by doing it mostly online and then cut the price further through marketing tie-ups.

Pay attention to the last of these factors, “marketing tie-ups” – and that is where the real secret sauce of the Freedom 251 phone lines. It is still a secret because Chadha explains there will be “revenue from other partners”. He adds, “We will unfurl this as we go along,” as if that is a national tricolour flag.

Read: What’s the catch? We answer your 10 interesting questions on Freedom 251

There are, Chadha explains in the presence of Mohit Goel, NDAs (non-disclosure agreements) that they have signed with partners.

Who could these partners be?

To get that let us understand some newspaper economics first.

The Hindu, Chennai-based national daily, costs Rs 8 per copy. The Hindustan Times, with many more pages including huge colour supplements, has a cover price of only Rs 5. This is possible because HT gets more revenues from advertisers and marketers who help subsidise the cost of producing a newspaper.

In 2009, Business Insider explained this beautifully as it discussed The New York Times.

“Printing The NYT Costs Twice As Much As Sending Every Subscriber A Free Kindle,” its headline said for a story explaining the economics.

It is apparent that if there is a legitimate way for Freedom 251 to make money and sell a cool smartphone at Rs 251, it is through advertisements and marketing links. This is theoretically very much possible because the smartphone screen is now like a newspaper page into which you can “push” ads, apps and marketing offers from the Internet.

The question now: What is the chance that Messers Ashok Chadha and Mohit Goel pull it off?

In principle, you cannot object to them, but thus far they have only garnered Rs 17-odd crore from bookings. And early indications show that the phone they have unveiled resembles the Ikon 4 made by Adcom, whose price on Flipkart is Rs 3,999.

Freedom 251 resembles the Ikon 4 made by Adcom. (Sanchit Khanna/ Hindustan Times)

So what we are talking about is a scenario where an imported white-label phone re-branded as “Freedom 251” is sold and then Ringing Bells begins local manufacture under government patronage. This resembles the UPA-government-backed Aakash tablet made by DataWind and sold under the UbiSlate to the general public. DataWind now sells smartphones at Rs 1,999.

It is entirely possible for Ringing Bells to sell a phone at Rs 251 if, like newspaper publishers, it has loads of advertisers and marketers to put their money where the users’ eyeballs are.

I have argued more than once in my columns that some initiatives like this are possible.

In 2010, I had said localised apps can create value for Indian customers. In 2012, I argued that the Aadhar card could actually be turned into a Rs 1,000 smart feature phone and given free by the government and this could actually pay for itself by cutting the cost of government services. In 2013, I had said that India was headed for free phones linked to data plans.

As I see it, the Freedom 251 seems to be based on ideas that I have discussed – and it has government service apps built in suitably.

So, if the government and marketers come together to offer services and sales/promotion links, the Freedom 251 phone is actually feasible at that price – based on the simple rule of cross-subsidisation.

Read: Freedom 251 booking closed, company to deliver 7.35 crore phones in 2016

Will it actually happen? Can Mohit Goel emerge out of the woodworks like Micromax founder Rahul Sharma and turn a multi-millionaire or more?

Ringing Bells has promised to deliver 5 million phones by June 30. Mohit Goel, replying to critics, quotes Sachin Tendulkar: “My bat will reply to them!”

The hard questions:

# Has Goel ever been seen batting before, the way Tendulkar was before he played international matches?

# If the NDA government helps Freedom 251 get revenues under its Digital India scheme, will they be transparent enough not to attract charges of favouring one company?

# Are there big brands whose names can be revealed which are promising marketing-linked revenues for Freedom 251?

With questions like this, the answer to those who wonder if Ringing Bells will pull it off is: The stuff is possible, but does not look probable.

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