The Freedom 251 Circus Continues Even As India’s Smartphone Market Dynamics Shift Yet Again

The company’s press conference was filled with some outrageous statements though it claims it will start deliveries from tomorrow. But is a Rs 251 smartphone going to change the dynamics of the overall market?

President of Ringing Bells Ashok Chadha with director Mohit Goel and CEO Dhaarna Goel during the launch of Smartphone-Ringing Bells Freedom 251 in New Delhi. Credit: PTI

President of Ringing Bells Ashok Chadha with director Mohit Goel and CEO Dhaarna Goel during the launch of Smartphone-Ringing Bells Freedom 251 in New Delhi. Credit: PTI

New Delhi: Noida-based Ringing Bells, the company that dominated headlines earlier this year after announcing a smartphone worth Rs 251, is back. This time with a Rs 9,990 TV set.

The little known company, which received up to 30,000 bookings in February when it unveiled a model phone with a quad-core processor, a four-inch screen and front and back cameras, held a press conference in the city on Thursday that bordered on the ludicrous.

The company’s CEO Mohit Goel within a span of two hours, admitted that they were losing up to Rs 270 per handset, announced that the firm needed more time to completely deliver on its bookings and to cap it off shocked the audience by saying that over 90% of the company’s profits would go to charity.

“The first phase of delivery will begin from tomorrow with 5,000 phones being delivered,” said Goel.

After receiving money for its bookings back in February, Ringing Bells refunded its customers and announced that it would adopt a cash-on-delivery model so as to stave off concerns that it was a fly-by-night operator. It was supposed to finish delivering all bookings by June 30, but will only start initial deliveries (done through a lucky draw model) from tomorrow.

Goel’s logic regarding Ringing Bells and the Freedom 251 became clearer, if only by a little, when answering questions regarding the company’s business model. “Our selling price is Rs 251 and our costs go up to Rs 1,400 for the phone. Through advertisements on our website and by charging companies for pre-loaded apps we are filling that gap to a certain extent…but still are losing money,” he said, in a response to a question.

The figure of Rs 1,200-1,400 for the phone also seems in direct contradiction to earlier statements made by company officials, who put the overall cost of the phone at somewhere near Rs 2,200-Rs. 2,500.

Goel also claims that one of the app partnerships that has brought in some amount of revenue is Hike – an instant messaging application that has backing from Bharti Airtel and Japanese investment firm SoftBank.

Government subsidies

One of the more amusing highlights of the press conference is when Ringing Bells made a fervent plea to Prime Minister Narendra Modi: According to company officials, the government can help in achieving Digital India if it subsidises Ringing Bells. In an interview with IANS yesterday, Goel claimed that he sought “Rs 50,000 crore from the government to help in manufacturing the phones”.

If the government is able to do that, Goel said that he will be able to ensure that over 70% of India’s population will become part of Digital India. However, no worries even if Modi doesn’t step in. Company president Ashok Chadha insisted that they would continue towards their dream of delivering over 7 crore smartphones.

The Freedom 251 smartphone has captivated global media, with the BBC last week conducting a full-blown review of the smartphone after managing to get its hands on a review unit. Back at home, however, local competitors are not impressed.

“This is rubbish. This is a circus. He claims that he is losing money on every phone and announced that a majority of the company’s profits will go to charity? It just doesn’t make sense,” a senior executive of a Chinese smartphone maker told The Wire.

The freedom television

What indeed is Ringing Bells end-game? One of the highlights of today’s press conference was the unveiling the company’s expanded product line: a 31.5-inch LED TV called ‘Freedom’ that comes with a Rs 9,900 price tag and six new smartphones which will mostly cost more than the Freedom 251.

One theory floating around is that the company is looking to make a splash in the market with its cheap, Rs 251 phone and take losses on it. After a few months, it will, as the company currently plans on doing, introduce more expensive smartphones (and other products like TVs) that will presumably sell well because the company now has an established brand name. And yet, as numerous analysts and industry insiders told The Wire, the Ringing Bells brand name doesn’t have too many positive connotations going for it and the company will have to go a long way in changing that.

Indian smartphone market dynamics

Stepping back from the Ringing Bells show, the Indian smartphone market has over the last year undergone a major shift and is likely to undergo another structural change when Reliance Jio’s Lyf smartphones hit the market.

Two to three years ago, Samsung was faltering and Micromax seemed to be on an inevitable rise. The re-entry of Motorola and with it a subtle shift in focus from brick-and-mortar retail to online retail strategies further changed the market’s dynamics.

Today, however, Samsung appears ready to report its highest quarterly profit in over two years (on the back of its S7 line of smartphones and increasing ASPs) while Micromax has slipped due to an influx of Chinese competition and management issues. The aggressiveness from Chinese competition in particular – Gionee, LeCo, Oppo – has resulted in a slight shift in focus back towards offline retail as well as ruthless discounts.

Where does Ringing Bells fit in here? In all likelihood, nowhere. As one commentator put it, Reliance Jio’s Lyf brand of smartphones, if successful, are likely to be the true Freedom 251. A day before Ringing Bell’s press conference, on July 6, Reliance Jio slashed the prices of all its smartphones by 25%. This essentially means that its cheapest 4G LTE smartphone, which comes with three months of unlimited data and voice calls, is available for a cool Rs 2,999.

While it’s true that most Lyf smartphones aren’t of the best quality or user experience, the next true shift in the dynamics of India’s smartphone market will come with the bundling of smartphones and 4G data. Which is what Apple CEO Tim Cook’s meeting with Reliance officials was all about when he came to India earlier this year.

While decreasing smartphone prices are never a bad thing, a sub-Rs 1,000 smartphone is not the future. Not even one that retails for Rs 251.