On Wednesday Feb 17th Ringing Bells, a Noida based mobile company launched Freedom – 251, a multimedia handset at an unimaginable affordable price of Rs.251. The launch was blessed by Mr. Murli Manohar Joshi. Multimedia handset for Rs 251! The news got picked up by all prominent blogs, media, and news channels. Per their tweets, Freedom-251 website noticed unmanageable traffic (reportedly approx 6 Lacs hits per second. Insane, right?). Since then, Freedom-251 and the company Ringing Bells are constantly in news for good and not so good reasons. Every one like you and me are thinking “Is this even possible? How?”.
While there are some controversies and allegations going on with Ringing Bells such as the company is not legally registered with Mobile Phone authority of India, which means they can’t officially sell the handsets; secondly the rumors are their design is copied from that of Apple phones etc. Moreover the Telecom Ministry of India authorities are challenging Rs. 250/- pricing saying that the phone unit cost itself cannot be below INR 2500. All these and other points are suggesting that Freedom-251 could be a ponzi scheme and actual promises might not be fulfilled. And indeed, there are all the reasons in doubting the promises made.
Still, Mr. Mohit Kumar Goel, CEO Ringing Bells has confidently assured that the company is here to do genuine business and they have to fulfill all the promises and make it successful. He states that the company will start its phone deliveries in the month of April and will complete all deliveries by 30th June 2016. Practically speaking delivering 25 Lakh phones is very challenging, but time will say it all.
When asked about the pricing, Mr. Goel reveals his well thought out strategy about how the Business Plan works out. He claims that the company not only will deliver the promised handset, but also make INR 31 profit on each unit. Mr. Goel in talking to a mentioned a few points:
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Make-in-India benefit: Import duty of around 13.8% will be waved off as units will be assembled in India. The company will pass on the benefit to end customers
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Economies of scale: The bulk orders cuts down overall per unit cost
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Revenue model: Commission on pre-installed apps and in-app purchases, advertising, and marketplace for other phones.
While all above factors are yet to be validated, we all know the company managed to gain significant publicity and traction through its non-paid good and not so good PR thereby saving significant (millions of rupees) marketing budget.
So, coming back to our original question, can Ringing Bells really sell their handsets for Rs 251? And how is that possible even? Although, we claim no expertise in establishing either side, a simple perspective might help seeing things in differently.
Newspaper Business Model: We all buy daily newspaper. The newspaper with minimum 20-30 pages, offset color printed, so much valuable content to consume is sold for mere Rs. 5 or so. We all understand the news paper making cost is way higher than what we pay, right? So, we all understand, newspapers don’t make money from newspaper buyers but they make money from advertisers, sponsors, events, and endorsements. Again, combination of scale of economies and viable revenue model makes it all work just fine.
“Economies of scale are a good thing. If we didn’t have them, we’d still be living in tents and eating buffalo” ~ Jaime Dimon.
We think that Freedom – 251 proposes similar model. So, just to understand this disruptive business model of Freedom 251 mobile phone, team has made an attempt to put together a possible Business Model Canvas of Freedom – 251 mobile phone.
Here’s the business model of Freedom – 251 mobile phone:
Here’s a full view of Business Model of Freedom – 251
Now, lets try to understand few of the major component of this Business model:
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Value Proposition : Ringing Bells CEO Mr. Goel suggests that the company wants to align the business around MAKE IN INDIA & Digital India programs and wants to connect rural and semi-urban Indian citizens by providing best in class feature mobile handset at most affordable price [Just Rs. 251/-]. Through Freedom-251 mobile, company envisions to connect citizens to current knowledge, news and affairs.
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Customer Segment : Although handset can be used by literally anyone, Freedom – 251 primarily targets the rural & semi urban citizens who till now couldn’t afford a multimedia handsets. Secondly, a segment who is happy with minimum multimedia handset configuration to stay connected with people, and lastly people who are curious about such a cheap phone or looking to buy 2nd handset at dirt cheap price.
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Key Partnerships : Freedom – 251 banks on number of strategic partnerships to make this possible. Partnerships such as cost effective part supplier from Taiwan, expert assembly manufacturer from Noida, pan India delivery and services network, and array of pre-installed apps like e-commerce, travel companies (eg: goibibo), mobile wallet, government initiatives (like swachh bharat). Financial institutes such as ICICI Bank, PayUmoney & CC Avenue payment gateway, and Escrow are roped in to ensure seamless flow of transactions.
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Revenue Streams: So, by now it’s clear that Rs. 251/- per unit sell price is impossible without a strong revenue model to support it. Here are a few ways Freedom-251 plans to make money :
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Sales commission through partner apps.
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Upfront charges for pre-installed apps
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Marketplace for other brands to sell phone/apps.
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Advertisements on Freedom 251 website
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Browsing data through mobile / mobile applications
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Also, Mr Goel suggests that in the near future they plan to enter into the service provider segment and start their own network. Once this is done, they would give away the same SIM card with handset and make money.
This analysis is based on publically available information and we claim no internal insights or expertise. Whether will work, time will tell. However, we believe that the mobile industry is on the verge of a big disruption and this could be just a beginning of it. Of course we all will witness what time brings in future.
Friends and experts, it would be interesting to know your thoughts and views on whether this model is disruptive and is defensible in long run? What do you think?
Contributors: Akshay Nahar & Abhijit Mhetre from team Canvazify
asha chaudhry
looks like the IT dept doesn’t think so 🙁
https://tech.economictimes.indiatimes.com/news/mobile/freedom-251-sets-off-alarm-bells-possible-shut-down-of-its-noida-office/51237411
Akshay Nahar
Yes..IT dept would never think in favor of them else they will come in trouble. But when given a thought about this Business Model, it leaves a thought in mind which has enabled a new perspective which seems ‘could be’ possible if they do their homework properly like Legals, Getting companies on-boarded with deals etc. I know it’s not going to be that easy to execute if at all the company is sticking to their commitment and delivering the phone. For now, it’s still a puzzle to be solved in upcoming few days when their date of actual delivery comes.
Venkat Srinivasan
Frankly, I’m inclined to give Ringing Bells the initial benefit of doubt.
I remember, around the early 2000s in the US, telecom majors like AT&T & Verizon used to give customers free or heavily-subsidized mobile phone handsets upon going for a 1 or 2 year contract. Not a very different model in principle, right? Phones given for nothing or almost nothing, and the money made from elsewhere.
Ringing Bells may be eyeing a similar play. But of course, they’re a new player without the blue chip brand going for them, hence all the hoopla? And yes, let’s face it, a startup like them would certainly have to go a few extra miles to establish the alternate revenue streams.
Alok Rodinhood Kejriwal
This is turning out to be a bigger scam than Sahara, Qnet and Madoff.
Economies of Sale work when there is “Economy” and “Scale”
Rs 251 is not economy.
The product is already looking horribly shabby and pathetic as per some pics I saw.
This is a plot to garner as much money as possible and then put your hands up saying ‘the government busted me’
Like that cheap laptop computer scheme launched a few quarters back
Check – https://www.google.co.in/search?q=ringing+bells+scam&biw=1309&bih=708&source=lnms&sa=X&ved=0ahUKEwja0_qLk6zLAhWOUo4KHdTYDWcQ_AUIBSgA&dpr=1.1
Akshay Nahar
Yes Alok. What you say makes sense & I agree to what you say: ‘Economies of Sale work when there is “Economy” and “Scale”.I am just wondering if this has to be possible, how can they do it ? Thus the Business Model of it. But still it’s finance part needs to be worked on carefully. Rs.251 is not economy I agree, but they have some other revenue source which they ‘Claim’.
Coming to it’s design part, I agree the design might not be very great. But however if these kind of phones with decent configuration (as they mentioned) have to come at such low price, would people really care about design?
Looking at all the current news, seems they are going through big trouble as also, FIR has been filed against them, but still the founders commit that they will deliver the product. Let’s wait and watch.
Akshay Nahar
Even I don’t see a major problem with such kind of Business Models. Of course to make these kind of models work, you need to take care of partnerships as it’s all dependent game as they are your prime revenue source.If some one is able to nail that problem, nothing like that.
Due to all news & buzz , just the question remains, can Freedom 251 do it ?