Freedom 251 – A possible disruption?

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:

• 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

• Economies of scale: The bulk orders cuts down overall per unit cost

• 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: