Freedom 251: Will the alarm bell ring?

The 251 Freedom site has now stopped taking orders due to overwhelming response that has led to the servers to crash

The hype over world’s cheapest smartphone, Freedom 251, priced at Rs 251 (US$ 4), has gripped the popular media, especially Twitter and the web world. A smartphone at the cost of a pizza is unheard of, and whether the company, Ringing Bell Pvt. Ltd, will be able to deliver on its promises to consumers, from whom it collected the entire amount four months in advance during the ongoing booking, remains doubtful.

Update: According to sources, when some journalists visited the office of Ringing Bell this afternoon at B44, Noida, Sector 63, UP, they found the office closed and none of the Goel family member present at the site. The company has already raised Rs 251 each for booking from each customer in the morning.

Confusion before the disruption?

The Freedom 251 site has now stopped taking orders due to overwhelming response that has led to the servers to crash. “We receive approx 6 lakh hits per second as a result of which due to your kind overwhelming response servers are over loaded,” the site claims. It is said to have ‘taken a pause’ and will resume within 24 hours.

Before the actual handsets could see the light of the day, a controversy related to refurbished (or rebranding) is putting doubts in the minds of the experts.

The first set of smartphones which the company distributed among professional reviewers bears branding of an Indian mobile importer company AdCom. The product, Freedom 251, is a smartphone called AdCom Ikon 4. However, the company has reportedly denied that it ever manufactured any smartphones for Ringing Bell. “We have no idea that our branding is being used on the Freedom 251,” Adcom’s marketing head Deepanjali Arora told Hindustan Times. “We will look into this.”

However, a company official from Ringing Bell said that the initial set of Freedom 251 “has been procured from another manufacturer” and “those are beta models. The phones that will be sold in the market will not bear AdCom’s logo”.

But questions related to the credibility of the smartphones arising. “Will the actual models look the same as the displayed ones?” asked an enthusiast present during the unveiling of the device.

A Rs 2,500 handset at one-tenth of its price?

According to the company’s president, Ashok Chadha, Ringing Bell will be able to achieve this feat through four strategies.

First, benefit that it will receive due to excise duty cuts by assembling the handsets domestically equals to Rs 400 or 16 percent of Rs 2,500 – which he claims to be the original cost of the device. However, that does not match the excise duty cut that he is expecting from the government which is at 13.8 percent or Rs 55 lower than Rs 400.

However, the real benefit in terms of duty cut for the mobile handset industry in India is much lower, executives from major brands told Business Standard. While, companies like Lava, which is the fifth largest player in the market enjoys an effective benefit of eight percent, for OnePlus it is some three percent – much lower than what Ringing Bell is claiming.

Second, as it starts manufacturing in huge quantities (at least five lakh units a month according to Chadha), it would be able to cut costs by a further Rs 500 per unit.

Third, online selling mode will help it cut costs by another Rs 500.

And Forth, a specialized online platform, where the company is trying to tie-up with “different other market places” is expected to cut costs further and earn some revenue for Ringing Bell.

But all these three strategies are yet to be implemented and their successes, on which Freedom 251’s existence is directly dependent, are uncertain now.

Not Viable: Experts

While, Ringing Bell claims to cut down costs to Rs 1,000 after all the benefits and tactics, it is expecting to successfully fall in place.

According to industry analysts and experts, it takes at least Rs 1,000 (US$ 15) to manufacture a smartphone using cheapest components currently available. Display, Battery and the chipset, which together comprise 70-80 percent of the total cost of a smartphone can be procured at Rs 600, at the least.

However, Freedom 251 runs on Android 5.1 Lollipop operating system which further increases the cost by a few US dollars. Put together the smartphone with features such 1.3 GHz Quadcore processor, 1 GB RAM, 8GB internal memory and two, back and front, cameras can’t be procured at Rs 1,000.

“Then how do they expect it to sell at Rs 251?”, an analyst tracking the industry seemed confused.

Meanwhile, the company is raising the entire price of the smartphone that it has promised to deliver in June as the booking amount.