Consumers in India are finally getting their hands on the world’s cheapest smartphone. After delays, scandals, accusations of fraud and some downright strange antics, a company that is less than a year old, Ringing Bells, is shipping the “Freedom 251” handset. The smartphone costs 251 Indian rupees (hence the name), which is a little less than $4 USD.
The Android-based smartphone could revolutionize connectivity in one of the world’s largest and fastest growing nations. Getting the phone to market, though, has been a story of chaos, court cases, and politics. Essentially this is the story of doing business in an emerging nation.
A disruption to the market
India’s cellular market is the second largest in the world. Many of the nation’s 1 billion subscribers use relatively cheap phones. But many of these phones are not fully functional smart phones. The Freedom 251 could change all of that. The new smartphone costs almost 90% less than its cheapest smartphone competitors.
Early looks at the phone show a simple, sleek and stylish phone.
The device has most of the basic specs expected in a modern smartphone: a 4-inch screen, 8-megapixel camera with a flash, a 3.2-megapixel front mounted camera, a 1.3GHz processor, 1 GB of RAM and 8GB of storage with a microSD slot available to expand memory.
An exciting announcement
Ringing Bells announced the new phone in February, only 5 months after the startup was founded — an ambitious plan considering no one in the company’s leadership had any experience in digital products before the company was founded.
The launch event for Freedom 251 included prototypes distributed to media and the presence of a senior BJP member, the ruling political party in India. The new phone was hailed as a successful example of Prime Minister Modi’s “Make in India” initiative, a campaign to promote manufacturing inside the nation by providing subsidies to local companies.
Deliveries of the new phone were promised to start in March with the first round of 200,000 phones delivered by June 30.
The phone proved to be massively popular. In the 24 hours after the announcement, 30,000 customers gave advanced payments to secure a phone in the first round of deliveries. Hundreds of thousands more people tried to register for a Freedom 251 in the first 48 hours. This is also when the trouble started.
The problems begin
Very quickly the online demand crashed Ringing Bells’ website. The demand then spilled into the company’s obscure and small office as crowds of people showed up in person to register for the phone. What should have been an exciting story of innovation and economic disruption quickly turned to accusations of fraud, police investigations, and a regulatory crack down.
Immediately after the public announcement of the Freedom 251, competitors, analysts, and even political rivals of the governing BJP, launched attacks against the phone and the brand new company introducing it.
The head of the Indian Cellular Association Pankaj Mohindroo then called the new phone a “joke” and said the price point was impossible. A few days later, a member of India’s parliament went on TV and called the Freedom 251 a scam and blasted the ruling BJP for supporting the phone.
“I am making a definite allegation. This government is going to do a big scam. This is going to be the biggest scam of the millennium during the rule of BJP,” said Member of Parliament Pramod Tiwari on TV.
The political aspect of the situation is confusing. A senior member of the ruling BJP was present at the Freedom 251 announcement. The new phone was touted as an example of success within the “Make in India” initiative. After the outcry from political opponents, Ringing Bells and the government both said it hadn't received any government subsidies from "Make in India" after all.
From accusations to real problems
Things then went from bad to worse for the new company. Reporters who received prototypes at the launch event discovered the phones were actually products made by a rival company Adcom. It turned out the prototypes were simply Adcom phones with whiteout used to cover the logo on the front and stickers to cover branding on the back. There were also concerns that the phones’ operating system appeared to be Apple-based (a copyright protected system) after claims the phone was based on open-source Android.
Adcom quickly threatened lawsuits, calling the Freedom 251 “the biggest scam of the millennium.”
A member of the BJP also filed a formal grievance with the police, known as an FIR, that triggered a government investigation into the company. MP Kirit Somaiya said the phone was a “trick” to gain “the government’s sympathy” and misuse the “Make in India” initiative. The complaint claimed Ringing Bells misused the Indian flag in its promotion (something the government must pre-approve), and that the company “does not have a license to trade in the mentioned phone and it has not declared its financial or human resources to manufacture the phone.”
Complicating Ringing Bells’ operations, they had not correctly registered their office. The building they were located in was not zoned for commercial businesses. The owner of the building publicly took the blame, but it added to narrative that the company was fraudulent. Not to mention forcing a young company to move their offices in the middle of a public uproar.
Ringing Bells tries to respond
In the weeks that followed the announcement of Freedom 251, Ringing Bells’ young founder and CEO Mohit Goel publicly maintained his commitment to deliver the phones. The company returned the first 30,000 deposits, saying all future transactions would be cash-on-delivery.
Ringing Bells also admitted the distributed prototypes at the February event were made by Adcom, saying they were only intended to give an “initial impression about the way [the] phone would look and behave in the future. We have other partners for assembly of our phones.”
Goel also clarified that the phones would not initially be made in India. Instead the components were being sourced from Taiwan and then assembled in Noida, a small city in India. The company planned to move full production to India soon, he said.
Answering doubters about the low price point, Ringing Bells said they had subsidized the phone through payments from pre-loaded apps on the phone. “We will have a loss, but I am happy that the dream of connecting rural and poor Indians as part of the Digital India and ‘Make in India’ initiatives has been fulfilled with Freedom 251,” Goel told the Indian Express in June.
The real problem: Delays
Throughout the court cases, investigations, government raids, and arguments in the press not a single Freedom 251 had been delivered by its promised date of June 30.
Instead, Ringing Bells announced deliveries would again be delayed until July 6, with a public event on July 7. Notably by July 5, the company announced yet another delay for first deliveries until July 8.
“In the meanwhile, we have prepared a letter requesting a meeting with our Prime Minister to pitch our case as a domestic smartphone maker which wishes to contribute towards ‘Make in India’ initiative,” Goel told media outlet IANS.
"In order to digitally empower every Indian, if I can get government support under the Digital Indiaprogramme, I can ensure timely delivery of 'Freedom 251' phone to all citizens at the same price," Goel told NDTV on the eve of the public event. He said that with about $7.4 billion USD worth of government support, he could make sure 750 million people in India could join "digital India" through Freedom 251 phones. A strange request at this stage considering “Make in India” had initially been tied to the Freedom 251 announcement and then denied when it became a political problem.
Freedom phones! (Finally….?)
Today, it seems customers have finally received the long promised phone. The price point is revolutionary. The company is admitting it is losing money on each handset. In the last week it has specifically requested funding from the Indian government.
Only time will tell if the Freedom 251s are the true gateway to a fully digital India.