Written by Mark Nichols
The prototype of the Freedom 251, the ultra-budget smartphone that became available for pre-order in India in February, looks like a toy iPhone. Though it shares many characteristics of the popular device, Apple’s signature softly rounded corners, curved sides, and silver-ringed home button are rendered in white plastic. When switched on, even the app icon design recall the iPhone’s, displayed next to such pre-loaded apps as Facebook, WhatsApp and others linked to government initiatives for women, farmers, and fisherman. Above the screen, a smear of white correction fluid hides the logo of Adcom, a handset manufacturer that denies affiliation with the Freedom 251. An Indian flag, already starting to chip off of the white plastic casing, covers more Adcom branding on the device’s back.
Despite its questionable, derivative appearance, the device has received attention from media and potential customers alike: according to Ringing Bells, the company behind the Freedom 251, its website received 600,000 hits per second and 30,000 confirmed orders on the day of the launch before it crashed under the demand, and thousands showed up at the company’s office to buy the device in person (the Freedom 251 is only available for online pre-order). The cost: Rs. 251, or $3.67, the lowest price for an unsubsidized smartphone sold anywhere by a large margin.
The Freedom 251 is the newest entrant in the budget smartphone arms race, which has recently seemed more like an all-out sprint with important consequences for mobile money services and players. As we discussed in our predictions for 2016 trends, smartphone penetration is growing quickly in key regions for mobile money, including sub-Saharan Africa. Of the world’s 7.4 billion mobile phone subscriptions, 46% are smartphones, and Ericsson predicts this figure will be 70% by 2021. Though smartphone penetration is lower in poorer countries than in rich ones, it is also growing much faster in regions like sub-Saharan Africa, helped in part by the availability of more affordable devices. MTN, Tecno, and Google already offer smartphones at or below $50.
In December, we talked about the implications of this shift on the blog:
An immediate consequence of the spread is improved user interfaces and integration with smartphone capabilities for existing mobile money services, but this shift cuts deeper. Third parties can develop apps built on the mobile money service, such as pesaDroid and m-ledger, money management applications built on M-PESA. With the service delinked from SIM cards, competitors using mobile and web-based interfaces, such as Facebook’s remittance/e-money services, can enter the market, and existing services can expand to a customer base beyond that of a specific [telcom operator].
The Freedom 251, for its part, may yet fail to fulfill its potential to provide smartphones for even the poorest of the poor. “It feels like a Rs. 3,000 smartphone,” writes one reporter, and he is not far off: the materials of the phone are estimated to cost Rs. 2,500. Ringing Bells says it plans to reduce the price through economies of scale, partnerships, and innovative marketing strategies, and aims to hold 30% of the Indian smartphone market by the end of this year. Some observers fear the Freedom 251 and its highly publicized launch may be a marketing ploy or even a scam. If the device and its price are real, they likely owe their existence to subsidies of some kind (the announcement seems to come in connection with the Make in India scheme, launched in 2014, which encourages domestic manufacturing, though Ringing Bells has denied government involvement or subsidies). Such subsidies would be effective in getting handsets into the hands of the poor, but fall short of the market-based ultra-budget smartphone we might hope for.
Yet even if it has a dirty secret, the Freedom 251 still represents the future of possibilities its name suggests. Two months ago, a $25 smartphone seemed too good to be true; in the year of the $4 smartphone, it seems too good not to be. There is also a chance the low price of the Freedom 251—why Rs. 251 when a viable handset three times that price would still be a step forward?—will end the race towards the ultra-budget smartphone, as customers and manufacturers alike grow weary of the fixation on price above quality. Last year, Mozilla backed down from its 2014 promise to develop a $25 model, choosing instead to focus on improving user experience. Datawind delivered on its Rs. 999 ($14.53) smartphone last year, but with a dip in quality severe enough to dampen much of the excitement over the price.
Retreat from the cost-fixated fervor could be welcome if an emphasis on innovative financing models took its place. Even in rich countries, a phone’s sticker price is often meaningless. I am unlikely to invest the listed price of $749 for a 64GB iPhone 6s, but I happily pay AT&T $35 a month. Pay-as-you-go financing for solar home systems, for example, already increase energy access in areas with poor rural infrastructure by allowing repayment to mirror customers’ cash flow. For some of the world’s poorest, even $3.67 is too expensive to buy outright.
And cost is not the only barrier to smartphone adoption. Feature phones will still retain a significant minority of the market share, even in rich countries: 40% of Orange’s customers in Western Europe and 40% of those in Eastern Europe use feature phones. Many purchase these simple phones with long battery lives for their children or as a second phone for prolonged stays away from charging stations. In poor countries where power supplies are scarce and those residing in rural areas may only be able to charge phones during trips to a city or by using a shared power source, smartphones’ shorter battery lives makes them impractical.
Whether Ringing Bells meets the high bar it has set for itself is in some ways secondary. Even if it fails to meet its June 30 deadline to deliver on its pre-orders, its effect on the market for low-cost smartphones may endure.