When iPhone 3GS was released in the UK and US a few months ago, the sales went soaring. The number of phone connections spurred! I was also one of those people who were able to get their hands on one and I am really quite happy about it. But lets consider in India, will anyone be able to buy such a device? A device worth Rs 35,000!

So lets try and see the concept of a free phone which exist in UK and US. A person signs a contract with a service provider like O2 or Vodafone for a duration between 1 to 2 years to pay a minimum fixed amount per month and in return gets an amazing phone and phone connection as well. So you can get an iPhone, a N97, any blackberry and most other phones for free!

Now it is widely known that there are no free lunches in this world! so there definitely must be some strategic concept behind this free phone deal right? Ofcourse there is one. The company is basically ensuring two things, firstly that you will not leave their service for next two years, and secondly the phone is not really free its just that its been spread over months just like buying something in installments. The catch is that people don’t mind paying a little extra per month but taking out a huge bulk of cash in one go is a problem. O2 allowed users to buy the iPhone for 375 Pounds and take a pay-as-you-go plan but most users went for the pay monthly plan. This can probably be related to the economics principle of instant gratification.

But coming back the the title of this article! India, probably the fastest growing market in mobile phones in the world! still does not really have the concept of free phones (except probably Virgin Mobile). But why?? Isn’t something missing in this picture? A market which is absorbing so many phones every month does not have a free phone concept. Actually there was a concept of free phone in India and it was started by none other than Reliance Infocom when it launched in India. By Paying Rs 501 and taking a 2 year contract could get you a brand new phone from Samsung / LG and wonderful calling rates. The marketing plan was a success but the execution was unbelievably dissappointing. People took the phones, unlocked it and started using Airtel / Hutch. The whole problem in India is that the legal system is a failure in terms of such contracts. Even if a consumer signs a 2 year contract the enforcability is quite dismal. Moreover there is no real concept of a credit history in India. In UK / US people will not default on any payment because of the risk to credit history and if a small payment ruins their credit history then their mortgage interest rates will go up! The companies compete but also communicate.

Thus we can view this both in terms of a virtue or a burden. If you do pay all your bills and fulfil all your contracts then probably it is a burden for you since you can’t use such wonderful schemes and are not getting any benefit of a good credit history. But if you don’t care and don’t keep your commitments then it is definitely a big big boon for you!

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