FreedomPop — the startup that has built a mobile service based on the premise of a free basic tier of voice and data services — has announced plans to launch its services in Spain, its second market in Europe after the UK. And to woo users in one of the world’s most competitive and saturated markets, it’s throwing in something new: usage of WhatsApp will be zero-rated for FreedomPop users.
And on top of free basic voice and data and WhatsApp access, FreedomPop is also offering free roaming to 31 countries, including the U.S., UK, Germany, France, Portugal and Italy, among others.
Users interested can sign up for the beta here.
Zero-rating apps has caused controversy in some markets, specifically around Facebook (which coincidentally owns WhatsApp) and its Free Basics (née Internet.org) service violating net neutrality rules. But if it flies, it could be a key way of picking up users.
Spain is a typical market for something like this: aside from being already overcrowded with existing mobile services, messaging apps are massive, for both text and voice services, and WhatsApp currently reigns supreme among all messaging apps in the country. At the same time, the popularity of messaging apps makes them one of the bigger drains on users’ data allowances. So giving users free access could draw attention to FreedomPop, and help further differentiate it from the rest of the carriers out there, the company believes.
“WhatsApp is huge in Spain, accounting for over 90% of all texting and over 70% penetration,” said CEO and co-founder Stephen Stokols in an interview. “So ‘free texts’ is worthless but ‘free WhatsApp’ is meaningful.” FreedomPop is projecting that it will pick up betwee 500,000 to 1 million Spanish users in the next two years.
WhatsApp in Spain will be the first time that FreedomPop zero-rates a third party app as part of its free tier, it won’t be the last. Stokols added that it is setting up a template for further roll outs, especially “in lower ARPU markets and markets like Spain that have really embraced OTT.”
“We are looking to roll out zero-rating in conjunction with other apps, e.g. Line in Korea,” he said. “This helps us prove the capability and puts FreedomPop in a position to lead the charge, given Internet.org has struggled to get carriers on board, particularly in developed markets.”
Where else might FreedomPop go? Stokols won’t name the country except to say that it is “huge.” One tip might come in the form of a strategic investor in the company: Axiata. The pan-Asian carrier invested along with Intel in an extra tranche of $10 million that was part of FreedomPop’s Series B, and at the time FreedomPop said part of the deal would involve the startup launching its services in Asia.
Axiata is based in Malaysia but also has operations in Indonesia, India, Bangladesh, Singapore, Cambodia and Sri Lanka (under brands like Smart, M1 and Celcom). It is Asia’s largest carrier with 230 million subscribers, but there is still a lot of growth left in these markets, albeit with very price-sensitive consumers.
He sees FreedomPop as having a broader mission here, too: to sway carriers to free up how they use their networks for free services as a way of winning more wholesale business from software-based companies like his.
The developments today come on the heels of FreedomPop raising an additional $50 million from an un-named financial investor earlier this year (taking the total to $109 million), and the startup itself toying with taking more investment from a company that happens to be trying to acquire it.
He didn’t name the company, but M&A has been rumored for a while now. “Hmmm, it isn’t fully off the table,” he said. “We have a formal offer but unlikely we will take it given the valuation of that offer not significantly higher from $50 million round we just closed. That said, we may take strategic investment there.”
It’s not clear what FreedomPop’s valuation is but Stokols has told us in the past that he’s aiming to build a $1 billion company.
One strategic investor that FreedomPop already has on the books is Intel, which invested in a previous round and is working with FreedomPop on rolling out a Wifi-based phone service. Stokols gave me an update on this: he says the “Intel phone is coming, and it will be a pretty solid phone with Intel tech, working globally and well below a $99 price point.”
Stokols would not say which carrier FreedomPop is working with in Spain, except to note that it is one of the major national carriers that will be revealed at launch.
Further afield, FreedomPop growth is “above target in US and UK,” Stokols said. The UK is approaching 100,000 users on its U.K. service. Over 50 percent of current users do not pay anything, and heavier users pay a fraction of what competitive plans cost.
As we’ve described before, FreedomPop says that it is not your run of the mill MVNO, using a software-based model to allocate mobile data for consumer services in a cost-effective way, and it also makes money from incremental value-added services, both of which appear to rely ultimately on economies of scale. That makes for an interesting future ahead for the startup.
Updated with more detail about future expansion.
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