FreedomPop, the mobile carrier that gives away mobile, data and text services and upsells users on other services, is today announcing its first international launch outside of the U.S. The company is opening up for business in the UK as a SIM-only service — meaning no phones, initially, just the cards that you put into a phone that you bring to the network.
The free service will cover 200 minutes of calls, 200 text and 200MB of data — or, in the words of co-founder and CEO Stephen Stokols, the equivalent of what you might get in the most basic mobile phone plan in England.
The deal also includes a pretty heavy emphasis on free international calling to 60 countries — international services being a key part of how mobile devices are used in Europe, along with free services to other FreedomPop users, and an allowance to roll over data to subsequent months. On top of this, FreedomPop is also launching Jetsetter, a free roaming data SIM launching later this year. Users will receive 100MB of free high-speed data per month initially for use in the U.K., Spain and France and eventually expanding to 20+ countries.
The news comes on the heels of FreedomPop approaching 1 million users for its U.S. service, which Stokols says the company is on track to do in Q3 of this year. The other big news is that Stokols confirms that the company is raising a large sum of money, either by way of a strategic investor taking a majority stake, or another VC-led round for a minority stake.
FreedomPop announced in July of last year that it would be opening up for business in the region — leading with a deal with KPN Belgium, but no actual service. In the event, Stokols says that FreedomPop is turning to the UK, and an MVNO partnership with Three (which recently acquired O2 from Telefonica) for its first commercial offering.
There is a second carrier likely to join the mix in the UK, and Stokols says that FreedomPop has also signed deals with six other carriers, covering nine countries, for further rollouts that are still pending.
It’s an interesting move: the UK is one of the biggest, but also one of the most competitive and saturated markets in Europe. Stokols claims that presents even more of an opportunity for FreedomPop. “People here are used to switching all the time, and no one can compete with free,” he says.
For those who are not familiar with FreedomPop, the company has developed a very unique business that sets the startup apart from your average MVNO. Most “virtual” operators essentially buy minutes, messages and data in bulk from carriers for their services and then resell these to their customers, making a very thin (and often no, judging by the number of MVNO failures) margin in the process.
FreedomPop, on the other hand, essentially buys just data from carriers and then uses that for all of its services, be they voice (over VoIP) or otherwise. It also negotiates different usage tiers and pays only for what it uses of a carrier’s data.
On top of this it’s built out a model that essentially cuts away with a lot of older styles of selling (such as retail stores) and puts the emphasis of sales online. “We acquire customers in the U.S. for 1/100th of what the carriers pay,” he claims. He says that its customer acquisition costs are “under $5 where most carriers’ are $380/user.”
Free doesn’t come free
All the same, the funds to grow out your international business do not grow on trees. Last year, FreedomPop became the subject of intense scrutiny for potentially being in play with Sprint as an acquirer. That’s something that has not abated too much.
“The activity around us really plateaued in the last month or two with multiple offers to sell the company,” he told me. “However there are other options,” referring to VCs. (FreedomPop has raised nearly $20 million from investors including Mangrove Capital, DCM and Niklas Zennstrom.)
From what we have heard the company could raise at least $50 million, or take a strategic investment from another party, such as a large tech company or carrier. (Given Google’s moves into Google Fi, the mention of a tech company isn’t too surprising to hear.) And the deal could close in a matter of weeks.
FreedomPop’s model is already profitable, he says, even though “51% of our users don’t pay us a penny,” because 49% do, opting either for extra data or voice or texts, or voice mail or other value-added services like “buying” local numbers to use in markets outside of where you live so that you can talk with people in those other countries at local rates. “We only need 30% to pay to make our model work, so it’s working,” he says.