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FreedomPop expands to Spain, adds in zero-rated WhatsApp voice and text to its free plan

TechCrunch TechCrunch 20/04/2016 Ingrid Lunden

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 and its Free Basics (nee Internet.org) service violating net neutrality rules. But if it flies, it could be a key way of picking up users.

Aside from Spain already being 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 makes these apps one of the bigger drains on users’ data allowances, so giving users free access to it will help further differentiate FreedomPop 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 a 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.”

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.

“We are hoping we can not only show that zero rate models can be profitable but also force other carriers (starting in Spain) to embrace this model versus resist it,” he said. “Carriers don’t like the thought of cannibalising their voice and text revenues, but ultimately can’t stop it.”

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.

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