FreedomPop, the U.S. wireless carrier startup that has been building a business based on completely free voice and data services, has raised another $10 million in funding from two strategic investors, the pan-Asian mobile carrier Axiata and an unnamed tech investor based in the U.S., the company is announcing today. The deal with Axiata will mean that FreedomPop will be expanding its free services into Asia for the first time.
Axiata is based in Malaysia but also has operations also in Indonesia, India, Bangladesh, Singapore, Cambodia and Sri Lanka (under brands like Smart, M1 and Celcom). Notably, FreedomPop points out that it is the largest carrier in Southeast Asia, with 230 million subscribers across its footprint.
Meanwhile, a source close to FreedomPop says that the U.S. tech company investor is a “major tech firm” that will use its commercial partnership with FreedomPop to “take on Google Fi at a device level and Qualcomm at a chip level.” The company is expected to announce its partnership with FreedomPop in the next month or so.
The news comes about a month after FreedomPop announced a $30 million investment, which also had an unnamed strategic tech investor that will be working with the carrier on the hardware side of things. It’s unclear whether the secret investor is one and the same company.
With that hardware partnership still under wraps, Stephen Stokols, the founder and CEO of FreedomPop, is more ready to talk about what the company plans to do with Axiata.
He says that the two will be working on a free mobile service that will launch in the next six to 12 months and run separately under a “disruptive brand” that will either use the FreedomPop name, or powered by FreedomPop, and “has nothing to do with current Axiata brands.”
The service will work the same as FreedomPop’s free U.S. service, and the expectation is that the offering in Asia will see a similar pattern of adoption: Stokols says that these days, about half the company’s nearly one million U.S. users stays on the basic free tier, while the other half opts to pay for extras like more data, voicemail and other features.
The Axiata deal is a notable regional expansion for FreedomPop, tapping into much-coveted, fast-growing, populous emerging market economies. But it’s also significant for another reason.
Stokols says that the company views it as a “blueprint” for how FreedomPop will expand in other markets as well, with “more progressive global carriers” viewing free tiers and free services as a way to defend themselves from competition by “embracing disruption.”
He says there are already several carriers talking with FreedomPop for services similar to Axiata’s.
“Not just [in] emerging markets, but some large developed markets as well in Europe and parts Asia,” he says. “In some cases, major carriers are seeing this as a way to extend their footprint/reach beyond their network assets and in other cases, it is to cannibalise their own user base versus being cannibalised.”
The trick here for FreedomPop is that the company has developed a way to buy wholesale data services from carriers and then use some tech in the backend to deliver the same kinds of services that the carriers do, but in a way that is more efficient (and cheaper) than what the carriers offer themselves.
This distinguishes FreedomPop from your average MNVO “virtual” operator, which essentially buys minutes, messages and data in bulk from carriers for their services and then resell these to their customers, translating into thin margins for those MVNOs. FreedomPop, in contrast, buys only data which it then uses to offer the rest of its services (for example, voice as VoIP). Instead of prebuying in bulk, it negotiates different usage tiers and pays only for what its customers use.
Now, those carriers want “to be able to use FreedomPop’s technology and capability as a weapon to ensure their own networks keep users.”
Stokols notes, however, that there is lower limit to where FreedomPop may work today. “If a market is too under developed, our model doesn’t work,” he notes, citing parts of Africa where network strength or payment mechanisms not mature enough. But even those regions are not immune to tech-led disruption: Google and Facebook are among those hoping to fill that gap in the market.
Aside form Asia, FreedomPop has also been plugging away at its first international deployments in Europe, too. “We have live test users in UK now, aiming to launch live to the public in next four to eight weeks after the August slow down,” Stokols says.
Other investors in FreedomPop include Mangrove Capital, DCM, Partech Ventures and Atomico, the VC firm co-founded by Skype’s Niklas Zennstom.