Disruptive MVNO FreedomPop has said its new business model will force UK operators to
rethink how they approach the mobile space.
CEO Stephen Stokols is expecting to add 100,000 subscribers to FreedomPop’s free mobile service within its first month. He told Mobile that traditional MNOs won’t be able to compete with the digital services FreedomPop will offer, claiming that the MVNO will accelerate the move towards more value-added services.
Changing the cash cow
This new business model is one that Stokols claims is unique to the UK market and one which he believes will accelerate the move towards value-added services. He explained that this market shift will cause traditional MNOs to rethink their market approach, claiming ‘they can’t go below free’.
He said: ‘Our business model is underpinned by tech and that gives us an advantage; other operators are trying to make money from voice, texts and data and we’re not trying to make money from that. We go for very specific technology to deliver value-added services, and the company has built technology to support the business model. We have the tech to give the highest conversion into different digital services. I look at our traditional MNOs and they’re essentially marketing companies, not really tech companies.
‘The end game is an acceleration towards selling digital services. Ultimately, you’ve got a competitive market in the UK and we’ll come in and offer a floor – you can’t go below free. The beauty of what we’re doing is it takes a competitive market and throws gasoline on it.
‘In the short term we don’t see any competitors, but in the longer term it will happen. The big carriers will have to rethink how they approach the mobile space. When landline started going away, BT had to rethink how it went after voice and realised it wouldn’t be the cash cow it had been for years. Mobile is the same. Data is now the cash cow and we’ll accelerate the move away from that.’
Stokols explained that this move will be driven by commoditising voice and data services. FreedomPop plans to get rid of £5 and £10 tariffs, instead looking to add-on features as a way to make money.
Stokols said: ‘There’s huge demand for this type of value proposition – we already know that for definite – and now we’ve got a new business model. It will be difficult for carriers to match that. We looked at the plans between £5 and £10 and we can give that away for free but we know we’ll lose money.
‘We’re offering value-added services. It’s an entirely different business model. FreedomPop is more of an internet company and we look at digital services that add value to a plan – we say how can we develop this and sell it on top of our plan?
‘We’re coming into the market with a new business model – if you’re not replacing anything then your company has no value, so we’re replacing the lower end of the mobile market. We’re expecting 50% of our users to never pay us a penny. We’re not going to make money on voice and data but we’re going to make money on paid plans, which will be cheaper than the rest of the market.’
The US MVNO has built up a number of online distribution channels in the UK, but Stokols explained that FreedomPop will not utilise these partners just yet. He explained that distribution is not something he is worried about, claiming the company is going to be ‘under water’ from current demand.
He said: ‘Out of the gate we have about 2,800 online partners such as Groupon and bargain sites, all the way down to media companies. We have a big online distribution network but we’re not going to bring that when we turn on in the UK as demand has been so huge – we’re expecting 100,000 subscribers in the first month.
‘We don’t want to overwhelm ourselves and we’re not worried about distribution. It will be at least four to eight weeks before we turn on distribution. In the first eight weeks we’ve got more demand than we can deal with – we’re going to be under water – we don’t need retail at the moment. That’s our disruptive value; with a free proposition you don’t need to rely on distribution and marketing.
‘We eventually will have offline presence in retail shops but we’re not interested in being on a SIM wall, where you have 50 SIMs and we’re one of them. We will be more of a strategic partner, an offline retailer that promotes free services. In the US, 60% of our subs are coming through organic channels. If you deliver enough value, people will flock to it.’