US firm FreedomPop has struck a software partnership with Wind/Three in Italy in what it claims is the first example of an MVNO licensing its technology to a network operator.
The deal will see the combined CK Hutchison and VimpelCom Italian operator use FreedomPop’s core machine learning software to offer customers additional services in a bid to increase ARPU. EU regulators approved Three's €20 billion merger with Wind in September after French operator Illiad agreed to take on some of the combined firm's spectrum to launch its own services in Italy.
FreedomPop operates in the US, UK, Spain and Mexico, offering calls, texts and data completely for free. The operator makes money through selling additional high-value services, leveraging its platform to target the right customers.
According to CEO Stephen Stokols, it is this big data-based technology which has led to an agreement with the operator, the first of five he expects to announce this year.
“We’ve got a unique freemium model which a few others have tried but have never been able to make it work,” Stokols explained to GTB. “We rely on some strong underlying technology to convert free users into paying customers. One of the first we built was a machine learning platform to drive conversion. We had some carriers trying to buy us for that capability, and that made us realise there’s a lot of value in that capability beyond just driving our own user base.
“So we decided to open it up to other people, and productised it for third parties and carriers. We offer it as a light integration that they can leverage to upsell their users into other value added services and other higher margins. We developed for about a year and Wind is the first to go live with it. It is the first time an MVNO has licensed technology to an MNO.
“We’ve got other carriers who are interested and what is exciting is they will be able to do what we can do on a small scale, but on a much larger scale.”
FreedomPop claims that around 45% of its customer base spend money on additional services, much higher than is normally seen for “freemium” service providers, but also much higher than the industry average, which it claims is around 5%.
Take the US, for example, a market where FreedomPop is understood to have had discussions with a number of operators. To recoup costs, operators have a price floor which they cannot go under. Stokols claims that FreedomPop’s technology allows MNOs to increase ARPUs, meaning they can lower overall prices without lowering margins.
The service works by assessing customer information to offer them a suitable service. On it’s own MVNO, these services include an additional virtual phone number, and compressed data packages, though Stokols said operators can offer their own services as well.
“Almost every single exec we speak to sees data being commoditised the same way text is,” he added. “FreedomPop is a leader with the ability to drive that revenue on top of data. They all see data ultimately heading the same way as voice and text, with much lower revenues. The ones who can drive incremental high margin revenue on top of the data will be ahead.”
FreedomPop makes money from the agreement with Wind/Hutch by operating the technology on a managed software as a service basis.
Though he expects to announce at least five additional carriers using FreedomPop’s technology within the next few months, Stokols said it’s main business remains as an MVNO. He claimed the MVNO will launch in three new markets in the first half of 2017, aiming to add seven new countries by the end of the year.
He added: “When we look at it, we’ve built our business around the freemium model and the retail piece is still our core business. The investment to extend this to third parties is quite small, but the revenue opportunity is huge, which is exciting.“It is very hard to get a deal with a carrier and we don’t have a big sales team, but we have carriers lining up with us. It is a sizeable revenue opportunity that will increase the company value significantly, and boost ARPUs for the operators.”