FreedomPop moves onto Sprint's EV-DO network, trumpets profitable business model
MVNO FreedomPop announced it is beginning to move its services onto Sprint Nextel's (NYSE:S) CDMA EV-DO network, a move that will allow the company sell services nationwide rather than just in Clearwire's (NASDAQ:CLWR) WiMAX coverage area. FreedomPop said the first device to make use of Sprint's network will be its new Overdrive Pro mobile hotspot. FreedomPop CEO Stephen Stokols also confirmed to FierceWireless that the company's business model is working, and that FreedomPop is currently "profitable from a gross margin perspective."
Stokols explained that today's news marks the beginning of FreedomPop's efforts as an MVNO of Sprint. Further, he said FreedomPop is preparing for a major push onto Sprint's LTE network later this year, which is when FreedomPop will offer a range of new, "innovative" LTE devices. Stokols said the devices could include LTE-capable cases for Android phones like the Samsung Galaxy S III and LTE clips for tablets like the Apple (NASDAQ:AAPL) iPad, but he declined to provide specifics.
FreedomPop launched last year on Clearwire's WiMAX network, offering 500 MB of free data to subscribers. FreedomPop makes money when those subscribers opt to pay for additional data or when they purchase a service like usage alerts, data sharing or speed boosts. Stokols said the company's "freemium" strategy is working; he said 40 percent of new customers who sign up for the company's service purchase additional data, and fully 49.8 percent make some kind of purchase, either additional data or a service.
"It is playing quite well for us. From a margin perspective it (the company's financial position) is positive," Stokols said, explaining that the company's margins are in the black but that FreedomPop is spending money right now to develop new LTE devices.
FreedomPop had planned to move from Clearwire to Sprint last year, but Stokols said that move has been delayed because "the Sprint LTE buildout is not moving as fast as we'd like." Sprint had planned to offer LTE to 250 million POPs by the end of this year, but recently dialed that back to 200 million POPs. Thus, FreedomPop plans to launch LTE service via Sprint "later this year," and in the interim is launching nationwide service on Sprint's EV-DO network.
Launching on EV-DO instead of LTE "is a short-term solution in some respects," Stokols explained, adding that FreedomPop is in discussions for a Series B round of venture capital financing that the company expects to close by the end of the year. Stokols said FreedomPop also is planning to expand its advertising efforts and launch its services in retail outlets, though he declined to provide details or a timetable for those efforts.
FreedomPop's Overdrive Pro, for $39.99, will be able to connect to Clearwire's WiMAX network and, where that's not available, it will connect to Sprint's EV-DO network. FreedomPop customers who want EV-DO connections will need to pay a little more: 2 GB of WiMAX data through FreedomPop costs $17.99 and 2 GB of EV-DO data costs $19.99, and for 4 GB the WiMAX data will cost $28.99 and the EV-DO data will cost $34.99.
However, FreedomPop will continue to offer the first monthly 500 MB for free on both WiMAX and EV-DO. FreedomPop is selling Sprint's EV-DO connections as "nationwide 3G roaming." Subscribers will be able to change their plan between EV-DO/WiMAX service and WiMAX-only service at any time.
In other FreedomPop news, Stokols said the company currently plans to launch voice calling and text messaging services in the next six to 10 weeks through the company's previously announced deal with textPlus. Stokols declined to say how much FreedomPop would charge for voice calling and text messaging, though he confirmed those services would work over WiMAX and EV-DO data connections and not through Sprint's dedicated voice network.
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