FreedomPop aims to wrap up M&A talks in the next 4-6 weeks, CEO says

Sprint (NYSE: S) MVNO FreedomPop expects to know whether it will enter into a strategic deal with another company in the next four to six weeks, according to CEO Stephen Stokols. The company is also pushing ahead with its normal business, unveiling a new software feature that will make the handoff between VoIP and cellular calls more seamless.

In an interview with FierceWireless, Stokols said that the company has a formal M&A process set up with The Raine Group, the merchant bank that is the U.S. adviser to Sprint parent SoftBank. Stokols said that initially, last fall, FreedomPop was talking with two or three interested parties about a deal but that the number then expanded. It has since shrunk as the company has sought to settle on a suitor.

"I'm expecting some resolution one way or the other," he said, "hopefully" in the next four to six weeks, though the process could drag out longer.

"We're at the point now where we're further down the process with a party of our choice," Stokols added. At the same time, in parallel, FreedomPop has been in discussion with venture capital firms about a "pretty significant" funding round, though he declined to provide details. The VC funding possibility is there if FreedomPop ends up not making some kind of strategic transaction, Stokols said.  

Overall, Stokols noted, the M&A interest has shown that the industry thinks highly of FreedomPop's freemium business model. "Telcos are looking at it from a defensive perspective," he said. "Other guys are looking at it from an offensive perspective, if they want to enter the space. It's a good validation that we're in a sweet spot."

Stokols said that FreedomPop expects to count 1 million total subscribers in the third quarter (in January he said it would be in the second or third quarter). While he declined to provide the company's 2014 revenue, he said that the company is growing at a double-digit pace month over month. According to Stokols, the company's subscriber additions declined only once in the past 15 months on a month-over-month basis.

FreedomPop has built its business model around a service that gives smartphone customers 500 MB of LTE data, 200 voice minutes and 500 texts per month for free. Beyond that, customers can pay $10 per GB of data or $20 per month for unlimited voice, texting and data. However, customers' data speeds are reduced to 3G speeds after the first 1 GB of usage.

In an effort to expand and improve its service, FreedomPop today launched what it calls "Premium Voice" technology, a software-centric approach to let customers seamlessly switch between VoIP and cellular networks regardless of what device they have. New customers will have access to Premium Voice today and existing customers can upgrade to Premium Voice via an app update in Google Play. Premium Voice will be available for iOS later in this year.

Basically, when a VoIP connection is too slow the technology will start a parallel call to connect to Sprint's CDMA 1X voice network and then will drop the VoIP connection so that the call is uninterrupted. Stokols said the software-centric approach, implemented down at the APK level, makes it more of a mass market proposition than fellow Sprint MVNO Republic Wireless' similar technology, which is hardware-based. Stokols also said that the solution could make FreedomPop more palatable to the small-and-medium-sized-business market that "needs to have a slightly higher quality assurance."

Premium Voice will be available on all FreedomPop plans but might cost some customers more than others. Customers on the company's free plan will get the technology free for one month but then will need to pay $2.99 per month for the feature. Customers on the unlimited plan will not need to pay for the feature.

Stokols said the company aims to have a distribution deal signed with a major U.S. big-box retailer well ahead of the holiday shopping season, and then with another by the holidays, but he said that the M&A talks have complicated those negotiations.

FreedomPop still plans to launch its international expansion in a "major" European market early in the second quarter, though Stokols declined again to name the market. The company has four new European carrier partners in five countries, including KPN and Deutsche Telekom's T-Mobile (FreedomPop already announced plans to launch with KPN in Belgium). The company has announced plans to expand to Spain, Austria, the Netherlands, and two additional countries to be announced later. Stokols has said that although KPN in Belgium was the first international partner FreedomPop signed with, the company now plans to launch in a larger market than Belgium.

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