FreeUP Mobile is aiming at the price-sensitive segment of the prepaid market by offering subscribers a way to reduce or eliminate their monthly bills via ads and other rewards.
The company, which is launching today after several weeks of testing, said that its subscribers can earn discounts on their bill by using the FreeUP app to download coupons for restaurants and stores, complete surveys, shop online, download mobile apps or refer friends and family members.
"We looked around the MVNOs and saw the opportunity for a cellular service with a tier one network, BYOD, a SIM card and all that to be married to a rewards program that allows subscribers to earn either by taking an action or spending money through our channels," said founder and CEO Rod Nakjavani.
iOS and Android versions of the FreeUP app are available. The company is creating a prepaid dealer channel and marketing online through paid Facebook ads, on Amazon and at WhistleOut.com. Two particularly attractive sectors are college kids and complementing the Lifeline program, which only gives one phone to a household.
FreeUP will generate revenue from small margins on the prepaid accounts and through its relationships with its rewards partners, which it reaches through a card-link program. There are four subscription price points: $10, $15, $25 and $40 per month. Nakjavani said that testing suggests subscribers will earn between $10 and $40 using the service, with the average at about $25. Earnings in any month greater than the subscriber's monthly charges cycle to the next month, while balances are deducted from credit cards or other payment methods kept on file.
Nakjavani, who founded Simple Mobile in 2009, declined to identify the MVNO’s carrier partner, though signs point to AT&T. He pegs the prepaid market in the United States at about 80 million people and says FreeUP is capable of growing to 3 million to 5 million subscribers—between 5% and 10% of the prepaid market—within a few years. It will get there, Nakjavani says, because the wholesale price of carriage will drop and FreeUP will grow. One source of the growth will be reducing "friction" by proactively presenting opportunities instead of having subscribers search for them.
Jeff Moore, the principal of Wave7 Research, said the concept is intriguing. "The main hurdle may be people not willing to take surveys or visit select vendors to get the discounts," Moore said. "On the flip side, one advantage they may have is that some of principals behind FreeUP have back office and software skills that some other MVNOs do not have, such as the FreeUP mobile app and platform that they have is proprietary to FreeUP and something I don't think is easy to replicate."