Sprint MVNO TextNow expands distribution, shifts away from Touch Mobile brand

Sprint (NYSE:S) MVNO TextNow is expanding its distribution by partnering with Fry's Electronics and accepting payments for its service at more than 10,000 locations nationwide. Meanwhile, TextNow, a no-contract service from Waterloo, Ont.-based startup Enflick, is also deemphasizing the Touch Mobile prepaid brand, which it launched in September 2014.

Ahead of the back-to-school shopping season, TextNow unveiled the partnership with Fry's, which will bring its service and phones into 34 locations across the country.

TextNow, which operates a Wi-Fi-first service, is also making it easier for credit-challenged customers to pay their monthly bills by accepting cash payments at over 10,000 locations nationwide. Starting in the next few weeks, TextNow customers will have a choice to pay and top up their accounts at a wide range of locations including Gates Petroleum, Sunoco, NMart and Circle K stores, among others.

TextNow also launched the 16 GB Samsung Galaxy S5, running Android 5.0 Lollipop, for $399 for a new version or $299 refurbished, significantly less than at other carriers. The company is also introducing the LG Electronics Volt for only $14. The entry-level Volt features a 4.7-inch screen, 8-megapixel camera and runs on the Android 4.4 KitKat operating system.

In an interview with FierceWireless, TextNow CEO Derek Ting said that when TextNow first started it was an online-only service and customers needed a bank account and debit card to pay for the service. However, some customers were uncomfortable with the online shopping experience and did not have access to debit or credit cards. Ting said that while the majority of TextNow's customers do have access to debit or credit cards, some don't. The expansion into Fry's and the ability to pay in cash at thousands of locations across the country will help the company alleviate those concerns, he said.

"A huge percentage of the population lives in a cash-based economy," Ting said. "Not being able to capture that is a lot of opportunity lost."

Ting added that many TextNow users pay for the service with prepaid debit or credit cards, which he said was an indication that the company needed to support cash-based payments.  

The expansion into Fry's will be "the first step of many steps" TextNow takes to expand its retail distribution, Ting said. He added that the company is working with some college campus bookstores to sell its service, including the University of California, Los Angeles, and Portland Community College to start.  

"In general, we want service to be easily accessible," Ting said.  

Meanwhile, Ting said the Touch Mobile brand is "still around" and is being sold by prepaid dealers in independent channels. TextNow launched it last year as a brand that only took cash-based payments. However, he noted that TextNow is a small company with one marketing budget.

"We find it's really prohibitive to our growth when we split our brands up," he said. So, Ting said, several months ago TextNow made the strategic decision to focus on TextNow as its main brand going forward because "we found ourselves having to do things twice."  

Going forward, Ting said, customers will be able to look at phones online and buy them in stores, and the company's retail and sales channels will work together.

TextNow started in 2009 as an over-the-top messaging service, similar to WhatsApp, and lets users send and receive unlimited text messages within the United States and Canada free of charge. The company offers customers a dedicated TextNow phone number, and because the service is cloud-based, users can use that number on their phones, tablets or the web to sync messages. TextNow launched as an app and expanded into the MVNO business last year by offering handsets under a no-contract model with service from Sprint.

Ting said the company is focused on leveraging the fact that the company's free app has been downloaded more than 58 million times. He said the company is experimenting with ways it can use the app to engage with users and get them to sign up for wireless service. Currently, users can order a phone from the app and in the near future TextNow will let users see nearby locations where they can buy service.  

Using the phones' native dialer, the company's service will route calls over Wi-Fi and, if no Wi-Fi is available, will then route calls over Sprint's LTE network as an IP-based call. If that network is not available, the company's software will route calls as an IP transmission over Sprint's 3G EV-DO network. If that network is not available, then the call will be transmitted over Sprint's 2G 1x network. The goal, explained company executives, is to reduce users' monthly expenses by using Wi-Fi networks.

The company optimizes not just for cost but for quality as well. The service's phones have proprietary technology to know if a Wi-Fi signal is weak and will not route calls or traffic over the Wi-Fi network and will instead automatically go to cellular if that is the case. Additionally, if the cellular connection is not strong, it will drop service down to CDMA 1x for voice.

When customers start a call on Wi-Fi, the call will automatically hand off to cellular and will be handed back to Wi-Fi seamlessly, Ting said. He said the company is still working on transitioning an IP-based cellular call to CDMA.  

In April TextNow revamped its plans. All of the plans come with unlimited voice and texting and unlimited 2G data. The plans start at $19 per month for 500 MB of EV-DO/LTE data and range up to $60 per month for 4 GB of EV-DO/LTE data. When customers use their allotment of 3G/LTE data, they simply get throttled down to 2G for the remainder of their billing cycle. TextNow extended that to all existing customers as well.

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