| MEXICO CITY
MEXICO CITY Oct 12 A U.S. wireless startup
backed by a co-founder of web phone service Skype has teamed up
with Mexican pay-TV provider Dish Mexico to lure subscribers
with free call and data plans in the country's growing and
increasingly competitive mobile market.
FreedomPop, a five-year-old firm backed by Niklas Zennstrom,
will take advantage of a sweeping telecoms reform that gave
mobile virtual network operators (MVNOs) access to the network
of billionaire Carlos Slim's America Movil at regulated prices.
MVNOs, like Virgin Mobile, which has just a 0.6 percent
market share in Mexico, rent capacity from companies with
existing mobile networks. L.A.-based FreedomPop, though, is
seeking to sharply undercut them and the carriers, by giving
about half its users a package of calls, texts and data for
"The business model part is really what differentiates us,"
co-founder Stephen Stokols said in a telephone interview, adding
that the free plan would have a limit on data and was likely to
be of interest to half or a little less of its overall customer
The company's other subscribers will pay for services such
as extra data, microfinance loans, online security and the
purchase of extra phone numbers.
MVNOs have historically struggled to gain ground in Mexico,
with just 0.8 percent of Mexico's mobile subscriptions,
according to the latest data from regulator the Federal
Telecommunications Institute (IFT).
That compares to the United States, where the largest MVNO,
TracFone, owned by billionaire Slim, has a hefty 25 million
Despite Mexico's reform, Slim's telecoms giant still holds
almost 70 percent of the market there.
Competition is also getting tougher. Mexico's operators have
been in a price war since the reform brought U.S. carrier AT&T
Inc into the market.
Carlos de Legarreta, an analyst at GBM, said that, unlike in
other countries, MVNOs in Mexico have not focused on market
niches and targeted advertising.
"I think its more an issue of competition, of commercial
strategy," he said.
Stokols said that there was a "good dynamic" because of the
reform and FreedomPop's partnership with Dish Mexico, Mexico's
second-largest pay TV provider, majority owned by the Vargas
family's MVS Comunicaciones. EchoStar Corp also has a
minority stake in the venture.
MVS spokesman Felipe Chao said that the precise workings of
the alliance were still in the planning stage.
FreedomPop, which also operates in Spain and Britain,
earlier this year got $50 million in funding from LetterOne, the
investment vehicle owned by Russian telecoms billionaire Mikhail
Fridman, to help pay for international growth.
The startup is also backed by Zennstrom's venture capital
The Mexico deal is a blueprint for further services in other
countries which will be announced next year, Stokols said.
FreedomPop increases its margin by offloading traffic onto
Wi-Fi hotspots when it can. In 2015, Alphabet Inc's
Google launched an experimental wireless service called Project
Fi which switched between Wi-Fi and cellular networks to cut
There are still doubts about the technology that allows
seamless switching, but Stokols said they will soon disappear
given rapid advances in the area.
"It's crystal clear where were going...in two years that
question's going to seem ridiculous," Stokols said.
(Reporting by Christine Murray; Editing by Christian Plumb and