Free calls coming for WhatsApp

WhatsApp will add free voice-call services for its 450 million customers later this year, laying down a new challenge to telecom network operators just days after Facebook Inc scooped it up for US$19 billion (NZ$23b).

The text-based messaging service aims to let users make calls by the second quarter, expanding its appeal to help it hit a billion users, WhatsApp CEO Jan Koum said at the Mobile World Congress in Barcelona.

Buying WhatsApp has cemented Facebook's involvement in messaging, which for many people was their earliest experience with the mobile internet. Adding voice services moved the social network into another core function on a smartphone.

On Monday, chief executive Mark Zuckerberg defended the price paid for a messaging service with negligible revenue. He argued that rival services such as South Korea's KakaoTalk and Naver's LINE were already 'monetising' at a rate of $2 to $3 in revenue per user per year, despite being in the early stages of growth.

Media reports put WhatsApp's revenue at about US$20 million (NZ$24m) in 2013.

'I actually think that by itself it's worth more than 19 billion,' Zuckerberg told the Mobile World Congress.

'Even just independently, I think it's a good bet.

'By being a part of Facebook, it makes it so they can focus for the next five years or so purely on adding more people.'

WhatsApp's move into voice calls was unlikely to sit well with telecoms carriers.

WhatsApp and its rivals, like KakaoTalk, China's WeChat, and Viber, have won over telecom operators' customers in recent years by offering a free option to text messaging.

Telecom providers globally generated revenue of about US$120b (NZ$145b) from text messaging last year, according to market researcher Ovum.

Adding free calls threatens another telecom revenue source, which has been declining anyway as carriers' tweak tariffs to focus on mobile data instead of calls.

WITH, NOT AGAINST

Since the advent a decade ago of Skype's voice over internet service, which Microsoft Corp has acquired, and the rise of internet service providers like Google Inc, telecom bosses have gotten used to facing challengers whose services piggyback on their networks. But carriers complain that the rivals are not subject to the same national regulations.

Mats Granryd, the CEO of Swedish mobile operator Tele2, said he was happy to partner with the likes of WhatsApp because of the additional data traffic they generate.

But he shared the concerns of other network operators that they must operate under strict national regulations that internet companies were not subject to.

'They (internet firms) need to be regulated a little bit more and we need to be regulated a little bit less,' said Jo Lunder, who headed Russian mobile network operator VimpelCom.

Vodafone CEO Vittorio Colao said he did not understand how such an important acquisition as the Facebook-WhatsApp deal could go unchallenged at a time when European network operators were facing intense regulatory scrutiny.

'These types of deal are a clear indication that the world is changing and the regulations don't fit anymore,' Colao said on the sidelines of the conference.

Both Facebook and WhatsApp CEOs have cast themselves as partners to telecoms network operators.

On Monday, Koum also announced a partnership with E-Plus, the German subsidiary of Dutch group KPN, under which it will launch a WhatsApp-branded mobile service in Germany.

The European Parliament was set to vote on Monday night on a package of proposed telecoms market reforms which among other provisions would restrict the ability of carriers to charge internet companies like Facebook to give them an enhanced service in handling their network traffic.

LONG TERM INVESTMENT

Arguing for long-term growth over short-term gain, Facebook CEO Mark Zuckerberg said Monday that his company's US$19 billion (NZ$23b) deal to buy the messaging service WhatsApp fits into a larger goal of connecting more people to the internet around the world.

WhatsApp may ultimately be worth more than the eye-popping price Facebook agreed to pay last week, based on the revenue that other messaging services were earning, Zuckerberg insisted during a talk at the Mobile World Congress in Barcelona.

But he added that the acquisition meant WhatsApp co-founder Jan Koum could concentrate on continuing to expand the service's international user base - now about 450 million and growing fast - rather than worry about how to make money from the operation.

Zuckerberg also announced several new initiatives by an industry alliance called Internet.org, which he formed last year to work on improving internet access in undeveloped regions.

He said he's looking for telecommunications company partners to help deliver a free or low-cost service that would include a stripped-down version of Facebook along with weather forecasts and other information.

'I think we're probably going to lose money on this for quite a while,' he said of the Internet.org effort, but added that 'over time, if we can deliver this, there probably will be some benefit for Facebook' and other companies involved in the effort.

Facebook was paying US$16 billion (NZ$19b) in cash and stock for WhatsApp, while promising an additional US$3b (NZ$4b) in restricted stock for WhatsApp founders and employees who stay with the company over the next few years.

Zuckerberg initially declined comment when an audience member asked if he planned another bid for Snapchat, another popular messaging service that reportedly turned down a US$3b (NZ$4b) offer from Facebook last year. But he then appeared to put a damper on speculation of other big deals, saying: 'After buying a company for US$16 billion, you're probably done for a while.'

- Reuters and MCT

- MCT

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