WhatsApp will be offering free voice-call services beginning
second quarter of this year. In the ongoing Mobile World Congress
(MWC), it announced that the service will initially be available
on iOS and Android and will gradually be extended to Windows and
BLACKBERRY LTD (BBRY): Free Stock Analysis
CHINA MOBLE-ADR (CHL): Free Stock Analysis
FACEBOOK INC-A (FB): Free Stock Analysis
AT&T INC (T): Free Stock Analysis Report
To read this article on Zacks.com click here.
WhatsApp currently serves 450 million users. Per Facebook, the
text-based messaging service provider is adding 1 million users
on a daily basis, which will help it to reach the magic 1 billion
mark by mid-2015. This will make WhatsApp bigger than the world's
China Mobile (
Moreover, WhatsApp's free voice-call service will intensify
competition for telecom companies such as
. According to Bloomberg, worldwide telecom companies lost $32.5
billion in text fees due to free services like WhatsApp in 2013.
WhatsApp's free service is expected to further erode their voice
revenues in the long run.
However, despite this anticipated strong growth in user base and
market share gains WhatsApp is not expected to earn significant
revenues over the next few years. Currently, the company's
text-messaging service is offered free for the first year and
charges a meager 99 cents from the second year.
WhatsApp developers are also well-known for their aversion to
advertisements. Hence, its decision to offer free voice-call
service is expected to increase Facebook's operating expenses,
However, Facebook is not worried. According to its Chief
Executive Officer (CEO) Mark Zuckerberg, WhatsApp's only aim
should be to continue to add users rapidly and the addition of
voice-call services will help it to do so in the long run.
In the MWC, he not only defended Facebook's decision to pay a
hefty $19.0 billion for WhatsApp, but also said that the service
is much more valuable than what it is paying for. Per Facebook,
WhatsApp is an important part of the company's Internet.org
initiative, which aims at providing Internet access to billions
of people at low cost.
As part of the initiative, Facebook is seeking partnership with
three to five wireless carriers who will roll out telecom
networks and offer data services at affordable prices
particularly in developing countries. This will help to connect
billions of people who will be able to access basic data services
such as search and Facebook.
Facebook and WhatsApp said that they will encourage users to move
to data plans, which will boost telecom revenues. Nonetheless, we
believe this initiative will take a considerable time to earn
noticeable revenues. Moreover, data security and government
regulations are major headwinds. These factors may prevent major
wireless carriers, particularly in the U.S. from joining this
Nevertheless, Facebook is already partnering on a regional basis
(in Paraguay and Philippines). We believe WhatsApp's significant
international presence, particularly in Asia and Europe, will
expand Facebook's footprint in these regions over the long run.
Currently, Facebook has a Zacks Rank #2 (Buy).