WhatsApp Voice Means Trouble for Telecom Carriers

The company plans to offer a voice service in the second quarter

   
WhatsApp Voice Means Trouble for Telecom Carriers

Think Facebook’s (FB) $19 billion deal for WhatsApp was too rich? Well, with a platform of 465 million users, the messaging service has some interesting possibilities to expand its business.

WhatsApp 185 WhatsApp Voice Means Trouble for Telecom CarriersConsider that the company is now planning to launch a voice-calling service in the second quarter. This is according to a speech from WhatsApp CEO Jan Koum (at the Mobile World Congress in Barcelona).

A WhatsApp voice app seems like a natural thing to do (the current app already allows sending recorded voice messages). Yet Jan was far from clear on the features. But he did mention that the focus would be on “simplicity,” which has been a winner for the core WhatsApp system.

In other words, WhatsApp voice is likely to have no frills — just seamless ease when it comes to making calls. There will also probably be minimal load in terms of bandwidth use.

The first version will be on Apple’s (AAPL) iPhone and Google’s (GOOG) Android platform. Later on, WhatsApp voice will be available on Microsoft’s (MSFT) Windows Phone and even on the BlackBerry (BBRY) system. Striving for a multi-platform approach has been a key strategy for WhatsApp.

It also looks like Whatsapp voice will be free, at least in the early stages.

This should not be a surprise. Right now, the focus is on continuing to ramp up the user base. In Jan’s presentation, he set out the goal for reaching at least 2 billion users. And at the current rate, he may hit that number within a few years.

Now it’s true that the company already has a business model, requiring its users to pay an annual $1 fee after the first year. Yet it is far from clear how much revenue this is currently generating. In Facebook’s conference call on the deal, there was no mention of the financials.

But there’s one thing that’s clear: WhatsApp has wreaked havoc on a key business for telecom carriers — SMS. Keep in mind that the company currently accounts for all of the telecom volume. Every day, WhatsApp processes 19 million messages sent and 34 billion received.

But WhatsApp voice will now hit an even bigger market. The players not only include wireless carriers like AT&T (T) and Verizon (VZ) but also VOIP players like Microsoft’s Skype. If the WhatsApp voice app gets traction — which is has a good chance happening because of the massive user base — it could prove extremely disruptive. In fact, Korean-based Kakao already offers voice calling for its messaging service and it appears to have been a popular feature for users.

It’s kind of scary stuff for legacy telecom companies. And in light of this, it is getting clearer why Facebook’s Mark Zuckerberg was willing to go big on his offer for WhatsApp.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2014/02/whatsapp-voice-fb/.

©2014 InvestorPlace Media, LLC

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