Rebtel Makes Mobile VoIP Pay Off

By Paula Bernier, Executive Editor, TMC  |  May 22, 2012

This article originally appeared in the May 2012 issue of INTERNET TELEPHONY magazine.

When it comes to VoIP services, Skype seems to get lots of attention. But a company called Rebtel is attacking VoIP from a mobile perspective, and its mobile VoIP services are ringing up average revenues per user of $23 to $24 a month. That’s much higher than Skype’s ARPU, which is around $8, Rebtel CEO Andreas Bernstrom tells INTERNET TELEPHONY.

Rebel got its start in 2006 at the hands of the two founders of Sendit, an early mobile Internet company that went public and later was bought by Microsoft (News - Alert) for $150 million. Those founders are Hjalmar Winblad, who is now a Rebtel board member, and Jonas Lindroth, who engineered the company’s system architecture. These gentlemen saw Skype and its PC-based approach to VoIP, and they felt a mobile solution would be much stronger. So they set out to create a company that offers free or low-cost calls over cellular and Wi-Fi networks via mobile apps for Android, BlackBerry (News - Alert), Microsoft Windows and iOS operating systems.

Today Rebtel is the world’s second largest mobile VoIP company (after Skype, of course).

It provides low-cost international calling from mobile devices to landlines, and vice versa, and has both PC and smartphone products. Importantly, Rebtel has termination agreements in place, so its users can call anyone on the Rebtel network or any other network.

Initially the company’s sweet spot was first- and second-generation immigrants. But now Rebtel also targets business travelers and what the company refers to as digerati. Rebtel has 15 million users, about 70 percent of whom are in the U.S. The other 30 percent of the company’s users are pretty evenly distributed between Canada, the U.K. and the rest of Europe. And Rebtel is growing its customer base at a rate of about 500,000 users a month. Bernstrom adds that the customer base at Rebtel includes mostly heavy users – in the 300 to 400 hours a month range; because users are mobile, he adds, they can use the service anywhere.

Infonetics (News - Alert) Research says that while the adoption of mobile VoIP services is growing rapidly, with free applications and extremely low revenue from users, it is tricky for application providers without the deep pockets of larger companies like Google (News - Alert), Microsoft, and Telefónica to have a sustainable long-term business model.

"Despite the fact that we expect mobile VoIP subscribers to grow nearly 10-fold from 2010 to 2015, there is relatively little money to be made from it in the near term," says Diane Myers, directing analyst for VoIP and IMS at Infonetics Research (News - Alert).

Bernstrom agrees that the tricky part of mobile VoIP is finding a business model that works. Rebtel started with a pay-to-play model, he says, but then added free services to create a funnel for its for-pay options. He adds that international calling and international SMS remain a $150-200 business. And he says that Rebtel takes a 35 percent gross margin on what it buys its traffic for, and it’s still able to come in with prices that are 40 to 50 percent cheaper than Skype.

Rebtel has been profitable since 2010. Company revenues in 2011 grew more than 55 percent to reach $60 million. And it expects to see revenues of around $85 million this year.

“2011 was a great year for us,” Bernstrom said following the release of the financial results. “Our new set of international calling apps with KeepTalking technology were well received; we generated 13 times more downloads in Q4 than Q3 as a result of the launch. We also expanded our workforce by almost 50 percent and increased our user base by 50 percent to 15 million users. 2012 will be more of the same. We are focused on growing our user base, we aim to add up to 10 million to our user base this year, as well as maintaining high revenue run rates and ensuring our apps are viral as they can be.”

To help continue to drive that growth, Rebtel is poised to expand its product offerings on several fronts.

By May it aims to have DVD/HD quality voice on both its free and pay services. By the end of the second quarter, Rebtel expects to have extended its messaging suite to support rich media. And Bernstrom tells INTERNET TELEPHONY that Rebtel plans to bring video into the mix in the third quarter. The company will start its video with the introduction of a PC-based offer, but Rebtel plans to come out with video offerings for Android and iOS devices starting in the fourth quarter.


Edited by Stefania Viscusi