We ask for your phone number because that is how WhatsApp routes chat messages between you and your contacts, similar to how the SMS system would.
In order to prevent and reduce unsolicited spam messages, as well as to improve your in-app experience, WhatsApp uses the phone numbers from your phone's address book. WhatsApp does not store any of your information on anyone else's systems. WhatsApp looks at the phone numbers in your address book and then checks to see which of those numbers are verified in WhatsApp. This allows any WhatsApp users from your address book to appear as contacts in your Favorites list (Contacts tab on Android) and the Chatsscreen. During this entire process, only phone numbers are sent to WhatsApp for lookup, securely, over an encrypted connection. No other information, such as names, emails, and addresses are sent. So that you know who you are chatting with, the app then displays the names from your address book.
We encourage you to read our Blog post on "Why we don't sell ads". It explains our view towards user privacy, what we expect from our users, and what they should expect from us.
WhatsApp Support Team