Updated: For a long time we have been skeptical of the mobile virtual network provider (MVNO) model, pointing out repeatedly that it is a business not for the faint of heart and needs pockets as deep as a sub-saharan well.
Perhaps, that is why we are not the least bit surprised by Amp’d Mobile filing for bankruptcy. Rafat Ali, who first reported the news of bankruptcy points out that Amp’d owes Verizon Wireless about $33 million. Other creditors include Motorola which is owed $16 million, Vivendi ($10 million,) BestBuy ($8 million,) MTV Networks ($1.8 million) and a whole sundry of others bringing the total to $100 million. The total assets of the company are lower than that amount.
Katie had been hearing some rumblings about the mess at Amp’d, and had reported about their troubles last month. First there was news that the CEO Peter Adderton was out. And then he was not. And now this bankruptcy filing.
Amp’d had raised $360 million in funding, but in recent days ran into strong headwinds of reality, as it chased growth. “A variety of sources say that there is trouble brewing, mostly around the issue of subscribers. Our sources say that lack of stringent credit checks and other issues have resulted in a ‘collections nightmare’ as one source put it,” is how Katie put it in her previous post.
The company in a statement emailed to us says:
As a result of our rapid growth, our back-end infrastructure was unable to keep up with customer demand. We are taking this step as a necessary and responsible action to sustain and strengthen our momentum in the market place. We expect to continue normal business operations throughout the reorganization process. We are confident that we will emerge from this stronger than ever for the following reasons:
The company says it “working with one of Amp’d Mobile’s largest investors to obtain debtor-in-possession financing.” The management team is large intact, and they will “continue to focus on improving and scaling our backend infrastructure. We are committed to assuring Amp’d Mobile services remain uninterrupted and will continue to provide our customers with the best service possible.”
Amp’d is not the first MVNO to run into trouble. Cool.prepaid and ESPN Mobile are two other examples of MVNO-no-no. And does anyone remember Xero? With Amp’d restructuring, Helio is the only high end MVNO left standing, and even they are costing their parents, Earthlink and SK Telecom some serious money, though SK seems to be pretty committed to this JV.