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.
If this story interests you, check out our
upcoming conference:
Mobilize — Mobile Web Today and Tomorrow
12 comments so far
7:37 AM PT
“Back-end infrastructure was not able to meet demand”?!? Isn’t that the point of an MVNO…that you leverage SOMEONE ELSE’S INFRASTRUCTURE?!!! Dumb f%cknuts all the way around. Hopefully we’re at bust 2.0 now…we need another Silicon Valley colonic.
9:46 AM PT
Carrier agnostic off-deck app is the way to go…
check out (link)
9:47 AM PT
Which MVNO do you think has better chance of survival ?. Is Disney a good bet ?. I heard Virgin is not doing very well either.
12:14 AM PT
who uses these friggin phones anyhow?
9:43 AM PT
“scaling our backend infrastructure” = getting backend infrastructure providers to write off debt.
10:05 AM PT
I love when they talk about “reconstruction”, usually means a large group of poor souls is going to get the boot because of poor managment/planning.
12:27 AM PT
Amp’d is DEN (Digital Entertainment Network) 2.0… anyone that led the Amp’d investment for their respective funds should be fired. Adderton was fired from Boost… reason.. he is a marketing wank.. thats it.. nothing more.
Helio is next.
10:02 PM PT
Peter Adderton is a smart guy. Correct me if I’m wrong Kyn, but have you built out an MVNO across multiple countries and sold it off to Nextel before? Oh no? maybe you should reserve your comments about Peter A until after you’ve done the same.
Now as for amp’d going into protection — MVNO’s hit billing snags all the time. A billing system is their most important asset. This doesn’t seem like an unworkable issue. It’s not like they put up their shingle and nobody walked in the door to buy their stuff…
11:47 AM PT
Despite Ampd’s difficulties, they and other MVNOs have shown that there is real demand by the youth market for edgier rich media content and social networking/connected experiences on mobile phones in the US.
The issue is that the MVNOs’ massive cost structures don’t support the business model which is better suited to off-deck mobile internet sites that provide UGC/edgy content to consumers for free, supported by an ad model and a much leaner cost structure.
11:02 PM PT
adam - amp’d didn’t give content away for free. they had a 100$ ARPU…
10:52 AM PT
I heard hellohelio.net was offering people who got ax’ed by amp’d a free transition to helio and also a free phone.
4:20 AM PT
Buyer beware if you’re thinking about buying from Helio or HelloHelio. They didn’t honor their return policy. I returned my phones within 30 days in order to receive a 100% refund and got nothing but the run around from each rep. I spoke to. They told me that I wasn’t due a refund because my credit card was never charged. My card was charged and I have the credit card statement as proof and since when does Helio give out free Oceans. It’s been two months and still no refund.
Leave a Comment