Amp’d Mobile in Bankruptcy

Amp’d Mobile, one of the highest profile Mobile Virtual operators (MVNO), has filed for Chapter 11 bankruptcy protection. According to the site, “The company says that it has had to carry out the restructuring due to fast growth which its back-end infrastructure has not been able to manage.”

Amp’d Mobile

What fast growth? Amp’d Mobile is reported to have only about 200,000 subscribers. That is nothing compared to the approximately 60 million customers that AT&T and Verizon Wireless each has. Second, I thought it uses the back-end infrastructure of Verizon Wireless, although back-end infrastructure can mean many different things.

Amp’d is targeted at the cool, hip youth with services such as Live TV, Radio, song downloads, and even Sports. However, Amp’d has a lot of trouble attracting customers (It aint no boost mobile and, remember ESPN Mobile!).

The whole point of MVNO is to focus on a niche group (say, sports-fans), where the service provider can acquire customers cheaper than a mass-market service provider such as Verizon Wireless or AT&T can. This is done by targeted marketing in mediums that specialize in the target market (for example, target youth through youth magazines).

However, Amp’d I think did more mainstream advertising, spending considerable money for little return. Advertising in things like the Amp’d Mobile AMA Supercross Series probably didn’t work. In fact, I heard that after more than 6 months of operation, Amp’d had less than 5000 customers (that’s right, 5k customers, no typo here).

So, what’s a MVNO to do when vendor bills are piling high – According to the court statement, Amp’d currently owes $33 million to Verizon Wireless, $16 million to Motorola and $10 million to Vivendi. No Wonder they ran out of cash.

BusinessWeek’s Olga Kharif in Amp’d Files for Bankruptcy says that “The company hopes to rise up from ashes and yet become a hot wireless services provider, a la Leap, which emerged out of bankruptcy in 2004 and is revving up its engines.” This is going to be no simple feat. The MVNO business is extremely difficult, especially now that the US cellular market is nearing saturation.

RIP Amp’d Mobile!

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