Ampd Goes Bankrupd

By Tara Seals

Down but not yet out: After 17 months of fast growth, hipster MVNO Amp’d Mobile filed a petition for Chapter 11 bankruptcy late Friday night, blaming a lack of OSS/billing scalability for its troubles.

To finance a back-end infrastructure overhaul necessary to maintain operations, the company is expecting to restructure its more than $100 million in debt.

The Verizon Wireless-based reseller has issued an official statement saying: 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 marketplace.

With 200,000 subscribers and an ARPU of around $100, Amp’d has recouped some of the $360 million in investments from MTV Networks, Universal Music Group and others. But the content and multimedia-focused Ampd still owes about $33 million to underlying network provider Verizon, $16 million to handset partner Motorola Inc., and various sums to Universal, BestBuy and MTV presumably leaving it without the available capital to beef up the billing and order systems to operate at scale, since the companys total assets are less than that sum.

Sources inside the company have been reported as saying that a collections maelstrom arising from its postpaid billing model has forced the MVNOs hand: In the quest to add customers, stringent credit checks werent performed, leading to a plethora of costly bad-debt subscribers. Meanwhile, subscribers have come forward to complain of billing inaccuracies and timeliness issues.

Is it time to add Ampd to the dead pool? The company itself stressed that it is not going out of business and said it would continue normal business operations throughout the reorganization process, while Amp’d Mobile’s senior management team remains largely intact. The blogosphere, meanwhile, is more skeptical, with opinion split evenly as to Ampd continuing prospects and ability to emerge unscathed from Chapter 11.

The viability of the MVNO model in general has come under fire of late, after the high-profile demise of Mobile ESPN and the fact that youth-oriented Virgin Mobile USA remains not only unprofitable, but more than $500 million in debt after five years in business (as it revealed in its IPO filings). The virtual reseller approach hinges on the ability to create a strong enough marketing brand to profitably attract and retain a highly segmented set of users that has been overlooked by the big network operators. With no network infrastructure to support and a wide variety of mobile virtual network enablers out there to support the billing end of things, the idea is to be able to offer more personalized, tailored services than the mass market wireless companies. However, the business has proven to need much deeper pockets than originally thought.

For its part, Ampd made the decision to handle billing itself (based on systems from bcgi) and to offer postpaid calling plans. It also has made 3G content and enhanced applications such as social networking and Web-mobile integration its primary focus, hoping to capture the tech-savvy 20-something market. Will these business realities play out in Ampds favor? Theres no word on restructuring plans yet, so industry watchers will have to wait and see.

Amp’d Mobile get.ampd.com