We knew that US music based MVNO Amp’d Mobile wasn’t in the best of condition, but it has been rather quick to file for Chapter XI bankruptcy, citing the need to re-build its back end infrastructure, and not having the money to do so, as the main reason.
The one year old start up said that it would continue business as usual, but it will find it hard to continue to fuel the advertising spend needed to keep growing. ‘We expect to continue normal business operations throughout the reorganization process. We are confident that we will emerge from this stronger than ever due to the strength of Amp’d Mobile’s brand and high customer demand for the product.’
During the reorganization process, the company will work with one of its existing investors to obtain debtor-in-possession financing and the management team is expected to remain largely intact. It is unclear exactly how much cash the company retains from its earlier investment rounds.
Amp’d investors includes Qualcomm, MTV and Universal Music Group, along with Columbia Capital, Highland Capital partners, Intel Capital, Quilvest Private Equity and Redpoint Ventures and the company was launched in late 2005 and rents airtime from Verizon Wireless and claims 200,000 subscribers. It has raised some $360 million so far.
Last September saw the demise of Disney’s ESPN Mobile and it became clear that many MVNOs were relying too much on the power of their brand and content, and needed to focus on the concrete benefits of low priced voice services, a move that Amp’d followed this January.
Amp’d managed to weather the storm and after initial mistakes claimed ARPU of $100, with $30 coming from data services, and in 2006 it signed up more than 100,000 subscribers, including 70,000 in the fourth quarter.
Although this was far less than its initial predictions, it was far better than previous sign up rates and Amp’d looked like it had seen the worst of its problems off.
It also signed distribution deals with Best Buy and Circuit City, but warned in January that it needs to average 25,000 net new subscribers a month to hit its target of an operating profit by the end of 2008.
Amp’d was also known to be working towards partnering Canada’s Telus and KDDI in Japan to launch versions of the service there, but not as an MVNO, instead with the cellcos taking the media services and re-branding them in an attack on the youth market.