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Amp'd Mobile Hits the Wall and Files Chapter 11 Bankruptcy Protection| June 4, 2007 | Wireless Services - U.S. | Competitive Intelligence Report
On June 1st Amp’d Mobile filed for protection under Chapter 11 bankruptcy to restructure its business. The MVNO states that it will continue with normal operations. Analytical Summary • Current Perspective: Negative on Amp’d Mobile’s filing of Chapter 11 bankruptcy protection, because it’s a public admission of the problems at the MVNO. Despite stating that operations will continue, the company faces a list of creditors totaling over $100 million in debt, the largest being Verizon Wireless with over $33 million owed. Still, the company’s disclosure of further investor debtor financing signals confidence in the company, and through Chapter 11, it can shed debt. However, that’s in the future; the here and now presents its own challenges of retaining subscribers, shedding staff and keeping its service commitments. • Vendor Importance: Very high to Amp’d Mobile, because Chapter 11 is not necessarily throwing in the towel, but rather an opportunity to continue operations and repay creditors concurrently through a court-approved plan of reorganization. However, growth will invariably be curtailed and the company has to worry more about its existing subscriber base churn in light of this significant and highly covered news event. • Market Impact: Very high on the MVNO market as Amp’d is the second high-flying MVNO to hit the wall. As a result, MVNOs will all have an uphill battle in proving that their own particular spin on a wireless niche is different and a better bet. Further, the reason for failure is far different from Mobile ESPN, which failed to attract subscribers: the Amp’d crash demonstrates that even gaining lucrative subscribers ($100+ ARPU) is not enough to ensure success.
• Helio and any new MVNO should learn from the Amp’d lessons and finetune its operations to avoid duplicating any of those pitfalls. Helio should aggressively target Amp’d postpaid subscribers since the two MVNOs largely share the same target demographic. • Virgin Mobile should aggressively go after Amp’d Pay As you Go subscribers and play up Amp’d Mobile’s precarious financial problems. Through new market messaging, it should tout its reasonably priced handsets and plans. • Sprint and T-Mobile needs to monitor Amp’d Mobile’s actions and try to pick off any churning subscribers on data and voice value. • Verizon Wireless should consider purchasing Amp’d Mobile outright down the line if it eventually rights itself. By integrating Amp’d in as a business unit (much like Boost Mobile within Sprint), the carrier has a readily available organization to address a growth market without having to adjust its mainstream focus. Moreover, the high ARPU bearing customers have already been acquired by Amp’d and can eventually move service revenue metrics.
• Existing Amp’d Mobile postpaid subscribers should not exit their contracts with Amp’d yet since Chapter 11 does not mean the company will cease operations. Rather, service will continue and breaking the contract will be costly since Amp’d early termination fee (ETF) is $150. • Potential Amp’d subscribers should be wary of signing for postpaid service as an 18 month commitment is required. However, Amp’d prepaid plans still are extremely competitive and no long term agreement is required. |
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