Blacknbengal
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Bankrupt wireless company blames deadbeats
Amp'd Mobile has had great success in attracting youthful subscribers, but too few customers have bothered to pay their cell-phone bills.
The gold rush of specialized cell-phone companies targeting niche audiences took another hit June 1 as Amp'd Mobile, an edgy upstart geared to free-spending youths, filed for Chapter 11 bankruptcy protection.
Apparently, those free-spending youths don't care much for paying their cell-phone bills. A court motion filed June 4 explains that Amp'd "experienced an unprecedented growth of subscribers" between November 2006 and February after running ads on MTV about the wireless phone company's lineup of mobile music and video content.
Collecting payments from these subscribers proved to be a challenge, however.
"Approximately 90% of the debtor's customers were on 18-month service contracts," according to the filing. "The debtor began to find a host of credit and collections problems (that) contributed ultimately to a liquidity crisis."
By May, the number of nonpaying customers reached 80,000. That's nearly half of the current Amp'd customer base of 175,000 subscribers.
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The filing in U.S. Bankruptcy Court in Delaware, which says the company owes more than $100 million to creditors, marks another setback for the fledgling market of "virtual" cell companies that lease network capacity from the nation's big wireless operators to reach purportedly underserved market segments.
The biggest flameout came last year as Walt Disney (DIS, news, msgs) pulled the plug on Mobile ESPN, a flashy sports service that was recently relaunched as part of Verizon Wireless' multimedia lineup.
The bankruptcy filing will have ramifications for other virtual wireless operators, now numbering about 40 in the U.S. alone, up from about 33 a year ago. "It just means that some of the hype (around virtual operators) is gone," says Tole Hart, an analyst with consultancy Gartner. "We are in the trough of disillusionment."
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Amp'd Mobile has had great success in attracting youthful subscribers, but too few customers have bothered to pay their cell-phone bills.
The gold rush of specialized cell-phone companies targeting niche audiences took another hit June 1 as Amp'd Mobile, an edgy upstart geared to free-spending youths, filed for Chapter 11 bankruptcy protection.
Apparently, those free-spending youths don't care much for paying their cell-phone bills. A court motion filed June 4 explains that Amp'd "experienced an unprecedented growth of subscribers" between November 2006 and February after running ads on MTV about the wireless phone company's lineup of mobile music and video content.
Collecting payments from these subscribers proved to be a challenge, however.
"Approximately 90% of the debtor's customers were on 18-month service contracts," according to the filing. "The debtor began to find a host of credit and collections problems (that) contributed ultimately to a liquidity crisis."
By May, the number of nonpaying customers reached 80,000. That's nearly half of the current Amp'd customer base of 175,000 subscribers.
Get free, real-time stock quotes on MSN Money
The filing in U.S. Bankruptcy Court in Delaware, which says the company owes more than $100 million to creditors, marks another setback for the fledgling market of "virtual" cell companies that lease network capacity from the nation's big wireless operators to reach purportedly underserved market segments.
The biggest flameout came last year as Walt Disney (DIS, news, msgs) pulled the plug on Mobile ESPN, a flashy sports service that was recently relaunched as part of Verizon Wireless' multimedia lineup.
The bankruptcy filing will have ramifications for other virtual wireless operators, now numbering about 40 in the U.S. alone, up from about 33 a year ago. "It just means that some of the hype (around virtual operators) is gone," says Tole Hart, an analyst with consultancy Gartner. "We are in the trough of disillusionment."
Rest of Story
