Amp'd casts shadow over MVNO land

For a company that boasts subscriber additions of 20,000 per month and user revenues double the national average, the problems at Amp’d pose some tough questions for the rest of the MVNO sector.

The US MVNO filed for protection under Chapter 11 bankruptcy last week, claiming that its rapid growth meant the back end infrastructure was unable to keep up with customer demand.

But closer inspection of Amp’d predicament paints a slightly different picture.

As the company said, customer numbers were not the problem. Amp’d, which specifically targeted the youth and young professionals markets, recorded more than 200,000 subscribers at the end of the first quarter, 84 per cent of which were on a post paid contract.

Usage wasn’t a problem either. Impressively, the company recorded ARPU (Average Revenue per User) of $100 per month, compared with the industry average of $54, while data ARPU stood at $30, compared with the industry average of $6.74. Over half of that date expenditure came from content downloads, which is again, more than double the industry average.

The problem was that Amp’d’s contract customers didn’t like paying their bills.

A court filing with the US Bankruptcy Court in Delaware has emerged, which shows that “a host of credit and collections problems” extends to around 80,000 subscribers – almost half the company’s customer base.

This could be attributed to poor credit screening but it may also be indicative of the market Amp’d is targeting and threatens to cast a shadow over the MVNO business model, many of which target younger consumers.

While Virgin Mobile has made a success of the MVNO model, others such as Helio and the forthcoming ad-funded Blyk, still have to prove their mettle.

During the reorganisation process, the Amp’d directors will work with one of Amp’d Mobile’s largest investors – widely assumed to be Verizon Wireless – to obtain debtor-in-possession financing.

Amp’d is understood to owe $33m to Verizon, $16m to Motorola and $10m to Vivendi. Total outstanding debt to its top 20 creditors exceeds $99.6m.