Mobile virtual network operator Amp'd Mobile quietly filed for Chapter 11 bankruptcy protection late Friday night, announcing the move on its website. The Chapter 11 filing follows weeks of rumors concerning the fate of founder and CEO Peter Adderton, who reportedly exited the company following a rift with directors; Amp'd said in a statement issued over the weekend that its "senior management team remains largely intact."
Despite more than $360 million in venture capital financing and subscriber totals closing in on the 200,000 mark, Amp'd is over $100 million in debt, owing $33 million to Verizon Wireless for network operations and $16.4 million to Motorola for handsets. The Chapter 11 petition, filed in U.S. Bankruptcy Court in Delaware, is likely to erase that debt, but will also wipe out ownership stakes and preferred stock held by investors and content partners like MTV and Universal Music.
In an interview with The Wall Street Journal, Amp'd president Bill Stone said the filing was forced by the MVNO's inability to keep up with its growth over the past six to eight months: "We are pretty confident we'll come out stronger," he added. But the filing nevertheless follows in the wake of growing concern over the continued viability of the MVNO market--in the fall of 2006, parent company Walt Disney shuttered its much-hyped Mobile ESPN service, and other MVNOs are struggling as well. According to Korean carrier SK Telecom, Helio--the U.S. service it launched in partnership with Internet service provider EarthLink--is expected to report losses between $330 million and $360 million in 2007, despite a subscriber base anticipated to grow to 250,000 by year's end.
According to a statement posted on its website, Amp'd expects to continue normal business operations throughout the reorganization process. "It's going to be very challenging--with eight different VCs backing them up, all of whom are now creditors, I don't see much hope for them coming back," said Alex Besen, founder and managing consultant with mobile data consulting practice The Besen Group, in an interview with FierceMobileContent. "We've seen examples from Europe proving that MVNOs are a good business model, but it's never an easy proposition. What Amp'd tried to do is very hard--trying to sell content in the current marketplace is very hard."
For more on the Amp'd bankruptcy:
- read this release