Deadbeat customers, Verizon Wireless’ threats led to Amp’d bankruptcy

Amp’d Mobile Inc. blamed its rapid growth, back-office systems and collection problems as the reasons for its need to reorganize under Chapter 11 bankruptcy, and said that nearly half of its youthful customer base were not paying their bills by early 2007, according to the company’s bankruptcy filings.
According to the filings, Amp’d had raised about $350 million in investment money and had about $31 million in debt investments. The company began to run into troubles after it hit the 100,000-subscriber mark in late 2006. Amp’d said that about 90% of its customers were on 18-month postpaid service contracts, and in early 2007 the company “began to find a host of credit and collections problems and contributed ultimately to a liquidity crisis.”
The MVNO tried to address the issues, Amp’d said, but “its business model could not sustain such revenue collections problems.” By May, the company estimated that it had about 80,000 non-paying customers-or nearly half its customer base, given that the MVNO said it was close to reaching 200,000 subscribers at that time. Amp’d tried to raise more money, hoping to stave off the reorganization, but a last-ditch effort fell through when Verizon Wireless demanded a $4.5 million payment and accused Amp’d of defaulting on its wholesale agreement. Verizon Wireless then sent a letter terminating the company’s wholesale agreement and threatening to disconnect Amp’d subscribers from its network. On the same evening Amp’d received the letter from Verizon Wireless, the company filed for bankruptcy protection.
Amp’d said it plans to protest the validity of Verizon Wireless’ termination letter, and said that it is working with “one of Amp’d Mobile’s largest investors to obtain debtor-in-possession financing.” The company’s largest creditors include Verizon Wireless (owed $33 million); Motorola Inc. ($16 million); Vivendi ($10 million); Horizon Media Inc. ($8.6 million) and Best Buy ($8 million). Vivendi/Universal Music Group is the company’s largest single investor, according to the filings.
Amp’d Mobile’s founder and CEO Peter Adderton, who initially financed the company before its venture capital investors came on board, still owns a substantial chunk of the company. Aurli Bokovza, director of public relations for Amp’d, confirmed that at this point Adderton is still the company’s CEO despite rumors to the contrary, and that the company’s international operations in Canada and Japan won’t be affected by the bankruptcy filing.
Amp’d Mobile’s filings also revealed:
–The company’s users consumed more than 4 million videos, songs and mobile games in the first quarter of 2007, doubling the MVNO’s fourth quarter 2006 figure.
–The company has 229 employees in the United States, with a bi-monthly payroll of about $990,000.