Bankrupt “virtual” wireless carrier Amp’d Mobile, which resells service on Basking Ridge, N.J.-based Verizon Wireless’ network, may shut down tomorrow according to a new posting on their Web site (via MocoNews). As I noted last month at Forbes.com, Amp’d Mobile’s failure could be bad news for Warren, N.J.-based Virgin Mobile USA, which recently quintupled the amount of money they are hoping to raise in an initial public offering to $506 million.
Amp’d and Virgin have different customer bases — average Amp’d customers spend about five times more money a month on service than average Virgin customers — and Amp’d has had some problems stemming from loose credit terms. Both operate under the same “virtual” model, however: They buy wholesale airtime from a competitor, sell their own phones, and hope exclusive content and marketing can win customers away from nationwide carriers. Amp’d’s bankruptcy and even Virgin’s ongoing performance suggest that the MVNO model (mobile virtual network operator) is a very tough business.
In this year’s first quarter, Virgin Mobile managed to squeak out a profit, making $15 million on $339 million of revenue from almost 5 million subscribers. Last year, however, the company lost $36.7 million on $1 billion of sales.