Amp'd Mobile Files For Bankruptcy After 1/2 Of Their Subscribers Don't Pay Their Bills

Amp’d Mobile has filed for bankruptcy after nearly 1/2 of their 175,000 customers failed to pay their bills. From Businessweek:

Apparently, those free-spending youths don’t care much for paying their cell-phone bills. A court motion filed on June 4 explains that Amp’d “experienced an unprecedented growth of subscribers” between November, 2006, and February after running ads on MTV (VIA) 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 Amp’d’s current customer base of 175,000 subscribers.

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.

Well, we’re just f*cking shocked that the customers who responded to the above nicotine-voiced pitchwoman were deadbeats who don’t pay their bills. Stunned, even. Who on earth could have predicted this? And can someone get that poor girl a coffee? She’s not driving is she?—MEGHANN MARCO

Amp’d Mobile Runs Out of Juice [Businessweek] (Thanks, Ben!)

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  1. SexCpotatoes says:

    SHAZAM! SHAZAM! SHAZAM!

  2. NoThru22 says:

    That commercial sold me. Where do I sign up???

  3. slackerdeluxe says:

    I’m wondering if the actor in the video ad was working off a script or if the dialog was all improv? Either way it was quite a convincing performance.

  4. bedofnails says:

    Apparently she can’t afford “fifty bucks a month” either.

  5. royal72 says:

    hahahahahahahahahahaha a cell phone company getting fucked for once… sorry amp’d, but i’m a lil short on sympathy for you and your industry of corporate thieving bastards.

  6. swalve says:

    Corporate thieving bastards? The subscribers didn’t pay their bills! What’s wrong with you?

  7. SOhp101 says:

    What did they honestly expect when they marketed towards an age/socioeconomic demographic that is notorious for being delinquent in their bills?

  8. polarogak says:

    There’s no amount of LOLs that can convey my utter joy at this news.

  9. star_ says:

    It sounds like the thieves are the people who didn’t pay their bills. I don’t know what’s more pathetic, the target-market who can’t handle a simple phone bill or the company that marketed to them.

  10. faust1200 says:

    She said she gets hand cramps. I’m sure she does. Gotta pay that amp’d bill somehow.

  11. Jaysyn was banned for: http://consumerist.com/5032912/the-subprime-meltdown-will-be-nothing-compared-to-the-prime-meltdown#c7042646 says:

    I know technically it’s wrong but I can’t help but find this entire situation hilarious.

  12. timmus says:

    What did they expect? This is like dumping a truckload of stereos and TVs at the prison, and asking the inmates “just send us a check!”

    Some will, but come on.

  13. Catalyst says:

    I was also a big fan of their other commercial, where a stereotypical “urban male” talks about how he can’t afford to go to concerts, so he just watches them on his amp’d phone.

    I guess the reason he couldn’t go to concerts was because there was no 18 month plan for concert tickets to not pay later.

  14. CumaeanSibyl says:

    I wonder if the same commenters heaping blame on Amp’d for advertising to what could be called a subprime market are the same ones who refuse to ascribe blame to subprime lenders because “it’s the customers’ fault, they should’ve been more careful.”

  15. Catalyst says:

    @CumaeanSibyl: Not to put words in anyone’s mouth, but advertising to a market is different than preying on them.

  16. huadpe says:

    @star_: Not paying your bill doesn’t constitute criminal theft. It’s civil breach of contract. If you don’t pay the bill, you don’t get to keep using the service. If you hacked Amp’d’s computers and got your service to continue without paying the bill, thats theft. You can’t really steal a service with a monthly bill.

    The reason that it’s bad for Amp’d to offer service to these people, even if they cut them off for non-payment is that Amp’d made a bad move in buying infrastructure costs for alot more paying users than they could attract.

  17. alk509 says:

    [...] Amp’d “experienced an unprecedented growth of subscribers” between November, 2006, and February after running ads on MTV [...]

    I think Amp’d Mobile has no one to blame but themselves: marketing cell phone service to anyone who would watch MTV is cleary a wildly irresponsible business decision to anyone who has watched even a few minutes of their programming. Had their marketing execs actually watched a few hours of MTV before buying ad time on the network, they would’ve come to the inevitable conclusion that selling to that audience was a bad idea.

  18. Techguy1138 says:

    I don’t get why people are down on amp’d mobil?

    I haven’t heard any complaints about them being abusive to customers and bleeding every last cent out of them like verizon or singular stories.

    They seemed to be charging market rate to people with unestablished histories,if you assume MTV has younger viewers.

    I actually feel a bit sad. The business doesn’t have seem to have screwed people over and went under.

    This is just encouragement for other companies to offer MUCH higher rates for the same service to those without established credit AND bleed every customer for every last cent you can get.

    When you don’t you get “Amp’d”

    Do the commenters here work for the government or in socialist countries? Why the hate for a business that failed due to it’s customers?

  19. Will Clarke says:

    Good job finding the one AMP’d commercial with a white person.

    Anyone want to take odds on when Boost Mobile’s chapter 11 will be filed?

  20. homerjay says:

    This business failed because they trusted that its customers would pay. Normally this result would be unusual but given their target market, of course its not.

    We’re not faulting them because there customers broke their contracts. We’re faulting them for trusting a bunch of punk-ass teens.

    Its like putting your child in the care of a known pedophile. They should have anticipated this problem.

  21. CumaeanSibyl says:

    @Catalyst: That’s the thing, though — I would blame some subprime lenders for preying on people, while others wouldn’t. I’m just seeing two contradictory trends here:

    1) Subprime lenders didn’t do anything wrong because their customers should’ve read the terms and shouldn’t have taken on contracts they couldn’t pay.

    2) Amp’d Mobile is stupid because their customers should’ve read the terms and shouldn’t have taken on contracts they couldn’t pay.

    Maybe it’s not coming from the same people… I don’t know.

  22. etinterrapax says:

    The spectacle here is really Amp’d’s business model. Obviously, it’s the customers’ fault for defaulting on bills, but any time there’s a 50% default rate, there’s also something wrong with the company’s business plan. They’re advertising to a demographic that’s relatively high-risk, and they didn’t think to make their services pay-to-play? That was a mistake.

  23. Hexum2600 says:

    Ummm am I the only one who finds the girl in that ad extremely attractive? I’d buy a cellphone from her… and then not pay when it turns out she doesn’t come with it.

  24. hypnotik_jello says:

    @huadpe:

    Infrastructure? I thought they were an MVNO, so they don’t own their on network.

  25. Catalyst says:

    @Will Clarke:
    *BEEP* Boost: Where you at?
    *BEEP*Customer: Down on the corner.
    *BEEP*Boost: Good. Stay there, cause we’re coming to take care of this bill.

    I believe almost all of Boost is prepaid, including premium prepaid (whatever that means) though they do have monthly plans as well.

  26. adambadam says:

    Don’t consumers all pay in instances like these? When you have a service which the cell companies will practically give to anyone, everyones prices go up as a result of the added risk.

    If US cellular companies had better and more competitive pre-payed plans, I don’t see subscription services being such a pain. Though the networks are already so dense that it is hard for new-comers to enter the market, leaving the consumer in multi-year contract plans and getting screwed by cellular companies.

    In Europe where pay-as-you-go is the norm this is hardly a problem.

  27. ExGC says:

    On the other hand, Amp’d’s customers are about to experience the fun that occurs when a bankrupt company’s creditors, probably in this case led by a Federal Bankruptcy trustee, come looking for their cash. Imagine Verizon, with the backing of the Federal courts, coming for your cash. It won’t be pretty for quite a few.

  28. This should be a lesson to all other mobile carriers:

    The customers do have the power!


    http://www.tian.cc/

  29. nardo218 says:

    I bet what happened was, they got nailed with scammers.

  30. alk509 says:

    @Techguy1138:

    Why the hate for a business that failed due to it’s customers?

    Because they saw this coming and went ahead with their flawed business model anyway, and now their customers suffer the consequences.

    You don’t let a known pedophile babysit your kids, you don’t give your house keys to a random crackhead, and you don’t base your business model on signing 18-month contracts with children who watch MTV. I don’t see what’s socialist about that, but then again I’m a Libertarian, which I suppose puts me closer to Lenin than to today’s “conservatives”… ;-)

  31. Secularsage says:

    Wait, we can run cell phone companies out of business by not paying our bills? Then we’ve got all the power!

    Maybe we should coordinate an effort — everyone not pay their cell phone bill for one day. It worked for the oil industry, right?

  32. Amry says:

    I think I know all of the 80,000 customers who didn’t pay their bills. Every single one of our regular shoplifters uses Amp’d phones, and somehow I just can’t see these ladies being bothered to send in a check. They’re too busy stuffing baby clothes down their pants.

  33. CaptainRoin says:

    I don’t get it, I’m a little bummed because now there is less competition for V and Sprint, etc. I think this MVMO (orwhatever) move is sweet because companies like Helios actually have good deals. I thought they would be an alternative to big cell companies and hopefully bring the prices down a bit.

    I wasn’t allowed to have a V phone in my name when I first got mine (about 8 years ago) but I paid all my bills. Not everyone who watches MTV is a “punk-ass-teen”. Maybe some of those rich-ass-yuppies should stop paying $elevendybillion for cell service so my bills come down.

  34. Juliekins says:

    @Hexum2600: Yes. I find myself wanting to punch her in her smug face. “Oh tee hee, I send a lot of text messages, that makes me so cool! I am getting RSI from texting my friends! Whoa, I am hungover. Which is cool.” The other ads just kind of make me feel embarrassed for the people in them.

    You kids get off my lawn.

  35. revmatty says:

    People are getting down on amp’d for having an idiotic business plan. The subscribers who didn’t pay are assholes and completely in the wrong, but amp’d are morons for 1) not having a big enough reserve on hand to deal with the entirely predictable high rate of non-payment and 2) overspending on marketing that didn’t bring in enough quality subscribers to offset the number that wouldn’t pay.

    It’s the kind of business plan that would’ve gotten 10 mil in first round funding during the dotcom era and ultimately flamed out with nothing to show for it 6 months later.

  36. Canadian Impostor says:

    @CumaeanSibyl: Subprime lenders may have been dishonest, but caveat emptor.

    Sucks that people didn’t read or understand their mortgage contracts, but those same people got way more money than they could afford to repay and used it to inflate prices on the housing market.

  37. jeffj-nj says:

    WTF is wrong with you people getting nasty towards the Amp’d customers’ demographic? It’s entirely uncalled for. Sit back and listen for awhile…

    I used to work for a wireless internet company, back before wireless internet was anything most people had even heard of. The Minstrel III, AirCard 300, and RIM950 were some of our more popular products. We marketed our services to well-employed males in their 30’s and 40’s – old enough to have an income which could afford our prices (remember how expensive cell phones were in their infancy?) yet young enough to be open to new technology. Sure we had customers outside of that demographic, but those were our core. Well, guess what, no one paid our bills either. People were racking up insane charges (thousands of dollars a month!) in network time which we had to pay Sprint, Verizon, etc for while our customers just stayed delinquint. Even if you cancel their account, the damage is already done.

    So, we hemoragged money and kept letting employees go in a feeble attempt to recoup losses. I watched that company grow from 40 employees to 300 and then watched it drop from 300 to 100. I sort of saw it drop from 100 to 50, but only because I took longer to clean my desk out than most.

    Now, this strikes me as an extremely similar situation. I feel it important to point out that while “urban youths” might be skipping out their wireless bills left and right, so are people in the exact same – and probably even higher – demographic than yourselves. So, STFU. Seriously.

    (…unless you want to mock Amp’d Mobile’s presumption that “attending” a concert via cel phone is even the slightest bit similar to being there live, in which case, carry on with the hate.)

  38. zentec says:

    This is what happens when you market to the NEFR crowd; Not Especially Fiscally Responsible.

    History is full of companies extending credit to these types and then getting into problems. Mitsubishi ran an extensive and by all measures, a successful ad campaign with generous credit terms only to find a year later that there were thousands of their vehicles sitting in repo depressing their new vehicle sales.

  39. CumaeanSibyl says:

    @Jason: That’s not my point. My point is that Amp’d is doing the exact same thing as the subprime lenders — serving a high-risk market — but people aren’t holding Cheapo Mortgage, Ltd. responsible for the bad behavior of its customers in the same way they’re blaming Amp’d.

    Might as well say, “sucks that people didn’t read or understand their phone contracts, but those same people got a ton of phone service they couldn’t pay for and ended up making prices higher for the rest of us.” Is that entirely accurate, in either case? No, because both businesses in question still had stupid business plans.

    In fact, I’m inclined to censure subprime lenders more than Amp’d, for having a very very stupid business plan. At least phone plans don’t run to hundreds of thousands of dollars apiece.

  40. Erskine says:

    @jeffj-nj:

    So, what you are saying, in essence, is:
    “I used to work for a wireless internet company; So I am really getting a kick out of most of these replies. Some of you guys are very good at making it sound like you know what you are talking about. But trust me…. You don’t. I think you just want to make yourself sound smart, when in reality you don’t know what you are talking about. This is how bad info gets passed around. If you don’t know about the topic….Don’t make yourself sound like you do. Cos some Consumerist posters believe anything they hear.”
    Bravo.

  41. gamble says:

    @:

  42. gamble says:

    ummm…ok…anyway

    @faust1200: dirty!

  43. Why didn’t they just make their customers pay for their service a month ahead of time? How long were they providing service without getting paid.

    It’s less competition, which is bad, but the competition needs to know how to compete.

    It would be funny if we’d heard of the company being abusive or shady but otherwise it’s just another business that failed. Oh, and thanks Amp’d Mobile customers for making young people look like deadbeat jerks. We really needed that.

  44. jeffj-nj says:

    Not really. What I’m trying to say is that most of these comments strike me as prejudicial when the truth (which I’m sure I’m not alone in being aware of, but am, yes, aware of) is that customers of all demographics can skip out on bills in droves. And, it’s possible to have a company collapse for that exact reason even if that company establishes a more affluent base.

    More so, though, what I’m really trying to say is that white people don’t pay their bills either. Everyone is trying to be vague, but you know as well as I do what they mean, and it’s uncalled for, in a variety of ways.

  45. jeffj-nj says:

    On second thought, upon re-reading these replies, I see now that there are more “age-ist” ones than rascist ones, but both are definitely present, and the same point still applies. Old people don’t pay bills either.

    I guess some of the replies just got more under my skin than the others, so those stood out. Regardless, there’s a lot of pre-judging going on in here.

  46. rawsteak says:

    i don’t mean to sound like a bad person, but this reminds me of a skit that dave chapelle did, when the government actually made good on their “40 acres and a mule” promise, which subsequently led to to the skyrocketing of Sprint stock because a lot of customers somehow paid back their phone bills in full…

  47. shoegazer says:

    @jeffj-nj:

    there’s a lot of pre-judging going on in here.

    Welcome to Consumerist. Your towel is on the rack.

  48. deweydecimated says:

    @Jason:
    aren’t you putting the cart before the horse, or something like that? people who got more mortgage than they could handle in the long run did it because the housing prices grew at a ridiculously high rate. for many people, those loans were the only way they could get into a house in the location they needed. the homebuyers didn’t set out to inflate the housing market, they got trapped by housing that was already inflated.

  49. Techguy1138 says:

    @jeffj-nj:

    Thanks for speaking up. I don’t quite get why people think that MTV viewers are some kind of sub-prime demographic.

    If amp’d advertised on the back of cash-call fliers or stated that poor credit is no problem I may feel different.

    Watching MTV requires the ability to steal premium cable, which is hard now, or teh ability to live in a household that PAYS a cable bill of at least $60+ a month. It reaches a mostly affluent audience.

    How on earth is that a “poor business plan” that they could see comming “for years?”

    This posters here seem to confuse pro-consumer with anti-business.

  50. Hexum2600 says:

    OKAY OKAY OKAY I JUST caught this…

    watch the video again… watch how she WINCES when she says she got her phone from Amp’d mobile! Shes embaressed, and they decided that is the look to have her display in a commercial for them. Oh, that is classic. So so good.