Rise and fall of Amp'd Mobile

The Santa Monica-based cell phone company filed for Chapter 11 bankruptcy in June after burning through almost $400 million - by most reckonings, the worst local tech collapse since the dot-com bubble burst. How it could fall apart so quickly is the subject of my piece in the December issue of Los Angeles magazine. The company was considered a mobile virtual network operator, or MVNO, and the idea was to focus on branding the Amp’d Mobile name with a menu of entertainment and services. Most all the MVNOs have struggled, but Ampd's collapse was the most spectacular, despite the efforts of its Australian-born CEO, Peter Adderton. Actually, some pin the company's bankruptcy squarely on the shoulders of Adderton, though the truth is there were a bunch of reasons for the collapse. Adderton himself admits that he's no "an operations guy."

There’s also Adderton’s manner, which can be, well, jerky. He’s an intimidating presence, with rugged, fashion-model looks and a three-day growth that makes him appear as if he’s been trekking across the outback. “I don’t tolerate people not doing their job as well as they could,” he says. “Being Australian, I have a different approach.” Apparently, that includes telling his wife—a former Australian beauty queen—if she’s fat or has served him a bad meal. He figures the next time he gives her a compliment, it won’t seem phony. “If we’re in business and I think you’re a prick, I’ll call you a prick and you’ll call me one and we can have it out,” Adderton says. “You come across to the United States and there’s this whole movement towards what you can and can’t do. If someone is useless at their job, you can’t just fire them. You’re supposed to give workers three warnings. I would just go, ‘You’re an idiot—leave.’ ”

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A number of former Amp’d executives play down the tough-guy act, pointing out that Adderton is quick to apologize when he pushes too much and that many of the whiners were young employees unaccustomed to a high-energy workplace. Besides, most everyone says he is good at what he does. “He has an incredible ability to see the future,” says [former COO Sue] Swenson. “It would surprise me to see the kinds of things he would come up with, and he would generally be right.”

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When it was over, the Chapter 11 filing disclosed that up to 80,000 of Amp’d’s customers, almost half the subscriber base, weren’t paying. The full story is worse. Sure, there were deadbeats, but Amp’d’s billing system was such a mess that thousands of customers weren’t being billed at all. Still others were being billed incorrectly. As with most service plans, customers were allotted a certain number of minutes per month, and anything over that amount was billed at 45¢ a minute. But the billing system didn’t recognize overlapping months. So if someone signed up on September 25 for 1,000 free minutes, only five days would be covered; everything from October 1 to October 25 was billed at 45¢ a minute. The botched program led to monthly customer overages of hundreds of dollars—and accounts were difficult to adjust. A big jump in subscribers, to more than 100,000 at the beginning of 2007, compounded the billing problems.

Revised post