Daniel Primack sums up in his newsletter the story of MVNO Amp’d:
“It’s been four months since I first began researching and writing about Amp’d Mobile Inc., the Los Angeles-based virtual mobile network operator (MVNO) targeting teenagers and young adults. My original prompt was the company’s massive Series A funding, which totaled $67 million (including the rollover of $7 million in loans). My continuing interest, however, was twofold. First, I believed that MVNOs/MVNO infrastructure would become a very hot VC sub-sector, due to its advantages for both brand-conscious multimedia content providers and capacity-loaded mobile carriers. Second, Amp’d seemed to have the right management pedigree (particularly Boost Mobile founder Peter Adderton) and the right target audience (let’s face it, senior citizens don’t want/need Larry King streaming through mobile phones).
For the uninitiated, MVNO is a term that loosely means reseller. MVNOs buy or lease unused mobile carrier spectrum at wholesale prices, and then sell the “minutes of use” to retail consumers with a device that can access specified content. Perhaps the best-known example of an MVNO – although it’s not typically thought of as one – is OnStar, the automotive communications companion that uses extra Verizon capacity. More “traditional” MVNOs would include things like Virgin Mobile or Disney Mobile.
So why did yesterday change everything? First, it signed the best possible branding partner for the youth market: MTV Networks, which includes MTV, Nickelodeon, Comedy Central, Spike TV, etc. Not only will MTV content/branding be prominent on Amp’d products, but Amp’d will become very visible on MTV Networks products. This obviously will include traditional advertising, but I’d also expect it to eventually include various product placements (“For winning today’s Real World/Road Rules Gauntlet, you win an Amp’d Mobile handset…”). The deal also has effectively blocked MTV from offering its own MVNO, since MTV now has an equity stake and board seat with Amp’d. Why compete against yourself?
And then there is the cash. The MTV deal includes an initial $50 million investment, and this is only the beginning. Amp’d already has a much larger financing set up, of which the MTV infusion is just an opening tranche. A secondary close is likely will occur within the next 30 days (which would include original backers like Highland Capital Partners, Columbia Capital, Redpoint, etc.). If it manages to close by year-end, expect Amp’d to jump from #7 to #3 in terms of the most VC dollars raised in 2005. This certainly will help with product rollout, which begins today. Oh, as an unrelated funding note, MTV Networks now has an Amp’d minority equity stake approximately equal to most of the Series A backers.”
Amp’d is certainly not in for the cheap – $67 million for a first round is not exactly nothing as they do not build any communications infrastructure but us an existing network.