Amp’d Is Dead, but Plan Imitation
is the Sincerest Form of Flattery

| August 10, 2007 | Wireless Services - U.S. | Advisory Report

| Analyst: William Ho

Issue Summary

Amp’d Mobile has ceased operations and the industry has already dissected and opined on the elements of failure. Perhaps more reasons will come out over time, but one must give credit where credit is due. The MVNO seemingly had all the components for survival: big name investor backing, aggressive handset pricing, growing distribution, the right content for the right demographic, a decent marketing and promotion push, riding the reliable Verizon Wireless network, and a variety of plan choices with an emphasis on data push.

Regardless, the MVNO is dead, but some Amp’d traits have entered into two carriers’ plan lineups, T-Mobile and Helio. Whether its coincidence, homegrown innovation, a direct copy or modification of some defunct Amp’d plans, they’re in the marketplace today. Will it ultimately help their subscriber growth?

Current Analysis Perspective

T-Mobile FlexPay and Amp’d Hybrid Plans

Amp’d introduced its prepaid hybrid plans in September 2006, mirroring the price points and anytime minutes of its postpaid plans. Without the usual 18 month contract the hybrid plans provided an attractive, if not a too attractive alternative to 18 month postpaid plans. Of course, the immediate concern is with the same price points and anytime minutes, blurring the line of pre and postpaid benefits, it stands to cannibalize its postpaid plans. Corporately, prepaid customer churn is much higher than that of postpaid customers. Despite the similar overall macro concept, T-Mobile has implemented these same postpaid-like conditions in their product called FlexPay.

Believing that postpaid customer growth has nearly plateaud, T-Mobile (and many other carriers) are looking to the prepaid segment for greater net additions. As credit tightening policies have filtered out higher-value/low churn customers, the prepaid space has become more competitive in the last year and a half. Witness the readjustment of AT&T GoPhone plans, Virgin Mobile’s lineup of monthly plans, the introduction of Cricket Nation plans, and Boost’s Unlimited trials in California and Texas.

Introduced in late July, FlexPay’s similarities with Amp’d Hybrid plans include no activation fee, postpaid price points, a postpaid-like one or two year commitment in order to attain different handset prices, purchasing add-ons such as messaging packages, and obviously higher handset pricing relative to postpaid plans. But T-Mobile has implemented different levers to ensure control including a $4.99 fee (oddly enough called a Control Charge) if the customer waives prepaying through monthly draws via a credit card, a separate bucket for overage and other add-ons and downloadables called FlexAccount.

In this age where two-year contracts seem to be the norm, why wouldn’t anyone just jump on FlexPay instead of the standard postpaid plans? Well for one, FlexPay plans cannot be obtained online and need to be purchased in a store (reseller or corporate store). Our visits to a corporate and reseller store revealed just FlexPay brochures without signage whereas the reseller had a modest sign. Interestingly, the reseller wanted $200 to activate where in theory there is no activation fee. Unless one knew that FlexPay was available, it isn’t pushed until perhaps the prospective customer doesn’t pass the credit worthiness test.

Helio All-In Membership and Amp’d Unlimited

While FlexPay addressed prepaid plans, Helio in the postpaid space should be making a splash with its aggressively priced unlimited “All-In Membership” plan (albeit promotional and launched in late July) priced at $99, normally $149. The connection to Amp’d is not only in the non-promotional price point but also the notion of a low priced national unlimited calling (and data) plan. Amp’d Mobile offered an unheard of $150 Amp’d Unlimited plan that provided unlimited messaging, and PTT. Previously, Sprint (and still) offered an unlimited calling plan for $200. Although the content may differ, the thrust is the same – getting the same high-value postpaid customers who value both unlimited voice and data.

Sprint is still trying this concept out at a lower price point in various markets with their Unlimited Access packs at $120 and do offer national capability but it’s still in trial mode. While others may argue that Cricket and MetroPCS (and Boost Unlimited) offer lots of similar unlimited features, they’re prepaid offerings and nowhere near national capability. That is the unlimited benefits cannot be enjoyed outside of the home calling area. So Helio’s promotion is both timely and necessary. It’s timely in that Amp’d has failed and at launch time, Amp’d users were looking for alternatives with Helio providing a good fit to the demographic.

Moreover, the Exchange support for its QWERTY/two directional slide Ocean device can attract some more of the road warrior/business types who don’t want the Q or a BlackBerry with the security of unlimited everything. It is both timely and necessary as the MVNO continues to lose money and needs to accelerate its subscriber base. The MVNO is well-funded with two corporate parents and to some extent have a longer runway for success than Amp’d. That’s not to say that external pressures (read the financial community) on the parents aren’t being felt.

Will these new plans drive subscriber growth? Yes, given the structures and price points there shouldn’t be any reason why these approaches will not succeed. For Helio, it’s all about marketing and for T-Mobile it’s about no marketing and keeping it under the radar until the right customer fails their credit, er… comes along. Amp’d may be gone, but some of its concepts have survived.

Recommended End User / Customer Actions

• Former Amp’d users will already have already found alternatives, but for those who are prepaid users, they should flock over to T-Mobile to take on FlexPay. While there may be discomfort in paying more for a handset and forking over the credit card (or debit), the upside of postpaid features is too great to ignore, especially if one was a former Amp’d Hybrid subscriber.

• All users who want national coverage with unlimited calling and data access should consider Helio’s promotional All-In Membership (provided they get over MVNO-phobia). At $99 for voice and data, it’s one of the most valued packed calling plans around along with Microsoft ActiveSync and Exchange support to satisfy the IT shop and business road warrior types.

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