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A Tale Of Two MVNOs

Another one bites the dust: Amp'd, the mobile virtual network operator aimed at teens and 20somethings, is expected to shut down its wireless phone service in the U.S. at the end of the month, despite receiving a one-week reprieve by creditor Verizon Wireless to sell off its remaining assets in Japan and Canada. The Walt Disney Company's MVNO, ESPN Mobile, met a similar fate last year.

It's a tough business: MVNOs target niche audiences by offering premium content through media partnerships. However, Amp'd and others don't own wireless spectrum, requiring them to license from Verizon and AT&T. When you factor in the cut that goes to media firms, you realize that margins are slim.

But not all MVNOs are suffering: Virgin Mobile USA, which benefits from the backing of Richard Branson's Virgin empire, is thriving, announcing it would seek a $506 million IPO. Virgin was able to borrow from the European idea of prepaid calling cards, which ensure that users receive a certain number of minutes rather than paying a monthly fee.

Ironically, this strategy served to boost sales in the very market Amp'd tried to target: younger consumers. Whereas Amp'd had an astonishing number of young customers that never paid their bills, Virgin users couldn't use their phones unless they paid ahead of time. Virgin now is looking at going public, while Amp'd owes Verizon $33 million.

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