Guaner
04-11-2008, 08:36 AM
Movida Communications of Kansas City blamed intense wireless industry competition and restrictive terms imposed by Sprint in seeking bankruptcy protection. The company reaches out primarily to Spanish-speaking consumers with its own brand of cell phone service that runs over the wireless network of Sprint Nextel Corp.
The company has more than 267,000 customers, but is in the process of “of winding down its business,” according to documents filed this week in U.S. District Bankruptcy Court in Delaware.
In its Chapter 11 filing, Movida cited liabilities ranging from $50 million to $100 million.
The more than $15 million Movida owes to Sprint was listed as the single largest debt.
A Sprint spokeswoman did not immediately return calls seeking comment. Started in 2005, Movida sold its own brand of service over Sprint’s wireless network. In essence, partners such as Movida pay Sprint wholesale rates to use the network and then attempt to make money by signing subscribers who pay higher retail prices. Sprint has been among the most aggressive companies at pursuing these sorts of deals, reaching out to specialized niches of customers.
Virgin Mobile USA, which started as a joint venture between Sprint and Richard Branson’s Virgin Group, generally is considered to be the most successful of these wholesale partnerships. Many others, including ventures with major consumer conglomerates such as Walt Disney Co. and ESPN, have crashed and died.
As Movida’s struggles mounted, the company failed in attempts to renegotiate the terms of its deal with Sprint, according to the bankruptcy filing.
With Movida’s pay-as-you-go cell phone service, the costs to buy and distribute phones typically topped the retail price tag. A company still can make money if it signs and keeps customers who make up for the difference with their purchases of calling time, downloaded content and other services.
Movida gained traction initially and grew. The company’s downfall came, however, as it has been “recently plagued by a combination of increased competition in the industry and the restrictive and costly terms of its” agreement with Sprint, according to the court documents.
In recent months, competitors “drastically” reduced their prices on phones, increasing the squeeze on Movida.
The Full Article (http://www.kansascity.com/798/story/557883.html)
The company has more than 267,000 customers, but is in the process of “of winding down its business,” according to documents filed this week in U.S. District Bankruptcy Court in Delaware.
In its Chapter 11 filing, Movida cited liabilities ranging from $50 million to $100 million.
The more than $15 million Movida owes to Sprint was listed as the single largest debt.
A Sprint spokeswoman did not immediately return calls seeking comment. Started in 2005, Movida sold its own brand of service over Sprint’s wireless network. In essence, partners such as Movida pay Sprint wholesale rates to use the network and then attempt to make money by signing subscribers who pay higher retail prices. Sprint has been among the most aggressive companies at pursuing these sorts of deals, reaching out to specialized niches of customers.
Virgin Mobile USA, which started as a joint venture between Sprint and Richard Branson’s Virgin Group, generally is considered to be the most successful of these wholesale partnerships. Many others, including ventures with major consumer conglomerates such as Walt Disney Co. and ESPN, have crashed and died.
As Movida’s struggles mounted, the company failed in attempts to renegotiate the terms of its deal with Sprint, according to the bankruptcy filing.
With Movida’s pay-as-you-go cell phone service, the costs to buy and distribute phones typically topped the retail price tag. A company still can make money if it signs and keeps customers who make up for the difference with their purchases of calling time, downloaded content and other services.
Movida gained traction initially and grew. The company’s downfall came, however, as it has been “recently plagued by a combination of increased competition in the industry and the restrictive and costly terms of its” agreement with Sprint, according to the court documents.
In recent months, competitors “drastically” reduced their prices on phones, increasing the squeeze on Movida.
The Full Article (http://www.kansascity.com/798/story/557883.html)