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T-Mobile MVNO Solavei Files for Chapter 11 Bankruptcy Protection

T-Mobile MVNO Solavei has filed for protection from its creditors under Chapter 11 of the Federal Bankruptcy Code. Chapter 11 allows a business to keep operating under the supervision of the court while it restructures its business. The court can allow the company  to cancel contracts and can temporarily block creditors from suing the bankrupt company. The company creates a restructuring plan, which must be approved by the court, detailing the changes it will make to achieve profitability and pay its debts.

Solavei launched in Sept. 2012 with a $49/month unlimited talk, text and data plan. Data was throttled after 4GB and there were taxes and fees that added about $10/month to the plan cost, but it was the best deal available at that time for unlimited talk and text and 4GB of data. Solavei's multi-level-marketing business model turned customers in salespersons by paying users $20/month in recurring commissions for every three customers they signed up, with additional commissions when your referrals signed up customers of their own. Solavei got of to a great start with lots of buzz and enthusiastic members promoting the service to friends, family and on social media.

Things started to go south in November of last year when the amount of data included with the $49 plan was cut from 4GB to 2GB. Solavei added several new plans including one with 4GB of data priced at $69. With these changes, Solavei was no longer the least expensive operator at any price point and that undoubtedly cost them some customers. Less than two months later, commissions were cut to a flat $5 per referral, drastically reducing earnings for members with large sales networks.

Solavei has issued a press release saying it will continue normal operations while in Chapter 11, with no further changes to plans or commissions while it restructures. Solavei says it expects to emerge from bankruptcy by the end of this year.

Chapter 11 is designed to help companies return to profitability. Many well known firms have entered and emerged from Chapter 11 including General Motors, Texaco and United Airlines. Others like Circuit City and Borders Books never emerged and ultimately failed. Overall only about 35% of all companies filing for Chapter 11 successfully emerge. Solavei's chances  doesn't look particularly good. Statistically, relatively small companies like Solavei are less likely to emerge form Chap 11. Solavei has $63 million in outstanding debt which is quite a bit for a company that generated just $96 million in revenue over its entire lifetime. Any reorganization plan the court approves will likely require Solavei to spend no more than it earns and that could make it hard for Solavei to keep its promise of no price increases or commission rate decreases.

For more about Solavei's bankruptcy filing and see these FierceWireless and BehindMLM articles and this HowardForums thread.


16 comments:

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  1. Networking marketing is an extremely costly method of distribution. Very few people make significant money in network marketing. Solavei paid very little commission to distributors so they should not have had difficulty paying bills. Howard Forums had many posts suggesting Solavei was poorly managed.

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    1. Aint that a b****** I have been advertising solavei since the start...Got my commission up to around 2,000 a month...what a waste of the last year of my life if this company goes under by by commission money for me boo

      www.solavei.com/jqwest to sign up before its over

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  2. One more MVNO out of the way. Solavei had no volume and no retail store.
    More will follow like Freedom Pop, Republic Wireless, Ringplus ect.....

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    1. What a bizarre stance to take (never mind your poorly drawn conclusion).

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    2. Yeah, let's get ALL MVNOs out of the way. Life would be simpler. Why do we even need multiple carriers? Ma Bell did a fine job. Sure you paid about 50c/minute for long distance, but local calls were free, and those sturdy rotary phones never broke....except maybe a toe if you dropped the phone on it. Bring back the good old days! Our first, sturdy Ma Bell phone did not even have a wall plug! You just cranked the thing and the DC generator called the operator on the party line! We often had to ask her to hang up after she completed the calls, though..... Ahh, those were the days. And don't get me started about the fun we had in pay phone booths. The original pay-as-you-go!

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    3. They are not carriers, just lease from the carriers. So you want a monopoly and to have no choice but to pay whatever you're told no matter how outrageous? Sounds like a good plan. Republic Wireless is going nowhere by the way. Their business model is too unique and their wifi switching allows them to save a lot of money that other MVNO's cannot. FreedomPop is also interesting and may be safe, operating in some regards in a way similar to google voice.

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    4. "Solavei had no volume"

      I wonder if it would have been better if it attached itself to one of the actual extensivee national networks. TMobile is not there yet.

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    5. The network was not the problem. Solavei gives you the best of T-Mobile and AT&T. Faster T-Mobile LTE and HSPA+ data speeds in the top 30 markets, and extensive voice and data roaming everywhere else.
      Vzw prepaid data is so SLOW that it does not even compare. Solavei would not made it this far if you had to sell slow 3G to your friends and family.

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  3. The most insidious mix of Mlm and mvno goes under. FINALLY. It was never a matter of if but always of when and when is NOW. I bet all the pro Solaveites crowing nothing but praises about the before are either dead silent or now hating on them. Oh well. Good riddance.

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  4. Multilevel marketing = pyramid scheme. Stay away.

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    1. Sounds like the meeting place of Amway er Scamway and modern telephony.

      If it is not sold in a standard retail situation (or related virtual equivalent), buyer beware.

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  5. IMHO, MLM style businesses are slash and burn. They are designed to make a lot of money for the guys at the top then quickly fold. I avoid MLM like the plague.

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  6. Hah. I'm not surprised.
    Is Ringplus next?

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    1. Yeah, let's see who goes next. Top three candidates are Ringplus, Republic and FreedomPop.

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  7. I knew this would happen, I'm a retailer for all t-mobile products and used to get solavei reps coming in everyday saying solavei is the best and wont go anywhere....To all solavei rep's don't say l didn't tell you so!!!!!

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  8. Solavei is asking the bankruptcy court to approve a reorg plan so they can exit bankruptcy and merge with a Dutch company. They are NOT going out of business, as some people claimed they "knew would happen":
    http://www.fiercewireless.com/story/t-mobile-mvno-solavei-exit-bankruptcy-merge-mobile-solutions-provider-aspid/2015-03-13

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