Peter Adderton, the CEO of wireless startup Amp’d Mobile, likes to call his company’s service the “Red Bull” in a sea of milk products. The reference to the energy drink should be enough to tell you that he targets the 18- to 35-year-old frat-set mobile market, a segment the 38-year-old Australian knows well.

Mr. Adderton, looking more like an extra on an L.A. soap than an entrepreneur, founded Boost Mobile, which delivered 2 million subscribers to cell phone company Nextel. “Our job is to make the industry nervous,” he says, pausing slightly for full dramatic effect

Amp’d is similar to Boost and is one of a slew of new companies that have come along to snare wireless business. The idea is to target niches that mass-market cell phone companies can’t reach, and take advantage of underused high-speed cellular networks.

The business model naturally comes with its own jargon—MVNO, for mobile virtual network operator—and while MVNOs have been around for years, a new breed has come onto the scene.

Targeted Content

These companies fight for subscribers who will pay for high-priced mobile services like video and music delivered on third-generation (3G) cellular networks. ESPN launched just this kind of service nationwide over Super Bowl weekend.

Amp’d rolled out just before Christmas. Internet service provider Earthlink and South Korea’s wireless king SK Telecom plan to launch a service called Helio in the spring. Investors, including old media companies with deep pockets, are funneling money into the new companies in hopes of getting their brands established with different target audiences over the cell phone.

Consumers appear ready: 80 percent of U.S. cell phone subscribers surveyed by wireless research firm In-Stat said MVNO-style targeted services sounded appealing.

But like the wannabe energy drinks that compete with Red Bull for shelf space, there can be only so many favorites. “There will be a fair number of failures,” says In-Stat analyst Allyn Hall.

Building an ad-hoc wireless service to sell video and music can cost—$200 million to $300 million in Amp’d’s case, Mr. Adderton says, refusing to be more specific. But a risk-taker he can sometimes be. He personally approved, for example, a pre-launch commercial pitch that tamer executives probably would have shied away from: “Try not to die, Amp’d Mobile is coming.”

Branded 3G

For derring-do, few can top Richard Branson, who has been in the game for a while now. Non-wireless brands have acted as virtual cell phone companies for years, Sir Richard’s Virgin Mobile being the most famous example. Between them, Virgin Mobile and Mr. Adderton’s Boost have attracted millions of subscribers. Both target budget users using pre-paid plans, teenagers, and different ethnic groups

Virgin Mobile has big plans for developing markets like China—the world’s biggest mobile population—India, and South Africa. The entire global MVNO market will be a $10.7-billion industry by 2010, according to Yankee Group. As it is, there are 100 MVNOs in Europe right now, and over 20 in the United States.

The recent U.S. MVNO entries are looking to take advantage of the new billion-dollar high-speed cellular networks that have blazing speeds but little content to sell over them. Amp’d will run over Verizon’s 3G network. Sprint’s high-speed pipes will funnel ESPN mobile and Helio content.

Right now, the U.S. is an open market for MVNO media services. That’s because carriers have been slow to launch their own 3G content services. Carriers in Europe and Asia have tended to launch more of their own content, though European MVNOs have pretty much stuck to slower cellular pipes.

That said, Virgin Mobile recently started select 3G services in the United Kingdom, and analysts say several other data-centered MVNOs are expected to go live in the next few months. Analyst Kenneth Hyers at research firm ABI says the U.S. should be the most lucrative market for the new MVNOs in the short term, though he expects Europe to eventually take the lead.

Mobile Spenders

Amp’d, Helio, and ESPN all have plans to sell music and videos over cell phones which, if all goes to plan, should turn subscribers into coveted high-paying users. Amp’d’s charges will run from $30 to $200 per month, along with a $99 one-off payment for its own branded phone. Helio will likely offer similarly priced services on higher-end phones. ESPN is charging $200 for its phones and $35 to $225 per month for its services.

Besides the customers they lock in, operators are also hoping to snare customers who make spontaneous music and video purchases off plan. Compared to customers signing up for the standard big-company package with free phones and basic voice plans, high-payers signing up for media-laden MVNO services look a lot more interesting.

Investors have been clamoring to fund companies that make the cell phone a big consumer channel along with PCs and TV, which explains why developments are being watched closely by old media companies—all are anxious to reel back subscribers they lost through slumping newspaper and TV markets.

“Amp’d is about a mobile media property,” declares Redpoint Venture partner Geoff Yang, “not about just slapping a brand on wireless and hoping that it will sell more phones.”

Mr. Yang has to hope that, anyway, Redpoint being an Amp’d investor. But it seems to be in excellent company: So far, Amp’d has received a total of $110 million in venture funding from Universal Music Group, Highland Capital Partners, Columbia Capital, and Redpoint, of course. That sum includes $50 million from MTV, which sees Amp’d as a surefire way to reach more users with its branded content. Mr. Adderton, in fact, says nailing the MTV partnership was a priority from the beginning.

Amp’d is also rumored to have picked up another $150 million from old-world media funders, though Amp’d CFO Derek Andersen won’t confirm or deny the claim. But there’s no question that Mr. Adderton has been connecting the dots: even game giant Electronic Arts has done a deal with Amp’d to put 15 games on Amp’d phones.

Cellular Competition

With its roster of partners and investors, Amp’d has proven it can draw up a plan that attracts the right kind of people. That doesn’t mean other players can’t match it, although none is letting anything out of the bag. SK Telecom and Earthlink invested a total of $440 million in Helio. Helio CEO (and Earthlink founder) Sky Dayton says the company will start selling services in the spring to the same market that Amp’d targets, i.e., “young, tech savvy consumers, who put gadgets and mobile at the center of their lives,” as he puts it.

Mr. Dayton is another young upstart who knows his market. He founded Earthlink at the age of 23 in 1994.He says Helio should have 3 million subscribers by 2009. SK Telecom has long been one of the most advanced wireless operators in the world and spends a reported $200 million a year researching advanced mobile services. Helio is SK’s first U.S. foray. While Mr. Dayton refuses to say anything about specific services coming, he does boast, “we have more advanced technology than any other MVNO that exists in this market.”

That still isn’t much to go on. But he has raised a pile of money and Amp’d is still looking for more. Helio can also use Earthlink’s citywide Wi-Fi networks to help beat the competition.

Redpoint’s Mr. Yang agrees that he has seen a significant ramp up of MVNO companies looking at 3G networks across his desk in recent months. ABI’s Mr. Hyers calls the influx of U.S. MVNOs on 3G networks a “second phase of growth.” Analyst Roger Entner from research firm Ovum even senses “a gold-rush mentality” taking over.

ESPN Mobile’s Senior Vice President and General Manager Manish Jha calls 3G MVNOs “the flavor of the month.” The increasingly crowded startup market means the big funds needed to build the services could be a riskier bet.

Rushing In

Even bigger companies like Apple Computer could be eyeing the market. In January, Apple patented “Mobile Me,” which some analysts suggested could be an Apple-branded MVNO play. While Cingular’s Rockr i-Tunes phone failed to sell well, Apple could conceivably still use its high-end brand to create a 3G wireless service with a music-dominated cell phone. “Mobile music is the easiest fit for these new MVNOs,” notes In-Stat’s Mr. Hall.

And that’s only the new companies. Traditional wireless operators such as Verizon Wireless, Sprint, and Cingular are also eyeing the markets, still deciding where they could partner or compete with the MVNOs. Right now, the big cell companies can’t reach hip niche audiences and could use MVNOs to help tap into these markets. Ranking third in the U.S. wireless market, Sprint has been the most aggressive at partnering with MVNOs. “We believe in multiple brands. The youth market is edgy,” says Sprint CTO Len Lauer, referring to Boost’s tagline. “Sprint can’t have a slogan like, ‘Where you at.’”

With niche markets of maybe 3 million subscribers, MVNOs hardly pose much of a threat to big U.S. players now. But who’s to say the big companies won’t be a threat to MVNOs when the market does a little growing?

As it is, Mr. Adderton won’t even mention Verizon by name in an interview about Amp’d’s plans, even though it’s widely known to be his network partner. The last time around, of course—when Boost partnered with Nextel—the carrier virtually co-opted his brand. It’s enough to make anyone nervous, Mr. Adderton included.