TeleNav 2010 Annual Report Download - page 20

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ITEM 1A. RISK FACTORS
We operate in a rapidly changing environment that involves numerous uncertainties and risks. The
following risks and uncertainties may have a material and adverse effect on our business, financial condition or
results of operations. You should consider these risks and uncertainties carefully, together with all of the other
information included or incorporated by reference in this Form 10-K before you decide whether to purchase any
of our securities. If any of the risks or uncertainties we face were to occur, the trading price of our securities
could decline, and you may lose all or part of your investment.
Risk related to our business
We are substantially dependent on two wireless carrier partners for a large portion of our revenue and if these
wireless carrier partners were to limit or terminate our relationships with them or to offer LBS directly or
from other vendors, our revenue and net income would be adversely affected.
We are substantially dependent on two wireless carrier partners for a large portion of our revenue. In fiscal
2008, 2009 and 2010, Sprint represented 62%, 61% and 55% of our revenue, respectively. Effective
September 1, 2010, we amended our agreement with Sprint to, among other things, extend the term of our
agreement from December 31, 2011 to December 31, 2012. Pursuant to the terms of our agreement with Sprint,
we are Sprint’s preferred supplier of navigation applications until December 31, 2012 and Sprint is required to
use commercially reasonable efforts to feature our navigation services more prominently than other navigation
applications on handsets and to preload certain of our products on handsets. Sprint is entitled to expand the
number of bundles in which our navigation services are offered. For bundled navigation services, Sprint will pay
us a fixed annual fee regardless of the number of subscribers (up to specified thresholds). Sprint may terminate
our agreement for any reason, beginning June 30, 2012, by providing notice at least 30 business days prior to
termination. We anticipate that our amended agreement with Sprint would result in declines in ARPU and
significant reductions in revenue from Sprint for bundled basic navigation services compared to the most recent
quarter, but would also likely result in continued increases in the number of subscribers. Although we are entitled
to receive more revenue from Enterprise LBS, mobile commerce and premium navigation services than we were
previously, we may not be able to realize these benefits in the short term or at all. We cannot predict the ultimate
financial impact of our amended agreement with Sprint. Our failure to renew or renegotiate this agreement on or
after June 30, 2012 on favorable terms or at all, a termination of our agreement by Sprint or our failure to
otherwise maintain our relationship with Sprint would substantially reduce our revenue and significantly harm
our business, operating results and financial condition.
In connection with our amended agreement with Sprint, we and Sprint have agreed to transition Sprint
Navigation branded services to TeleNav branded navigation services. The branding transition may not increase
end user recognition of our brand and may result in confusion that results in reduced or more limited adoption of
our services by Sprint’s subscribers.
In March 2008, Sprint began offering the Simply Everything plans which currently include our LBS. As a
result, we have experienced a significant increase in end users and benefitted from increased marketing exposure
since the Simply Everything plans’ introduction. If Sprint reduces its expenditures for marketing our LBS,
changes its Simply Everything plans to eliminate our services, prices our LBS at a level that makes them less
attractive or offers and promotes competing LBS, in lieu of, or to a greater degree than, our LBS, our revenue
would be materially reduced and our business, operating results and financial condition would be materially and
adversely affected.
In fiscal 2008, 2009 and 2010, AT&T represented 26%, 29% and 34% of our total revenue, respectively.
AT&T is not required to offer our LBS. Our current agreement with AT&T expires on March 19, 2011 and
during the term of our agreement, we are the exclusive provider of white label GPS navigation services to
AT&T. If AT&T were to terminate its agreement with us or fail to renew or renegotiate the agreement on
favorable terms when it expires, we would lose a substantial portion of our revenue and our business operating
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