TeleNav 2010 Annual Report Download - page 22

Our wireless carrier partners may change the pricing and other terms by which they offer our LBS, which
could result in increased end user turnover, lower revenue and adverse effects on our business.
Several of our wireless carrier partners sell unlimited data service plans, which include our LBS. As a result,
end users do not have to pay a separate monthly fee to use our services. If our wireless carrier partners were to
eliminate our services from their unlimited data service plans, such as the Sprint Simply Everything plans, we
could lose end users as they would be required to pay a separate monthly fee to continue to use our services. In
addition, we could be required to change our fee structure to retain end users, which could negatively affect our
gross margins. For example, effective September 1, 2010, we amended our agreement with Sprint to, among
other things, provide bundled navigation services for a fixed annual fee from Sprint regardless of the number of
subscribers (up to specified thresholds), rather than the per subscriber per month fee structure we and Sprint had
previously employed. We anticipate that our future revenue from Sprint and our ARPU and gross margins will be
negatively affected as a result of the shift to a fixed fee model for services we provide to bundled subscribers.
Our wireless carrier partners may also seek to reduce the monthly fees per subscriber that they pay us if their
subscribers do not use our services as often as the wireless carriers expect or for any other reason in order to
reduce their costs. Our wireless carrier partners may also decide to raise prices, impose usage caps or discontinue
unlimited data service plans, which could cause our end users who receive our services through those plans to
move to a less expensive plan that does not include our services or terminate their relationship with the wireless
carrier. If imposed, these pricing changes or usage restrictions could make our LBS less attractive and could
result in current end users abandoning our LBS. If end user turnover increased, the number of our end users and
our revenue would decrease and our business would be harmed. We are also required to give AT&T certain most
favored customer pricing on specified products and in certain markets. In certain circumstances this may require
us to reduce the price per end user under the AT&T contract.
We are substantially dependent on our wireless carrier partners to market and distribute our LBS to end users
and our business may be harmed if our wireless carrier partners elect not to broadly offer our services.
We rely on our wireless carrier partners to introduce, market and promote our LBS to end users. None of our
wireless carrier partners are contractually obligated to continue to do so. If wireless carrier partners do not
introduce, market and promote mobile phones that are GPS enabled and on which our client software is
preloaded and do not actively market our LBS, our LBS will not achieve broader acceptance and our revenue
may not grow as fast as anticipated, or may decline.
Wireless carriers, including those with which we have existing relationships, may decide not to offer our
services and may enter into exclusive relationships with one or more of our competitors. While our LBS may still
be available to customers of those wireless carriers as downloads from application stores or our website, sales of
our LBS would likely be much more limited than if our LBS were preloaded as a white label service actively
marketed by the carrier or were included as part of a bundle of services. Our inability to offer our LBS through a
white label offering or as part of a bundle on popular mobile phones would harm our operating results and
financial condition.
If we are unable to manage our costs in light of the anticipated reduction in average revenue per user, or
ARPU, or a potential increase in end user activity, our gross margin would decline and our operating results
would be adversely affected.
Our ARPU has declined over time due to a number of factors, including the bundling of our LBS with voice
and other data services and the introduction of white label services. We expect the current trend of declining
ARPU to continue. Our wireless carrier partners have the ability to lower end user pricing on our LBS which
would have an immediate adverse effect on our ARPU. As a result of the recent Sprint amendment that provides
us with a fixed annual fee for bundled navigation services, we believe that future ARPU and average monthly
paying end users may not be comparable to earlier periods or be a meaningful indicator of our financial
performance. Our gross margin may decrease if the average cost per end user to provide our services does not
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