TeleNav 2010 Annual Report Download - page 50

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read together with our consolidated financial statements
and the notes to those statements included elsewhere in this Form 10-K. This discussion contains forward-
looking statements based on our current expectations, assumptions, estimates and projections about TeleNav and
our industry. These forward-looking statements involve risks and uncertainties. Our actual results could differ
materially from those indicated in these forward-looking statements as a result of certain factors, as more fully
described in “Risk factors” in Item 1A of this Form 10-K, Management’s Discussion and Analysis of Financial
Condition and Results of Operations and elsewhere in this Form 10-K. We undertake no obligation to update
publicly any forward-looking statements for any reason, even if new information becomes available or other
events occur in the future.
Overview
We are a leading provider of LBS, including voice guided navigation, on mobile phones. Our LBS solutions
provide consumers and enterprises with convenient and easy to use location specific, real time and personalized
features and functions. By using an integral tool of their daily lives, their mobile phone, our end users can access
our LBS almost anytime and anywhere to efficiently navigate to their destinations and easily obtain relevant local
information. Through our hosted service delivery model, we provide our solutions through the networks of
leading wireless carriers in the United States, including Sprint and AT&T, as well as through certain carriers in
other countries. Our flexible and proprietary LBS platform enables us to efficiently provide our LBS to millions
of end users, across more than 500 types of mobile phones, all major mobile phone operating systems and a
broad range of wireless network protocols. In the three months ended June 30, 2010, we had a monthly average
of 16.1 million paying end users, who represented less than seven percent of our U.S. wireless carrier partners’
total subscribers.
We primarily derive our revenue from our partnerships with wireless carriers who sell our LBS to their
subscribers either as a stand alone service or in a bundle with other applications. End users are generally billed
for our services through their wireless carrier. We receive revenue from our wireless carrier partners in three
ways: (1) a monthly subscription fee per end user, (2) commencing in fiscal 2011, a fixed annual fee for any
number of subscribers (up to specified thresholds) receiving our services as part of bundles with other voice and
data services or (3) a revenue sharing arrangement that may include a minimum fee per end user. Our wireless
carrier partners may offer our services on a stand alone basis or bundled with other voice and data services. In the
future, we may have other revenue models, including fees for certain automotive navigation applications or
advertising supported arrangements. We and our wireless carrier partners may offer subscribers a 30-day free
trial for our service. We believe that the wireless carrier billing makes our services more appealing to consumers
and enterprises as they are not required to pay a separate monthly charge to a different vendor. For a small
minority of end users who purchase our LBS through our website or in application stores, we bill their credit
cards directly on a monthly basis.
In September 2010, we and our largest customer, Sprint, entered into an amendment to our agreement that
will result in us receiving a fixed annual fee from Sprint for their bundled service subscribers’ use of our
navigation services in which the annual fee is not dependent upon the number of subscribers participating in
those bundles until such time as a specified threshold is reached. This amendment to our Sprint agreement did
not have any impact on our results of operations for fiscal 2008, 2009 or 2010 but will affect our results of
operations beginning in the first quarter of fiscal 2011. We anticipate that our amended agreement with Sprint
will result in further declines in ARPU and significant reductions in revenue from Sprint for bundled basic
navigation services compared to the most recent quarter, but will 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. As a
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