TeleNav 2011 Annual Report Download - page 24

Table of Contents
In addition, other new entrants may seek to have their products preloaded on mobile devices by OEMs or offered by OEMs directly.
Increased competition from providers of LBS which do not rely on a wireless carrier may result in fewer wireless carrier subscribers electing to
purchase their wireless carrier’s branded LBS, which could harm our business and revenue. In addition, these LBS may be offered for free or on
a one time fee basis, which could force us to reduce monthly subscription fees, migrate to a one time fee model or offer free versions of our
products that allow for upgrades to more premium versions for a fee to remain competitive. We may also lose end users or face erosion in ARPU
if these competitors deliver their products without charge to the consumer by generating revenue from advertising or as part of other applications
or services. Finally, we may not be successful at generating revenue from premium navigation services if end users believe that free services are
comparable or adequate.
Our success depends on significantly increasing the number of end users that purchase our LBS from our wireless carrier customers.
Our revenue is derived almost exclusively from subscription fees that we receive from our wireless carrier customers for end users who
subscribe to our services on a standalone basis or in a bundle with other services. Depending on the wireless carrier contracts, we receive
revenue as (1) a monthly subscription fee per end user, (2) 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, or (4) based on usage or other basis. To date, a relatively small number of end users have subscribed for our services in connection with
their wireless plans compared to the total number of mobile phone users. Our near term success depends heavily on achieving significantly
increased subscriber adoption of our LBS either through standalone subscriptions to our services or as part of bundles from our existing wireless
carrier customers. Our success also depends on achieving widespread deployment of our LBS by attracting and retaining additional wireless
carrier customers. The use of our LBS will depend on the pricing and quality of those services, subscriber demand for those services, which may
vary by market, as well as the level of subscriber turnover experienced by our wireless carrier customers. If subscriber turnover increases more
than we anticipate, our financial results could be adversely affected.
If our current and future wireless carrier customers do not successfully market our LBS, particularly GPS Navigator, to their customers or
if we are not successful in maintaining and expanding our relationships with our wireless carrier customers, we will not be able to maintain or
increase the number of end users that use our LBS and our business, operating results and financial condition will be materially adversely
affected.
If our wireless carrier customers lose net subscribers, such as the losses Sprint previously experienced, or if their subscribers do not continue
to purchase service plans that include our LBS and we are unable to develop relationships with other significant wireless carriers, we may
lose end users and our revenue and operating results may be adversely affected.
Wireless carriers’ relationships with subscribers have been threatened by several factors, including strong competition, lack of subscriber
loyalty and the development of direct relationships between mobile phone manufacturers and mobile phone operating system providers and
consumers. A loss of net subscribers by one or more of our wireless carrier customers could harm our business as we rely on our wireless carrier
customers to market our products. For example, one of our key wireless carrier customers, Sprint, has experienced losses in net subscribers in the
past. Although Sprint has recently experienced gains in net subscribers, if these gains in subscribers are not sustained or if Sprint subscribers do
not continue to purchase service plans that include our LBS, we may also lose end users and experience a decline in revenue to the extent we are
unable to develop similar relationships with other significant wireless carriers which include our services in attractive bundled or other LBS
offerings that generate comparable revenue. A significant decrease in the number of our end users will adversely affect our revenue and
operating results.
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