Cell Phones With GPS Ring Up New Revenue For Carriers, Vendors
BY PATRICK SEITZ
INVESTOR'S BUSINESS DAILY
Posted 10/20/2008
Two privately held companies, Networks In Motion and TeleNav, are poised to capitalize on the growing market for cell phone-based navigation services.
The two firms dominate that market in the U.S., providing voice and on-screen driving directions and location-based services to all the major wireless carriers.
Networks In Motion of Aliso Viejo, Calif., and TeleNav of Sunnyvale, Calif., both say they are profitable and will look to go public after the IPO market recovers.
NIM's service powers Verizon Wireless' VZ Navigator, which delivers spoken and visual turn-by-turn directions, maps and local points of interest. NIM provides similar services to Alltel and U.S. Cellular.
TeleNav provides its navigation services to AT&T, (T) Sprint Nextel, (S) T-Mobile and others.
The cell phone-based navigation business is just starting to take off because GPS satellite receivers are now becoming standard in new handsets, says Doug Antone, chief executive of Networks In Motion.
"The numbers are skyrocketing," Antone said. "You're seeing more than 50 (million), 60 (million), 70 million devices a year coming out that have the GPS chip in them."
At this point, fewer than 10% of cell phone users are actually using cell phone navigation services, but the numbers could grow rapidly as more GPS-enabled phones hit the market, analysts say.
One factor is the large, touch-screen displays in many new phones, making it easier to use GPS.
Cost, though, has held back many, analysts say. Subscription services from NIM and TeleNav cost $10 a month. That's "pretty expensive," said David Chamberlain, an analyst with research firm In-Stat.
But carriers are experimenting with different business models. For instance, Verizon offers its VZ Navigator on a pay-per-use basis for $3 a day, which is compelling for infrequent users, Chamberlain says.
Carriers also are offering navigation in bundles with other services such as unlimited text messaging and video. Other pricing methods being reviewed by carriers include an annual price, a life-of-device price and an ad-supported service that would be free for users.
"To get the kind of penetration levels that the aggressive carriers want to see, which is that 20-to-30-to-40% penetration level, you're obviously going to have to do some different things with the pricing," Antone said.
Wireless carriers also have to do a better job of promoting navigation services, analysts say.
Navigation services from NIM and TeleNav provide more than directions from point A to point B. They also offer location-based services, such as real-time traffic data, local search, movie listings, area gas prices, and the ability to find nearby ATMs, restaurants and stores.
NIM, TeleNav and other cell phone navigation providers face competition on a number of fronts. Rivals include portable navigation devices, or PNDs; factory-installed systems in new vehicles; and free services from companies such as Google (GOOG) and Yahoo. (YHOO)
PNDs have larger screens and sell for as little as $99. But wireless connectivity for real-time traffic and other data is mostly available only on higher-end devices and usually involves paying subscription fees.
More new cars are coming with in-dash navigation systems. But at $1,000 or more, these systems are much more expensive than PNDs.
Web search companies Google and Yahoo provide basic services for getting point-to-point directions, but without audible turn-by-turn instructions and street names.
NIM and TeleNav get their digital maps from Navteq, a unit of cell phone leader Nokia, (NOK) and Tele Atlas, a unit of PND maker TomTom.
NIM is the No. 1 cell phone navigation service in the U.S., with revenue exceeding $3 million a month, says Patrick Connolly, an analyst with IMS Research. It has more than 60% market share by revenue, he says. TeleNav is No. 2, with a large part of the remaining market.
In Europe, Telmap and Wayfinder are the established application providers, Connolly says.
Last year, Networks In Motion generated a little over $16 million in sales, CEO Antone says.
TeleNav doesn't disclose its revenue, but Chief Executive H.P. Jin says the company has been profitable for the last three quarters.
