TeleNav Extends Contract With Sprint

TeleNav, Inc. TNAV has announced a re-negotiation with its contract with Sprint S that has been extended through December 31, 2012, according to JP Morgan. JP Morgan writes "TNAV will remain Sprint's preferred navigation supplier through December 31, 2012 (previously December 31, 2010) and Sprint's right to terminate the agreement will begin on June 30, 2012 (previously December 31, 2010). TNAV will receive a guaranteed annual fixed fee from Sprint for bundled navigation application, to be recognized monthly over the term of the agreement (28 months, starting September 1, 2010). As expected, the new contract leads to an aggregate reduction in revenue from that key customer, who represents 55% of total revenue. On the other hand, TNAV's portion of revenue sharing for MRC (monthly recurring charge) navigation subs, enterprise LBS subs, mobile advertising/commerce and any other premium services, was increased. We expect that these contract terms will provide an incentive for Sprint to pre-provision TNAV application to a larger number of subscribers, and therefore an opportunity for TNAV to provide additional services on top of navigation to a larger subscriber base." JP Morgan maintains its Neutral rating and $7 price target for TeleNav Inc., which closed yesterday at $5.06.