Why Connected PNDs Could Get Subsidized by Wireless Operators

By Aaron Solomon, CEO at Mobile Devices

We hear they are a dying breed, slow, outdated, outsmarted by phones… still there is plenty of life left in the PND category and the next generation of connected PND will have what it takes to attract operators interests.



Why Connected PNDs Could Get Subsidized by Wireless Operators
Mobile operators are still key players for anybody who wants to put a subscription-based connected device on the market. The Google Nexus One never took off because it tried to circumvent the operator’s business model.

It is essential to understand the operator perspective regarding the connected PND market in Europe. What sort of revenues can operators expect from these devices? Let's take a look at the likely ARPU, the average revenue per unit.

In Europe, 22 million new smartphones were bought in 2009, most of them by already subscribed customers. Meanwhile 42,2 million smartphones were active in Europe in 2009, all equipped with GPS.

We can reasonably estimate that a low end subscription for a smartphone is €40 a month. From there we can estimate that the total revenue from smartphone subscriptions for operators in Europe amounts to €20.2 billion.

During 2009, 15 million PNDs were sold in Europe. It's safe to estimate that monthly M2M data connection costs would be about €1 for a connected PND (using GPRS), depending on the proposed or planned services.



Aaron Solomon
Aaron Solomon
Aaron Solomon
Aaron Solomon
Right now an estimated 8% of PNDs in Europe are connected. That comes to 1,2 million connected PNDs. For operators, this amounts to €14.4 million in connection and M2M revenue.

The difference is huge and stark. PNDs earn about 1,400 times less than smartphones for the operators.

The connected PND represents at best a marginal opportunity for them — discounting the fact that PNDs compare very unfavourably with smartphones as advertising revenue earners because of the lack of flexibility and applications that the car environment imposes on them.

To make matters look even more gloomy for PND makers, the relative novelty of the connected PND, the lack of strong brand power and the specificities of the applications require the operators to spend on advertising.

This is why operators will not hesitate to subsidise smartphones even if their cost is above €250 but they will refuse to subsidise a sub-€100 connected PND — even if the visible price of the PND appears superior to the consumer.

Continued...

Tuesday, September 28th 2010
Aaron Solomon


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