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A notification of the Nokia/Navteq deal at the same time as Tele Atlas/TomTom would ease the competition assessment of the deal rather than jeopardize it, it is understood. Dutch listed navigation systems company TomTom notified its acquisition of country-peer digital mapping manufacturer Tele Atlas to the US competition authority this week and is still in pre-notification talks with the European Commission (EC). It is understood that the parties have already made an informal filing and are now waiting for feedback from the Commission but the objective is for a Phase I clearance.
Meanwhile, Nokia’s USD 8.1bn bid for Tele Atlas main rival Navteq, which was announced last Monday [1 October], will also require regulatory approvals in the US and the EU. But a simultaneous notification at the EC would not change anything for Tele Atlas/TomTom and could even help the competition argument, it is understood, the rationale being that if for some reason, the combined Navteq/Nokia did not want to sell maps to competitors, Tele Atlas/Tom Tom would.
A competition lawyer, who is not involved in any of the deals, thought that at first sight neither transaction seemed likely to be problematic or to cause problems for the other from a competition law standpoint. “Given that both transactions appear to be vertical in nature and involve markets that appear from the press reports to be competitive, both should in principle involve first stage clearances,” he added.
The digital maps market is currently a duopoly between Tele Atlas and Navteq, with the first being stronger in Europe and the latter more present in the US. If there is a duopoly at the moment, the situation does not change with the two deals, it was pointed out.
As previously reported on this news service, the vertical integration of Tele Atlas and TomTom could prompt concerns by those Tele Atlas customers that are also TomTom competitors. One area competition authorities may well want to explore would be the scope for bundling and the combined entity to restrict access to maps.
But one argument the authorities could pose is whether in the long term the value will be in the handset or in the content. The reason why TomTom decided to buy Tele Atlas was to improve the quality of maps to sell to a wider audience and serve the increasing demand for such products rather than restrict access to the market, it was said. If the aim was to refuse to sell maps to protect TomTom that would be a short term vision.
It is understood that parties are confident in the final outcome of the competition investigations because if someone wants to enter the market, they can. Smaller players are already out there, such as Dutch company Automative Navigation Data (AND), which has just launched street level maps for Benelux countries or Openstreetmap, a free editable map of the world where users can add entries in the same principle as on Wikipedia.
Indeed digital maps and satellite sources have been around only since 2004 and new market entrants such as Google, Microsoft or other large companies could well knock at the door soon. Since Nokia announced its move for Navteq, speculations have circled around potential rival bids from Google and Microsoft as well as handset manufacturers such as Sony Ericsson and Motorola. If markets have been particularly effervescent over the past few days it is because this sector is huge and has massive financial stakes, it was pointed out.
In any case, if remedies were required on Tele Atlas/Tom Tom – whether in Phase I or Phase II – these could be nothing else than behavioural, it was said. Indeed, the only structural measure to address concerns that the combined entity could discriminate against competitors, would be not to do the merger. But parties do not think at this stage that remedies will be necessary.
As for the Navteq transaction, a source close to the Tele Atlas/TomTom deal said although a company such as Nokia cannot be put in the same category of strength as Microsoft or Google, it is still strong in one sector and very technology driven. If there is a sensitivity from competition authorities, it is going to come around bundling and whether the mapping inputting being owned by one company would foreclose competition from other companies, he added.
The source thought in any case, scrutiny would be stronger in Europe than in the US, with the latter generally taking a more laissez faire approach and would unlikely worry if the technologies are considered complementary. “The US view in simple terms is that there are other technologies out there,” he said. ”Actually it is not a profit maximising way in which to behave not to make the technology available to as many people as possible.”
A Tele Atlas spokesperson indicated that at this stage the companies were still working towards closing the deal by the end of the year and hoped to have secured approval from the European and US competition authorities by 4 December.
TomTom and Nokia declined to comment.
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