May 14, 2008 / 4:49 PM / 9 years ago

EU sees Nokia, TomTom deals as similar

4 Min Read

<p>NAVTEQ's real-time television traffic platform ConnuteVantage is seen in an undated handout image.PRNewsFoto/Navteq</p>

BRUSSELS (Reuters) - The European Commission has told customers and competitors of the world's biggest mobile phone maker, Nokia NOK1V.HE, and map maker Navteq NVT.N that their deal resembles one it cleared on Wednesday.

Investors have been wondering whether the European Union competition regulator's decision to clear without conditions the purchase of map maker Tele Atlas TA.AS by TomTom (TOM2.AS) sets a precedent for the Nokia decision.

Confidential Commission questionnaires obtained by Reuters show regulators are bound to make an independent investigation of Nokia, even though Brussels acknowledges the deals are similar.

Nokia has offered $8.1 billion for Navteq, which, like Tele Atlas, is used in car navigation devices, telephone handsets and Web maps for Yahoo YHOO.O and Google (GOOG.O). TomTom makes automobile navigation devices.

"Although the two transactions involve largely the same markets .... the merger regulation obliges the Commission to investigate separately the Nokia/Navteq merger," the EU executive said in a questionnaire dated from February.

"If you responded to the market investigation in the Tom Tom/Tele Atlas case, you can provide the same answers by 'copying and pasting' the submission you made on that occasion," it advised.

But some questions were unique to the Nokia case.

The Finnish mobile phone maker is many times the size of TomTom, with deeper pockets and 40 percent of the handset market, making it a more dominant player in its own sector.

Conflict

The Commission asked rivals whether there was "conflict ... with regard to the inclusion of a specific service that your company would have wanted to embed into its handset".

Conflicts have arisen where mobile phone operators and makers wanted to provide the same service, each seeking a bigger share of profits.

"Operators are starting to lose control of some of the value chain. That fear of loss of control is pretty much for all operators, but less so in Japan and the United States because they have a tight grip on retail distribution," said Neil Mawston, an analyst with Strategy Analytics Ltd in London.

The loss of control can be partially offset by new revenue.

"It's quite a fine balancing act. Operators don't want to give up control of the network," he said.

Early this month Nokia signed a deal with Germany's T-Mobile TMOG.UL to provide Internet services for European customers, on top of earlier deals signed with Spain's Telefonica (TEF.MC), France Telecom's FTE.PA mobile arm Orange, Telecom Italia (TLIT.MI) and Vodafone (VOD.L).

T-Mobile had earlier voiced misgivings about signing with Nokia.

Nokia has also signed deals with record labels Vivendi's (VIV.PA) Universal and Sony BMG to distribute their music. Users may download unlimited content for 12 months.

The questionnaires avoided questions about such broader issues and focused only on maps.

They asked phone makers how they see the differences between Navteq and Tele Atlas products, where they buy maps and at what price, and whether they could make their own maps.

The Commission also wanted to know how fees for maps are passed on to consumers.

Reporting by David Lawsky, editing by Paul Taylor and Andrew Callus

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