AMSTERDAM/HELSINKI (Reuters) - Handset makers and operators are looking at acquisitions among the remaining independent satellite navigation firms after Nokia NOK1V.HE and Google (GOOG.O) shocked the industry with free offerings.
Following several takeovers, remaining players in the satnav sector are rethinking strategies and some are set to sell out under pressure to survive, industry sources and analysts say.
Top mobile industry players — including Samsung Electronics (005930.KS), RIM RIM.TO and Microsoft (MSFT.O) — are likely to be more interested in buying assets rather than licensing the software as they need to minimize costs if they are to offer a service that is free for the consumers.
By offering free turn-by-turn navigation, Google and Nokia have raised the bar and made free navigation a standard, the basis on which others can offer their own services such as dynamic information about road conditions and traffic.
Providers of such services such as Telmap, Navigon, Waze and Automotive Navigation Data (ANDP.AS) have become potential acquisition targets.
The world’s largest cellphone maker Nokia last month followed Google in starting to offer free navigation on phones, dealing a blow to the navigation industry across the globe.
“It’s a massive disruption,” said Noam Bardin, chief executive at Waze, which provides a mobile application for free turn-by-turn navigation based on live road conditions.
In 2008 Nokia and TomTom (TOM2.AS) bought out digital map makers Navteq and Tele Atlas. There has been consolidation too among companies building software on top of maps.
Last month, Dutch Nav4All became the first major victim of free cellphone navigation as it could not change map supplier from Nokia’s Navteq to TomTom’s Tele Atlas.
“The general perception now is the map is crucial. If we don’t have it, we are toast,” Chief Executive Maarten Oldenhof at Dutch Automotive Navigation Data (AND) said.
Vodafone (VOD.L) bought Sweden’s Wayfinder for $30 million in 2008, after Wayfinder first acquired Finland’s Navicore. Nokia itself bought Germany’s Gate5 in 2006.
“There will be a lot of talk whether operators should follow Vodafone and look to acquire,” said Tim Shepherd of industry consultancy Canalys.
And the operators — under pressure from Nokia and Google — in turn have to consider offering the service for free.
Research firm Gartner has said if others follow the example of Nokia and Google it would slash up to $5 billion off the $25 billion consumer navigation market.
Consumers’ rising expectations for a free turn-by-turn navigation on smartphones could lead to a new flurry of acquisitions from the likes of Samsung, RIM and Microsoft.
“In the coming two to three years providers and handset makers will try to do it themselves, but not everyone can. My expectation is that only the big ones will survive, the likes of Nokia, Apple, maybe Microsoft, but a lot has to be improved in their mobile application,” said AND’s Oldenhof.
Still they need to turn to existing players as nobody has the required navigation knowledge and expertise in-house.
They will have to turn to companies who are struggling to find new income — through bundles or location-based advertising — under pressure to offer free services.
“We will see some bargains in this space. Companies will be for sale for fairly small amounts of money,” Canalys’ Tim Shepherd said.
Industry executives have already noted appetite for navigation-related services is growing since Google and Nokia made their move into the industry.
“We have some strategic discussions,” said Chief Executive Oren Nissim of Telmap, a provider of real-time mobile mapping and navigation services. “I am definitely sure there will be more consolidation in the sector.”
Gerhard Mayr, vice president for the global phone business of Navigon, Europe’s third biggest seller of personal navigation devices (PNDs) after TomTom and Garmin (GRMN.O), also notes more interest for his company and its services.
“We are talking to several parties in the industry,” he said, declining to say whether there is any interest in the company as a whole.
Editing by David Holmes