|[The EC may deny the merge of Tomtom/TeleAtlas while letting Nokia acquire the crown jewel. |
At this time, the entire European and American maps can be stored in a fresh memory card the size of a small fingernail. In a few short years, standalone PDA/GPS will disappear and the mobile phone market is the real battlefield. Every cellphone will come with GPS with digital maps produced by NVT, or TeleAtlas good or bad. Without controlling the digital maps, Nokia will soon lose to the competitions from all the Asian competitors.]
Tele Atlas: Tomtom has deadline today to reply to EC objections about confidentiality, partial foreclosure and efficiency
By Ben Bschor in Brussels
Published: March 17 2008 16:20 | Last updated: March 17 2008 16:20
This article is provided to FT.com readers by dealReporter—a news service focused on providing insightful intelligence on event driven situations to investors. www.dealreporter.com
TomTom, the manufacturer of personal navigation devices (PNDs) has had until today Monday, 17 March, to submit a reply to concerns raised by the European Commission (EC) on its takeover of Tele Atlas, the digital mappings company, dealReporter understands.
Meanwhile it is understood that the statement of objections (SO), issued by the EC at the end of February, focuses on three key areas of concern: confidentiality, partial foreclosure and the efficiency argument brought forward by the merging parties.
On confidentiality, the concern is that Tele Atlas would inevitably lose customers – that is PND manufacturers directly competing with TomTom - as there would be a lack of confidence in the market that customer secrets are being kept away from TomTom.
In terms of partial foreclosure the EC is worried that Tele Atlas would have an interest to degrade the quality of maps supplied to external customers compared to the products provided to TomTom.
In the context of these arguments, the EC believes that a takeover of Tele Atlas by TomTom would in fact strengthen Tele Atlas’ only serious rival, Navteq. Navteq is currently also in the process of being taken over by a hardware manufacturer, Nokia. But unlike TomTom, Nokia is first and foremost a mobile phones manufacturer and not focused on PNDs.
Following an argumentation described in article 38 of the EC guidelines on the assessment of non-horizontal mergers, partial foreclosure and confidentiality concerns regarding a merged TomTom/Tele Atlas could play into the hands of Navteq. The assumption is that in a market that is seen as oligopolistic, customers can only turn to Navteq if confidentiality concerns drive them away from Tele Atlas. Therefore competitive pressure on Navteq would be reduced which would result in increased prices for Navteq products.
Finally the Commission is said to have doubts in the efficiency argument brought forward by TomTom and Tele Atlas in favour for the takeover. In general terms, TomTom and Tele Atlas are believed to have argued that only the merged entity was able to fully optimise the use of data fed back by the end users to the suppliers. But it is believed that the EC, while not generally dismissing the potential to optimise PND products by utilising customer feedback, is not convinced that such goals can only be achieved in a merged company.