TomTom, the world’s largest maker of GPS navigation systems for cars, has announced it plans to buy its primary map supplier Tele Atlas for €1.8 billion in cash, or about $2.5 billion in U.S. dollars. The move is seen as a way for TomTom to consolidate its business and move towards a service model: as the market for GPS devices becomes more saturated, GPS manufacturers will be able to make less money selling devices, and will instead have to shift towards service offerings to make their brands competitive.
TomTom and Tele Atlas say the combined company will be able to create significant new advantages for GPS users, including expanded map coverage, improved route planning and map updates, and new technologies that will enable users of the over 10 million TomTom GPS devices in the market to provide feedback and map update data directly. Information could include pointers where maps are out-of-date or inaccurate, along with statistical information on traffic flows and other quickly-updated map data.
“We think that the navigation industry is going to change dramatically in the next few years as end customers will give ever increasing importance to intelligent routing and continuously updated maps,” said TomTom CEO Harold Goddijn in a release. “By integrating customer feedback into the Tele Atlas map manufacturing process, we will be able to considerably enhance the user experience and further increase all Tele Atlas and all TomTom’s customers’ satisfaction.”
Tele Atlas will continue to offer its maps to other companies, although the TomTom acquisition may cost it clients which directly compete with TomTom. TomTom’s offer for the company constitutes a 32 percent premium over Tele Atlas’s average share price over the last three months, although it’s still possible the company may receive higher bids from other parties such as Google, Nokia, or Microsoft.