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TomTom's Plan to Buy TeleAtlas Rocks GPS Industry

7/24/2007 02:14:00 PM Eastern

New York — Industry members called TomTom’s decision to purchase map supplier TeleAtlas a significant industry-changing event, which could give TomTom some key advantages in the competitive GPS market.

TomTom NV announced yesterday it made an offer to purchase TeleAtlas NV in a deal valued at more than $2.3 billion and one which would give TomTom, the No. 2 U.S. supplier of personal navigation devices (PNDs), lower-cost access to maps.

Low-cost maps are considered important in the intensely competitive PND market because maps can comprise up to 20 percent of the wholesale cost of a PND, said industry members.

Several said the deal puts pressure on Garmin, the No. 1 U.S. supplier, who would presumably continue to buy maps at a typical market rate. By contrast, the TeleAtlas deal could allow TomTom to purchase maps at a third of the going rate, said one industry member, while a second source called that estimate “reasonable.’”

TeleAtlas said it supports the TomTom deal, which is expected to be finalized by the end of the year, pending it clears European anti-monopoly regulatory hurdles and other stipulations.

After the merger, Tele Atlas will continue its business as a separate unit that supplies map data to customers other than TomTom, said the company.

PND suppliers said the announced deal caught them by surprise and many spent yesterday scrambling for information on how the deal will impact their business.

TeleAtlas supplies maps to such PND makers as Mio, Cobra, Navigon and Dash. Essentially, its only competitor is Navteq, the map data market leader in the United States.

Mio sales and marketing senior director Kiyoshi Hamai said Mio has no plans to switch to Navteq at present. “We’ve been assured by [TeleAtlas] that nothing is going to change.” He also noted that the industry is heading into a key selling season and that this would not be an ideal time to switch map suppliers.

Two PND makers that are TeleAtlas customers said they were contacted yesterday by Navteq.

Navteq issued a comment on the deal saying only, “We believe the announcement reinforces the value and importance of map data and location content.”

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