TomTom, manufacturer of navigational systems had been given permission by the European Commission to take over digital map supplying company Tele Atlas. This was announced by Neelie Kroes, European Commissioner for Competition yesterday. The European Commision adds no conditions to the takeover.Investigation
Kroes’ decision has taken a few months longer than both companies had hoped for. TomTom initially wanted to finalise the takeover in 2007, but Kroes ordered an additional investigation in order to predict the effects of the transaction for the competition on the navigational market.Kroes now states the takeover will not limit the competition on the European market in any major way. She points out that Tele Atlas customers can take their business to competing map supplier Navteq should TomTom decide to only use the Tele Atlas maps for its own products. However, this is unlikely to happen, because this would mean a considerable loss of income for the company according to the European Commissioner: the loss of turnover for digital maps would not be compensated by the extra sales of navigational devices.
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With the acquisition of Tele Atlas, TomTom wants to take the matter of producing its maps into its own hands. The company, which will pay almost 3 billion euros for Tele Atlas, relies on the fact this should mean better maps for a lower price for them. The money which is saved this way will be re-invested to realise a better coverage of the maps.In the heat of the battle for the ownership of Tele Atlas, TomTom met their biggest competitor Garmin. At first Garmin seemed to be able to counter the initial offer TomTom had made for Tele Atlas, but then TomTom struck back hard with an offer of ¤ 30 euro per Tele Atlas share. This proved to be too much for Garmin to handle, and they threw in the towel.
Immediately after the announcement of the European Commission’s decision, the courses of both TomTom and Tele Atlas shares climbed.
