German car makers to buy Nokia map service for $3.1 billion

HERE, a direct competitor to Google Maps, was bought by Nokia from US tech company Navteq for $8.1 billion in 2008

FRANKFURT: German car makers BMW, Audi and Mercedes-Benz have teamed up to buy digital mapping service HERE for $3.1 billion from Nokia, the Finnish telecoms group said Monday.

The sale "should be concluded in the first quarter of 2016," Nokia said in a statement, adding that it expected net proceeds from the deal of just over $2.7 billion. The three German luxury car makers, which were already clients of HERE, said in a separate statement that they would hold equal shares in what would be an unprecedented type of partnership in the sector.

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"HERE is laying the foundations for the next generation of mobility and location-based services," they said, adding that HERE's technology would eventually be used in self-driving cars.

The companies touted HERE's maps of nearly 200 countries in more than 50 languages as being able to use "swarm intelligence" to provide constant updates on hazards such as icy roads, accidents and traffic jams.

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The joint acquisition, which will have to be approved by competition authorities, is aimed at maintaining HERE'S products and services "as an open, independent and value-creating platform" in the automotive industry and other sectors, the car makers added.

PHOTO: AFP

Nokia paid $8.1 billion in 2008 for US digital map provider Navteq, one of the firms that merged to create HERE, a direct competitor of Google Maps. The German acquisition deal had been in the works for months. Although much less familiar to consumers than its rival, HERE has a solid list of industrial and Internet clients including Facebook and Amazon and its maps are used by four out of five cars in Europe and North America with integrated GPS.

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Nokia, the former number one in the mobile telephone sector, aims now to focus on network equipment and is working on a return to the handset business, which it sold to Microsoft in 2013. In mid-April Nokia struck a $17.1 billion deal to buy its rival Alcatel-Lucent to create the world's biggest supplier of mobile phone network equipment.

It also expects to finalise that deal in the first half of 2016.

The controversial taxi app Uber told The New York Times in May that it had made a $3 billion offer for HERE. Analysts said Nokia could be happy with the sale price.

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"Nokia paid a very high price for the service then (by buying Navteq in 2008), but that was a long time ago. Back then they paid too much but now the price is reasonable," equity strategist Kristian Tammela of Nordea Bank Finland told AFP.

Mikael Rautanen of equity research firm Inderes said it was the right acquisition at the right time for the German car makers. "It is a good deal and above all strategically important for them. The biggest threat for them was that HERE would be sold to Silicon Valley. They don't want to be dependent on players like Google or Microsoft," Rautanen told AFP.

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He noted that digital services are transforming the car market. "In future carmakers won't differ from each other so much by their motor or by their design but rather by the services that come with their cars, let alone driverless cars which will very quickly become a part of everyday life," Rautanen said.

London-based IHS Automotive said the acquisition could spur the establishment of a "de facto standard" in the industry, spurring high-tech development. "The consortium model has many benefits for the industry, including the ability to combine resources to secure and continue developing a long-term strategic resource," it said in a statement.