Nokia Buys the Worlds Maps

In a mobile, connected world, maps are becoming a hugely strategic asset. All kinds of burgeoning digital revenue streams are being created on the backs of maps: local search, friend finders, family tracking, location-aware advertising and turn-by-turn navigation. If you control the map, you control the game.

In July, the industry woke up to just how valuable maps could be when TomTom, the Dutch manufacturer of personal global positioning system navigation devices, said it would buy Belgian mapmaker Tele Atlas for approximately $2.7 billion.

TomTom was quick on the draw; since the deal, Navteq stock has shot up 86%. But not doing the deal could have turned out to be even more expensive for Nokia given that it is a customer of Navteq: If the likes of Microsoft (nasdaq: MSFT – news – people ), Google (nasdaq: GOOG – news – people ) or personal navigation device maker Garmin (nasdaq: GRMN – news – people ) snapped up Navteq, they could easily put Nokia out of the map business by refusing to renew its license in a few years, or hurt it badly by jacking up the price of maps.

Now Nokia can tell the others where to go. Navteq claims it has the most accurate maps in the world, in part because it sends out more than 700 workers in vans every day to take down detailed road information. Navteq also bought Traffic.com a year ago for $179 million, giving it real-time traffic information in more than 50 U.S. cities. Seven out of ten of the in-dash car navigation systems in Western Europe and the U.S. use Navteq. More than half the GPS-equipped mobile devices sold in Western Europe and North America have Navteq maps embedded in them.

Nokia uses Navteq data to power the maps in its new phones equipped with GPS chips, including the N95 and 6110 Navigator. Owners of these phones get free maps and can upgrade to Nokia’s turn-by-turn navigation service, called Smart2Go, for $13 a month or $112 a year. Nokia also debuted two in-car navigation devices this year and a GPS accessory that turns any Bluetooth phone into a personal navigator.

The Garmin and TomTom-type personal navigation device business is booming. Unit sales are up from 2.5 million in the U.S. last year to 7.5 million for this year. But Nokia is mostly eyeing the opportunity in GPS-equipped phones. Only 11% of the 1 billion cell phones sold last year had GPS chips in them. By 2011, more than a third of new cell phones will, creating a $3 billion a year business in cellular navigation in the U.S. and Europe, according to Sanford C. Bernstein research. That means 500 million GPS phones walking around in cities and towns, creating a powerful two-way sensor network that Nokia and others can tap for selling targeted advertising, friend-finder services and city guides.