Mobile phone giant Nokia launched free satellite navigation in a direct challenge to Google at the same time hitting market leaders, the Dutch firm TomTom and the US firm Garmin.
Nokia said this week it ould offer free navigation to 20m smartphone users. The move follows Nokia’s acquisition in 2008 of digital mapping firm Navteq, a rival to TomTom’s Tele Atlas unit, for US$8.1bn.
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“It’s a major shock for the navigation industry. Going forward profit margins have to come down,” Gartner analyst Thilo Koslowski told Reuters. He estimated that if other companies follow with free navigation, they could take up to US$5bn of the US$25bn satnav market in the near-term.
Analysts said the move may also spark a flurry of acquisitions from the likes of Samsung, Blackberry maker RIM and Microsoft, as consumers will expect free navigation to be a standard feature on smartphones.
“This has massive consequences for pure software companies. It is, of course, a watershed for the industry,” said Michael Halbherr, vice president for location-based services at Nokia.
Underlining the shift away from separately priced service, Halbherr said he saw navigation as a “function masquerading as an industry”.
“If you are a pure software player, you’ve got a big problem. Who’s going to pay for turn-by-turn navigation now Nokia and Google are giving it away?” asked analyst Martin Garner from British consultancy CCS Insight.
TomTom also sells navigation software with 70% of sales coming from personal navigation devices.
Nokia sells more smartphones than any of its rivals but has lost ground to Apple’s iPhone and RIM’s Blackberry .
“It will help us to sell smartphones,” Anssi Vanjoki, head of marketing at Nokia, told Reuters. “It will serve as a defence to our product prices.”
