German Car Makers Close to Clinching Nokia Maps Deal

Germany’s premium car makers are close to a deal to buy Nokia’s Here map business for between 2.5 billion and 3 billion euros ($2.74 billion to $3.29 billion), but a final agreement hinges on the question of who owns the patents that help self-driving cars talk to mobile networks, two sources familiar with the deal told Reuters on Tuesday.

The purchase of Here, which has been valued at between 2 billion and 4 billion euros, could also require multi-year pledges to make further investments to improve map data quality. The deal is expected to be finalized by the end of July, if the two sides can settle the intellectual property issues, the two sources familiar with the transaction said.

So-called connected and self-driving cars, linked to mobile phone networks, can perform intelligent functions such as recalculating a route if data about a traffic jam or an accident is transmitted to update the car’s intelligent mapping system.

So much real-time data is processed by self-driving cars to navigate successfully that telecom network infrastructure has emerged as a major component of connected cars, and as a sticking point in deal discussions, auto industry sources said.

Self-driving and connected car services could evolve into a $50 billion market, analysts at Exane BNP Paribas say.

A consortium of Daimler, parent of Mercedes-Benz, BMW and Volkswagen’s Audi division want outright ownership of all relevant patents owned by Nokia related to mapping, auto industry sources said.

But the Finnish mobile network equipment maker is seeking to keep control of some patents for how mobile devices connect to networks, be they computers, phones or newer types of network-connected cars, industrial, corporate or agricultural equipment.

Spokesmen for Nokia, Mercedes-Benz parent Daimler, BMW and Volkswagen’s Audi declined to comment.

One auto industry source told Reuters the car makers and Nokia needed this week to work out the remaining hurdles. An overall agreement by the end of the month was possible, but in no way guaranteed, the source said.

Shares in Nokia fell 2 percent in late afternoon trading in Helsinki to 6.21 euros.

Nokia is shedding the maps business as part of efforts to focus on integrating its 15.6 billion euro purchase of Alcatel Lucent. It is due to report results on July 30.

Nokia announced a strategic review of its navigation business in April, setting up an auction process for Here that has pitted Germany’s premium automakers against rivals from the United States and China, which have now pulled back.

Self-driving cars use data gathered from vehicle radar and laser sensors and cross-reference this with information embedded in digital high-definition maps such as the location of traffic lights, lane markings or traffic jams up ahead.

Nokia’s Here has emerged as an industry leader in the field of high-definition digital maps, and automotive industry players already account for more than 50 percent of Here’s revenue. Its main rivals include Google and smaller Dutch map maker TomTom.

For Nokia, keeping control of the location-aware network patents would give it bargaining power over rival equipment makers Ericsson and Huawei in talks to define the so-called 5G era, the next generation of mobile networks, whose construction will begin later this decade.

Nokia, whose main business is selling equipment to run mobile networks, also owns a licensing business that is expected to generate more than one billion euros this year.

Separately, TomTom on Tuesday said it had deepened a partnership in high-definition mapping with giant German auto supplier Robert Bosch to refine the technology crucial for autonomous driving.

(Reporting by Edward Taylor and Eric Auchard; Additional reporting by Andreas Cremer, Ilona Wissenbach and Irene Preisinger; Editing by Maria Sheahan and Jane Merriman)

This article originally appeared on Recode.net.