Nokia to introduce free navigation services to boost smartphone sales

print this

Finnish mobile phone giant Nokia announced on Thursday that it would introduce a free global satellite navigation facility for ten of its smartphone models. From March the free navigation service package will come preinstalled with all new Nokia smartphones that come with GPS.
      By making the previously chargeable service free, Nokia’s obvious aim is to enhance the sales figures of its smartphones.
      “From the market share point of view this is a good move, for it adds to the attractiveness of the Nokia smartphones. However, it happens at the expense of the long-term asset value of the Navteq company, for which Nokia paid a hefty price”, says investment bank Nomura analyst Stuart Jeffrey.
     
Part of the price of every single handset provided with the navigation service is paid by Nokia to Navteq.
      In addition, Navteq invoices those of Nokia’s competitors that use Navteq’s digital maps in their map and navigation applications.
      “Presumably Nokia does not have to change Navteq’s book value, because the handset division pays for every single sold Navteq map licence. In other words, in practice it is a question of transferring net sales figures from the handset division to Navteq”, Jeffrey estimates.
      With book value Jeffrey refers to Navteq’s business value.
      Business value, on the other hand, means the price that exceeds the purchased company’s asset value.
      If the purchased firm’s result expectations weaken substantially, the owner company has to lower the firm’s business value in its bookkeeping.
     
Nokia will offer its free walk & drive satellite navigation virtually all over the world.
      According to the company, its Ovi Maps application’s voice-guided navigation service will initially be launched in 74 countries in 46 languages.
      The service will cover 28 million kilometres of roads, and it will include the street maps of 650,000 towns and cities.
      According to Nokia, Navteq’s market share of the maps used in car navigators is more than 70 per cent.
     

In the mobile phone map and navigation applications, Nokia’s main competitor is the search engine company Google.
      For quite some time its map applications have been available to download free of charge to be used in handsets by various manufacturers.
      In the United States, Google’s voice-guided navigation service has been available for a couple of months now.
      “Compared with Google Maps, our service is ten times more effective in satellite positioning. According to measurements, with our system navigating through a 20-kilometre distance with our traffic updates takes 200 kilobytes of information, as opposed to two megabytes with Google’s corresponding service. This means that navigation with Google’s system is more expensive and takes up more battery power”, estimates Jukka Hosio, Director of Service Marketing, Location.
     
When navigating by using a mobile phone the used maps are often downloaded through the teleoperator’s network, and the operator charges for the data transfer based on the used megabytes.
      “From the consumers’ point of view, the problem is that the data transfer charges are obscure or that they are not familiar with them. Furthermore, the quality of the equipment and the provided services have raised suspicions”, Hosio says.
      More and more people who use their handsets a lot are opting for contracts with free to a point or even unlimited downloads.


Previously in HS International Edition:
  Nokia to buy Navteq in Finland´s largest-ever corporate acquisition (2.10.2007)

Links:
  Nokia press release

Helsingin Sanomat