Nokia sells Here maps business to carmakers Audi, BMW and Daimler

The deal shows how important mapping and location data are to the future of the car industry, particularly in the coming era of self-driving cars.

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Nokia has finally unloaded its mapping service.

The Finnish telecommunications giant said on Monday that it had agreed to sell its Here maps business to European automakers Audi, BMW and Daimler, who have agreed to pay a total of 2.8 billion euros ($3.1 billion, £2 billion, AU$4.2 billion).

The fact that the three major manufacturers have teamed up to buy Here shows how important mapping data is to the future of the car industry as new vehicles become more connected. The technology gives them a viable alternative to mapping services offered by Google and Apple. The deal also allows them to move past simple satellite-navigation-style directions and toward the next generation of navigation: cars that can collect data to share real-time updates on traffic, parking and other variables with other vehicles. Down the line, those highly accurate, up-to-date maps will be crucial for self-driving cars to know where they're going.

The 150-year-old Finnish company Nokia is best-known for making phones, especially in Europe. But since selling off its phone business to Microsoft last year, it has been reduced to its three less well-known divisions: Nokia Networks, making networking equipment; Nokia Technologies, researching and developing new technology; and Here. Nokia recently bulked up its telecom equipment business with the acquisition of rival Alcatel-Lucent.

Here is available to the public in the form of maps apps on Android, iOS and Windows Phone, but the majority of its business comes from licensing mapping data to other companies, particularly in the automotive industry. There were 17 million vehicles produced with navigation systems in 2014, according to research firm IHS. Those cars will all need a steady flow of map data.

Here is developing technology that will pull data from cars, phones and the furniture of the road to the cloud and deliver real-time and predictive mapping services. The business is also expected to play an important role in the development of self-driving cars.

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"It is clear that access to high quality maps and location information is critical, not only to traditional players but to challengers from connected industries as well," said industry analysts Jeremy Carlson, Kevin Hamlin and Gerrit Schneemann of IHS. "The acquisition by Audi, BMW and Daimler poses an interesting opportunity of how an industry collective will share a strategic resource with competitors."

The analysts noted that having three major automakers join together could help provide some common ground for the industry.

"The consortium model has many benefits for the industry... By acquiring a global platform in Here, it may establish a de facto standard," the analysts said.

Watch this: Smarter Driver: Will self-driving cars ever be legal?

Here has 6,454 employees. It's one of two companies supplying navigable maps on a global scale as an alternative to Google and Apple, the other being TomTom. In the first half of 2015, the company made an operating profit of 28 million euros, after making a loss of 1.2 billion euros in 2014.

"The auto is under threat from the big ecosystems like Google and Apple who are encouraging users to view the auto as just another device where their services can operate," said independent analyst Richard Windsor. "The acquisition of Here is a step forward for the German automakers, but navigation is only part of the digital experience that users are coming to expect. Audi, BMW and Daimler all have significant shortcomings when it comes to the 'digital life' experience in the car and this acquisition should help them begin to close the chasm."

Nokia has been prompted to spin off Here as part of its merger with French company Alcatel-Lucent to focus on becoming a global power in networking equipment.

"With this step we complete the latest stage of Nokia's transformation," said President and Chief Executive Officer, Rajeev Suri. "[Now] we will focus on our planned combination with Alcatel-Lucent. Once that is complete, Nokia will be a renewed company."

Once it's approved by regulators, the Here deal is expected to close in the first quarter of 2016 and the Alcatel-Lucent deal some time after that.