Today TomTom N.V. announced it intends to make a cash offer of € 21.25 per ordinary share (about $2.77 billion) for Tele Atlas N.V. According to the media release, the price represents a nice 32% premium over Tele Atlas’ average closing share price for the three months prior to July 20, 2007.The announcement touts benefits to TomTom customers who would improve the data while using the devices. While the deal would purportedly help these European companies better compete, the data/product ownership combination is troubling. TomTom competitors that use Tele Atlas data must be a bit apprehensive about the combination, and the market should be as well. There aren’t many data providers, and if they are rolled into the navigation systems companies, it would seem to foretell a rapid consolidation of the device market.

Would we want Google or Microsoft to own Tele Atlas or its competitor NAVTEQ? While TomTom is much smaller than those behemoths, the result could be the same – digital data as a slave to a particular device maker. The question goes beyond digital maps – does society want the data providers owned by the application or device companies? What are the long term ramifications of such combinations? Are there legitimate anti-competitive concerns? If so, how can the business world address them so that competition remains healthy?

Before now, the application and device companies have for the most part licensed digital map data. NAVTEQ and Tele Atlas have grown as independent firms; their growth illustrates the critical role of data in location-based services. Therefore, this deal changes the entire landscape. NAVTEQ could stand to gain from not only the aforementioned concerned device makers but also increased stock price. However, should the deal go through, NAVTEQ will find itself forced to consider a similar arrangement.

Look for TomTom to provide assurances that its acquisition of Tele Atlas will not close the market. Perhaps independent operation of the companies could reduce some of the concerns. But for TomTom to reap the maximum benefits of the merger, its devices will need to offer superior integration with the data.