GPS deals lose their bearings

NEW YORK (Fortune) -- With the pending merger of GPS device maker TomTom and No.2 digital mapping supplier Tele Atlas under review by the European Commission, shares of rival Navteq are trading almost $10 below the $78 per share all-cash merger offer from Nokia.

Nokia (NOK) needs the Navteq (NVT) deal so it can continue with its strategy to sell more than just phones. But with Navteq and Tele Atlas the only two major map makers to supply the GPS industry, regulators are likely to raise concerns about putting both under the control of their device-making customers.

TomTom had until Monday to respond to three questions raised by the EU's regulators. Regulators asked whether TomTom and Tele Atlas would keep sensitive information from rival GPS customers confidential, whether Tele Atlas would provide TomTom competitors inferior maps, and whether the combination created efficiencies otherwise unattainable.

The GPS sector has seen a flurry of deals as device giants like Garmin (GRMN) have explored new markets like mobile phones and as wireless players like Nokia have set their sights on selling new applications like GPS navigation on cell phones.

TomTom kicked off the consolidation trend last year when it made a bid for Tele Atlas and then prevailed over Garmin with a higher offer of 30 Euros a share. That puts a price tag of 2.7 Euros or $4.2 billion on the deal.

The fate of the TomTom deal for Tele Atlas will likely determine Nokia's prospects with Navteq. And as the widening gap, or value spread between Nokia's $78 a share offer and the $68 trading price for Navteq suggests, Wall Street isn't fully confident the Nokia-Navteq deal will be approved.

Investors are "recalculating," as the voice on the GPS device might say, on the road to a deal, or maybe finding some alternate route.