May 7 (Bloomberg) -- TomTom NV, Europe's biggest maker of car-navigation devices, will get unconditional approval from European Union regulators to buy mapmaker Tele Atlas NV, according to two people with direct knowledge of the case.

The European Commission will clear the 2.9 billion-euro ($4.5 billion) purchase on May 14, a week before the regulator's May 21 deadline to rule on the transaction, said the people, who requested anonymity because the decision isn't public. TomTom shares have risen 11 percent the last two days.

The approval will come after Amsterdam-based TomTom refused the regulator's request to sell rights to Tele Atlas's database to create more competition. Tele Atlas will give TomTom access to mobile-phone makers and car manufacturers as sales growth of portable navigation devices, its main product, is slowing.

``TomTom needs an extra revenue stream and Tele Atlas will help it increase service income,'' said Wing-Yen Choi, an analyst at Theodoor Gilissen Bankiers NV in Amsterdam, whose ``buy'' rating on TomTom is under review. ``It guarantees growth on the longer term.''

TomTom spokesman Taco Titulaer declined to comment. The company is having a ``constructive dialogue'' with the commission, he said today in a telephone interview. Jonathan Todd, a European Commission spokesman, said the commission doesn't comment on pending merger reviews.

Shares Rise

TomTom rose 95 cents, or 3.9 percent, to 25.44 euros in Amsterdam. They rose 1.74 euros, or 7.7 percent, yesterday. Tele Atlas rose 45 cents, or 1.6 percent, to 29.17 euros.

While staff for the commission, the EU's antitrust regulator, had said the deal raises competition concerns because TomTom would acquire one of two map suppliers for Europe, it failed to get TomTom to accept a demand to sell rights to Tele Atlas's database. The commission's handling of the case should be reviewed, said David Wood, a partner at Gibson, Dunn & Crutcher LLP in Brussels and a former head of a unit in the commission's competition department.

``There should be an ex-post evaluation that led to this apparent incoherence,'' Wood said. ``They have to be more sophisticated in how they deal with'' third-party complaints about mergers.

Pricing Concerns

Den Bosch, Netherlands-based Tele Atlas is the world's second-biggest producer of digital maps. TomTom, which announced its first offer for the mapmaker in July, has said Tele Atlas will continue to deliver maps to rival navigation device makers.

The commission staff had said that it wanted TomTom to address worries that the pricing for maps might become prohibitive after the takeover. The commission's solution was to create a new map supplier by compelling TomTom to sell rights to its database.

The Dutch company instead promised in December in a letter that the relationship between Tele Atlas and its customers ``will remain exactly the same.''

TomTom's car-navigation devices, which stick to the windshield and help drivers find their way and avoid traffic, automatically act as map surveyors, gathering feedback from its more than 18 million users that can be incorporated into Tele Atlas maps.

Nokia-Navteq Review

TomTom, with sales of 1.74 billion euros, competes with Garmin Ltd., the world's biggest navigation-device maker. Based in George Town, Grand Cayman, Garmin has revenue of $3.2 billion.

Tele Atlas has one major rival, Chicago-based Navteq Corp., the world's largest maker of digital maps. In October, Nokia Oyj made an $8.1 billion bid for the U.S. company. The commission is to rule on the Navteq deal by Aug. 8.

While TomTom's revenue has grown ninefold in the past three years, increased competition has led to falling prices. TomTom's first-quarter profit this year sank to the lowest point since the company sold its first product in 2004.

Further competition will come from handsets with mapping capabilities from Espoo, Finland-based Nokia and other mobile- phone makers. Nokia, the biggest producer of mobile phones, expects to ship 35 million GPS-enabled handsets this year.

The commission began an in-depth probe of TomTom's bid for Tele Atlas on Nov. 28. The investigation has focused on whether the deal would make it more expensive for other makers of navigation devices to purchase or have access to maps.

The probe was stepped up on Feb. 29, when the commission informed TomTom in a statement of objections that its acquisition may break antitrust rules, two people with knowledge of the case said at the time.

Map Innovations

Regulators were concerned that TomTom would have an advantage over other device makers because it would have advanced knowledge of Tele Atlas's latest innovations. The second concern was that TomTom would sell lesser-quality digital maps to its rivals, the people said.

In most cases involving formal objections, which could lead to the EU blocking a deal, companies offer concessions to appease competition concerns. TomTom didn't want to undermine the value of the deal by creating a new competitor, the people said at the time.

The commission is reluctant to stop the deal because they are aware that EU courts have struck down merger rejections before for lack of well-supported economic arguments, said Dennis Oswell, a competition lawyer with Oswell & Vahida in Brussels.

The European Court of First Instance, the EU's second- highest tribunal in Luxembourg, overturned three commission merger vetoes in 2002.

To contact the reporters on this story: Matthew Newman in Brussels at mnewman6@bloomberg.net

Last Updated: May 7, 2008 12:07 EDT