Nokia has agreed to buy the digital mapping company Navteq for $8.1 billion, supporting a plan to add navigation capabilities to more of its devices.

The acquisition, announced Monday, also helps Nokia to grow the services side of its business at a time when profits from mobile phones are being squeezed.

Navteq provides the digital maps behind Mapquest and other online services, as well as for navigation systems from Garmin Ltd., Magellan Navigation Inc. and others. Its main rival is Tele Atlas NV, which currently provides mapping services for Nokia.

The deal between Navteq and Nokia comes about two months after TomTom NV, a big European maker of GPS (Global Positioning System) products, announced plans to buy Tele Atlas. TomTom has said it will make a formal acquisition offer on Tuesday.

TomTom is expected to keep offering Tele Atlas as a stand-alone service, but the acquisition creates uncertainty for Tele Atlas customers such as Nokia, said Chris Jones, a principal analyst at Canalys Ltd. Buying Navteq will assure Nokia that it has continued access to the digital maps it needs, he said.

Navteq, based in Chicago, will be one of Nokia's largest corporate acquisitions. The Finnish company has agreed to pay $78 in cash for each Navteq share, a 34 percent premium over its stock price one month ago. The aggregate purchase price is $8.1 billion, or $7.7 billion including the cash Navteq has on hand.

The deal must be approved by regulators and Navteq shareholders and is expected to close in the first quarter of 2008, Nokia said.

The mapping services are important to Nokia, which is making GPS capabilities a central part of its phone strategy. The company released its first device with integrated GPS, the N95, in Europe and Asia earlier this year, and is expected to offer GPS in less expensive phones in the future.

Nokia said it would continue to serve Navteq customers such as Mapquest, while also using the map services to offer more location-based services of its own. Such services make it easier for people to get traffic reports or find local restaurants and gas stations from their mobile phones.

Buying Navteq may be a defensive move to prevent another company from buying it first, Jones said. He named Microsoft, Yahoo and Google  as potential suitors. All three have been increasing their map-based services.

The IDG News Service is a Network World affiliate.