Well, yeah, that could be it. But that restriction is just on the general ToS and I don't think Apple was bound by that. And I think that both Google and Apple could have agreed to let Apple maps use turn-by-turn, disregarding the API ToS.

I find it hard to believe that Google did not want iPhones to have turn-by-turn. In their minds, the more people use their services the better. And I never saw one piece of evidence of Google crippling a product on iOS so people buy Android.