Your browser is not supported. Please update it.

16 February 2018

The Sigfox climb-down – just 2.5m devices, €50m revenues

Sigfox has released updated numbers and confirmed that it is a long way off what many in the analyst community expected the LPWAN provider to have achieved. It comes after a period of intense speculation surrounding executive departures, and a growing sense that 2018 will be the year that makes or breaks the company.

Sigfox said that it had 2.5m active devices on its global network in 2017, up 65% since the year before – meaning it had 1.51m in 2016, adding 984,848 in the year to reach that 2.5m. In terms of revenue, it posted €50m in 2017, up 56% from 2016 – meaning 2016 revenues were €32m.

Sigfox missed its revenue target this year by around €10m, but CEO Ludovic Le Moan told Reuters that the company aims to break even in Q4 2018, and that if it reaches that target, it could move to file an IPO and go live on the stock markets.

Investors (which include Engie, Eutelsat, Intel, NTT Docomo, Salesforce, SK Telecom, Telefonica, Total, and a number of investment firms), will be anxious to see a return on their investment. To date, Sigfox has raised more than €270m since its launch in 2009, and has 380 staff, according to the Le Moan interview with Reuters.

The company plans to reach 60 countries in 2018, with a footprint covering 1bn people. Currently, it covers 45 countries and around 800m people. It is also targeting 6m device connections, and claims to have around 10m devices in its sales pipeline. To date, Riot has understood that the number of active devices was much higher than 2.5m, and this new information is surprising.

Now, that’s a lot of funding to use to pay wages and build networks, and the nature of Sigfox Network Operator (SNO) contracts means that Sigfox doesn’t have to burden itself with the capex cost of building out new coverage – meaning that with sufficient care, it should be able to reach those footprint goals.

However, as a private company, we’ve no way of telling how much cash it has in the bank. Its US expansion will have cost it a lot of cash, and there’s no telling how much of those reserves it has left – to begin plotting cash-burn. Competition in the LPWAN space has never been higher, with LoRa adopters and the LTE community both driving forward, the pressure will be on Sigfox to bring its services to new customers – in an era where every vendor is going to be increasingly price competitive.

Currently, it offers four distinct services. For ‘Connectivity,’ there is Admiral Blue (the standard service) and Admiral Ivory (a stripped down version that allows much cheaper hardware costs, for simpler applications). Riot spoke to Le Moan at the launch of Admiral Ivory,

The ‘Cognition’ service comprises Monarch, which is a system that can automatically recognize which radio band a roaming device should be communicating in.

A ‘Location’ service called Atlas (formerly called Sigfox Geolocation) provides simple geolocation features, which we have been told are accurate to hundreds of yards. While this level of accuracy pales in comparison to GPS, it is far cheaper, and is actually well-suited to many applications that don’t require pinpoint accuracy – such as knowing if an asset has returned to a depot, or left a port.

Sigfox recently announced an agreement with Chengdu High-Tech Industrial Development Zone to use Sigfox’s LPWAN tech to power a senior healthcare service – based on Senioradom’s device platform. Chengdu has committed nearly €300M to the investment, which will begin following a 1,500-person trial this year. The current deal would cover China’s biggest cities. It would be a huge win for Sigfox, but it is not clear if there is any immediate payment for its services in that trial.

Riot spoke to CMO Laetitia Jay, CTO Raoul Mallart, and PR and Content Manager Lucia Guzman, to ask about the changes – and recent speculation in the press. On the topic of ‘unethical’ contracts with buyout clauses, the Sigfox team said they couldn’t talk about the confidential agreements, but that the company was able to find partners happy to work with it – and that it is on track for its 60-country target in 2018.

That expansion is currently planned to cover Canada, China, Central and South America, the Middle East, South Asia, India, and East and Central Europe, with some SNO’s already in negotiations with Sigfox. Jay said that things were going well, but admitted that the company can sometimes be too silent – but added that it had strong foundations.

As for the device pipeline, we ascertained that it was larger than 6m devices, but could not draw a number from Sigfox. Jay clarified that the 2.5m active devices are not trials or PoCs, and that there are many test deployments under way.

When we asked about the status of a 5m-unit deal that was struck with Telefonica, Jay said that the progress here was a typical example of the lead-time taking longer than expected. Telefonica has been slower at acquiring the Latin American customers than expected, and that this impacts the development and then deployment elements of the ramp-up cycle. The team stressed that no contracts have been cancelled, and said that some large announcements were due to be published soon.

We asked CTO Mallart if any commercial customers for Atlas had been signed yet, and were told that there were already live deployments – although Sigfox could not disclose who they were. For Admiral Ivory, there are no commercial customers yet, because the technology is still in its PoC stage – but Sigfox expects the first such customer to launch this year.

As for strategy, Jay said that the current goal is to become profitable, and that an IPO might follow. Jay stressed that an IPO was not a primary objective. The CMO added that Sigfox had taken a heavy bashing from the cellular community in the past two years, and has shifted its approach somewhat – emphasizing the use cases of its tech, rather than the technology itself. To this end, Mallart noted that customers typically do not care about what technology is carrying their data, only that it does so within acceptable pricing and QoS limits.

Mallart said that this was the value Sigfox brings, and that he still believes Sigfox is the only one that can do this, and that the developers are working on further reducing power consumption, as well as adding energy harvesting support for end-devices. Mallart added that he has no doubt that other approaches, like NB-IoT, will continue to exist and have success, but believes they will not be able to reach the very low-end price of connectivity that Sigfox can.

Closing out our conversation, Jay said that Sigfox had moved away from trying to prove the merits of the technology, shifting to stressing the viability of the business model and the company – to convince companies that picking the LPWAN implantation was a viable option for long-term deployments.