Telefonica has announced that it has signed a deal with Sigfox to integrate Sigfox’s LPWAN offerings into its global managed connectivity platform services. It looks like a big win for Sigfox, and an extension of its channel strategy, and comes as the company considers its plans for IPOs in the coming year.
Thanks to the deal, Telefonica gets another tool in its belt, to use when targeting new IoT projects. However, the emerging LTE Cat-M1 and NB-IoT standards are potential rivals for Sigfox, in this cellular ecosystem, and it will be interesting to see how this plays out. Sigfox is perfectly happy acting as redundancy connectivity, but there is a chance that NB-IoT could poach that function over time.
Telefonica IoT uses a series of roaming deals to provide its customers with end-to-end coverage, in markets where it isn’t a local network provider. With its main focuses being transport, retail, and energy, Sigfox is likely to find itself targeting applications in these areas.
The announcement declared that the two companies are already in discussions regarding mass rollouts in Europe and Latin America in 2017, including customers within Telefonica’s mobile network footprint.
Currently, Sigfox has a network live in 31 countries, and says it is on track to cover 60 by 2018 – with much of the Americas rolling out coverage via Sigfox Network Operator (SNO) licenses, as well as Australia and New Zealand, Japan, Iran and Oman, with its best coverage being in Western Europe.
It says that gives it a current population coverage of 486m people. It no longer lists the number of devices connected by its network in its press releases, and last we saw, it stated 7m connected objects. Perennially at the beginning of hockey-stick growth curves, the Telefonica deal stands a good chance of propelling Sigfox up the chart of connected device volume – if those numbers are ever made available publicly.
“The simplicity of Sigfox’s connectivity solution and its global IoT ecosystem are a great complement to our IoT connectivity technologies and our LPWA strategy. Together, we are more able to help our customers capitalize upon the great IoT opportunity and conquer new markets,” said Andres Escribano, Telefonica’s IoT Connectivity Business Director.
Sigfox also recently launched Spot’it, an asset tracking platform that doesn’t need GPS – which should translate to cheaper installation and running costs for those who opt for it. Sigfox’s big claim here is that Spot’it doesn’t require additional hardware, software, or energy – running fine on the stock Sigfox experience.
This is a bit of a pivot for Sigfox, which has already had to deviate from its original business plan of letting third-parties set up Sigfox networks and acting purely as a global coordination layer. The US rollout suggests that Sigfox couldn’t find a single entity willing to sign up to an SNO deal, or that the headache of coordinating multiple third-parties wasn’t worth the hassle and that it was easier to rollout the network itself.
Besides in-housing the French and US network operations, the other significant pivot was the shift to channel deals as a route to market. Around a year ago, in fact probably at last year’s MWC, we spoke to Sigfox’s President for North America, Allen Proithis, who explained that Sigfox was looking to use business channel agreements as a means to expand its customer base.
Soon after, a deal with French conglomerate Altice was announced, a company that was then in the process of buying Cablevision and Suddenlink in the US, as well as owning Numericable-SFR. The deal sees SFR selling Sigfox connectivity to its business customers, and means that Sigfox doesn’t have to go chasing sales leads – providing it can get enough volume from the channels alone, allowing it to focus on the network coverage.
The new Telefonica deal is essentially an extension of this strategy. On paper, Sigfox’s initial business model looked straightforward, but if it has still only connected less than 10m devices since its launch in 2010, then the channel pivot can be read as a recognition of the fact that ‘build it and they will come’ doesn’t seem to work in LPWAN.
Strong sales teams and the merits of application use-cases aren’t going to be enough to convince the largest enterprise customers, unless you have the backing or endorsement of a big-name service provider – like Telefonica, for instance. As for the Fortune 500 clients, it seems a rather incredible ask of your sales team to walk through the frontdoor and convince the decision makers to hand over a check – and we think the largest clients are going to be won by the largest vendors and providers, thanks to corporate inertia.
Telefonica is a significant investor in Sigfox, with Telefonica Ventures taking part in its Series C round back in 2014, and Telefonica itself investing in round D. Intel is another early investor, taking part in rounds B-E, and other notable investors include Eutelsat, NTT Docomo, Salesforce Ventures, Samsung, SK Telecom Ventures, and Total – as well as Elliot Management Group.
We have previously speculated as to who a likely buyer for Sigfox is, in the wake of its $160m Series E round, which injected the capital needed to carry out its US network rollout. Through our conversations with the company, the consensus has been that an eventual IPO makes sense, but a wholesale acquisition is certainly not off the cards.
Telefonica is a potential buyer, but it didn’t catch our eye at the time, given that Telefonica would likely be more focused on its cellular expansion rather than trying to integrate a new LPWAN division. The new Telefonica deal might go some way to easing that pain, should Telefonica want to buy Sigfox further down the road, but the issue of roaming agreements for a proprietary protocol could prove a major headache. Intel might have a much easier time of it, but moving into owning networks themselves sounds like a little too far a leap for the silicon titan.