French Toast? Sigfox on Skid Row

An exodus of senior executives, customer dissatisfaction, the postponement of IPO plans and allegations of 'unethical' dealings with network partners. What went wrong at the French technology champion?

Iain Morris, International Editor

January 30, 2018

24 Min Read
French Toast? Sigfox on Skid Row

Nearly a decade ago, Christophe Fourtet and Ludovic Le Moan, two Frenchmen with a passion for technology, had an idea they believed would transform the slumbering market for "machine-to-machine" (M2M) communications into a multi-billion-device global phenomenon -- and make them rich in the process.

Sigfox, the company they subsequently built, has fast become a household name in today's "Internet of Things" industry. But it is also mired in turmoil, intrigue and uncertainty about its very survival. A sale of its networks seems a growing possibility.

Ever since Sigfox was founded in late 2009, its admirers have seen it as a bantamweight with a knockout punch. Generating sales of only about €30 million ($37.4 million) in 2016, it has attracted far more publicity than most companies of its size, buoyed like an up-and-coming sports talent by expectation and promise.

With its proprietary network technology, it has long been able to boast a much lower-cost radio system than its rivals. Investors continue to hope this could one day provide connectivity for billions of everyday objects, ranging from residential smart meters to industrial tracking devices. They have included some of the world's biggest firms, as well as state-backed funds in France.

Moreover, as an all-too-rare example of a French technology champion in a US-dominated landscape, Sigfox has been the toast of the Élysée. Emmanuel Macron, France's current president, was even pictured at a recent contract-signing ceremony in China.

Figure 1: All the Presidents' Men Emmanuel Macron, France's president, sits next to Xi Jinping, his counterpart in China, during the recent signing of an agreement between Sigfox and Chinese telecare company Senioradom. Emmanuel Macron, France's president, sits next to Xi Jinping, his counterpart in China, during the recent signing of an agreement between Sigfox and Chinese telecare company Senioradom.

But despite its global renown and political connections, Sigfox is flailing. Since March last year, some of its most senior executives have quit or been fired, and others are likely to follow. It missed reported fund-raising targets in 2016, and this month published data showing the number of connections on its network is far less than previously implied. Its financial situation looks increasingly precarious. (See Sigfox Sheds More Senior Staff, Including North America CEO.)

The chief problem lies not with the Sigfox technology -- despite the challenges this now faces from rival networks -- but rather with Sigfox's management and commercial approach, including its arrangements with partners. So-called Sigfox network operators, or SNOs, are tied to onerous contracts that have been described as "unethical" by one source in that community. In its desperation to hit lofty coverage targets and amass users, it appears to have overextended. Last year, there were signs of customer dissatisfaction. This year, it has acknowledged that network rollout in the US has fallen behind schedule.

At the root of all this, and almost synonymous with Sigfox, is the larger-than-life figure of Le Moan, the co-founder who today leads the company as CEO. Said to be a close friend of Macron, he was in 2016 inducted into France's Légion d'Honneur, its highest order of merit, and has been described as a visionary by those who know him. Yet he has also been accused of pride and stubbornness, of refusing to adapt the Sigfox business model despite a backlash from partners and his own executives. Notwithstanding his flair, he is to critics the cancer that ails the company. Excise that and Sigfox might have a better chance, is the implication. And the upheavals of the last few months lend support to the narrative that Le Moan must adapt, depart or watch his company fail.

Taking flight
Originally designed for submarine communications during the First World War, the technology was nearly 100 years old. But Christophe Fourtet, a radiofrequency engineer who had previously worked at Motorola, could see its twenty-first-century value.

While much of the industry was obsessed with pumping more data over radio connections, Fourtet had figured out that ultra-narrowband systems dating back to the early twentieth century could massively reduce power consumption, and costs, on modern-day networks.

Ludovic Le Moan, Fourtet's eventual partner in Sigfox, saw an opportunity in the nascent M2M market. Having already started and sold an M2M services company called Anywhere Technologies, Le Moan knew that sector as well as anyone. Still in their relative infancy in 2009, M2M networks could be used to provide connectivity for all manner of dumb devices and objects -- electricity and gas meters, industrial control systems in factories, vending machines. Just about anything, in fact, that might be worth connecting and typically place few bandwidth demands on a data network.

Want to know more about the Internet of Things? Check out our dedicated IoT content channel here on Light Reading.

Therein lay the problem. Despite interest in the potential of M2M, and some examples of actual deployments, existing mobile networks were not built for it. They had first taken shape to support basic voice and text-messaging services. Later, following the award of 3G licenses in the early 2000s, they were adapted for "bandwidth-hungry" applications, such as mobile gaming and video. But the cellular industry had largely bypassed M2M, and so M2M's pioneers had been forced into an awkward compromise. Running M2M services over 2G and 3G networks was technically possible, but it was far from ideal economically -- and sometimes prohibitively expensive.

Lab-bound egghead and flamboyant visionary, Fourtet and Le Moan seemed the perfect complement for a technology startup. Using ultra-narrowband technology in unlicensed spectrum bands, Sigfox would be able to design networks catering solely to the M2M marketplace, they realized. It could undercut cellular rivals already supporting some M2M services. More importantly, it would create opportunities where high connectivity costs had previously been an insurmountable barrier.

Next page: Cruising

Even after the cellular retaliation of recent years, Sigfox's technology looks remarkably inexpensive. During an interview with Light Reading in 2014, Le Moan said that per-device connectivity costs were as little as $1 annually. Sigfox has also boasted a big advantage over cellular on the cost of adding silicon to end-user devices. In 2016, it estimated its own silicon costs would fall from about $2 to $0.50 per device over the next five years. The equivalent cost for NB-IoT, its main cellular rival, would be roughly $5 at the end of that period, it reckoned. (See Sigfox Plans Global IoT Network.)

Even if these estimates grossly exaggerate the difference between Sigfox and cellular, any progress the French company has made owes everything to its perceived cost advantage. Sigfox is clearly not for everyone. It is so narrowband that even some M2M applications are too demanding. Its weak two-way capability does a poor job of transmitting signals from the device back to the network, say critics. But for companies that place an emphasis on cost, and need a no-frills connection, it is hard to beat.

That much explains the support that Sigfox gained after its network launch in 2012. Investment has flowed from Bpifrance, a French investment bank, as well as a joint venture between the Caisse des dépôts et consignations and EPIC Bpifrance, two French government agencies. Intel Corp. (Nasdaq: INTC), the world's biggest chipmaker, has also provided funding. And in a sign of cellular's early shortcomings, so have NTT DoCoMo Inc. (NYSE: DCM), Telefónica and SK Telecom (Nasdaq: SKM), three of the world's biggest mobile operators.

It helped that Le Moan had been able to lure Anne Lauvergeon to the business in 2014. Replacing Le Moan as board chair, Lauvergeon had previously worked in the government of François Mitterand, France's president between 1981 and 1995, and had excellent political connections. She had also served as the CEO of nuclear power group Areva between 2001 and 2011. In 2009, Forbes magazine ranked her the ninth-most powerful woman on the planet.

Figure 2: Well Connected French politician and businesswoman Anne Lauvergeon was a high-profile recruit for Sigfox in 2014. French politician and businesswoman Anne Lauvergeon was a high-profile recruit for Sigfox in 2014.

Crunchbase, a website that tracks funding for startups, calculates that Sigfox has raised about €277 million ($344.9 million) in total since 2009. About $115 million of that came in February 2015, when there was no NB-IoT and Sigfox seemed to be riding high. The three cellular operators participated in this round, as Sigfox noted in a press release at the time. In it, Lauvergeon hailed investors for their "trust" and the Sigfox team for its "dynamism." (See Sigfox Closes $115 Million Funding Round.)

Wan skies
Since then, trust and dynamism have waned.

In mid-2016, a French customer called Nigiloc, developing tracking gadgets for bicycles, told Light Reading that Sigfox's technology had not met its quality threshold, appearing to be unsuitable when "mobility" was a key requirement. Clear Channel Outdoor, an advertising company, and MAAF, a French insurance firm, were also rumored to have had problems with Sigfox, although neither would appear to need any support for mobility. Clear Channel declined to comment on those rumors, while MAAF never responded to Light Reading's approach. (See Sigfox Said to Face Customer Backlash.)

Thomas Nicholls, the former head of communications for Sigfox, and one of the senior executives who left during last year's exodus, would not deny those companies had experienced difficulties. He did insist, however, that all three were among Sigfox's earliest customers, and that they might have had problems unrelated to connectivity. Nicholls also said Sigfox had never provided any commitment to Nigiloc to support "quick-moving devices," a bizarre assertion given Nigiloc's role. The signs were that Sigfox had tried to address needs its technology could not satisfy.

Want to know more about 4G LTE? Check out our dedicated 4G LTE content channel here on Light Reading.

There was other murkiness, too. At the time, Sigfox claimed to have 7 million connections on its networks globally, and that figure had reportedly risen to about 10 million by the end of the year. But these numbers, it transpired, were simply the amounts that Sigfox had agreed to support in contracts. The number of "active" connections was somewhat less than 7 million in June, Nicholls acknowledged, although he would not disclose it. That amount became apparent only at the start of this year, when Sigfox revealed it to be just 2.5 million. Even if Sigfox were making substantially more than $1 per device annually, connectivity revenues would account for only a small fraction of the €30 million ($37.4 million) it generated in sales that year.

Instead, most of its revenues have come in upfront fees it collects from partners. While Sigfox has played the role of network operator in the markets of France, Germany, Spain and the US, it works elsewhere through network licensees, or SNOs. The only way to keep these revenues flowing is to recruit more SNOs. And as Sigfox has given partners exclusive rights in their national territories, there is a limit to how many it can recruit. At some point, Sigfox will have to replace these sales with revenues from connectivity. Unless there is dramatic growth in "active" connections, it risks falling short.

Meanwhile, some SNOs themselves may be treading a fine line between survival and failure.

Besides agreeing to share about 40% of their connectivity revenues with Sigfox, SNOs also assume the huge investment burden of building a Sigfox network, which includes paying around $4,000 for each basestation. Despite this, a clause in the contract allows Sigfox to buy the SNO's network at the end of a seven-year agreement at accounting value. After depreciation and amortization have taken their toll, that could mean at a price of next to nothing.

"You enter into negotiation with Sigfox and after many months it appears with this bunny-in-the-hat, buyback clause that is totally absurd," says one source who agreed to speak with Light Reading on condition of anonymity. "This clause is something that all SNOs have."

In practice, Sigfox would be unlikely to execute the buyback clause unless it had piles of cash and an SNO wanted out. "That is a curious situation because the SNO wants out only when it is not flying," says another source with knowledge of the contract arrangements. Nevertheless, a number of SNOs, many of which are very small companies, are rumored to be struggling. And only Thinxtra in Australia has been especially vocal in its support for Sigfox, dismissing criticism of the French company, and suggestions it is a "Ponzi scheme," on Light Reading's message boards.

Despite the onerous contracts, some companies have clearly seen a path to success in a Sigfox partnership. With a disciplined approach, and full commitment, the SNO arrangements can work, argues the source who first described them to Light Reading. "It requires a lot of effort and to be right on target, but it is possible with a startup attitude and huge means," he says.

Sigfox, however, has notably failed to land many deals with larger organizations, including cellular operators. Although it previously signed agreements with Telefónica and France's SFR, neither company appears to have made commercial use of its technology, and certainly not on a widespread basis. Sigfox identifies neither as partners on its website. (See Sigfox 'Only Option' Today, Says Telefónica and Altice, Sigfox Join Forces in French IoT Battle.)

Has the recent emergence of lower-cost cellular technologies spoilt some of the appetite for Sigfox? If so, it has not stopped operators from feasting on LoRa, another technology using unlicensed spectrum and conceived outside the cellular industry. Comcast Corp. (Nasdaq: CMCSA, CMCSK) in the US, KPN Telecom NV (NYSE: KPN) in the Netherlands, Orange (NYSE: FTE) in France and SK Telecom in South Korea are all making use of it, sometimes in parallel with cellular. (See SK Telecom Sees LTE-M, LoRa as Its 'Two Main IoT Pillars', Orange Hails LoRa Breakthrough as Bouygues Ups IoT Game, Don't Put a SIM Card in a Rodent Trap and KPN to Include LTE-M in IoT Mix in 2017.)

Next page: Storm clouds

Storm clouds
On the investment front, the storm clouds were gathering in late 2016, despite an announcement that suggested otherwise.

Indeed, Sigfox appeared to have defied its critics, as a headline from Light Reading indicated, when it revealed on November 18 that it had raised another €150 million ($186.7 million) in funding. Several of its existing investors (although not the cellular operators) had injected additional money into the business, it said, while new backers included Total, the energy giant, and Salesforce, the cloud-computing specialist. (See Sigfox Defies Critics to Raise €150M in Funding.)

On the surface, this all seemed dandy. The funds would help it extend networks into 60 countries by 2018 from 26 at the time, said Sigfox. They would allow it to break even that same year, it added. And they would provide a validation of its business model to any doubtful observers, it must have hoped.

There were just two problems: First, Sigfox had originally been aiming for a lot more; and second, it may not have secured as much as it claimed.

While Sigfox had given off mixed signals about fundraising targets, Le Moan's sights were clearly set on banking a bigger sum than €150 million ($186.7 million). In August 2015, he was on the prowl for about €200 million ($249 million), according to Bloomberg. By February 2016, the figure had soared to as much as €500 million ($622.5 million), said French newspaper Les Echos. This proved substantially more than Sigfox eventually announced in November, and yet Sigfox has made no changes to its rollout and profitability targets. It still aims to "reach" 60 countries by the end of 2018, and to become profitable at the same time.

Figure 3: IoT Pioneer Ludovic Le Moan, Sigfox's co-founder and CEO, outlines his vision at an industry conference. Ludovic Le Moan, Sigfox's co-founder and CEO, outlines his vision at an industry conference.

There is a big difference between covering a market and reaching it, though. In its last coverage update on January 16, Sigfox said it was active in 43 countries, an increase of 17 since November 2016. In many of them, it must have only the tiniest presence. Active connections number fewer than 60,000 per national territory, and are probably concentrated in a handful of markets. More telling is the failure to expand networks. In the US, Sigfox missed its target of covering 40% of the population last year, it confirmed to Fierce Wireless earlier this month, following a report from Light Reading.

But what if Sigfox did not even raise as much as €150 million ($186.7 million) in late 2016? According to sources that have previously shared reliable information with Light Reading about staff departures, this figure was tied to performance targets it has lagged. Sigfox pocketed only half that amount, said one source, with €50 million ($62.3 million) coming from Intel and the French investment funds and another €25 million ($31.1 million) from a large group of smaller investors. With Sigfox trailing expectations, the other €75 million ($93.4 million) has not materialized.

For a loss-making company still in rollout phase in a capital-intensive industry, any of this looks troubling. Light Reading's source thinks Sigfox will run out of funding by June and that it badly missed a revenue goal of €60 million ($74.7 million) last year, generating just half that amount. Asked to comment on this speculation at the start of the year, Sigfox was adamant that all is well financially. "To be clear, contrary to any rumors you have heard, we are in a strong financial situation and we are on track to hit our target in 2018," said a spokesperson for the company in a statement emailed to Light Reading.

This omits any mention of the sales situation in 2017, of course. Yet with only 2.5 million "active" connections, and SNOs collecting a share of the connectivity revenues, Sigfox would have needed to make a vast amount in equipment sales and from upfront partner fees to get anywhere close to the €60 million ($74.7 million) target. The most obvious sign of financial discomfort is the postponement of plans for an initial public offering: It is now aiming for an IPO in 2019, reports Les Echos, having previously eyed one this year. (See Sigfox to Go Public in 2018 – Report.)

Want to know more about cloud services? Check out our dedicated cloud services content channel here on Light Reading.

What options are there in the meantime? To raise funds and reduce the cash burn rate, Sigfox could try selling networks in markets such as France, Germany and the US. The US business, in particular, has been a huge drain on funds, sources reckon. Cutting headcount, which has soared from around 200 to more than 370 employees in the last couple of years, might also help. Any infrastructure buyer, though, could rapidly find itself in the same position -- spending heavily on networks without the connectivity revenues to show for it.

Nonetheless, an asset sale could be a face-saving move for Le Moan, allowing him to position Sigfox as a technology licensing company and developer, rather than a network operator in its own right. Nor would such a strategic shift be as dramatic as it might sound: Sigfox already plays this licensing role in the overwhelming majority of its markets.

But a sale of networks would not address other concerns. Some want Sigfox to narrow its focus, doubling down on a smaller number of geographical territories and industries. The company's feudal relationship with partners is an obvious sore point: If SNOs are treated like vassals, worked and taxed to exhaustion, then Sigfox could also totter.

More philosophically, some market watchers and industry executives fret about the long-term prospects for proprietary technologies in the shadow of cellular, with its broad and supposedly more "open" ecosystem. While Sigfox makes its intellectual property freely available to silicon developers, it evidently has a tight grip on SNOs and other parts of the supply chain.

The developers of other non-cellular technologies certainly insist they are less "closed." LoRa does appear to be a more straightforward "plug and play" choice than Sigfox, and counts many equipment makers in its ecosystem, although a Californian chipmaker called Semtech Corp. (Nasdaq: SMTC) owns the intellectual property. Another UK-based initiative called Weightless is developing what it claims is the only genuinely open alternative to cellular. William Webb, its CEO, reckons there has never been a successful proprietary technology in the history of wireless communications. What the industry really needs, he has previously suggested, is silicon that combines fully open cellular and unlicensed-spectrum technologies in the same device. (See Weightless Aims to Exert Gravitational IoT Pull, The Wolf at Sigfox's Door and Is Sigfox on the Run?.)

Next page: Turbulence

Whatever the precise details of the disagreements, discontent within Sigfox about Le Moan's leadership seemed to bubble over last year.

In March 2017, after expressing "different views from the founders on the way to organize the company," deputy CEO Xavier Drilhon left. He had been at Sigfox less than two years, having joined it from a French digital security specialist called Oberthur Technologies in June 2015. (See Sigfox in Peril as Senior Execs Exit – Sources.)

Other senior executives were soon following him out of the door. Thierry Siminger, the president of Sigfox's Middle East and Africa business and another ex-Oberthur employee, left in May to become chief commercial officer at a company called TransferTo. Contacted in late 2017 by Light Reading, Siminger said he had quit after "a major disagreement with the top management on the company strategy." At the time of his departure, Sigfox issued a statement indicating it would not be replacing him. "A team of regional directors has taken the leadership in Africa and the Middle East to pursue the expansion of the Sigfox global network in this strategic region," it said. (See Sigfox MEA President Hits the Road, Jacques.)

By the end of the year, the list of managers who had either quit or been fired also included: Allison Junoy, group general counsel; Stuart Lodge, executive vice president of global sales; Remy Lorrain, the vice president of operations and networks; and Thomas Nicholls, head of communications. Lodge, Lorrain and Nicholls did not respond to Light Reading when contacted about the circumstances of their exit, but all have flagged a change in employment status on their LinkedIn pages. Junoy confirmed in a LinkedIn message that she had left Sigfox in October.

But the hemorrhaging did not end there. At the start of the year, well-placed sources revealed that Allen Proithis, the CEO of the Sigfox business in North America, had also gone. Following a report from Light Reading, Proithis told SDXCentral that he left Sigfox because of "management differences," echoing the cursory explanations given by Drilhon and Siminger, neither of whom wished to comment in more detail about their departures. He also said that nearly all of Sigfox's original management team had quit and not been replaced.

Another senior employee who appears to have recently left under mysterious circumstances is Jerome Burriez, Sigfox's chief information officer. Light Reading was unable to confirm the move with Burriez, who did not respond to a LinkedIn message, while Sigfox declined to comment on his whereabouts. It did, however, insist that his correct job title was the less impressive information system director. Despite that, an internal company presentation subsequently obtained by Light Reading identifies him as chief information officer, listing him as one of 13 "key people" at Sigfox. Junoy, Lorrain and Nicholls, all of whom left in 2017, were also on that list. (See Sigfox CIO Said to Be Latest Senior Exec to Depart.)

Spectrum manager Thomas Schmidt is also out, while Virginie Heringer Pashaus, executive vice president of human resources, no longer occupies that role, according to sources. Instead, says one, she is working in a "coaching" capacity only. Sigfox, which insisted Heringer Pashaus was still a company employee as recently as January 8, began advertising for a human resources director in November last year.

It has not entirely been a one-way street. Although his appointment was not officially announced until January 16, Franck Siegel joined Sigfox in October from South African IT company Dimension Data, as revealed by Light Reading on January 8. With the job title of chief delivery officer, Siegel has responsibility for human resources, marketing, engineering, operations, IT and communications, a job description that suggests other senior positions remain empty after the turbulence of the last 11 months. Raoti Chetih, the former president of a business park in Lille called EuraTechnologies, also joined Sigfox in June as its chief adoption officer. (See Sigfox Appoints Chief Delivery Officer.)

Figure 4: Can He Deliver? Franck Siegel joined the Sigfox team in October as chief delivery officer, and appears to have taken responsibility for a wide range of activities. Franck Siegel joined the Sigfox team in October as chief delivery officer, and appears to have taken responsibility for a wide range of activities.

Quizzed about the departures during a recent interview with Les Echos, Le Moan said that "all the departures were made on the initiative of Sigfox, and the vacant positions were filled," contradicting what Proithis told SDXCentral. Renald Gallis, vice president of ecosystem and marketing at Thinxtra, argues that Sigfox has merely been ridding itself of "non-performing staff." If that is so, then more remain on its books, according to sources, and will leave in the coming days.

Underperformance on this endemic level, moreover, would not be a good news story for Sigfox. Surgery has stopped the rot, supporters might argue. But what damage has been done in the meantime? How is it that so many important executives, many with impressive resumes, have not measured up? Whether or not Le Moan's strategy can succeed, the staff departures make him look isolated and combative, regardless of new hires. While he has so far enjoyed the board's support, it has been with a narrow majority of votes, Light Reading understands.

Want to know more about 5G? Check out our dedicated 5G content channel here on
Light Reading.

None of this means Sigfox is destined to fail or that its technology must die. Despite the emergence of NB-IoT, and some desire in the cellular industry to see this "crush" its rivals, the Sigfox technology is still held in high regard by many, including some of the company's former employees. William Webb's ideas about combining cellular and non-cellular technologies seem eminently sensible, and could point to a future role for Sigfox, LoRa or Weightless alongside the mobile industry standards. The French government would be loath to see it perish, and might engineer some kind of rescue plan if that looked imminent. But the Sigfox business in its current form seems increasingly like an endangered species. (See Vodafone to 'Crush' LoRa, Sigfox With NB-IoT.)

Note: In preparing this story, Light Reading spoke with a number of sources on condition of anonymity. As indicated in the story, LinkedIn messages were exchanged with some of the executives who have left the company. We were also in contact on several occasions with Sigfox's press office, which scheduled a meeting between Light Reading and Ludovic Le Moan for mid-January in Paris. However, this was subsequently canceled. A spokesperson told Light Reading: "We have had to reshuffle Ludovic's agenda due to recent business developments." Sigfox has not offered to reschedule that meeting. Asked to provide a comment about its contractual arrangements with SNOs and details of the funding it announced in late 2016, Sigfox's spokesperson said: "We do not disclose this kind of information for confidentiality reasons."

— Iain Morris, News Editor, Light Reading

Read more about:


About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like