Silencing the Sigfox skeptics
The big uncertainties are whether Canada's IoT market will rapidly grow to the size Rawlings anticipates, and how much of that business will fall to Sigfox Canada. Despite some juicy IoT forecasts, the market has not developed as quickly as IoT players once hoped, and Sigfox has remained a relative weakling on the international stage. Across all operations, it had previously claimed to support 12 million connections, but that number was revised down sharply, to around 2.5 million, in early 2018, and Sigfox ended last year with roughly 6.2 million connections in total. Given the network footprint of more than 60 countries, the headline figure suggests many Sigfox operators have a small number of active connections at best.
The financial stability of France's Sigfox is also cause for concern. Last year it made 60 million ($68 million) in revenues, up from 50 million ($56 million) in 2017 but far less than its reported target of 80 million ($90 million). If Rawlings' pricing metrics accurately reflect what Sigfox operators charge elsewhere, then most of these revenues must come from one-off equipment sales and upfront licensing charges, and not from recurring service revenues. On the cost side, a source close to the matter estimates that Sigfox, with its payroll of about 400 employees, is burning through 5 million ($6 million) a month.
Profitability has certainly remained elusive and plans for an initial public offering have repeatedly been delayed. In the meantime, funding may also be drying up. In late 2016, Sigfox claimed to have landed 150 million ($169 million) from investors including Salesforce.com and French energy giant Total, having previously secured $115 million in February 2015. But subsequent funding rounds in 2018 and 2019 each raised the comparatively modest sum of 40 million ($45 million), with the second tranche coming from the European Investment Bank, according to a reliable source. Asset sales in the US or Europe could raise additional capital and help to reduce cash burn, but they would also force Sigfox to relinquish its role as a network operator.
Critics, including former employees, have identified some fundamental problems with the Sigfox strategy. Among those are an overly hasty expansion into new geographical and vertical markets; the revenue-sharing demands Sigfox makes on network operators; and the proprietary nature of Sigfox technology, which means that anyone who wants to operate a Sigfox network must deal with Sigfox. Proponents of a rival technology called LoRa claim to have a more open ecosystem. And while the intellectual property behind LoRa is owned by Californian chipmaker Semtech, there were an estimated 80 million LoRa connections at the start of the year, nearly 13 times as many as Sigfox reports.
Analysts are increasingly skeptical Sigfox will emerge as one of the main players in the future IoT market. "Considering the challenges lying ahead, along with the company's newly disclosed connection numbers, it's difficult to see how Sigfox will compete at the same level as similar low-power wide-area network standards, such as LoRa and NB-IoT," said Lee Ratcliff, a senior principal analyst for connectivity and IoT with IHS Markit, in a blog published in May last year.
Could Rawlings be the one to prove the naysayers wrong? That mission will not be easy. While NB-IoT might not yet have made inroads into the Canadian market, LoRa is increasingly visible. Three operators -- Xtelila, IOTcan and Eleven-X -- have already deployed 800-1,000 gateways in Canada, according to a representative of the LoRa industry, and a fourth player is due to be announced shortly. With an ecosystem of more than 700 devices, Sigfox can today boast a major advantage over LoRa, which has far fewer. But sustaining it will be tricky, with the LoRa industry apparently determined to address the device deficit.
Nevertheless, the boss of Sigfox Canada does look to have an impressive track record in the telecom industry. After stints at BT and AT&T Canada, he joined Rogers, where grew the high-speed Internet business from just 3,000 to more than 750,000 customers. He was attracted to Sigfox after noticing similarities between the nascent IoT business and the "early days of the Internet at Rogers," he says. If he can succeed amid the doubts that surround the French firm, he could become the man who puts the teeth back into Sigfox.
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Iain Morris, International Editor, Light Reading