Telefónica Opens IoT Door to Sigfox

Global deal could be transformative for Sigfox, helping the French IoT player to realize its ambition of holding an IPO next year.

Iain Morris, International Editor

February 22, 2017

5 Min Read
Telefónica Opens IoT Door to Sigfox

Internet of Things specialist Sigfox appears to have landed its second partnership with a major telco, today announcing a "global deal" with Spanish incumbent Telefónica, which has previously invested in the business.

The news comes about a year after the French company -- whose low-power, wide-area network (LPWAN) technology supports data links for smart meters and other connected objects -- struck a similar deal with Altice , which provides broadband and mobile services in France, Portugal, the US and several other markets. (See Altice, Sigfox Join Forces in French IoT Battle.)

The tie-up with Telefónica is arguably a far more significant deal, however, given the Spanish company's extensive operations in Europe and Latin America.

Indeed, it has the potential to be transformative for Sigfox , which has largely relied on single-market deals with much smaller businesses -- often playing the service provider role itself.

Sigfox has attracted criticism for demanding a hefty share of service revenues from its network partners, which may have deterred some telcos from striking deals with the company. (See Sigfox Plans Global IoT Network.)

Others, however, have simply laid into Sigfox's "proprietary" technology, which uses unlicensed spectrum to support device connectivity.

The UK's Vodafone Group plc (NYSE: VOD) has perhaps been the most outspoken critic of Sigfox and the biggest cheerleader for NB-IoT, a rival technology that was included in the 3GPP's Release 13 last year and is being rolled out today.

Vodafone senior executive Matt Beal has gone as far as saying that NB-IoT will "crush" Sigfox, but others have also expressed skepticism that any proprietary technology will last the distance in the wireless connectivity business. (See Vodafone to 'Crush' LoRa, Sigfox With NB-IoT and Weightless Aims to Exert Gravitational IoT Pull.)

Yet Sigfox has long insisted that its technology is more power efficient and capable than alternatives such as NB-IoT, saying there are instances where the two could play a complementary role.

Telefónica certainly appears to regard Sigfox as one of several options it wants in its IoT toolbox.

"The deal, set for several millions of connections, is part of Telefónica's global strategy regarding LPWA [low power, wide area], relying on licensed technology as NB-IoT and LTE-M [another 3GPP standard], and non-licensed technology such as Sigfox, adopting the most appropriate technology to the use case and customer needs," says a press release from the companies.

The real uncertainty is whether Sigfox ends up playing a very prominent role in a commercial setting for Telefónica, or is used in only a small number of scenarios.

Light Reading has questions in with Telefónica about its reasons for choosing Sigfox when NB-IoT is now set for commercial rollout and given the growing popularity of LoRa, another unlicensed-spectrum technology that has attracted interest from several major telcos. We will add an update based on the operator's response.

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

What the companies' statement does reveal is that Sigfox and Telefónica are already in "positive talks" with customers about delivering "mass IoT rollouts" in Europe and Latin America this year.

This would include countries in Telefónica's footprint such as Spain, Germany, Mexico, Colombia, Argentina and Brazil, they say. Sigfox also claims that WND, its partner in Latin America, has started discussions with local Telefónica subsidiaries in the region.

While Sigfox has been written off a few times by rivals with vested interests, and even taken some flak from smaller customers, it appears to have been on a hot streak in recent months. (See Sigfox Said to Face Customer Backlash.)

In November, the company secured €150 million ($158 million, at today's exchange rate) in a funding round that attracted Inc. and energy giant Total as fresh investors, bringing the total it has received in funding to about €300 million ($315 million). At the time, it said it planned to use the new funding to accelerate network deployment to 60 countries by 2018, up from 26 in November, and to reach a financial break-even point. (See Sigfox Defies Critics to Raise €150M in Funding.)

Telefónica participated in a much earlier funding round along with South Korean operator SK Telecom (Nasdaq: SKM), which appears to be developing an LPWAN strategy around the use of LoRa and LTE-M, despite its investment in Sigfox. (See SK Telecom Sees LTE-M, LoRa as Its 'Two Main IoT Pillars'.)

In December, Sigfox was reported by the UK's Financial Times (subscription required) to be planning an initial public offering in 2018, although Ludovic Le Moan, Sigfox's CEO, said it would need to grow its number of device connections from about 10 million to 100 million before that was feasible. (See Sigfox to Go Public in 2018 – Report.)

The deal with Telefónica could be absolutely critical in helping Sigfox to reach this connections target.

As a private company, Sigfox does not publish details of revenues but is reported to have grown sales from more than €12 million ($12.6 million) in 2015 to more than €30 million ($31.5 million) last year.

It generates as little as $1 ($1.05) annually from each connected device, giving it an advantage over pricier technologies but making it heavily dependent on an increase in connections for sales growth.

According to the Financial Times report from December, Sigfox is currently targeting €100 million ($105 million) in revenues in 2018.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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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).

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