Sigfox is a fast-growing French IoT network operator that is partnering with – but could become a competitor to – telcos, which are increasingly looking to develop their own IoT offering. TelecomFinance speaks to its CEO and co-founder Ludovic Le Moan to find out how worried MNOs should be, and whether it is headed for unicorn status.
Sigfox is a fast-growing French IoT network operator that is partnering with – but could become a competitor to – telcos, which are increasingly looking to develop their own IoT offering. TelecomFinance speaks to its CEO and co-founder Ludovic Le Moan to find out how worried MNOs should be, and whether it is headed for unicorn status.
Guy Ferneyhough: Can you tell me about Sigfox and what it does?
Ludovic Le Moan: Sigfox is an operator dedicated to the internet of things. The vision we had from the beginning was to create one network covering the world with the same API (application programming interface) which could be used by any device vendor or application provider.
We have complete networks in four countries, and another seven underway that will be ready in mid-2016. We are also on the way to signing rollouts for Brazil, Chile, Peru and Colombia. I believe by the end of next year we should have 15 countries signed, from the rollout strategy standpoint.
In the meantime, if you have a network but you don’t have any ecosystem of devices, it doesn’t make sense, so we are also working with the world’s main silicon vendors to embed Sigfox technology into chipsets that they will be able to manufacture at high volume for a low price.
We are working with the top five silicon vendors, which are already able to sell chipsets for less than $1, and we are working to lower the price to US$0.10 to US$0.20.
We are investing millions of euros on this, without expecting a direct return. Sigfox’s business model is based on a subscription fee, so we make every effort to help customers reach high volume at a lower price.
Device manufacturers (which subscribe to Sigfox’s connectivity) can use transceivers from different vendors, which enables them to connect millions of devices.
The other point is the autonomy (lifespan) of a device, which we want to be long.
Our technology enables devices to run independently for years, which drives OPEX for the end customer.
We have already signed seven million subscriptions, and have invested in a satellite position because we will need satellite to cover some regions that are not accessible through ground base stations.
GF: What spectrum does your network run on?
LLM: We operate on the ISM band, which is unlicensed spectrum so available for free. But this spectrum is not always on the same frequency, depending on the area. The range is roughly between 800 MHz and 920/930 MHz.
We have invented a way to switch from one spectrum band to another, meaning that if your device moves from France to US, we have a way to dynamically switch between the two frequencies seamlessly, and the antennas would be the same. This is part of the value we offer for the customer – they don’t have to worry about geography.
GF: Who are your competitors?
LLM: So far, no one else has a system in place to compete with us. No competitors have an offer with an SLA (service-level agreement), or an available coverage map. We cover millions of square kilometres and operate seven million objects. Competitors claim they will do GPS, higher throughput, less energy consumption… but right now that is just a claim.
ISM spectrum can in fact be quite noisy so you need to support the interference. That is easy to do in a laboratory demonstration, but in real life is different.
GF: As far as mobile network operators are concerned, is Sigfox complementary or a competitor?
LLM: For me, we are complementary, but is not so easy to make operators accept that. Some of them have understood that we can be a really good complement for them because we are very low throughput. Today we are doing 100 bits per second, but we know we will be able to reach 1 kilobit per second.
Traditional operators have a very good solution today for high throughput, for mobile and tablet and so on. There will be LTE improvements, LTE-M or maybe 5G – these technologies will address devices that will require many kilobytes per second, but not 1 kilobit.
It is a balance between having something able to reach a higher throughput, and something which is very low throughput but with features optimised for low cost.
Traditional MNOs come from the previous system and try to put SIM cards to connect devices for the network, but for IoT – because we are connecting millions of devices – you need to have something very simple. No peering, no configuration, just something that is completely seamless is very important to get because every complexity will imply cost and time.
It makes sense to have a very good relationship with the MNOs and not compete with them, but today in France the MNOs try to work with LoRa (Low Power Wide Area Network) technology, which is not working right now. They are trying to find a solution to address the market in their traditional manner, but for me IoT is something else. IoT is not an evolution of telecommunications. It’s a new business, a new approach, and you can’t address this business in the same way that they have done before.
GF: Some of your investors are operators such as SK Telekom, Telefónica and NTT Docomo. Do you think they understand your new approach?
LLM: We are working well with Telefónica, because we will soon enter Latin America. Telefónica understands the opportunity and is increasingly working with us.
It’s not completely clear with SK, which may try LoRa. NTT Docomo are still very interested in us, but generally MNOs are big guys with many employees and big teams.
Some of these believe they don’t need such a network, and prefer to wait for LTE-M or even 5G before entering the IoT business. As a CEO of a big MNO, you get feedback from different people with different approaches, so it’s not easy to see something clearly.
T-Mobile is an example of an operator moving in our direction, because they have understood that they need to have something available right now, they can’t wait years before having something up and running for IoT. The value for operators is not in the network, the value is the data on top of that, and the connectivity must exist to have the data. For me, it doesn’t make sense to do something different. I think the operators should focus on the added value and not trying to redo what we have done.
GF: Earlier this year you raised US$115m from those three operators, alongside satellite operator Eutelsat, investor Elliott Management, and utilities GDF Suez and Air Liquide, amongst others. Now I understand you are embarking on another funding round and looking to raise a further US$200m?
LLM: Maybe more. Right now we are holding discussions with big investors willing to invest hundreds of millions because they know that, with US$800m, we can achieve worldwide coverage. A global footprint drastically speeds up the ecosystem. With that cash, we could roll out in at least 100 countries in nine or 12 months.
We currently lead this space, working with a growing number of partners. It is the right moment to raise more money, and we expect to do so in the next few months.
GF: Do you have plans for an IPO? What sort of valuation can we expect?
LLM: Yes. The strategy for Sigfox is to IPO in 2017, to enable us to expand the business even further. We don’t talk about valuation, as discussions are ongoing. Many people are willing to invest, but the main question is the valuation.
GF: Is it possible you’ll reach unicorn (US$1bn-plus) status?
LLM: Yes. Before we raised US$100m, people thought Sigfox was interesting, but not credible, they thought it was a bit too good to be true. Afterwards, they took us more seriously. Investors came to France and Spain to see tests and saw that our solution was a reality. Becoming a unicorn would not only accelerate our business, but expand the overall ecosystem.
GF: Are you looking at any acquisition opportunities?
LLM: Perhaps we can consider that in the future, when we’re ready to increase our portfolio of features. Right now, we are concentrating on getting a global network up and running, and ensuring that it is very reliable and sustainable. Most of our customers have SLAs with their customers, so they want us to have the same SLA. We have to be very sure that if we move in any new direction, we will not destroy the quality of the network. We have many ideas because the IoT space is home to endless opportunities, but we need to go carefully.
