An identity crisis, a catch-22, a €3.3m problem? What’s in the Unabiz/Sigfox in-tray?
It has been a month since Unabiz was declared the new owner of IoT tech provider and network operator Sigfox. And it has been a couple of weeks (such is the workload) since Enterprise IoT Insights was passed a shareholders’ note from the Sigfox legal team, signed on behalf of incumbent chief exec Jeremy Prince, to state the main tech unit, Sigfox SA, went for just €3.3 million in the end – and the French network, Sigfox SAS, went for only €300,000. It is unclear from the letter whether the €3.3 million fee included the €300,000 for Sigfox SAS, as well.
This is new information in the Sigfox saga. The rest of the acquisition fee, thought to be around €25 million, and therefore the vast majority of it, has gone on Sigfox staff. Unabiz’s winning deal promises to “safeguard” 110 Sigfox employees, out of a total of 174 in France. Their sovereign job security was a crucial ingredient to swing the deal for Unabiz. The US network operation, the only other Sigfox-owned property when the business went into receivership in France in January, filed for bankruptcy in a Delaware court in March, owing $150 million in unsecured debt.
Its US assets, pegged at $85 million, will be sold to pay creditors; all US staff contracts have been terminated. The ability (!) for Sigfox to uncouple their “financial distress(es)” might just have saved the technology and the brand, if indeed the brand is to be retained under Unabiz’s stewardship. Commentators have suggested (see below) that Unabiz might do well to “fade away” the brand “like WiMAX or Video 2000”, on the grounds it is damaged already and will be damaged further by the US bankruptcy.
This seems unlikely, however; the tribal nature of the low-power wide-area (LPWA) IoT crowd and Unabiz’s own blue-eyed vision for the wider IoT sector probably means there is enough good will left in the tank for Sigfox supporters to give it another whirl, and strategic knowhow to make it a more focused ecosystem-play. This side of the story, with input from the new owners, is yet to be written; all we have, for now, is reasoned guesswork from market watchers and close sources.
The letter is remarkable on the grounds it shows how devalued Sigfox has become – a one-time darling of the IoT scene, which raised $311 million in five venture rounds through 2016, and even enjoyed nominal ‘unicorn’ status at the time. Curiously, the letter states that the €3.3 million deal for Sigfox includes “the takeover of Sigfox Singapore, [and] Sigfox Spain and Portugal” – network entities (if indeed, it refers to the Sigfox operators in these markets, rather than to overseas Sigfox SA offices) that were owned, in the first instance, by Unabiz already, and, in the second instance, by Cellnex Telecom.
It might be noted, the Cellnex-managed Sigfox network in Spain has stood-up the key Securitas Direct / Verisure supply contract, to provide backup connectivity in case of cellular 2G/3G jamming in its alarm transmission network.
The letter to shareholders, from the Sigfox legal team, on behalf of Prince, states: “On January 26, Sigfox SA and Sigfox SAS went into receivership… and a bidding process was initiated. [On April 21] the Toulouse Commercial Court [chose] Unabiz for Sigfox SA and Sigfox SAS… On [April] 22, it took over all assets and employees included in their bid. For your information, the final price was €3.3m for Sigfox SA (€300,000 for Sigfox SAS), and included the takeover of Sigfox Singapore, [and] Sigfox Spain and Portugal.
“[Unabiz] is keeping 110 employees for Sigfox SA, and all 16 employees for Sigfox SAS. Sigfox SA and Sigfox SAS are now entering a liquidation process… [where] all creditors [will be] ranke[ed based on] the applicable rules… All employees that were not taken over by Unabiz in the newly created entity will be terminated in the coming weeks in compliance with employment laws and regulations. This process is a public procedure, meaning there will be no specific communication by the administrators and liquidator.”
Unabiz and Sigfox were unavailable for comment; no doubt they will be in touch to put-right certain assumptions made here. Meanwhile, some commentators responded to a request from Enterprise IoT Insights to sum-up the challenge for Unabiz, as the new owner of Sigfox, and to detail the most key items in its new in-tray. “It is certainly an overflowing one,” responded Jim Morrish, founding partner at Transforma Insights.
The email conversation went like this: Enterprise IoT Insights scratched its head, and wondered out loud about the most important tasks for Unabiz: about reassuring customers, renegotiating with operators, opening up to developers, and a whole bunch of other stuff. We wrote them down and pressed send, and the responses were long, and searching, and wondered-back whether Unabiz might just have bitten off more than it can chew.
Time will tell, as stated, and hopefully Henri Bong and Philippe Chiu, the company’s co-founders, will talk in due course about their master-plan, and how to rebuild and re-integrate a seminal (frankly, legendary) LPWA technology that – probably through mis-management and mis-communication, more than anything – has lost its lustre. But for now, the responses from others say something, if not everything.
Some Sigfox players (not operators) make clear the priorities are to reassure big customers, reform operator licences, and incentivise infrastructure expansion. Others think the malaise goes deeper, and possibly too deep – and pulled no punches on the grounds they remained anonymous. “The protocol is not unique enough to ‘survive’,” says one source, close to the Sigfox scene. “Unlicensed LoRa in SF12 is much alike, and the new LR FHSS is very alike – and probably better. The unique part of Sigfox was that the solution was simple. But that is no longer the case, either, because LoRa has copied the same principles.”
He goes on: “If enterprises have any worry with unlicensed tech – silly because BLE and Wi-Fi are unlicensed – then licensed cellular LPWA is a contender now, as well; and there is an argument to accept some additional cost and complexity, and remove the risk on the operator-side, certainly when compared with Sigfox. The point is, there is less sense now to save the Sigfox technology; it would be an uphill battle to make it relevant. Far better to fade it out, and build bridges with the LoRa community – and with cellular, Matter, satellite, and so on, where the focus has to be.”
Ouch. There is more. The operator question, about how to renegotiate licences and incentivise new growth, cannot be resolved, he reckons. “The 10 million-odd connections Sigfox has are very scattered. Most projects are small; only some have tangible volume. The big customers (DHL in Germany, Verisure in Spain and France, Nicigas in Japan) might justify the op-ex for network operators in those markets, but the other 70-or-so are only serving very small customers… A drop in licence fees for operators – from 40 percent to 10 percent, say – could help.
“But the trade-off is how Unabiz supports the staff it has taken on with such a drop in income. If Sigfox is going to work, the gateways have to be opened up to allow for private networks – so anyone can build a network, and do so at low cost. The model has to get away from exclusive national contracts. Big customers want a fallback option; the choice of one operator per market does not provide that. It is bad business. And enabling private networks could be as easy as including a Sigfox modulator/demodulator into the system, plus some additional features in the cloud.”
There is worse, too, except that it is unprintable, actually. More hopeful (just about) commentary comes from Morrish. Unabiz has got to go back to basics, he suggests: “Where to start? It has to be at the beginning – just to figure out what it has got. A lot of countries are listed with Sigfox coverage, but it is unclear how good their coverage actually is. Coverage of regions is more valuable than coverage of countries. Unabiz should probably focus on Europe and somehow get it to work there first – and fast.”
Tancred Taylor, research analyst at ABI Research, says the same; Unabiz has to somehow shake realism out of a business with its head in the clouds. “There has been a bit of a message- and role-creep from Sigfox over the years that should be addressed. It just got overexcited, going into hyperdrive to try to do everything – losing sight of what the developer ecosystem needed. It presented itself as really cheap, without necessarily being valuable in itself. It tried to do a data model; it owned networks; it pushed applications without the developer ecosystem or business case to back them up,” he says.
“This could be an opportunity to refocus – to be the tech enabler, rather than the end product or solution provider. Sigfox has to create a friendlier environment for an ecosystem to develop. It has to ask itself which features – at network level and cloud level – developers want in order to create devices and solutions. It must not try to be all-things to all-people, and get away from its strengths. Which is what has hindered it until now.”
Back to Morrish at Transforma Insights; operators and customers need to be convinced just that the lights will stay on, he says. “Unabiz needs to make some commitments to operators, to ensure business continuity in the event Sigfox goes bust again. It will probably need to arrange for the core network code to be available to operators, or to somehow ring-fence some core functions so the network continues in the event Sigfox fails. Otherwise Sigfox operators are going to be very reluctant to invest, or even to sell more connections – and diversification into LoRaWAN might seem appealing.”
He adds: “Operators and customers need to be reassured, but that is going to be difficult. There is not much money with super-cheap connectivity and Sigfox has already failed once. On one side, some operators have suggested that the licence fees are too high; on the other, Sigfox has been overly-reliant on revenues from hardware sales for network rollout. The best solution is massive-volume growth, but it is hard to see that happening – it’s a catch-22. Unabiz needs anchor clients with the necessary scale to justify a network rollout by themselves.
“If UnaBiz could persuade a large manufacturer to commit to the technology in Europe, say, then one deal might provide enough scale to… stabilise the proposition. Smaller customers will not have the same effect, and smaller customers will be hard to sell to until the proposition is stabilised. But even the largest partners might not generate the right volumes. Securitas has been a good anchor in Spain, valuing the technology for its ability to withstand jamming, and there could be similar options in other countries. The priority is to stabilise the business, so everyone – Sigfox, Unabiz, operators – has enough to cover their costs. Only then is it worth thinking about what to do next.”
Taylor at ABI Research returns to the idea that, more than anything, Sigfox needs a complete reset – to put focus on its technological strengths and get away from the delusion that a race to the bottom is the same as a race to the top. “It cannot just rely on being the cheapest of the LPWA tech, which is an empty claim. It has other strengths, and where it is strong, it is really strong – for small, infrequent, high-penetration uplink transmissions,” he says.
“Lots of use-cases fit that job description, as has been seen with some very-large successes. So it needs to refocus – to understand its strengths, map them to end-markets, and then to provide the features for developers to build solutions…. There is a role for Sigfox in the ecosystem; it just needs to get out of its identity crisis.” If Sigfox cannot find its mark, as a technology, then it is finished, the implication goes. Morrish notes the low-end of the IoT market is already squeezed, and getting tighter – and that its rivals would find blessed relief in its failure, ultimately.
Morrish says: “Competition is tough. There is an interesting dynamic where LoRaWAN, Sigfox, and, increasingly, cellular LPWA are competing on price at the low end of the market. If Sigfox disappears, then the price pressure on the others will be much less. So the LoRa folks and the 3GPP community would be quite happy to see the back of Sigfox. In a parallel universe, we might have seen a player like AWS step in and commit to offer network core functionality for next to nothing, for perpetuity. Think where that might have taken us.”