Rakon takes cornerstone stake in start-up rolling out 'internet of things' technology

Monday 4th April 2016

French company Sigfox will roll out its low powered wide area network technology in New Zealand and Australia through Australian start-up Thinxtra, in which listed Kiwi high tech component manufacturer Rakon has become a cornerstone investor.

Trials of the Internet of Things (IoT) network, which provides an energy-saving alternative to existing cellular networks, are underway in Sydney and Melbourne. Thinxtra hopes to provide coverage to 30 percent of Australians and New Zealanders by the end of this year, rising to 85 percent within 18 months.

The IoT and the number of connected objects is forecast to grow exponentially in the next few years and Sigfox claims its network has the lowest deployment and maintenance costs of any system proposed, allowing lower cost subscription plans.

The Australasian move is part of Sigfox’s plans to expand its network around the world, with rollouts in each country undertaken with a network partner. Set up in 2010, the French company now operates in 14 countries.

Rakon has upped its stake in Thinxtra from 18 percent, spending A$5.5 million to gain a 63 percent stake although that could dilute back to just under 50 percent if the management founder/shareholders take up outstanding options. Thinxtra plans to raise a further A$20 million through a capital raising later this year and Rakon has an option to invest another A$3 million, if certain objectives are achieved.

Based on current market forecasts, the parties expect the total number of connections in New Zealand to overtake the total population, currently close to 4.7 million, by 2022.

Sigfox’s low-speed networks are typically based on antennae and base station infrastructure, independent of existing networks. Customers range from utilities for the likes of remote meter reading and emergency alert systems for healthcare providers.

It works in concert with hardware that manufacturers integrate into their products and focuses on low-power, low-bandwidth communications that are relatively easy to set up and run at a tenth of the cost of a traditional cellular network, it said.

The company said most IoT-connected devices don’t need to send huge data loads and can function well on ultra narrow band technology. Because they are only “on” when they are transmitting, power demand is negligible. For example, a GPS tracker could run for up to 10 years on two AA batteries, it said.

The companies said Thinxtra will generate revenue from three areas: infrastructure, applications and services. It will sell subscriptions for annual network connections and monthly usage fees, sell and distribute connected hardware which could include Rakon-made components, and sell services such as advising customers on solutions and implementation.

Rakon has been exiting the smart wireless market, which didn’t deliver big enough margins.

The company has warned that annual earnings will miss forecast after a return to profitability last year after restructuring to pull manufacturing back to New Zealand and Indian sites only. In January, it forecast underlying earnings before interest, tax, depreciation, and amortisation of between $9 million and $10 million for the year ending March 31, down from a previous forecast of $15.4 million.

Rakon’s shares recently traded at 25 cents and have dropped 26 percent this year.

(BusinessDesk)

BusinessDesk.co.nz

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