Page 44 - Trends in Telecommunication Reform 2016

Box 1.10: Key lessons: SIGFOX
• Investing in more unfamiliar technology fields can raise the risk for investors but can offer
an upside with high potential. Investing in new technologies is not Elliot Management’s
typical type of investment, but if SIGFOX succeeds as the prevailing technology to enable
the Internet-of-Things market, the return on investment could be significant.

• Other fixed and wireless operators could consider investment from hedge funds,
particularly for the expansion of fixed broadband networks. However, the lack of notable
examples suggests that some hedge funds may be hesitant to invest in long-term
infrastructure projects.

• It is interesting to note that the Series D funding was not made in isolation by a hedge
fund alone, but in collaboration with a number of high-profile global partners, which
stand to benefit from the success of the technology as it evolves. These “expert”
investors can provide financial investors with a higher degree of certainty and reduce the
risk. Technology companies looking for alternative sources of investment should consider
a combination approach.

• Neither the telecommunication regulator nor the government had any direct investment
in SIGFOX. However, regulators do still have overall responsibility for ensuring that
the market environment is competitive and attractive for investment. In this instance,
regulators will also have responsibility for making spectrum available for low-power
wireless networks.

collaborating with Texas Instruments to integrate largely been attributed to Seacom, which is 100
SIGFOX’s technology into TI’s chipsets. per cent privately funded.

Case study: Seacom, Africa Convergence Partners is a South African
investment management company focused on the
This case study was chosen to demonstrate that telcommunication sector in Africa. Its investments
financial institutions (particularly those that focus typically target ICT infrastructure development.
on and understand the technology sector) also Convergence invested USD 37.5 million of the total
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invest in broadband infrastructure projects. Seacom project cost of USD 650 million, giving
Convergence an equity share of 12.5 per cent
In 2007, a venture dubbed Seacom was of the cable system. Other investors in Seacom
established to launch the first submarine cable included Nedbank (offering long-term commercial
system along East Africa, linking South Africa, loans), and various African economic development
Tanzania, Uganda, Kenya and Mozambique to funds.
major Internet connection hubs in Europe and
Asia. Seacom’s aim was to bring affordable and Convergence Partners made the investment in
high-quality broadband to southern and eastern Seacom because it expected significant growth
Africa as an alternative to expensive satellite in data traffic following the exploding growth of
technology, which was limited in service capability. mobile services in Africa. Results have been mixed
since Seacom went live in July 2009. According to

Since 2009, Seacom has been an open access Remgro, a listed investment fund with a 25 per
undersea cable system supporting high-bandwidth cent share of Seacom, the cable infrastructure
connectivity. Seacom provides open access company had lost money from 2011 through 2013.
points of presence in various countries, and its In 2014, though, Seacom’s headline earnings were
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global partners provide end-to-end wholesale ZAR 40 million (USD 3.34 million ), compared with
connectivity for African operators. The resulting a loss of ZAR 32 million (USD 2.67 million) in the
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broad take-up of broadband across East Africa has previous year .

26 Trends in Telecommunication Reform 2016