UK-based company IP.access is one of only a handful of big players in a potential $22bn market. This prediction for 2016 was voiced at the telecommunications industry’s annual Mobile World extravaganza in Barcelona by one market observer, Informa Telecoms & Media, commissioned by IP.access’s industry trade body, the Small Cell Forum.
Cambridge-based company IP.access makes small cells – low-powered wireless mobile access points – rapidly being adopted to improve telecoms coverage by mobile operators in favour of traditional, higher-powered macro-cells.
Informa estimated the market was set to grow from almost 11 million units today to 92 million units in 2016. IP.access said last month it had become the first 3G small cell provider to ship a million residential units, one of a type of small cell.
Nagraj Kashyap, who leads US-based chipmaker Qualcomm’s corporate venturing unit, Qualcomm Ventures, said: “We looked at IP.access because we were an early believer in small cells as a natural evolution from large macro cells. We saw them as an early leader in that field. We looked at IP.access and [UK-based and corporate venturing- backed rival] Ubiquisys, and we chose IP.access. From our perspective they have progressed well and shipped a number of small cells and the industry is moving towards IP.access. We backed them a while back and it is heartening to see that vision coming through.”
IP.access has reached its current position through its tie-up with investors at Qualcomm Ventures, US-basedchip company Intel’s corporate venturing unit Intel Capital, and US-based technology companies Cisco and TE Connectivity.
Simon Brown, chief executive of IP.access, said: “What we have here is a nice picture, but it started as a jigsaw puzzle. You need good management teams and good technology. To be successful you have to line up all this stuff. Investment was critical in helping the company grow.
In terms of the right time to work with a strategic, right now we bring income in from lots of different sources. Yet at the
right time they were there to help the company through.”
He added: “We are in constant dialogue with Qualcomm about the nature of the industry and where it is going, in an effort to fully understand the industry role and where it should play.”
Andrea Traversone, a partner at venture capital firm Amadeus Capital Partners, said: “IP.access already has scale and a huge potential market size. My expectation is this will have a very significant impact on this sector in the UK. We are very excited and they are a great UK technology story.”
Brown said IP.access’s investment from Cisco was linked to part of a large contract with telecoms operator AT&T, one of the most vocal advocates of the small cell sector, to increase the reach of its network. AT&T’s executive director of small cell solutions and radio access network delivery Gordon Mansfield, also chairs the Small Cell Forum. Brown said: “The bulk of Cisco’s exposure to the small cell space is with IP.access.”
The company had initially had financial backing from TE, which has subsequently developed into a business relationship in which they are working jointly on another project.
Brown said: “When I became chief executive in 2011 we embarked on a process of setting up the company for market acceleration. As part of that we made the product right for the job. We also looked at the way we engaged and retained customers. This process has been spectacularly successful, and we have had a wonderful prior 12 months.”
Brown declined to give financial details but said the company had recently hit profitability. Another person familiar with the situation said the company had increased its revenue run-rate to nearly £50m ($75m).
The financial performance marks a significant lift since the company’s last published accounts, when revenues fell 15% to £26.5m in the year ended March 2012, and the company’s losses widened to £12m during the financial year, up from £4m the previous year.Brown replaced Stephen Mallinson, who had been chief executive since May 2010. Traversone said: “Simon [Brown] came in as a non-executive director when they needed his type of experience. Steve [Mallinson] liked being much more early stage or at the middle phase. Often these companies need to match people’s preferences and comfort zones with the right executive.”
Brown said: “Being venture- backed we could delay profitability and go through product architecting. We executed our agreed plan to the letter. This meant we hit profitability at the back end of last year, which changes the face of business and its capabilities.”
He added: “When you go through these things, it is a big decision. We got on with it, and we did forecast a very substantial lossand were within 0.5% of the plan. We absolutely delivered based on the investment. In terms of financials we are exactly where we expect to be.”
Besides the visible attempt by telecoms network operators to offer complete network coverage, where small cells have generated headlines,
IP.access’s technology is also set to be used in other areas, such as big data.
Brown said: “As we go towards a world of big data, how we gather data in a wealth of different sectors will need something like small cell systems to
get granularity of data. We are having a number of interesting conversations with major operators and data analysis companies which have no way to gather the data they need effectively.”
There is also a general push for complexity in the technology, which in theory should allow the business to create high margin business lines. Brown said: “The market itself is in a fairly early stage and usage has been initially quite basic, with capacity type usage, with basic functionality and basic utility. What we are beginning to see now is a broadening interest in different verticals. The technology is going through an inflection point and is being more widely adopted.”
Given the market opportunity IP.access will continue to face fierce competition.
Other independent companies operating in the sector listed by market research provider Infonetics in a 2012 report, are Contela, Juni and Minieum Networks, while Infonetics listed the bigger companies operating in the sector as Alcatel-Lucent, Ericsson, Huawei, Nokia Siemens Networks and ZTE.
However, IP.access remains confident its business model helps it stand out. Brown said: “We are one of only two companies globally providing an end-to-end solution, with Alcatel Lucent being the other, making us the only independent play offering a complete end-to-end small cell
system.”
He said this had proven attractive to customers, with 90% of deals “closed successfully”.