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The cost of building out a new mobile operation from scratch was all too evident in Rakuten Mobile's first quarter results, but the company is unconcerned.

Mary Lennighan

May 14, 2021

3 Min Read

The cost of building out a new mobile operation from scratch was all too evident in Rakuten Mobile’s first quarter results, but the company is unconcerned.

Japan’s newest mobile operator just turned one year old and marked the occasion by reporting a 94.1 billion yen (US$860 million) operating loss for the first quarter of 2021, almost three times the loss it posted in the year-ago quarter and more than 20 yen greater than its loss in Q4. The figures refer to its core mobile business; its overall mobile loss was slightly greater.

But speaking in a pre-recorded interview with Credit Suisse, Mikitani made it clear that the problem is short term.

There are two sides to Rakuten Mobile’s business, he reminded us: the Japanese mobile operations and the company’s role as an exporter of its mobile platform. “When both of these businesses are in full swing we will be capable of driving tremendous profitability,” he said.

His sentiments were echoed by Rakuten Mobile president Yoshihisa Yamada on the firm’s results call. “Mobile business losses are expected to decline gradually after 2021,” he said. “We aim to achieve breakeven in fiscal year 2023,” aided by subscriber growth, he added.

As it stands, Rakuten is still spending heavily on network rollout and the costs associated with domestic roaming, both of which should decline as the network build progresses. The firm has achieved 80% population coverage on 4G and aims to hit 96% this summer. Meanwhile, the award of additional spectrum at 1.7 GHz will enable to speed up 5G rollout; it launched a limited 5G service in March.

At the same time, the telco’s customer base and revenues are growing. Q1 turnover came in at 56.7 billion yen, up 45% year-on-year, and as of 11 May it had clocked up 4.1 million customer applications, the only metric it provides on that front. Customer applications have accelerated this year – the company had just over 2 million at the end of last year – and it attributes this to the launch of its newest plan, UN-LIMIT IV in January.

“This has been very well received,” Yamada said. Even when rival operators launched value plans of their own in March, “the pace of the applications for Rakuten Mobile was not impacted,” he said.

Rakuten Mobile’s first year in operation drew to a close last month, and that is also significant from the point of view of generating revenues, with many early customers signing up to free 12-month plans. “We expect more revenues from the second quarter onwards,” Yamada said.

Outside of Japan, the future is also rosy.

“Many telcos around the world are starting to adopt our architecture,” noted Tareq Amin, Rakuten Mobile’s CTO, taking up the company as a disruptive force in Open RAN, edge network platform architecture, and automation.

Indeed, when asked which of the Rakuten Group’s global businesses has the most potential, Mikitani highlighted the export of mobile technology as “significant”. Huge mobile operators around the world want not only the Rakuten mobile platform – known as RCP, or the Rakuten Communications Platform – but are also keen to buy its membership programme, its AI capabilities, and so forth, he claimed.

“In addition to promoting the export of our mobile platform, it is quite possible we could form business partnerships with global telecom players to export e-commerce, fin tech, and the membership programme,” Mikitani said.

About the Author(s)

Mary Lennighan

Mary has been following developments in the telecoms industry for more than 20 years. She is currently a freelance journalist, having stepped down as editor of Total Telecom in late 2017; her career history also includes three years at CIT Publications (now part of Telegeography) and a stint at Reuters. Mary's key area of focus is on the business of telecoms, looking at operator strategy and financial performance, as well as regulatory developments, spectrum allocation and the like. She holds a Bachelor's degree in modern languages and an MA in Italian language and literature.

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