Rakuten Mobile celebrated the fourth anniversary of its service launch as faster subscriber growth put it on track to reach the low end of a stated user target needed to break even – aiming to capture 4 per cent of the overall Japanese market by end-2024.

The relative newcomer and open RAN pioneer added 500,000 users in Q1 to take its total to 6.5 million. It signed up 1.5 million new users in 2023, following a decline in 2022. 

At the current quarterly addition rate the operator will reach 8 million users by end-2024 and 10 million at end-2025. The question is can it sustain the Q1 growth rate: over the past two years, net additions rose an average of just 200,000 a quarter.

Chair Mickey Mikitani previously cited the range as the level needed to stem its losses, stating in February – following sharp cost cutting – it aims for monthly EBITDA break even by end-2024 and to achieve this on an annual basis in 2025. He also emphasised that with population coverage above 99 per cent, capex this year will fall 44 per cent to JPY100 billion ($652.7 billion).

Marc Einstein, chief analyst at research company ITR, expressed scepticism the company can break even by 2025 as a standalone domestic operator, estimating it needs at least 10 million to 15 million subscribers to achieve this, as in the long term it is difficult to survive with such a small market share.

Raising questions about the nature of the recent jump in subs growth, the operator noted a “dramatic increase in B2B subscribers” in Q4, which diluted ARPU. Einstein told Mobile World Live the company appears to include IoT connections, under the B2B category, in its subscriber figures.

He argued if the operator can address spotty coverage issues, it’s possible to continue to add users at a brisk rate but noted this “requires more capex, and the company is keen on limiting the outflow of capital at the moment”.

The operator ended 2023 with nearly 61,000 LTE base stations and 11,600 5G sites, far behind NTT Docomo with more than 261,000 and nearly 31,000, respectively. KDDI’s 4G sites totaled 195,000, while SoftBank Corp had 175,000.

Ecosystem synergies 
Mikitani insists its cost-cutting programme, combined with an increase in subscriber additions, will set it on the path to profitability. 

He has long touted the advantages of the e-commerce giant’s wider ecosystem, which in effect boosts ARPU via supplementary purchases, such as advertising and miscellaneous B2B income.  He also highlighted the contribution its mobile unit makes to the group’s overall services, claiming an impact of JPY10 billion on revenue and JPY6 billion EBITDA, as well as an “ecosystem ARPU uplift” of JPY764 per user.

There’s also its software platform Rakuten Symphony, long hyped as a growth engine for the group, working with mobile operators around the world to deploy end-to-end virtualised infrastructure using open RAN equipment. But revenue there in 2023 actually fell 15 per cent year-on-year to JPY398 billion.

The chair pointed to continued progress in deliveries to existing global customers, but with more focus on anchor clients, noting revenue tends to be uneven on a quarterly basis due to seasonality and hardware and software deliveries.

Last year the operator’s MVNO revenue dropped 37 per cent to JPY56.9 billion – it stopped signing up new users when it launched MNO service in 2020.

Einstein believes the operator’s success depends on how it can perform as a vendor and in the enterprise space. “It has some interesting new solutions in the telecoms management software space using AI, and if these are adopted overseas this would greatly improve its prospects.”

Four is a crowd
As its sub growth picks up, competition is intensifying. The operator is battling three formidable rivals: Docomo with nearly 90 million subscribers, KDDI 67 million and SoftBank Corp 30 million.

And the industry track record for a fourth entrant in the region isn’t encouraging. 

Australia had four players with licences beginning in 2014, when TPG Telecom, previously an MVNO, acquired spectrum and introduced its own service. Then it merged with Vodafone Hutchison Australia in 2020 and now has about a 17 per cent market share in a three-player market.

In Singapore, TPG Telecom launched 4G service in 2020 and rebranded Simba Telecom in 2022 with a focus on prepaid users in a predominately post-paid market. GSMA Intelligence data showed it has less than a 10 per cent share, with 966,000 mobile connections at end-March.

India is down to three major players, having once accommodated as many as 12 in 2018, including two state-owned entities, with Vodafone Idea currently struggling with subscriber losses and a huge debt.

Bizarrely, South Korea, one of the most connected countries in the world, soon will have a fourth player after local consortium Stage X acquired 28GHz spectrum in an auction. The Korean government, as also witnessed in Singapore and Australia, continues to call for more competition to spur lower prices for mobile and broadband connectivity.

The push often seems unfounded. Chetan Sharma Consulting back in 2011 expounded the Rule of Three, a theory that in a mature market three top players will dominate, or a market typically settles down to three major operators after inefficiencies are worked out.

After four years of heavy investment in Rakuten Mobile, its parent is looking to increase collaboration and likely reduce costs as well, unveiling plans to combine its fintech subsidiaries and listed banking unit into a single business. The group booked a net loss of JPY339.4 billion in 2023, its second-largest annual loss.

The question is how long will Rakuten Group allow its mobile unit to weigh on its bottom-line? If breakeven is again pushed back, the appetite for further investment and losses will likely evaporate. 

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.