In addition, Rakuten says that from here on, more customers pay for the operator’s services.
All of these metrics are important: Wider coverage improves the customer’s mobile service experience and further reduces roaming costs; more paying customers mean greater revenues and Rakuten expects those revenues to improve by leaps and bounds as it phases out the free service package it initially offered to attract early customers to its 4G network.
That free offer is in the process of being withdrawn and will be gone completely by the end of October.
As a result, Rakuten Mobile expects its average revenue per user (ARPU) number to improve by about 50% during the current quarter alone, which is a significant leap.
The only snag is that the withdrawal of the free service package means that Rakuten Mobile has lost some customers – those that didn’t want to pay and have gone elsewhere for their mobile service. At the end of June, Rakuten Mobile had just 5.46 million customers, of which 690,000 were mobile virtual network operator (MVNO) customers (meaning they are not connected to Rakuten’s own network). That total number is down from the first quarter’s 5.8 million customers, so Rakuten needs to reverse that trend, and quickly. By contrast, established rival NTT Docomo has almost 85 million mobile customers.
With the free offer no longer available to entice new sign-ups, Rakuten Mobile now needs to show it can attract new paying customers each quarter, with Mikitani citing 12 million customers as a target (although a timetable for that target was not mentioned) before mentioning 15 million or 20 million during his earnings presentation. To help reach such targets, it is planning a major marketing push and will be adding additional bolt-on services: remember that the bigger picture for Rakuten is to build a market presence in multiple digital services sectors and have customers from each sector using other Rakuten Group services – the company isn’t just building a mobile business for the sake of being a mobile operator – see this previous article for further details.
In many ways, Rakuten’s challenge is much the same as that of another high-profile greenfield mobile operator, Dish Network in the US. It has now launched its 5G service and has splashed billions of dollars on building out a public cloud-based, Open RAN-enabled network, but that will all be for nothing unless it can attract paying customers. At the end of the day, that’s the metric that really counts and that drives recurring revenues.
Dish, of course, is also in the mobile game for the long-haul and it is still very early days for the US 5G entrant, as it is for Rakuten, which has long stressed the attractive economics associated with its unique, software-oriented network, built using technology now on offer to other operators too via the Rakuten Symphony division.
Symphony has been expanding rapidly in an effort to attract business from other network operators around the world. To date, its only major commercial engagement outside Japan is in Germany, where it is building and will run 1&1’s greenfield, Open RAN-based 5G network.
But according to Mikitani, there is plenty of interest in what Symphony, which made a lot of noise during this year’s MWC event in Barcelona, has to offer. He noted that Symphony has 13 customers (including Rakuten Mobile and 1&1) but has a “pipeline” of 115 interested companies. It also has a staff of 3,500 employees and offices in eight countries: Japan, the US, the UK, Germany, France, India, the United Arab Emirates (UAE) and Singapore.
While that pipeline could come to nothing, it’s likely to deliver something, but quite what is anyone’s guess, because while Germany’s 1&1 has gone all in with Symphony, handing over the planning, build and operation of the network to the Rakuten division, many others are likely to just use a small part of the Symphony portfolio. In that respect, AT&T is an existing example, as it is using Symphony’s mobile network planning tool, as announced earlier this year.
Rakuten Mobile will be of ongoing interest to the whole communications industry (and the business world at large), such is the magnitude of the gamble and the nature of its operational model, and it will be fascinating to see how this new-age operator develops not only as an alternative competitor to NTT Docomo, KDDI and SoftBank in Japan but as the operator of a network that, it claims, will cost 40% less to build and 30% less to run than traditional mobile networks.
The validity of such cost claims will take years to quantify and qualify: the more meaningful statistics in the short term will be how many customers Rakuten Mobile has at the end of the third and fourth quarters of 2022.
– Ray Le Maistre, Editorial Director, TelecomTV