E-commerce giant Rakuten Inc. on Thursday said it aims to become Japan’s fourth mobile carrier in a move that threatens to disrupt the cellular phone market oligopoly.
In a statement, the company headed by billionaire entrepreneur Hiroshi Mikitani said it will be applying to the Internal Affairs and Communications Ministry for an allocation of wireless spectrum in January at the earliest.
If accepted, it plans to procure as much as ¥600 billion to invest in base stations and will aim to acquire at least 15 million subscribers.
Rakuten, which has already entered the domestic market as a mobile virtual network operator (MVNO)— which rents space from mobile networks to offer discount rates — said a successful launch will give it a new growth engine and allow it to become “one of the few companies in the world that can provide a comprehensive package of services in e-commerce, fintech (financial technology), digital content, and mobile communications.”
The move is bound to create waves in a wireless carrier market that has been dominated by three telecommunications giants — NTT Docomo Inc., KDDI Corp. and technology mogul Masayoshi Son’s SoftBank Group Corp.
Analysts, however, voiced skepticism over whether Rakuten will be able to penetrate such a highly competitive and saturated market, and said the key would be finding a way to differentiate itself from the existing providers. Plans offered by the three companies have become identical after years of fierce price wars.
“The share of subscriptions among the big three hasn’t changed much over the years. Look at SoftBank — it used to be the challenger, being the latest to enter the market, but even a maverick like Mr. Son hasn’t been able to beat the existing two players,” said Hitoshi Sato, senior analyst at InfoCom Research.
According to the Telecommunications Carriers Association, as of September, NTT Docomo had 75.11 million subscribers, followed by KDDI’s 49.1 million and SoftBank’s 38.9 million. With the population graying and shrinking, Rakuten will likely have to pry subscribers from existing players to reach its target of 15 million, a process that could require substantial financial resources.
Sato, however, said Rakuten’s edge may be its strong brand recognition and a business model that revolves around a point-based membership program that encourages people to use its myriad services, which range from travel booking and food delivery to credit cards.
“Rakuten is a household name in Japan, and in that sense the move could have its merits,” he said.
Rakuten, founded by Mikitani in 1997, has been expanding its global business through acquisitions of e-commerce sites like Ebates Inc. and messaging app Viber, and by investing in ride-hailing service Lyft.
In Japan this year, it announced a plan to enter Airbnb-like home-rental services and has been teaming up with major players including Booking.com.
It’s domestic MVNO service, called Rakuten Mobile, has 1.4 million subscribers.
Rakuten plans to apply for frequencies used by the fourth-generation communications system known as 4G (the 1.7 GHz and 3.4 GHz bands), part of which is expected to be opened to private-sector businesses in the near future.
“In Japan, the proportion of household spending taken up by telecommunications expenses is rising each year, and reducing the financial burden on consumers of mobile phones and other communications expenses is often cited as a major social issue,” Rakuten said in its statement released also on Thursday.
The Rakuten group “will be ideally positioned to provide affordable and easy-to-use mobile communications services, as well as maximize the benefits to consumers and society as a whole,” the company claimed.
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.