Business / Corporate

Rakuten delays full-scale mobile phone services

Kyodo, Reuters, JIJI, Staff Report

E-commerce giant Rakuten Inc. said Friday it would postpone the launch of its own wireless telecommunications network until April, from its original planned date in October, as the firm still needs to install network base stations.

Rakuten Mobile Inc., a unit of the online shopping operator, now plans to offer a free-of-charge service to 5,000 customers in limited areas such as Tokyo and Osaka from next month before rolling out its full network service.

“We would like to accept applications for our full-scale services within this year after ensuring the stability of our network systems,” said Rakuten Chairman and CEO Hiroshi Mikitani at a news conference.

“We will offer (lower) fees to our customers, which other wireless carriers cannot,” he added.

The online shopping operator also said it would not charge cancellation fees or introduce contract terms. It will sell only SIM-free handsets to its customers from October.

The online shopping operator’s move to become Japan’s fourth mobile phone carrier that operates its own network is expected to spur competition in the domestic mobile phone market, long dominated by NTT Docomo Inc., KDDI Corp. and SoftBank Corp.

Rakuten Mobile currently offers mobile services by renting the use of DoCoMo’s and KDDI’s networks, and will gradually shift to its own mobile network from October.

The government has called on mobile carriers to lower their fees, which are relatively high compared with other countries. A revised telecommunications business law was enacted in May to encourage them to cut charges.

Rakuten has said it has radically cut the cost of building the new network by using cloud-based software and commoditized hardware, instead of proprietary wireless radios.

However, it has run into delays constructing the network’s base stations due to difficulties securing the necessary land.

The firm has been told by the communications ministry to accelerate the build-out, and now plans to complete its total of 3,432 base stations — mainly in Tokyo, Osaka and Nagoya — by the end of March next year.

Rakuten has a roaming agreement with KDDI to help fill its coverage shortfall. That reliance further impedes the path to profitability for the mobile business, said Kazunori Ito, an analyst with Morningstar.

In a note ahead of the reports on the wireless network delay, Jefferies analyst Atul Goyal said Rakuten “lacks the financial, technical, manpower resources to compete” with the big three incumbents.

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