Losses are compounding at Rakuten Mobile, and the operator doesn’t expect to turn a profit until 2023. But it's also eyeing a bigger piece of a much larger pie. 

Rakuten founder and CEO Hiroshi Mikitani describes the company’s mobile strategy as a triangle. “We are trying to get three birds with one stone,” he said during the company’s second-quarter 2021 earnings presentation. 

The standalone mobile network in Japan is the first of three vertices for the e-commerce giant.

Improving the lifetime value of existing Rakuten customers and acquiring new customers through mobile service is also underway, but the third angle, an expansion of the Rakuten Communications Platform (RCP), presents the greatest opportunity, according to Mikitani.

“In five to 10 years, it is possible that we will see RCP’s revenue and profit outpace our other businesses,” he said, adding that the total addressable market could be as high as $150 billion in 2025. Rakuten reported $13.2 billion in revenue in 2020. 

Rakuten last week announced a series of deals to bolster this effort, including its $1 billion acquisition of Altiostar, an agreement with Germany’s greenfield operator 1&1 Drillisch to design and deploy its 5G open radio access network (RAN), and the formation of Rakuten Symphony, a new umbrella company housing RCP and Rakuten’s various open RAN technology assets and services.

Rakuten Mobile CTO Tareq Amin described Symphony as the second phase of the company’s mobile journey. “It is our aim to create the world’s largest cloud native telco platform provider,” he said. 

“Rakuten Symphony will enable cloud transformation with global industrialized delivery,” Amin said, claiming that Rakuten Mobile engineers “learn faster than anyone else in the industry” because Rakuten Mobile’s network serves as a “living lab” where improvements are made every day. 

Rakuten Mobile currently introduces up to 15 new network features per month, he said. “We write five automation scripts per day. We have over 2,000 software developers writing all our experiences into code, and we are training 1,500 people in cloud and new technology on a weekly basis.”

Rakuten Symphony targets specialized telco opportunities in unified cloud, network functions, intelligent operations, digital experiences, and the expansive services available from Rakuten Group. The business unit “will define the telco landscape with its unique approach, broad consolidated application portfolio,” flexible integration, transparent pricing on products, and automation, Amin said. 

He described the agreement with 1&1 Drillisch, RCP’s first public customer, as a multi-year contract, but added Rakuten is also in “advanced talks” with 27 prospective customers in the U.S., 22 in the Asia-Pacific region, 19 in Europe, 11 in the Middle East and Africa, and five in Russia. 

Mikitani, during a pre-recorded interview broadcast during the earnings presentation, said Rakuten’s early commitment to open RAN is now gaining traction globally. “Transition to the cloud is now a hot topic, but this is still mainly happening with the network core, while the final outpost of base stations is still largely dependent on hardware,” he said, adding that base stations and radios still represent the largest costs for mobile network operators. 

“Finding ways to automate and reduce investment required for the base stations is crucial to keeping overall costs down. It is very significant that we have acquired the only company that is currently able to realize this,” Mikitani said, pointing to the Altiostar acquisition.

While Rakuten Symphony targets global telco prominence, Mikitani’s mobile network goals in Japan are just as grandiose. “We’re envisioning to become the No. 1 mobile operator in Japan,” he said, adding that lower costs and speedier development underpin that ambition. 

Rakuten Mobile reported a 17% year-over-year increase in revenue to $466 million, but operating income losses rose 85% to $415.3 million. It’s also encountering some deployment delays due the ongoing COVID-19 crisis.

“The population coverage of the Rakuten Mobile 4G network exceeded 90% as of June. Due to the shortage of semiconductors amid the pandemic, the 96% population coverage target, which we initially aimed to achieve this summer, is now expected to be achieved within this year,” Rakuten Mobile President Yoshihisa Yamada said. 

All of the base station sites required to reach that goal are under contract, he added. The company expects losses to continue through 2021 and level off a bit in 2022 before reaching profitability in 2023.