Rakuten Mobile’s entrance into the highly penetrated Japanese telecommunications market using a fully virtualized cloud-native network architecture to power its 4G LTE and 5G service is having a significant financial hit on its parent company’s overall operations, but that is not stopping the mobile unit from spending even more money to bolster its long-term telecom plans.

Rakuten reported that its mobile division generated $366.4 million in revenues during the first quarter of 2020, which was nearly 55% more than it reported for the same quarter in 2019. That number is expected to significantly grow over the coming quarters as the carrier did not officially launch its mobile service until the quarter ended. Rakuten’s mobile operations also accounted for just over 8% of the company’s overall revenues in the latest quarter compared to more than 11% during the first quarter of 2019.

Highlighting the cost differential in deploying a service before it launches, mobile segment losses more than quadrupled year over year to $297.3 million, accounting for most of the parent company’s overall loss for the quarter.

The carrier did note that it had more than 4,700 cell sites operational at the end of the quarter, which was nearly 40% ahead of expectations, and that it had signed contracts on another 4,555 sites. It also aims to have 70% of Japan’s population covered by the end of Q1 2021.

Those deployment plans are going to run up against an established legacy pool of operators that have already launched 5G services in some urban areas and have plans for near-nationwide coverage over the next two years.

Rakuten Mobile’s financial picture is expected to remain in the red for the foreseeable future as it continues to invest in its network and grow its customer base. It noted that its initial aggressive pricing structure designed to lure customers will limit revenues “during the fiscal year under review,” and that with the ongoing deployment “we can expect an increase in operating expenses including depreciation.”

The carrier did paint a dire picture of the impact the ongoing COVID-19 pandemic is having on the Japanese economy.

“The world economy during the [quarter] has rapidly deteriorated and is in an extremely difficult situation due to the impact of COVID-19,” the carrier noted as part of its earnings release. “The Japanese economy also saw a rapid drop in corporate revenues and profits due to the decline in economic activity caused by the impact of COVID-19, and it will be necessary to maintain a close watch on the risk of the infection causing a further downturn in the domestic and international economy.”

Tariq Amin, group EVP and chief architecture officer at Rakuten Mobile, recently told SDxCentral that it was not seeing any material impact from the COVID-19 pandemic and remained on track to launch 5G services next month.

“In general, we are not seeing any side effects of the epidemic,” Amin said of Rakuten's 5G deployment plans. “I also don’t see an impact on our 5G construction. We might be slowed down on the number of base stations that we are able to construct, but I don’t think it’s going to be materialistic.”

The company might encounter a delay up to two weeks on software, but the hardware is built and ready to deploy, Amin said. That 5G hardware, which was designed and manufactured in partnership with NEC and Intel in Japan, includes radios for sub-6 GHz and millimeter-wave (mmWave) spectrum.

Rakuten also announced that it planned to acquire Virginia-based Innoeye, which has been providing the operator with a converged operating support system (OSS) platform for its 4G LTE and 5G network. Amin had previously stated that the carrier was having more challenges than anticipated in getting OSS and business support systems (BSS) in place for its network architecture.

Financial terms of the deal were not announced, but it follows a similar move by the operator last year when it gained a controlling interest in open radio access network (open RAN) supplier Altiostar.

The Innoeye platform will also be integrated into Rakuten’s Communications Platform, which the carrier is putting together as a sort of pre-packaged set of platforms that other operators can use to deploy a fully virtualized cloud-native network architecture.

That platform will include a “cluster” component targeted at edge and central computing hardware; a “functions” component for 5G vRAN and core network functions operating in cloud-native environment; an “automator” component that is the OSS/BSS part that Innoeye will be joining to provide network and customer lifecycle management; a “concierge” component for dealing with backend services; and a “marketplace” that will act as an app store for accessing and updating services from multiple vendors.

“Since we first envisioned the launch of Rakuten Mobile two years ago, we have also planned to bring to market our own expertise and technology stack as a unique service that will enable operators around the world to deploy fully cloud-native telco networks of the future,” Amin said in a statement tied to the Innoeye purchase. “With the planned acquisition of Innoeye, we are one step closer to closing the circle in bringing to market a carrier-grade telco cloud product that is as simple as click, purchase, and deploy.”