Rakuten Mobile Struggles to Achieve Financial Stability Amidst Industry Competition

Rakuten, the e-commerce and fintech giant from Japan, ventured into the mobile service network in 2020, aiming to disrupt the country’s telecom market. However, while the move shook the industry, it also severely impacted Rakuten’s financial standing, Reuters news report said.
The mobile network, envisioned as a cost-efficient infrastructure, faced challenges. Spiraling infrastructure costs and a rushed rollout led to spotty coverage, tarnishing Rakuten’s reputation and resulting in 13 consecutive quarters of operating losses amounting to approximately $5.5 billion. The looming $5.4 billion debt due within the next two years exacerbates the situation.

Amidst these financial struggles, Rakuten aims to break even in its mobile unit by 2024, a challenging task necessitating significant jumps in subscriber numbers and average revenue per user (ARPU). Competitors are intensifying the battle with competitive pricing and reward campaigns, adding pressure on Rakuten’s targets.

To alleviate its financial strain, Rakuten plans to refinance its debt and explore equity-related financing while striving to boost its mobile subscriber base and ARPU. However, analysts warn that any misstep could pose substantial risks, especially in a recession or tightening credit markets.

Rakuten remains optimistic about achieving its 2024 goals, citing recent subscriber growth, yet acknowledging the demanding path to profitability.

Despite the setbacks in its mobile venture, Rakuten’s other businesses, such as its e-commerce and financial services, continue to thrive. To bolster its finances, Rakuten has undertaken measures like issuing new shares, selling stakes in subsidiaries, and offloading assets, generating significant funds.

Analysts anticipate Rakuten’s potential listing of Rakuten Card, a pivotal unit within its ecosystem that leverages a points and payments system to attract and retain customers.

Despite its impact on reducing subscriber fees in Japan’s telecom industry, Rakuten Mobile holds only about 2.5 percent market share, far from its break-even scenario that requires substantial subscriber and ARPU increases.

Rivals like NTT Docomo and SoftBank have intensified competition with low-fee plans and lucrative reward campaigns, intensifying the challenge for Rakuten.

With financial pressures mounting, Rakuten faces the dilemma of limited strategic options. Its mobile unit’s lack of profitability makes it unattractive to potential suitors, and winding it down poses significant financial implications.

As the company navigates these challenges, Rakuten’s approach to marketing and innovation becomes pivotal in capturing customer attention and steering its mobile venture towards stability.