Rakuten is Building Its Own Mobile Network

Japan’s Biggest E-Commerce Company Challenges Three Major Mobile Operators in the Country

Young businessman talk to mobile phone
Young businessman talk to mobile phone
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Japanese e-commerce giant Rakuten is often compared to Amazon but over the 20 years of its activity Rakuten has done much more than just bringing the online trade to Japan. In a way, Rakuten is a company that can do and does pretty much everything from online shopping to banking, from professional sports to travel reservation, as well as book distribution, fashion, credit cards, etc. Currently, Rakuten is valued at 1.2 trillion yen ($11 billion).

The new milestone for the company will be the launch of their own wireless network starting October 2019. This network will be built from scratch and will require nearly 200 billion yen ( $1.9 billion). The number will rise to 600 billion yen ($5.6 billion) by 2025.

In order to make it possible Rakuten has obtained permission from the government to launch the network, while Japan’s Ministry of Defense is to vacate a spectrum band for this purpose. The network will be built in several stages by gradually adding newly covered areas. The whole process should be finished by 2022 when the last prefectures will be covered by the serves, meaning that Rakuten will not make it in time for the 2020 Olympics.

Rakuten mobile network will be built from scratch and will require nearly 200 billion yen ($1,9 billion).

Nevertheless, the company is willing to take this risky move. Among the reasons analytics name an attempt by Rakuten to balance the market against the Amazon Japan and Softbank that are actively pulling large sectors of the online-market to them. The companies flow went from 1.4 billion yen in 2013 to 111.8 billion in 2014 but then declined for two years ending up at 30.7 billion yen. Rakuten’s profits fell 3.8% in 2017, while other fintech businesses had about 11% growth.

Thus, Rakuten is planning to enter the mobile market to strengthen its positions in yet another business sector and develop a new growth area. This is not the first time the company is applying such a strategy. Rakuten has a partnership with Wal-Mart for online grocery delivery services and has previously sponsored sports teams.

Rakuten mobile will meet enormous competitions from three giants of the industry: KDDI (48.5 million users), Docomo (76 million users ), and SoftBank (39 million users). The company is planning to advance in this tough environment by waging a price war against all three of them. It offers a 30% discount to the new users and at the same time connects these users to the Rakuten loyalty-point system.

The e-commerce giant aims to reach 15 million subscribers in Japan, and the vice president Yoshikisa Yamada believes that Rakuten will be able to make a profit from their new endeavor.

Today’s “otsumami” – a bite size snack:

Rakuten proves that it is possible to disrupt the well-established and rigid market that seemed unshakable. 

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Written by Viktoriya Kuzina

Likes business in Japan and helping entrepreneurs become successful.

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