• Data consumption by 4G and 5G users is enormous, says CTO
• Network rollout accelerated to get more users ‘on net’
• Confident of converting free users to paid users

Tareq Amin, the CTO of upstart alternative Japanese operator Rakuten Mobile, is nothing if not enthusiastic about the kind of mobile data experience that Rakuten’s subscribers are currently experiencing. 

“If you look at our 5G network, the consumption is going crazy – about 11.5 Gbytes per day,” he claims during a media briefing this week.

That’s a lot of data – it’s equivalent to about 350 Gbytes per month. 

To put that into perspective, Rakuten’s 4G users are consuming about 15 Gbytes per month, and the average mobile data consumption in Japan is about 5 Gbytes per month. 

Interesting numbers, then, but it’s early days for Rakuten, which means that certain factors need to be considered here: Its current 5G users will be enthusiastic early adopters; the service has only been available for about six weeks; availability of 5G connectivity is limited as the network is still being rolled out; and Rakuten hasn’t said how many 5G users it has. (See Tada! Rakuten launches ‘free’ 5G using Open RAN.)

And, of course, it’s still early days for its 4G services too, as they were only launched in April. Rakuten, in its earnings report released this week, said it ended the third quarter with 1.6 million “applications” for its services (up from 1 million at the end of Q2) and now has 587 retail shops (as of October) up and running in cities across Japan. 

Also, keep in mind as well that these 1.6 million prospective users aren’t actually delivering any service revenues to Rakuten Mobile yet… the first year of service is free for the first 3 million customers to sign up (so there’s a way to go there yet), and even once they start paying for services, the fees are, by comparison, low, at just 2,980 yen ($28.41) per month, which the operator claims is about 70% cheaper than a comparative service from other Japanese operators such as NTT DOCOMO, KDDI and SoftBank (which all have many millions more customers).

In addition, much of the time, Rakuten’s current users aren’t connected to Rakuten’s own mobile network infrastructure (though it should be noted that the numbers quoted by Amin on data consumption relate to data mostly consumed ‘on net’). That’s because while Rakuten continues to build out its network, its users are roaming onto the partner network of KDDI and while that’s necessary for now, it’s not good for Rakuten because the users get a much poorer experience (much slower connectivity) and it costs Rakuten a lot of money in roaming charges.

Conscious of this, and particularly of the costs, Rakuten has accelerated its network rollout program: It says its virtualized 4G network is being built out quicker than previously planned, with the monthly base station development rate set to rise from 750 in June to 1,500 by December, and that it’s on course to achieve 96% population coverage with its 4G service by the summer of next year, five years ahead of the original schedule.  

That will help with its operating costs, noted Amin, who noted that heavy network investments will continue for a while yet.

“For the next three quarters we will continue to invest… if we compare the cost of roaming, and how much we pay for roaming, an acceleration of the build plan by five years has a significant return on investment to Rakuten, so we need to do whatever it takes to really accelerate the build and provide ubiquitous national coverage. We think that's extremely important for success,” stated the CTO.

And then what? Once the free service period is over, will customers stick with Rakuten and help drive the company towards growing revenues and profitability?

“The way we look at this now is that we are so focused around key customer metrics, so we look at NPS quite a bit, because NPS score gives us a clear indication. Once this free offer is over, what is the likelihood of customers staying? We feel super confident that the conversion between free to paid will be successful. The burden is on to prove we have a stable network. We have great coverage outside, inside, in airports,” he noted.

“This is the start of the profitability journey, but we have to focus on the build plan first, as we think this is critical for success,” he added. 

So what happens when Rakuten’s user numbers ramp up? Will Rakuten’s virtualized network architecture and cloud-based service management systems be able to cope?

This is where Amin gets really excited. 

“Many people in the industry call me enthusiast about Open RAN, I'm actually more of a fanatic about cloud networks… my approach has been, let's build a highly efficient, highly reliable, highly resilient network. We have to prove that the architecture is scalable, we have to prove that it works. We have to deliver on the level of quality. That is expected by Japanese and mobile customers of Rakuten in our market, and critical is the security on the apparatus that we build… How do we control the entire ecosystem of security, including things that many people don't even think about, which is supply chain components, and the products, and the manufacturing of the materials, including the chipsets for some of the key products that we use in the network,” stated the CTO.

So Rakuten continues to build out its network with the faith that it will all be worthwhile and that the financials of the mobile division within the Rakuten group will ultimately improve, because at the moment they are not very pretty. 

Rakuten Inc., the parent company that is a major force in e-commerce and FinTech, reported a 13.2% year-on-year increase in revenues to 361.4 billion yen ($3.43 billion) for the third quarter, but significant investments in its mobile and logistics businesses resulted in an operating loss of 28.7 billion yen ($273 million).

The mobile unit, which includes not only the 4G and 5G networks but also its MVNO and Viber messaging platform operations, reported revenues of 45.7 billion yen ($434 million), up almost 48% year-on-year, but an operating loss of 57.9 billion yen ($550 million) due to network investments. (Viber, by the way, ended the quarter with 1.2 billion unique users…)

Rakuten’s journey, and the performance of its Open RAN 5G network, will be very much in the spotlight for some years to come.

- Ray Le Maistre, Editorial Director, TelecomTV