In the run-up to Rakuten’s Q1 FY2022 financial results, Rakuten Group Chairman & CEO Mickey Mikitani sat down with AvidThink Principal Industry Analyst Roy Chua for a special interview on Rakuten’s groundbreaking efforts to transform telecom, including the major milestones for Rakuten Mobile, the keys to Rakuten Symphony’s long-term success, and more.
Below are some excerpts from the conversation (view the full video above):
Why did Rakuten decide to go into mobile?
There were two fundamental reasons. One, I’ve always been focused on maximizing the lifetime value of the customer and minimizing customer acquisition cost. We found that the biggest opportunity was in the wireless network business. We thought about how much people were paying in Japan, and how much we could bring the costs down, so that we could give money back to the consumer.
“We are achieving milestones which nobody has ever achieved.”Mickey Mikitani, Chairman and CEO, Rakuten Group
The second thing was the contribution to our ecosystem. We have seen people who join Rakuten Mobile buy approximately 70% more on our marketplace. 20% get a Rakuten Card. They can use Rakuten Points to pay for their subscription and data usage. I think there’s huge synergy between Rakuten Group services and Rakuten Mobile.
I’d also like to make one more point, which is about data. One of the surprises for me was the percentage of Japanese mobile users who play games on their mobile devices. I thought it was maybe 55-60%, but it’s 90%. We have good intelligence about the behavior and data usage of users.
What do you see as the key milestones on the horizon for Rakuten Mobile?
There are three important factors. One is coverage — consumers demand good coverage. Second, the connectivity has to be high quality, high speed. Third is the price. Some of the other providers have complicated contracts, but we wanted to make our plans simple and fair.
I am confident that we will get to 15-20 million subscribers in the future. Each household can easily save two to three thousand dollars per year by switching to Rakuten Mobile. Data usage is up 30% over last year, and as customers use more data, we are starting to sell more optional services. ARPU (average revenue per user) is going to keep increasing.
What disruption is Rakuten bringing to the global telco industry with the launch of Symphony and the Symworld Marketplace?
Together with Tareq Amin, CEO of Rakuten Symphony & Rakuten Mobile, we decided to break through the legacy of the wireless network industry with our technology. Many people in the mobile sector told me to reconsider, saying it had never been done. U.S. politicians told us it was too difficult, that it wasn’t going to happen. But we made it happen. We are achieving milestones which nobody has ever achieved: A significantly lower capital investment to build a wireless network out, and a substantially lower operating cost structure than the incumbents. This has definitely not been an easy task.
“Now, everybody sees the living evidence of our technology, which is the Rakuten Mobile service in Japan.”Mickey Mikitani
How is Rakuten Symphony progressing overall and how are you tackling the challenges of creating this ambitious startup?
Rakuten Symphony has two business models. One is software sales, and the second is end-to-end integration, like what we are doing for 1&1 AG in Germany. End-to-end integration requires allocation of many professionals to re-engineer networks, design the network, which represents a multi-billion-dollar business, and it is doing well. The software business side is comparatively hands-free and is also doing well. We have a big deal with AT&T, and we are talking with global telecom companies. Of course, we have to take it step by step, but I think it’s doing very well.
Going forward, what do you see as elements crucial to your strategy for success in the global adoption and deployment of this technology and platform?
Now, everybody sees the living evidence of our technology, which is the Rakuten Mobile service in Japan. And according to independent third-party research companies, our quality stats are pretty good, so there’s no argument about it. I think we have to prove that we can deploy with the same kind of success to other companies. We have to ensure that 1&1 AG is successful, as well as our other projects, and make sure that everybody feels comfortable with us as their partner.
Speaking of partners, you recently onboarded some very significant partners into Symworld. Can you share more details about that?
Nobody thought that this marketplace concept would work on a wireless network. We wanted to create an open marketplace so that everybody can use their service as a service , and now Nokia and other well-known companies are joining, which is a good endorsement for us as well.
“We’re going to make all the unprofitable businesses profitable and make Rakuten one of the most profitable companies in Japan.”Mickey Mikitani
Given the success you’ve had, especially around Mobile, what’s your vision for the future of Rakuten Group?
Domestically, our consumer business is very strong. Our e-commerce, banking, credit card, brokerage, travel and advertising businesses are all doing well. We came up with a new vision, called Vision 2030, which is to keep growing at the current speed — somewhere between 13% to 15% year-on-year growth in revenue. We want to achieve a 20% operating margin ratio. Currently, it’s about 13%, but if you narrow it down to only our profitable businesses, it’s about 20% already, at this moment. We’re going to make our unprofitable businesses profitable and make Rakuten one of the most profitable companies in Japan. Internationally, we have Rakuten Rewards doing very well. So is Rakuten Advertising, Rakuten TV in Europe. Rakuten Kobo and Rakuten Viber are doing great.
I have confidence that we’ll see a lot of Symphony out there in the corporate world as well.
I want to share the word-of-mouth effect that’s taking place with Rakuten Mobile. We started from zero coverage and we’re now getting up to 97% coverage. People are moving to native Rakuten Mobile coverage from using the roaming service, and I have acquaintances telling me, wow, it’s so cheap and so fast — why have I been paying such a high subscription fee? This word-of-mouth effect is going to keep taking place, and we are going to win in a big way, because after all, there are only three important points: price, coverage and speed. And we can beat our competitors in those three points.
For more highlights from the quarter and plans for future innovation and growth, as well as business-by-business breakdowns of Rakuten’s Q1 FY2022 performance, watch the video presentation here.
For details on each business segment, see the highlights press release in full here.