Rakuten made headlines yesterday with an announcement that it intends to enter into the Mobile Network Operator (MNO) business. If approved by the Ministry of Internal Affairs and Communications, the application will see the company on track to become Japan’s fourth mobile carrier, with service aimed for launch in 2019.

The move represents a bold step by Rakuten, but it is not the company’s first foray into the mobile phone business.

It was three years ago that Rakuten CEO Hiroshi “Mickey” Mikitani made a declaration: Japanese cell phone contracts – some of the most expensive in the world – needed to be more affordable. A lot more affordable. Soon after, Rakuten Mobile was launched as a mobile virtual network operator (MVNO), leasing its telecommunications infrastructure from established mobile carrier NTT DOCOMO.

Fast forward to November 2017, and Rakuten Mobile has over 1.4 million accounts – roughly ten times the figure from two years earlier – and leads the MVNO market.

The service earned significant attention from the media recently after releasing data about its performance following its acquisition of competitor Freetel, a move that expanded Rakuten Mobile’s MVNO market share to 25.9%. According to the data, not only has Rakuten Mobile’s revenue increased by a factor of 5.6 in the past two years (at a +136% average growth rate) but younger generations are becoming increasingly enthusiastic about the service, with over half of Rakuten Mobile users now in their 20s or 30s.

Playing to Rakuten’s strengths

Consumer awareness of Rakuten Mobile was high from day one, after Mikitani announced the service by boldly declaring that Rakuten would slash the cost of Japanese phone bills by two thirds. Despite competing providers releasing up to 14 times as many advertisements during the ensuing scramble for MVNO market share, Rakuten Mobile retained its position as a major player on the scene.

From day one, Rakuten Mobile has sought to differentiate itself not only from its MVNO competitors, but from the larger MNO players.

From day one, Rakuten Mobile has sought to differentiate itself not only from its MVNO competitors, but from the larger MNO players.

The Rakuten Ecosystem also played a significant role in the service’s success, enabling Rakuten Mobile to offer heavily discounted plans to Rakuten’s 90 million members in Japan, while at the same time offering unbeatable deals on popular devices during major Rakuten sales. The popular Rakuten Super Points program provided users with even more incentives: Rakuten Mobile customers could not only earn more points than usual when shopping on Rakuten Ichiba, but could also use those points in place of cash to pay their phone bills – something nearly a quarter of customers are doing.

Rakuten Mobile has also strategically expanded its presence in brick-and-mortar stores. After launching primarily as an online service, with users choosing their devices, SIM cards and contracts through the Rakuten Mobile website, it has gradually expanded its offline touchpoints, allowing users to sign up at a growing number of physical locations. The team has been able to determine areas with the greatest potential demand for a physical store by looking at where the most online applications were coming from. The tally of offline touchpoints stands currently at 181, and they account for approximately half of all new applications.

Setting a new standard of service

From day one, Rakuten Mobile has sought to differentiate itself not only from its MVNO competitors, but from the larger MNO players.

In addition to setting new benchmarks for low-cost cell service, Rakuten Mobile has set itself apart by offering a range of devices not available through other carriers and expanding its offerings to include diverse service options such as unlimited data and unlimited calls.

In another popular move, the service is also allowing customers to switch plans midway through their contracts after a certain period of time without incurring exorbitant handling fees – a common complaint heard from customers of major carriers – while also putting an end to the practice of automatically renewing multi-year contracts.

By taking advantage of Rakuten’s strengths and paying close attention to customer wishes, Rakuten Mobile has established itself as a strong alternative to the established players in Japan’s mobile carrier industry, and expectations are high for further telecommunications innovation in the near future.