Japanese online retailer Rakuten Inc. is planning to launch a mobile network operator business, which would make the company the fourth telecom operator in the country.
The company's board has decided to apply to the Ministry of Internal Affairs and Communications for the planned additional allocation of 1.7 GHz and 3.4 GHz frequency bands for a 4G network. The application process for the wireless spectrum auction is scheduled to start from January 2018, while a decision on approval is expected to be out by end of March 2018.
If the company's application is approved, Rakuten intends to establish a new entity to manage the telecom business, which will aim to acquire at least 15 million subscribers in China. The service is expected to start in 2019.
Japan's mobile carrier market currently comprises three operators — Nippon Telegraph and Telephone Corp.'s NTT Docomo, KDDI Corp. and SoftBank Group Corp.'s SoftBank Telecom Corp. Rakuten currently offers a mobile virtual network operator, or MVNO, service, which was launched in October 2014 utilizing NTT Docomo's network.
Rakuten has a membership base of more than 1.2 billion users around the world and offers a variety of services including e-commerce, online travel reservations, credit cards, online banking, online securities, messaging applications, and payment services. In Japan, the company claims to have nearly 100 million Rakuten IDs and has issued loyalty reward points worth over ¥1 trillion.
The company believes that its existing customer base in Japan, the loyalty program and its experience as an MVNO puts it in an ideal position to offer its subscribers affordable and easy-to-use mobile communications packages, along with online shopping, streaming services, video ads and online payment methods.
Rakuten said that its entry into the existing telecom business will add competition and challenge the "coordinated oligopoly among existing operators."
Rakuten estimated an expenditure of about ¥200 billion at the start of the service in 2019 and a maximum of ¥600 billion in 2025. "We expect the amount of debt to gradually decrease thereafter. The Company and the newly established entity will be the financing entity, and the method of funding is planned to be by interest-bearing debt, such as bank borrowing," Rakuten said in a statement.
