Japan's Rakuten Mobile Making Gains With Open RAN

3/30/2024 5:05:40 AM

(MENAFN- Asia Times) Rakuten Mobile, Japan's upstart mobile Telecom Network operator, sees light at the end of the financial tunnel as subscriber growth heads toward breakeven on an operating cash flow basis in 2024.

Breakeven will be a milestone for the Open RAN (Radio Access Network) standard that allows for various companies to supply different parts of a telecommunications network.

Open RAN gives telecom service providers more flexibility and independence from large suppliers of complete proprietary systems such as China's Huawei, Sweden's Ericsson and Finland's Nokia, and smaller national champions like South Korea's Samsung and Japan's NEC and Fujitsu.

US telecom software company Mavenir calculates that a cloud-based Open RAN network can deliver a 37% reduction in deployment and operational costs over five years compared with proprietary architectures.

This comes amid accusations that Open RAN is being co-opted by the dominant telecom equipment makers, particularly Ericsson, and its open promotion as a“Huawei killer” in Washington, DC. But for Rakuten and other Open RAN corporate proponents, it is a matter of establishing the technology as a commercially viable business.

Exclusively dedicated to Open RAN, Rakuten Mobile had nearly 6.5 million subscribers at the end of December 2023. If the growth rate reported so far in 2024 is maintained, the company should hit its target of 8-10 million subscribers by year's end.

That lags Japanese market leaders NTT Docomo, KDDI (au) and Softbank, which had 89.2 million, 66.9 million and 40.1 million subscribers respectively at the end of 2023. But it does show that the low-cost Open RAN business model combined with discount pricing can give customers better deals.

Cheaper mobile phone service was, in fact, the intent of then-prime minister Yoshihide Suga's government back in 2018, when the leader said“We want competition to accelerate and the three companies' market domination needs to be eliminated.”

Latest stories

How China's Volt Typhoon hackers target US infrastructure

India heads to the polls as a much lesser democracy

Rickover's and airmail pilots' disaster avoidance method

Rakuten Mobile was founded in January 2018 and received a license to build and operate a fourth generation (4G) mobile telecom network a year later. In September 2020, it launched its 5G service. By February 2022, it had extended its coverage to 96% of Japan's population. Now it covers almost 100% of the population and 99% of the nation's territory.

Service plans vary but most comparisons show Rakuten to be considerably cheaper than Japan's big three carriers after they cut their fees in response to Rakuten and as cheap or cheaper than discount shops UQ mobile Y!mobile, J:COM and BIGLOBE.

For the most part, Rakuten has also matched the others in quality. Telecom technology and market research company Opensignal ranks Rakuten Mobile the top carrier in Japan in 5G download and upload speeds, and second in consistent quality and live video experience trailing only Softbank and ahead of both NTT Docomo and KDDI.

Rakuten Mobile is the pet project of Hiroshi Mikitani, founder and CEO of Japanese e-commerce company Rakuten. He has made a long-term commitment and endured losses that most CEOs would not tolerate.

On a consolidated basis, Rakuten has recorded cumulative net losses of 993.5 billion yen (US$6.6 billion) over the past five years and is headed for more red ink in 2024.

Investors fell out of love with the stock, which dropped by about 70% from March 2021 to June 2023. However, it has since made up more than a third of that loss as Rakuten Mobile's operating losses have declined. Mobile telecom is one of Rakuten's three main product divisions, the others being online shopping and finance.

Rakuten Mobile's operating cash flow (operating profit plus depreciation and amortization) has improved from negative 70.6 billion yen in the fourth quarter of 2022 to negative 29.5 billion yen in the fourth quarter of 2023. In the estimation of management, it should drop to zero by the end of this year and turn positive in 2025.

Rakuten Mobile's domestic network has been largely completed and capital spending is dropping while quarterly data shows the number of subscribers rising at an accelerating pace in 2023. But even if the company hits management's targets, it is likely to be a drag on Rakuten's consolidated profitability for another two years.

In March 2020, Rakuten Mobile and NEC, Japan's top maker of telecommunications equipment, announced that production of jointly developed 5G radio units had begun at NEC's factory in Fukushima. As NEC pointed out at the time, the radio units conform to open architecture standards, are equipped with compact lightweight antennas and do not consume much electric power.

This was followed by the construction of 5G base stations for Rakuten Mobile's fully virtualized cloud computing-based Open RAN mobile network. Mavenir, the US company that claims to be the only end-to-end cloud-native network software provider for telecom service providers, contributed its newest voice and messaging technology.

American software company Red Hat explains that“Virtualized radio access networks (vRANs) are a way for telecommunications operators to run their baseband functions as software. One of the primary benefits... is that RAN functions no longer require special proprietary hardware to run, and can instead be run on standard servers.”

ACG Research estimates
that virtual RAN operated via cloud computing can reduce network operators' total cost of ownership by 44%. Rakuten Mobile itself says its network costs 40% less to build and 30% less to operate than some single-vendor proprietary mobile networks.

Several other equipment suppliers and software developers also contribute to Rakuten Mobile's Open RAN. At the top of the list, Airspan of the US provides Rakuten Mobile with its vRAN (virtualized radio access networks) hardware and software platform and collaborates in joint marketing of the Rakuten communications platform.

The Daily ReportStart your day right with Asia Times' top stories
AT Weekly ReportA weekly roundup of Asia Times' most-read stories

Korea Microwave (KMW) and Taiwan's Microelectronics Technology Inc (MTI) provide radio units. South Korea's Qucell and Taiwan's Sercomm provide small cell technology. Small cells are miniature radio access points that improve cellular network coverage in densely populated cities and other areas where usage is high.

Ireland-based Prose Technologies supplies and supports radio units, distributed antenna systems and other components. Druid Software, also based in Ireland, has deployed its private cellular network software on Rakuten's cloud platform, which is based on Intel technology.

Supermicro, based in San Jose, provides servers and works with Rakuten on the deployment of automated cloud-native network solutions. Dell, Google, Nokia, and Tata Communications of India also collaborate with Rakuten Mobile.

In August 2021, Rakuten and German telecom service provider 1&1 formed a partnership to build Europe's first virtualized Open RAN mobile network. In December 2023, 1&1 began operations with a core network from Mavenir, Rakuten responsible for end-to-end integration of the network and participation of some 80 other vendors.

Wherever the 1&1 network is not yet complete, coverage is provided by nationwide roaming on the Telefonica network. Starting this summer, roaming will also be available on the Vodafone network.

There have been great hopes for Open RAN but also grave doubts about its viability – and about the survival of Rakuten Mobile. But after several years of effort and great expense, it is gradually taking market share in Japan and making inroads in Europe. And if Rakuten or 1&1 do eventually fail, their operations will probably be taken over by larger telecom carriers.

Follow this writer on
X: @ScottFo83517667

MENAFN30032024000159011032ID1108038774

Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.