Tuesday, March 6, 2018

Rakuten Applies for Spectrum License

Japanese e-commerce giant Rakuten has applied to Japan’s Communications Ministry for mobile spectrum. Rakuten plans to launch service in 2019 as the country’s fourth mobile operator, according to a news report. Rakuten intends to acquire 15 million mobile customers over the next 10 years. Japan currently has three established mobile operators—NTT Docomo, KDDI and SoftBank.

The Rakuten Mobile Network was set up in January 2018. The company plans to invest JPY 600 billion (US $5.61 billion) in infrastructure and deployment of mobile base stations. The ministry is expected to review Rakuten’s business plan next month. The company, which currently leases licensed spectrum from other operators as an MVNO, determined that having its own mobile network would be more economical than paying connection fees to another operator if its customer base expands. Rakuten says that it plans to offer mobile plans bundled with other services, such as online shopping points.

Rakuten, with around 1 billion members, is one of the largest e-commerce entities in the world, and while it is often called “the Amazon of Japan,” it operates in 29 countries and has been acquiring e-commerce companies in many of them. Mobile operators have lately been fearing challenges from non-MNO internet businesses such as Google, Facebook, and Amazon that aim to offer mobile services within the OTT context. This move by Rakuten is interesting, we think, because it appears to represent a “join them” rather than a “beat them” approach from an internet giant.

Rakuten intends to invest in a network of its own and thereby become a conventional MNO, having already gotten its feet wet by launching MVNO service in Japan. While we can not say at this point whether its application for spectrum will be successful and result in its becoming Japan’s fourth MNO, if it does, it will certainly represent a victory for the traditional model of mobile service. For a merchant to start its own MVNO targeted at its existing customer base is a time-honored model of synergistic expansion. Going beyond that to become an MNO is a path only open to very large companies such as Rakuten; that it would choose to do so says a lot about the perceived vitality of the mobile-operator concept. And if the plan goes ahead, a glance at the history of Rakuten indicates that the company will eventually set its sights beyond Japan and try to become a multinational MNO.

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