Wednesday marks three months since Rakuten Inc. entered the mobile phone business. With a bullish strategy and aware it may lose money at first, the company has achieved a certain level of success, such as reaching more than 1 million cellular line applications as of the end of June.
However, there have been problems as well, including communication failures and sudden changes to the design of a device, leaving a mountain of issues to sort out going forward.
On June 30, Rakuten CEO Hiroshi Mikitani posted on his Twitter account: "We've exceeded 1 million lines. We will continue to update, such as by expanding our [service] areas and improving the quality of our services."
However, Rakuten is running a promotion that provides the first 3 million customers with free communications charges for one year, so even with more than 1 million lines, they are not making any income. The company has provided generous deals, such as temporarily offering its small-sized Rakuten Mini phone, which usually goes for 17,000 yen before taxes, for just 1 yen.
Advance investments in its mobile business, such as for building base stations, have piled up. Its net income for the January-March 2020 period was a negative 35.3 billion yen. Rakuten is aiming for 3 million customers by the end of the year, but Mikitani has said the break-even point is 7 million, meaning it will take some time to reach profitability.
Rakuten's biggest asset is its low price of 2,980 yen per month before taxes. However, mobile phone giants SoftBank Corp. and KDDI Corp. are introducing their own budget brands at a similar price point, which have been called "Rakuten killers" in the industry. And there are concerns that once the free trial period is over, "there will be a significant number of defectors," an analyst said.
A series of problems have also occurred.
In June, it was revealed that the Rakuten Mini design had changed in some devices without any formal procedures or explanations to consumers. By adding frequencies used in the United States and elsewhere, and eliminating frequencies for domestic use the company does not use, there are fears that some domestic users may have poor reception. This could be a violation of the Radio Law, so Rakuten submitted a report to the Internal Affairs and Communications Ministry in late June. It is possible the company could be disciplined soon.
On top of this, in May there were communication failures.
Due to the novel coronavirus pandemic, the company has been unable to make progress on testing its communication network, which is expected to delay the introduction of the 5G high-speed, high-capacity communication standard from June to September.
Rakuten is expected to help lower mobile phone charges in Japan, which have remained high due to the market being dominated by three large companies. First it needs to build a stable communication network and gain the trust of users.
Read more from The Japan News at https://japannews.yomiuri.co.jp/
