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Japan-Update

Rakuten's mobile phone game plan involves tie-up with Docomo

E-tailer looks to develop network with limited investment

Rakuten aims to form its own cellular network on top of the company's existing virtual network services, run on equipment rented from NTT Docomo.

TOKYO -- Rakuten is counting on its partnership with NTT Docomo to help roll out its mobile phone carrier business as it works toward submitting its application for the allocation of a mobile-phone frequency later this month.

Docomo, SoftBank Group and KDDI hold an effective lock on Japanese mobile services. But Rakuten aims to apply by the Feb. 26 deadline for a share of bandwidth being opened by the communications ministry.

The ministry will decide how to allocate the new slice of the spectrum following a radio regulatory council meeting at the end of next month. New market entrants likely will get extra points on their applications, a ministry spokesperson said. Rakuten is devising a business blueprint that satisfies the requirements, such as covering 80% of Japan by area in eight years.

Rakuten has said it plans to procure up to 600 billion yen ($5.5 billion) by 2025 for deploying base stations and the like. But the leading trio of providers each invests about that sum in equipment annually. This has sparked concern in some corners that the e-tailer's funding plans are not sufficient for building a nationwide antenna network on its own.

But Rakuten seeks to keep investment to a minimum in order to turn a profit from cellular operations as quickly as possible. For that reason, the company aims to start by building its base stations in metropolitan regions, then gradually expand its coverage area. This means the company also intends to maintain its tie-up with Docomo, which has allowed Rakuten to operate its existing mobile virtual network service on the telecom carrier's infrastructure.

Rakuten will enter talks soon with Docomo on a roaming arrangement, which would let Rakuten users connect via Docomo's network in areas where the e-tailer has yet to establish its own infrastructure. Though nothing is decided, Docomo "intends to negotiate in earnest if approached about a roaming deal," President Kazuhiro Yoshizawa said.

Docomo, for its part, wants to wean its income structure away from relying on domestic cellular operations by reinforcing video streaming, payment settlement and other services derived from mobile phones. The company also is hurrying to link with cross-industry partners on technologies such as next-generation wireless networks, known as 5G, and artificial intelligence.

Other major providers are pushing low-cost cellular services. SoftBank last month struck a capital and business alliance with the mobile virtual network operator arm of compatriot Line, known for its popular chat app of the same name. KDDI, which runs mobile services under its "au" brand, has gone on the offensive with low-cost, in-group offerings. With Docomo's net growth in cellular subscribers faltering, a Rakuten partnership may help broaden its revenue base down the line.

Rakuten draws strength from a wide membership base in its core online shopping business, which could let the company make a splash in low-cost smartphone service through tactics such as incorporating its point reward system.

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