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5G networks

Japan's Rakuten and NEC to build own 5G network

Pair to establish 16,000 low-cost base stations, with overseas expansion in sight

A Rakuten Mobile store in Tokyo's Ikebukuro district: The e-commerce group is mounting a low-cost challenge to Japan's three established wireless carriers.

TOKYO -- E-commerce group Rakuten, Japan's newest wireless carrier, will partner with information technology group NEC to install roughly 16,000 low-cost fifth-generation base stations across the country over five years, the company announced on Wednesday. Nikkei had reported the deal earlier in the day.

Billionaire Hiroshi Mikitani's Rakuten chose the domestic supplier to build out its 5G network as carriers in Japan and elsewhere shun equipment made by China's Huawei Technologies.

Rakuten and NEC will seek to develop an inexpensive 5G antenna based on the concept of network virtualization, in which the functions needed to run a network rely on software provided through the internet. The goal is to reduce the need for specialized hardware, allowing existing infrastructure to be upgraded to the 5G standard more easily.

Lowering the cost of network infrastructure could accelerate the spread of faster 5G wireless communication in Japan.

The e-commerce group, whose businesses include digital marketplace Rakuten Ichiba and online brokerage Rakuten Securities, will supply the cloud technology while NEC supplies the wireless units. They aim to fully install the network by the end of fiscal 2024.

Rakuten has the lowest cost of base station installation among Japan's four top wireless carriers, an analysis of plans submitted to the communications ministry shows. The company's cost totals about 8.2 million yen ($76,000) per unit, only 10% to 20% of the level for industry leader NTT Docomo.

Rakuten will enter Japan's mobile phone market in October with 4G service and looks to debut 5G service in June 2020, touting low costs to pull customers away from Docomo, KDDI and SoftBank Corp.

Though Huawei enjoys a lead in 5G network technology, its global business has been stunted by concerns that the company poses an information security risk. In Japan, Huawei was passed over by SoftBank when Masayoshi Son's wireless carrier chose a supplier for 5G equipment.

For NEC, which has fallen out of the top ranks of the world's network equipment suppliers, the Rakuten partnership offers a chance to use its strength in producing small, lightweight units.

The world's top three base station suppliers -- Huawei, Sweden's Ericsson and Finland-based Nokia -- hold a combined market share of around 80%, according to data provider IHS Markit. NEC, Fujitsu and other Japanese suppliers total less than 5%.

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