Thursday, 02 December 2021

Rakuten Mobile grabs stake in JTOWER as losses increase

by Harry Baldock, Total Telecom
Monday 18 October 21

Japan’s newest mobile operator said that the new deal will serve to lower the cost of deploying its 4G and 5G networks

Rakuten Mobile has reportedly purchased a minority share in Japanese tower infrastructure specialist JTOWER, hoping to lower their network deployment costs in the face of rising debt. The operator launched its commercial 4G services back in April 2020 and since then has expanded their network considerably, including the launch of 5G services in October the same year. However, to compete with its more established rivals…

Rakuten Mobile has reportedly purchased a minority share in Japanese tower infrastructure specialist JTOWER, hoping to lower their network deployment costs in the face of rising debt.

The operator launched its commercial 4G services back in April 2020 and since then has expanded their network considerably, including the launch of 5G services in October the same year.

However, to compete with its more established rivals, the Japanese operator’s 5G network in particular will still need significant growth. NTT Docomo has said that it aims to have around 20,000 5G base stations deployed by March 2022, with both SoftBank and KDDI aiming even higher, suggesting they will seek to deploy 50,000 base stations in the same period.

Rakuten, meanwhile, reported in March this year that they had just 1,000 5G base stations deployed, in addition to around 18,000 4G, with Rakuten’s CTO Tareq Amin suggesting that the company hoped to announce a “mass acceleration plan for 5G” by September.

But building mobile network infrastructure is not cheap and the process so far has already seen Rakuten Mobile slip into considerable debt. In the first half of 2021, the company reported losses of around $1.73 billion, up from around $780 million one year earlier. 

Naturally, the largest part of Rakuten’s losses comes from the expensive process of deploying a 4G and 5G network from scratch. There are other factors too, however, such as the enormous deal that Rakuten offered at the time of its commercial launch, giving new customers one year’s free, unlimited data plans. These plans have begun to expire as of April 2021.

By late August 2021, Rakuten had managed to attract around five million mobile subscribers, with the company estimating that they would break even when subscribers reached seven million, something they expect to reach in 2023.

Now, it is hoped that the deal with JTOWER, for an undisclosed sum, will help alleviate some of the financial pressure of the Rakuten’s network rollout.

“By utilising infrastructure sharing, it is possible to develop a network in a short period of time and at low cost compared to the case where equipment is installed by a mobile carrier alone,” explained JTOWER in an exchange filing.

JTOWER itself has been growing in recent months, having agreed to purchase 71 towers from NTT West back in July, noting that it was pursuing an M&A strategy to “carve out” additional infrastructure from the major telcos in order to provide “efficient and economical infra-sharing solutions” to the Japanese telecoms industry. 

 

Why are telcos divesting of their tower infrastructure in various markets around the world? Learn more about this trend and many others at this year’s live Total Telecom Congress

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