In major shift, Rakuten plots to become Japan’s No. 4 wireless carrier

TOKYO (Reuters) – Japanese e-commerce firm Rakuten Inc said it would apply for a 4G mobile license, aiming to become the country’s fourth major wireless carrier in a strategic shift that had analysts warning of an uphill battle to gain customers.

The logo of Rakuten Mobile is seen at its branch in Tokyo, Japan December 14, 2017. REUTERS/Kim Kyung-Hoon

Rakuten, which operates one of Japan’s most popular shopping websites, said it hoped to gain a new engine of growth, adding that having a mobile license would complement its e-commerce, streaming and fintech services such as online securities trading.

“There is no doubt that mobile devices are the most important user touchpoint for the expansion of existing services and new service development,” it said in a statement.

Rakuten said it aims to start offering mobile services in 2019 and wants to secure at least 15 million subscribers.

That would be a major jump up from the roughly 1.4 million customers it has through its mobile virtual network service where it rents network space from companies holding licenses.

A man uses a mobile phone in front of a Rakuten Mobile branch in Tokyo, Japan December 14, 2017. REUTERS/Kim Kyung-Hoon

The auction for 4G wireless spectrum is due to be held in January, with results expected by end-March.

Rakuten, worth some $13.9 billion by market value, said it was preparing to raise as much as 600 billion yen ($5.3 billion) by 2025 via interest-bearing debt such as bank borrowing to fund the move.

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But analysts were skeptical about its prospects.

“I don’t like their chances – the market is pretty much fully penetrated,” said Dan Baker, an analyst at Morningstar in Hong Kong. “It would have to fund the network build-out and customer acquisition, and then its operating losses until it could get enough customers.”

Shares in Rakuten slid to be down 4.7 percent in afternoon trade by those of Japan’s biggest carriers NTT Docomo Inc, KDDI Corp and SoftBank Group all lost more than 2 percent on the prospect of more competition.

“It won’t be positive for any of the operators. SoftBank could be worst impacted – as the newest player, its customers could be most likely to switch over,” said Baker.

Reporting Thomas Wilson; Editing by Edwina Gibbs

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