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The vision for what is possible can be clear as day. The path to achieve it is never quite as obvious.
When Rakuten Mobile launched the world’s first fully cloud-native, software-based mobile network service in a developed, highly competitive market in Japan, and a plan for upending traditional telecom economics, few outside the company saw the opportunity.
Five years later since the mobile service went live, Rakuten Group has just reported its first operating profit, buoyed by 30% year-on-year revenue growth from Rakuten Mobile.
Rakuten Mobile subscribers are also actively contributing to the growth of the Rakuten Ecosystem. Mobile subscribers drive an almost additional 50% gross transaction volume on Japan’s leading online marketplace, Rakuten Ichiba, 27% on Rakuten Card, Japan’s most popular credit card, and 14% on Japan’s top online travel portal, Rakuten Travel, compared to non-subscribers. This performance and a subscriber base that has just passed eight million members are the ultimate validation of a business vision once thought impossible.
Sharad Sriwastawa, co-CEO of Rakuten Mobile and President of Rakuten Symphony, joins us for our final issue of the year to discuss top takeaways from the journey.
In 2018, Rakuten Group CEO Mickey Mikitani announced at MWC Barcelona his vision to enter telecom as an internet services company with the aim of fully integrating telecom into the online value system—a feat not previously achieved. We became known as the telecom industry pioneers of cloud-native, software based, open RAN and autonomous network operations, but our focus was simply to deploy the right technology to achieve topline business growth.
As industry pioneers, there were early struggles, setbacks and unforeseen challenges, but realizing Mikitani’s vision has resulted in:
This is a story about the power of ecosystem and the creation of a radically different telecom operational and efficiency model, and how Rakuten Mobile and Rakuten Symphony can help other telecom operators do the same.
Reinventing telecom’s traditional topline from the bottom up
It was never just about the technology.
Building the world’s flagship modern network and de facto proving ground for next-generation telecom solutions at scale would have been an empty achievement if it didn’t also help us reinvent telecom’s economic models, cost structures, business efficiencies and customer acquisition methods.
By enhancing network operational efficiency, automating processes and building a scalable network architecture, Rakuten Mobile has transformed the cost structures that have traditionally burdened telecom operators.
Today, our applications run on a horizontal telco cloud-native platform built from the ground up with automation, AI and ML. Security has remained a top priority, even as we kept our interfaces open. We now have over 61,000 4G and close to 17,500 5G outdoor base stations across Japan’s 47 prefectures. Distributed units (DUs) are deployed in more than 1,900 edge data centers, handling over 350 terabytes of daily data traffic, including CDIA data, billing records, geolocation data, application data and more. This data is crucial for analytics, prediction and proactive network management.
Our fully autonomous network operations comprise anomaly detection and self-healing mechanisms across the RAN and core networks. Recently, we’ve focused on optimizing operations like content generation, ad timing and personalized offer management. We also implemented churn prediction algorithms, supporting customer engagement and retention as our 1.09% adjusted MNO churn rate continues to decrease.
The efficiencies we’ve achieved are the lifeblood of our overwhelmingly positive contributions to the Rakuten Ecosystem in Japan.
Rakuten Mobile can attract new mobile subscribers within the existing Rakuten ecosystem of more than 70 internet services, at little marginal acquisition cost, creating a sticky customer base that benefits from using multiple Rakuten services. Data-sharing within the ecosystem boosts value for Rakuten Mobile and adjacent services, strengthening customer loyalty and lifetime value.
Rakuten Mobile's initial subscriber growth rate was comparatively faster than even T-Mobile's growth after launching its "Uncarrier" program.
Delivering a differentiated customer experience in a “sticky” ecosystem
In Q3 2024, Rakuten Mobile drove 40% of Q3 Rakuten Group’s 9.3% YoY revenue increase, boosting growth across the company. This is the direct result of an ecosystem-based approach that put connectivity at the heart of the broader Rakuten ecosystem of internet services.
Membership becomes sticky as benefits stack for the consumer across the ecosystem, where new members are motivated to use other services like Rakuten Ichiba, Rakuten Card and Rakuten Bank, among others.
Let’s break down some of the key data points:
The power of personalization and its impact on efficiency
High volumes of cross-usage across the Rakuten Ecosystem completely changes the game when it comes to understanding our customers and what drives usage of our services.
Select data we collect across our services feeds into Rakuten’s analytics platforms to power a personalized customer experience, optimize service offerings and drive further ecosystem value. As our subscriber base grows, this becomes a major competitive advantage.
As an example, we recently launched Rakuten Link AI, available for free to Rakuten Mobile subscribers through its native ecosystem communications services app, Rakuten Link. This AI chat service is available for free without any sign-up requirements to help our customers create, synthesize and explore across the entire Rakuten ecosystem.
The data and technologies powering topline growth also power efficiency and optimization that allows Rakuten Mobile to operate on a lower cost base versus traditional approaches.
Looking deeper into the network, AI-driven solutions are helping to increase Rakuten Mobile’s operational efficiency as customer support costs per user are projected to drop by 31% with AI tools by December 2025. We’ve also seen "Triple 20" efficiency gains with marketing, operational and client productivity targets all contributing to major cost reductions.
Beyond AI, our shift to cloud-native functions (CNFs), success deploying open RAN at scale and transition to Rakuten’s own cloud have also contributed greatly to reduced costs and increased scalability.
Top takeaways for every telco
From the beginning, our focus was always on enhancing Rakuten’s own capabilities while simultaneously developing the tools and approaches that make it possible for other operators to do the same.
We see an opportunity for every traditional telecom operator to put connectivity at the heart of an ecosystem-based approach by:
In the end, it comes down to subscriber acquisition cost, churn and monthly EBIDTA profitability. We are now laser-focused on these economics to maximize the value of our mobile network and its role in the expanding use growth for Rakuten’s ecosystem services in Japan.
As we look to 10 million subscribers and beyond, we believe we can help the global telecom community do the same.
This article marks our final Zero-Touch Telecom issue of 2024. We'll be on a brief hiatus for the holidays but looking forward to bringing you the latest on the business and tech realities of automation and AI deployments in the new year. Happy holidays to all from the Zero-Touch Telecom team!
