Rakuten Mobile dragged down Rakuten Group operating income in the third quarter 2022. The company said that due to ongoing investments in the Mobile segment, including the installation of network base stations, the Rakuten Group recorded Non-GAAP operating losses of $561.2 million in Q3 FY2022. Excluding the Mobile and Investment businesses, Non-GAAP operating income was $339.6 million, up 7.8% year over year.
Analysts at New Street Research were appalled at the Mobile Group numbers. “As part of their Q3 results Rakuten has finally given much better disclosure on their MNO entrant. Data is shockingly bad,” wrote New Street analyst Chris Hoare. He noted that the Mobile group has spent $15.8 billion on capex, and MNO service revenue was only $143.8 million in Q3.
“The company needs MNO service revenue to grow approximately 6x with no increase in costs to break even,” wrote Hoare. “Data confirms Rakuten’s issue is not that costs are too high, but revenues are too low.”
Speaking with Fierce at Mobile World Congress Americas in September, Rakuten Mobile CEO Tareq Amin said, “We have always been consistent that we will break-even in calendar year 2023. If we really break even in 2023, I think this really addresses everything. Construction is a capex investment, and 2023 we will be pretty much done with our build.”
[Fun Fact: "Rakuten" means "optimism" in Japanese.]
But Hoare is not at all convinced, writing today that based on the data from Rakuten, “It is no longer plausible to argue that the revenue ramp is sufficient to drive Mobile to breakeven.”
On the brighter side, the company reported that average revenue per user (ARPU) rose because of the termination of free service offerings and new pricing. ARPU increased 75.9% to $10.59 in Q3, compared to $6.02 in Q1.
The Mobile business also achieved cost reductions from cutting back on roaming arrangements and switching mobile users to Rakuten’s own greenfield network. It said Mobile segment losses peaked in Q1 2022. “Going forward, losses are forecast to continue to decrease,” stated Rakuten in its earnings announcement.
The total number of Rakuten Mobile MNO and MVNO subscribers was 5.18 million as of the end of September 2022.
Rakuten Mobile reached 97.9% population coverage for the Rakuten 4G network area, with the number of outdoor 4G base stations on-air reaching 50,408 as of the end of September 2022.
Rakuten Symphony
Rakuten Symphony is the company that packages and sells mobile technology, based on its learnings with Rakuten Mobile.
Amin mentioned in September that Symphony would break out its financials, moving forward. And it did provide a few metrics in this quarter’s report.
Rakuten Symphony, which launched in August 2021, reported it has 14 customers as of the end of September with orders exceeding $3.1 billion. The cumulative sales revenue from launch until Q3 FY2022 reached $315 million.