Becoming the fourth carrier: the bet on a fully virtualized network (2017)

The reckoning of a bet that joined the ecosystem to telecom

The heart of this decision was a contrarian one: that a net company earning from e-commerce and finance would take on, for itself, the most capital-hungry infrastructure of all — telecommunications. To remain an MVNO renting lines was to leave its monthly point of contact with customers forever in the grip of another company’s network; to sever that dependence, Rakuten chose the heavy fixed asset of its own base stations. Chairman and President Mikitani’s reading that a fully virtualized network could cut costs by 70 to 80 percent was the premise on which the venture’s economics rested, hinging on that single point of compressed capital spending — but the cost of building an unprecedented network and covering the whole country exceeded the initial estimates, and rebounded as more than $6.1B (¥800bn) in cumulative net losses and the burden of bond redemptions.

That the bet did not end in a swing and a miss was because, somewhere along the way, Rakuten loosened its insistence on an all-own network. Filling the indoor and underground weak spots with KDDI roaming, securing a platinum band, and thickening the financial backing through the tie-up with Mizuho — laying realistic corrections over an aggressive plan, it reached 10 million subscriber lines and EBITDA profitability in 2025. The vision of extending the ecosystem from goods to finance and on to telecommunications came at a cost that once shook the finances of the entire company, but it has, for now, made real its original aim of placing the monthly telecom contract at the centre of the ecosystem. Whether the 10 million lines that Chairman and President Mikitani called “a waypoint” will bear fruit worthy of the capital sunk into them will be answered by the ARPU and churn rate still to come.