Internet firm Rakuten’s shares drop as it delays mobile service launch

Published On: September 7, 2019Categories: Stocks & Shares1.8 min read

Japanese internet firm Rakuten has pushed back the commercial launch of its mobile service, leading to a 7% drop in its shares

Japanese internet firm Rakuten said on Friday it was pushing back the commercial launch of its mobile service, a setback to billionaire founder and chief executive Hiroshi Mikitani’s ambitions to shake up the country’s telecoms market.

Shares in Rakuten dropped 7% after media reports pre-empted official news of the delayed service, which is being closely watched by analysts who say the technology, if successful, could lower barriers for new entrants in other markets.

Mikitani did not give a specific revised date for the launch, which had been due to take place in October, but said it could happen before the end of the year.

Rakuten will offer free mobile services to 5,000 customers from next month, a decision made to ensure the stability of the network, Mikitani said.

Rakuten has said it has radically cut the cost of building the new network by using cloud-based software and commoditised hardware instead of proprietary wireless radios.

However, it has run into delays constructing the network’s base stations and has been told by Japan’s telecoms ministry to accelerate the build-out.

While Rakuten’s network plans were initially met with scepticism, Mikitani’s confidence helped allay some of those concerns, said Kazunori Ito, analyst at Morningstar.

Now we again understand it’s not so easy, and are going back to the original concern, he said.

Mikitani on Friday denied the push back of the launch was due to network construction delays. When the commercial service launches it will be cheaper than those of rival carriers, he said, declining to provide further details.

Rakuten last month reported an unexpected operating loss for the April-June quarter, as it invested heavily in the wireless network and took a hit from the depressed value of its stake in ride-hailing firm Lyft Inc.

The delay relieves potential downward price pressure on Rakuten’s larger rivals NTT Docomo, KDDI and SoftBank Corp.

Rakuten has a roaming agreement with KDDI to help fill its coverage shortfall. That reliance further impedes the path to profitability for the mobile business, Morningstar’s Ito said.

In a note ahead of the reports on the wireless network delay, Jefferies analyst Atul Goyal said Rakuten “lacks the financial, technical, manpower resources to compete” with the big three incumbents.

About the Author: Jonathan Adams

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