Last year, Rakuten Mobile CEO Tareq Amin said he predicted the business would break even in 2023. But Rakuten appears to be backing off that assertion now. In its fourth quarter and year-end 2022 earnings yesterday, the breakeven wasn’t mentioned.
The Japanese company said that due to ongoing strategic investment in future growth for the Mobile segment, including the rollout of network base stations, the Rakuten Group recorded non-GAAP operating losses of ¥325.6 billion ($2.45 billion) in fiscal year 2022. Excluding the Mobile and investment businesses, non-GAAP operating income was ¥177.4 billion ($1.33 billion), up 9.6% year over year.
For the full year 2022, the mobile segment reported revenue of ¥368.7 billion ($2.77 billion), an increase of 62% year over year. MNO service revenue increased to ¥24.5 billion ($180 million) sequentially.
Although it reported operating losses of ¥492.8 billion ($3.7 billion), the pace of losses has slowed.
“After peaking in Q1 2022, operating losses continue to contract due to the increased number of paying customers,” stated Rakuten in its earnings announcement. It attributed this improvement to the end of its one-year campaign offering free mobile service, increased average revenue per user (ARPU) due to subscribers transitioning to higher service plans and reduced roaming costs as the Rakuten network coverage area expands.
The free mobile service ended in October, and all Rakuten Mobile subs are now paying customers. In addition, ARPU increased from ¥837 ($6.29) in Q1 2022 to ¥1,805 ($13.57) in Q4 2022.
The analysts at New Street Research led by Chris Hoare wrote, “Rakuten’s Q4 figures are weak in mobile (again). Mobile loss did decline but only from ¥121 billion to ¥113 billion sequentially (consensus expected ¥99 billion). The company is guiding to higher losses and higher capex in 2023 and no longer appears to be claiming breakeven in 2023. For the first time too, the company is acknowledging that a capital increase at the parent may be required.”
Other Rakuten Mobile metrics
The Mobile group reported that its total number of MNO and MVNO subscribers reached 5.06 million as of the end of December 2022.
But New Street was not impressed. “MNO subscribers actually fell 15,000 during the whole of 2022,” they wrote. “Rakuten needs to return to customer growth quickly, which will likely require an increase in marketing spend.”
The number of 4G outdoor base stations exceeded 52,003 as of December 31, 2022. The company aims to have 60,000 base stations in operation by the end of 2023. In addition, the number of outdoor 5G base stations — outdoor Sub6 macro base stations — increased to 7,058 nationwide.
The company also announced the full-scale launch of the Rakuten Mobile Business Plan, a mobile carrier service for business customers. It said more than 600 businesses are already using the service.