Cell phone firm pushes growth, foregoes profits

TOKYO >> Rakuten Inc. entered the mobile phone business three months ago with a bullish strategy, enduring hits to its bottom line in the name of growth. The company acquired 1 million mobile phone line applications in June but has yet to turn a profit.

Advance investments, including construction of base stations, have piled up, costing the company 35.3 billion yen ($329 million). Rakuten is aiming for 3 million customers by the end of the year, but CEO Hiroshi Mikitani has said the break-even point is 7 million, meaning it will take some time for the company to reach profitability.

Rakuten is running a promotion that provides its first 3 million customers with free communications for one year, and has launched other deals, such as offering its Rakuten Mini phone, which usually goes for 17,000 yen ($158.50), for just 1 yen.

The biggest selling point of Rakuten’s cell service, however, is its low monthly charge of 2,980 yen ($27.80). But mobile phone giants SoftBank Corp. and KDDI Corp. are introducing their own budget brands, dubbed “Rakuten killers” in the industry, at a similar price point.

But Rakuten was beset with challenges beyond market competition.

In June, changes made to the Rakuten Mini that potentially compromise phone reception could be a violation of Japanese law, and the company could face discipline.

In addition, the pandemic has hindered its progress in testing its communication network. This is expected to result in a three-month delay in introducing 5G high-speed, high-capacity communication.