How are the world's largest OpenRAN operators faring?

2022.02.17

On 14 February, Japanese operator Rakuten Mobile released its full-year financial results for 2021, revealing a number of previously undisclosed key information that has once again caught the attention of the industry.

 

Building the world's largest OpenRAN network

As wireless engineers who have long been concerned with base station equipment, the first thing that caught our eye was the following graph.

 

Rakuten said it has now deployed the world's largest OpenRAN network, with more than 200,000 cells (RU units) and station types including outdoor 4G macro stations, outdoor 4G small stations, indoor 4G small stations and outdoor 5G macro stations, and specifically revealed the number of each type of equipment deployed.

 

The operator also said that it had achieved 96% of its 4G population coverage four years ahead of the target set by the Ministry of Internal Affairs and Communications, but declined to disclose the 5G population coverage rate.

 

Comparing these figures, Lotte Mobile has deployed around 90,000 4G outdoor macro areas and only 7,420 5G outdoor macro areas, which shows that while its 4G network is almost complete, its 5G network is being built at a slow pace.

 

Record losses

According to the report, the Rakuten Group's sales have climbed every year since 2019, reaching ¥168.2 billion in 2021, up 15.5% year-on-year.

 

However, profit growth has continued to be negative, with 2021 seeing the largest loss in the Group's history, reaching ¥225 billion for the year.

 

In terms of financial results, the Rakuten Group's e-commerce and financial technology business segments all performed well, but its mobile business (Rakuten Mobile) was a serious drag, and this was the reason for the group's continued losses.

 

Due to ongoing investments in mobile networks and base stations, as well as high roaming costs (some regions lease KDDI networks), Rakuten Mobile's losses have continued to widen since 2019, reaching a record high of JPY 421.1 billion for the full year 2021.

 

The report also revealed that Rakuten Mobile has invested more than JPY 1 trillion in fixed assets in the mobile network sector since Q1 2018.

 

Remember that Rakuten Mobile has stated that its cost per site investment based on the OpenRAN architecture is 40% lower than that of traditional operators. A rough estimate of the amount invested and the size of the network built suggests that it is not as economical as claimed.

 

The ¥1 trillion investment also exceeded Rakuten Mobile's expectations.

 

I recall that when Rakuten announced its entry into mobile operators in 2019, it said it would raise around 600 billion yen to build a nationwide LTE network by 2025, including 300 billion yen for outdoor base stations, 80 billion for indoor base stations, and 220.4 billion for core network, transmission network and later expansion.

 

At the time, the industry considered the investment to be "too little", as it was only one year's investment by NTT DoCoMo, but Rakuten believed that "600 billion yen would be enough to build a nationwide network", given its small spectrum resources (only 20MHz), few users and a pure LTE network (no 3G services). I guess I was too 'naive' back then.

 

Slow subscriber growth

As an up-and-coming carrier, Rakuten Mobile has been playing up its ultra-low price strategy, but it seems that Japanese consumers are not willing to pay for low prices.

 

Financial reports show that Rakuten Mobile's subscriber base has been growing steadily since April 2020. As of February 2022, the total number of Rakuten Mobile subscribers (including MNO and MVNO contracts) has exceeded 5.5 million.

 

Despite this "steady growth", when comparing the market shares of Japanese mobile operators, NTT DoCoMo has around 84 million mobile subscribers, au around 61 million and SoftBank around 48 million, it is clear that Rakuten Mobile, while disruptive in terms of network, does not pose much of a threat to traditional operators in terms of market size.

 

Some analysts say that Lotte Mobile needs to grow to at least 20 million users to break even. From 5 million to 20 million, Lotte Mobile still has a long road ahead at the current rate of user development.

 

Responsible Editor: Zhao Ningning

Source: NetGoods Hired Guns