Hiroshi Mikitani, chairman and president of Rakuten.
On May 12, Rakuten Group announced financial results for the first quarter of the fiscal year ending December 2023. Sales were 475,635 million yen, up 9.3% year-on-year, but the loss in the mobile business became a burden, and the operating loss, which is a barometer of the core business, continued to be a huge deficit of 76,194 million yen.
Hiroshi Mikitani, chairman and president, explained that consolidated EBITDA turned positive in the previous quarter and continued to improve with a profit of 7.4 billion yen in the same period.Going forward, if we can achieve our goals by realizing loss reduction and sales growth in the mobile business,By 2030, “Fintech and Internet businesses will be able to generate more revenue”He expressed his view.
We will explain the quarterly financial results of Rakuten, where Mr. Mikitani’s steering is attracting attention.
Road to mobile business growth
Rakuten Group’s consolidated results. Sales revenue grew steadily, but non-GAAP improved, but a large operating loss continued.
Improving the profitability of Rakuten Mobile continues to be an urgent task for the Rakuten Group.
The non-GAAP operating loss for the entire group was about 69 billion yen, an improvement of 30.1 billion yen compared to the same period last year (according to the financial results), but the segment loss in the mobile business will exceed 100 billion yen this term as well. This is an improvement of nearly 30 billion yen compared to the same period of the previous year, but the deficit structure of the Rakuten Group as a whole is still created by the mobile business (see chart below).
Operating loss structure. The heavy deficit in the mobile business has created the current deficit structure.
The Internet service business posted 271.1 billion yen in revenue (up 8.7%), which is “very good” (Mr. Mikitani).
However, the segment profit itself decreased due to the transfer of burdensome media and content businesses such as Rakuten Ticket and Rakuten TV from the mobile business to the Internet segment. Segment profit decreased 17.1% year-on-year to 11.8 billion yen.
Still, Mikitani emphasizes that the group as a whole continues to grow. Monthly active users (MAU) in Japan exceeded 40 million, an increase of 10.3% year-on-year, and the ratio of users using two or more services increased to 76.1%.
The number of “key” (same) Rakuten points issued exceeded approximately 640 billion points in the last 12 months.bottom. The SPU (Super Point Up Program) is also doing well, with an average annual growth rate exceeding 20%.
Mobile continues to struggle, but other “key metrics” show steady growth.
Based on these assumptions, Rakuten will need to successfully grow its mobile business in the future.
As previously reported, Rakuten Mobile has announced a new “strongest plan.”
On May 12, Mr. Mikitani announced the “Rakuten strongest plan” at a conference just before the financial results briefing.
Rakuten will reduce base station construction costs and other costs through a new roaming contract with KDDI. By 2023, the amount of capital investment can be reduced by more than 100 billion yen, and in the three years until 2025, the company aims to reduce a total of 300 billion yen.
A new roaming contract with KDDI covers areas centered on indoors, which was a concern. We aim to further expand the area by allocating platinum bands and AST Space Mobile, which aims to expand the area using low-orbit satellites.
As a result, although the roaming costs paid by Rakuten will increase, there will be no change in the monthly reduction target of approximately 15 billion yen due to a decrease in capital investment.
Significantly reduce capital investment and absorb increased roaming costs. We aim to increase contracts by improving customer satisfaction while reducing total costs.
Improving the “mobile penetration rate” in the Rakuten economic zone is an issue
As I wrote in the first half, Rakuten has 40 million monthly active users. On the other hand, the penetration rate to 40 million people (ratio of unique users who have a contract with Rakuten Mobile to monthly active users) is only about 10.6%. President Mikitani said, “Even if we just raise this to 30% or 40%, it will become a considerable source of revenue.”
Mobile subscribers are relatively more likely to use Rakuten services, and the total ARPU, which is the sum of mobile ARPU (average sales per user) and Rakuten service ARPU, has reached 2652 yen.While aiming to increase ARPU by further expanding data use and option use, “first focus on increasing the number of users”(same).
Changes in ARPU. In addition to mobile ARPU, ARPU takes into account the difference in sales between mobile users and non-mobile users due to more mobile users using Rakuten services. Rakuten Mobile’s communication fee is approaching 3278 yen.
In terms of increasing the number of users, we will focus on corporate contracts and aim to acquire a 25% market share, mainly with 900,000 companies that have business partners with the Rakuten Group.
In the Fintech business, sales revenue increased by 7.6% to 168.0 billion yen and operating income increased by 20.4% to 26.6 billion yen. It is said that the sales target of Rakuten Card’s “triple 3” of 30 million cards issued, 30 trillion yen in shopping transaction value, and 30% share in transaction value is being achieved.
Fintech business is steadily expanding its user base.
The main Rakuten card appeals for the achievement of triple 3.
Announced the first medium- to long-term vision.Mention expectations for mobile
“For the first time, we present a medium- to long-term vision,” said President Mikitani, pointing out the outlook up to 2030.
The Internet service business will continue to maintain the current sales growth, especially the loss-making business transferred from the mobile business will be turned into the black, and the goal is to achieve an “operating margin of 15%.” As a result, the company aims to record a profit of 410 billion yen in 2030.
The target for the operating margin in the Internet service business is 15%. Aiming for a total transaction value of 10 trillion yen.
“Currently, the group is issuing more than 700 billion yen in points, so one way to think about it is to improve efficiency,” said President Mikitani. It’s not clear if this means changing the points redemption strategy.
In the Fintech business, based on Rakuten Card, we will strengthen synergies with Rakuten Bank, Rakuten Securities, and the entire group. By expanding the operating profit margin to 20%, we aim to achieve profit of 330 billion yen.
The FinTech business will also aim to significantly increase profits.
The biggest challenge will be to add profits from the mobile business here. Achieving 24 million contracts for individuals and 7 million for corporations “will be a very large profit” (ibid.). The profit is expected to be “a profit that exceeds Fintech and Internet services” (ibid.).
The material does not include figures, but if we take it literally, we can see that the operating income of these three segments is likely to be 1 trillion yen.
Although there are no specific numerical targets for the mobile business, we will increase the number of subscribers from the current level of less than 5 million to more than six times.
“This year marks the 26th anniversary of our founding. We believe that Rakuten Mobile, which is a major issue for 2030, has held down Japan’s price rise by about 1.4%, but we still think that (mobile phone charges) are still high,” said Mitsuhide. Mr. Kitani puffs out his chest.
In addition to realizing a high-quality and low-cost mobile network, we would like to sell mobile technologies such as virtualization overseas and grow so that we can contribute to the Rakuten ecosystem.
Mr. Mikitani’s leadership will continue to be watched as to whether the voices of concern about the mobile business in the entire group can be dispelled by expanding the number of users as envisioned.
Advertisements
Source: BusinessInsider
Emma Warren is a well-known author and market analyst who writes for 24 news breaker. She is an expert in her field and her articles provide readers with insightful and informative analysis on the latest market trends and developments. With a keen understanding of the economy and a talent for explaining complex issues in an easy-to-understand manner, Emma’s writing is a must-read for anyone interested in staying up-to-date on the latest market news.