Name: Rakuten CEO lays out ambitious plan to enter the telecom industry
Uploaded: 2020-12-03
Duration: 5 min 35 s
Description: Mickey Mikitani spoke at Fortune's Brainstorm Tech conference.

 ANDREW NUSCA: So the Rakuten of today is internet services is your largest segment, which includes retail. You've got the financial arm, which you mentioned. An industry unto itself. And then your newest one, last year you began reporting mobile as a breakout business. It's your smallest, but that's a relative term. So let's talk about your telecommunications ambitions, 5G and all the plans you have. You have great ambitions. Tell us about them. MICKEY MIKITANI: Rakuten has been evolving centered around our membership. So Rakuten is not really a pure e-commerce company. We're a membership company. And managing the brand and also our reward program, which we are doing in the US, Rakuten Rewards. And also the data. And so this has been a playbook. How we can bring the customer to the stores, or to the internet shops, or to the hotels and cross use the members. But I have started to realize the communication is going to be very, very important part of our ecosystem. And so that's why we wrote one of the largest messaging app company called, Viber. And it has been number one messaging app in most of the eastern European countries and some Southeast Asian countries. But I started to realize, we got to go to the hard core and why don't we try to get into the mobile space. Where lifetime value of the customer is very, very big. And also the synergy with our other ecosystem is also very, very large. And initially, I just thought we're going to do this mobile [INAUDIBLE] business in Japan. But as we move forward we started to realize, oh my gosh. What we are building is not just mobile service, but we are trying to transform mobile network from the architecture point of view, by converting hardware to software. To be very, very honest, this is a secret talk thing. But-- and just about buying the network devices and equipments from Chinese Vendors Chinese equipment companies. And that's when I realized, oh my God. We may have a little bit of political risk here. And started to the alternative. And I realized buying the network device that's existing, Western network device companies, is too expensive for us. And we can not justify it. So we came up with the conclusion, why don't we try to convert all these hardware to software and make it like a Cloud? And everybody thought we were kind of crazy. And in some of the [INAUDIBLE] in your country, categorize us as pie in the sky. My friends who are big CEOs of big [INAUDIBLE] and network device companies, it was laughing at us. Hey Mickey, I'm going to warn you. You guys are going to fail. But you know, I challenge that, we change that. And now everybody was shocked that we made it happen. ANDREW NUSCA: So Mickey. MICKEY MIKITANI: Yeah? ANDREW NUSCA: Let me ask you a little bit more about this. So telecom is indeed a brutally competitive industry. It's also a very, very expensive one. And indeed your company has plowed billions of dollars into the investment that you've outlined here. You just mentioned that you see it as kind of connective tissue for other parts of your business. Could you explain that a little bit more? How will you see the return on all that investment? MICKEY MIKITANI: Well, it depends on how you define the competitiveness. Obviously, [INAUDIBLE] is very, very high for three reasons. One, upfront capital investment is huge. Because you need to build a network. Or maybe you can do a roaming agreement, but which is also very, very expensive. The second is spectrum. You need to have a spectrum. Whatever how good you are, you don't have a spectrum, you don't have any business. Right? And Sometimes it's a location, like in Japan, or sometimes you need to be over the ocean. And the third is membership accretion. Right? But we have hundreds million members already in Japan. So membership accretion is not a problem for us, it's about the first two. And now we are convinced that we can really decrease initial investment by more than technology, by virtualizing, by automating using AI here and there. Our capital investment is probably less than half of what they have paid. And then, once you get in, it's not like e-commerce. You have a limited number of players, which is a lot like Amazon, Google, Facebook. So it depends on how you characterize the competition. And I'm very, very confident we will be extremely competitive for network mobile services in Japan, as well as mobile platform provider in the world. 

Rakuten CEO lays out ambitious plan to enter the telecom industry

Tech

Mickey Mikitani at Fortune's Brainstorm Tech conference.

Rakuten CEO lays out ambitious telecom plans

Mickey Mikitani spoke at Fortune's Brainstorm Tech conference.