Rakuten Group Inc. CEO Hiroshi Mikitani has defended the company’s controversial foray into Japan’s competitive mobile market, emphasizing its crucial role in driving future growth through artificial intelligence (AI). The move, which has resulted in four years of losses, has been met with skepticism from investors. However, Mikitani argues the mobile arm, with over 8 million users, provides invaluable data for training AI that will power the conglomerate’s expansion.
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Rakuten’s Mobile Data Fuels AI Ambitions
Mikitani, in a recent interview with Bloomberg TV, underscored the “extremely powerful” nature of the exclusive data Rakuten collects from its mobile users. He clarified that Rakuten’s AI strategy is not about competing directly with industry giants like OpenAI or Google. Instead, the company aims to build a “more vertically integrated, specialized AI” tailored to its specific business needs.
This focus on specialized AI aligns with Rakuten’s broader strategy of capitalizing on Japan’s relatively slow adoption of digital and AI technologies. While the Japanese government is actively supporting domestic AI development, a clear leader has yet to emerge. Rakuten joins a crowded field of contenders, including SoftBank Corp., Nippon Telegraph & Telephone Corp., NEC Corp., CyberAgent Inc., and OpenAI, all vying to establish a dominant Japanese large language model.
Hiroshi Mikitani, chairman, president and CEO of Rakuten Inc. speaks during the Mobile World Congress in Barcelona, Spain, on Tuesday, Feb. 28, 2023.
From Mobile Data to AI-Powered Services
Leveraging its unique data advantage, Rakuten is poised to launch an AI assistant designed to function as a travel and shopping agent. The goal is to drive increased traffic and engagement across Rakuten’s ecosystem. Furthermore, the company has recruited former Google maps and search expert Ting Cai to lead AI development beyond travel and e-commerce, signaling broader ambitions in the field.
Mikitani highlighted the significant synergistic benefits of the mobile business. He revealed that Rakuten mobile network users spend almost 50% more on the company’s online shopping mall, with positive ripple effects extending to its credit card, travel, banking, and brokerage operations.
Addressing the Financial Challenges
The ambitious mobile venture has come at a considerable cost. To address the strain on its balance sheet, Rakuten sold approximately 15% of its profitable credit card arm to Mizuho Financial Group Inc. and took its banking business public in 2023. Despite these challenges, Mikitani reported that the mobile segment, excluding customer acquisition marketing costs, is now profitable. The company’s recent achievement of its first quarterly operating profit since 2020, driven by shrinking mobile losses, further validates this claim.
A Rakuten Mobile store is seen in Tokyo, Japan, on Friday, April 8, 2022.
Expanding Coverage and Future Outlook
To broaden its reach and compete more effectively against dominant players NTT Docomo, KDDI Corp., and SoftBank Corp., Rakuten plans to achieve 100% smartphone coverage in Japan by leveraging satellite-based services. A partnership with US provider AST SpaceMobile Inc. will enable satellite connectivity starting in 2026.
Mikitani reiterated Rakuten’s ambitious long-term goals: “We want to become one of the top-tier profitable companies in Japan and — in the future — in the world,” he stated. “Our ambition is probably really big, but we are doing this step by step.” This statement reflects Rakuten’s commitment to its long-term vision and its confidence in the strategic role of AI, fueled by its mobile data, in achieving global success.
