Rakuten books Q1 loss, offloads Seiyu stake as mobile bleeds

JAPANESE e-commerce and fintech giant Rakuten Group on Friday (May 12) posted an operating loss of 76.2 billion yen (S$754 million) for the first three months of 2023, dragged down by its money-losing mobile business.

Rakuten posted a January-March loss of 102.7 billion yen for the mobile business – though that was narrower than in the same period a year earlier.

Rakuten founder and CEO Hiroshi “Mickey” Mikitani originally outlined plans to becoming Japan’s fourth major carrier, promising to create a low-cost nationwide mobile network by using cloud-based software and commoditised hardware.

However, the company has burned cash funding the build-out, with analysts flagging Rakuten’s struggle to take market share from cash-rich incumbents known for high-quality networks.

Mikitani has offloaded stakes in core businesses, selling shares in Rakuten and moving to float the group’s securities and banking units. Such “parent-child” listings are often frowned on in other economies but common in Japan.

On Friday Rakuten said it will sell its stake in supermarket chain Seiyu to US private equity firm KKR & Co for 22 billion yen, just three years after agreeing to buy the shares from Walmart.

Rakuten has also taken on debt.

The group has some 400 billion yen in bonds due by 2024 and a further 430 billion yen in 2025, Refinitiv data showed.

US dollar-denominated bonds issued in January have an annual interest rate of over 10 per cent.

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The group will continue “acceleration of asset divestitures such as minority investments” along with other capital raising measures, according to an earnings presentation given to media.

S&P Global Ratings, which rates Rakuten’s debt “junk”, in January cited the “prospect of deeply negative free operating cash flow ... and very weak financial standing continuing in the nonfinancial unit in the coming 12 months”. REUTERS