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Rakuten Group Inc
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Welcome to Rakuten Group's 2021 Third Quarter Financial Results. We just had another solid quarter of double-digit top line growth as well as strong sustained bottom line growth in our Internet businesses. This, despite the high hurdle created by last year's accelerated growth amidst the pandemic. Overall, as we continue to invest in our Mobile business, we recorded a consolidated loss similar to previous quarters.
Our Mobile business is now entering its next phase of growth as it starts to reduce reliance on our partner network's roaming service. The engine behind third quarter growth was our Internet businesses, which focused on driving cross-service use of our multiple online services. FinTech profit growth remains at the same level as a year ago when excluding upfront investment for future growth and a one-off gain last year in the credit card business. Rakuten Card has announced a mid-term plan aimed at not just boosting its own bottom line but also lifting the FinTech business as a whole.
Indeed, our FinTech business continues to acquire loyal customers at a rapid pace. In terms of account number, Rakuten Bank has grown to be Japan's #1 online bank and is disrupting traditional banking through a digital strategy empowered by Rakuten's strong ecosystem.
As previously mentioned, we are in the early stages of exploring capital options. Our CFO will have the details on our overall financial strategy that aims to ensure capital flexibility but also enable more autonomous growth of individual businesses within our ecosystem. All of this is part of a group strategy that aims to spur the next phase of disruption and growth in the post-pandemic world. For more, here is Rakuten's CEO, Mickey Mikitani.
Welcome to Rakuten Group's fiscal year 2021 third quarter consolidated financial results video streaming session. Today, I would like to cover several topics. One is how unique our ecosystem is. The Rakuten unique and resilient ecosystem has been performing very well. We have more than 70 innovative businesses in Japan and outside of Japan as well. Global membership has reached to 1.5 billion membership, and global transaction value for this quarter has reached to JPY 6.6 trillion, which is almost 20% growth year-on-year. The uniqueness of Rakuten Ecosystem is we utilize one brand, one ID, and also we utilize the data we accumulate across our different services.
Especially for a FinTech, which is demonstrating really amazing growth, we cross use our members, and there are also very strong financial synergies among financial services, including Rakuten Bank, which already have 11 million accounts; Rakuten Card, which has 24 million cards issued; and Rakuten Securities, which has 6 million accounts. All of them are either distant #1 service or close the #2 service in Japan. And on top of these 3 pillars, we also have Rakuten Pay, General Insurance and Life Insurance service.
This is the highlight of the -- some key verticals, which we do. And as you can see on this chart, despite the fact the general economy has been impacted tremendously during this COVID-19, Rakuten has demonstrated its resilience against any kind of environment. For example, Rakuten domestic e-commerce GMS has grown 16% for over 2 years CAGR base, while the other players are struggling. Rakuten Travel GTV didn't show growth. It was negative 14% on a 2-year CAGR base, but other industry has gone down significantly, almost over 50% negative growth.
Ad businesses is also growing nicely, so as card shopping. Other credit card companies struggled tremendously during this COVID-19 because off-line transaction has slowed down for the last 2 years because of COVID-19, but Rakuten card shopping GTV has shown 25% CAGR growth. And one of the outstanding performance is Rakuten Bank, Rakuten Bank deposit is getting very, very big. When we started Rakuten Bank, deposit balance was about a few billion dollars, but it is now getting close to $70 billion with plus 38% 2-year CAGR growth.
The -- talking about general market, obviously, for the last 2 years, the world economy has struggled because of the COVID-19, but the old economy in advanced countries, U.S., Japan, Europe, and China, are showing very significant comeback. Japan economy in last year was negative almost 5%. This year, we're going to show 2.8%. I think conservatively, we are estimating 3.0% GDP growth, but I think this can be a little bit higher. Now we are moving to the post-COVID-19 era, especially in Japan. I think this is going to be a tremendous growth opportunity for Rakuten Group.
Just talking about the pure performance for this quarter, our operating income has demonstrated extremely good growth. Excluding our Mobile business, which is a big investment for us, the OI of other businesses together has reached to JPY 47 billion, which is 45% Y-o-Y growth. So e-commerce, logistics, overseas businesses, all the financial businesses are performing extremely well.
And one of the area we have been working on is how we can improve our overseas businesses and sports business. As you can see on this chart, the -- our loss has dramatically shrunk. Not overstatement to say, probably we will be able to demonstrate positive income in the near future for overseas and sports businesses.
The FinTech is growing extremely well, and we recently announced very ambitious project for Rakuten Card called Triple Three, which means now we are aiming to get to 30 million number of cards issued, JPY 30 trillion of shopping GTV and the GTV market share among the credit card payment to reach 30%. This is an unbelievable target, but I think we will be able to execute.
In terms of the Mobile, we are building an radio station network in massive speed for 4G and 5G. And by the end of March of next year, we will reach 96% population coverage all over Japan. The mobile subscribers are growing consistent growth. And with more radios we build, I'm very confident we will be far able to further accelerate new subscribers.
Let's talk about ecosystem expansion through the partnerships. As you know, logistics is becoming one of the most important factor for e-commerce. And Rakuten has agreed and established joint venture with Japan Post, which has nationwide universal logistics service. Rakuten has been building its own delivery network across Japan, but one of the biggest challenge for us is how we can penetrate to rural areas and super rural areas, whereby Japan Post already has its delivery network. So this is going to be very positive for us to basically decrease our investment into logistics network as well as making it profitable in the very near future.
And the FinTech, we are now trying to bring Rakuten Bank to public for several reasons. One, definitely, bank needs good amount of equity to further accelerate the growth as well as increase our revenue. This is the -- as we grow equity through this public offering, we'll be able to scale Rakuten Bank businesses more and underwrite more assets, which will be generated by Rakuten Card.
Talking about Rakuten Mobile, we have basically 3 objectives. One is make sure that our stand-alone Rakuten Mobile business is going to be tremendously profitable. At the same time, we want to make sure that there is a tremendous contribution to Rakuten Ecosystem. And third is we would like to start really creating a very scalable business model to -- for selling our software as well as selling our platform.
We already started this project. We have 6 existing clients in the Americas, 4 existing clients in Europe and 4 in Asia. One of the most important project we have is this project with 1&1 Deutsche in Germany, which are going to basically adopt full implementation of Rakuten communication platform. We believe the addressable market size of [ ORAN ] or virtualized, the mobile network business is going to reach USD 150 billion in 2025, and we want to be the front runner for this business.
On top of that, definitely, how to contribute to society is becoming a very important issue for us. We are trying to be as green as possible. And we also want to be as diversified as possible, and we would like to make sure that we have a very strong corporate governance structure to support social contribution as well.
This is the highlights for this quarter. The global GTV has reached JPY 6.6 trillion, which is almost 20% Y-o-Y growth. The consolidated revenue has reached JPY 400 billion. Core business operating income has reached JPY 48 billion. Domestic e-commerce 2-year CAGR is plus 17.7% growth. Rakuten card shopping GTV has reached JPY 3.6 trillion, which is 23.3% Y-o-Y growth. Rakuten cardholders has already reached 23.9 million cards. Rakuten Security accounts has reached 6.6 million accounts, and Rakuten Bank accounts has reached 11.38 million accounts. So all these key performance indicators are showing very healthy and strong growth. We are very happy to see this solid but very strong growth of our core businesses as well as we are making some of the key businesses outside of Japan very profitable as well.
So that is it for myself, and I hope you will enjoy the rest of the presentation. Thank you very much.
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In the third quarter, shopping e-commerce GMS, centered on Rakuten Ichiba, steadily increased. This is despite the strong demand, which rose from stay-at-home trends in the third quarter of last year. In addition, domestic e-commerce GMs, including Travel, grew by single digit due to the postponement of the Go To Travel campaign. But the trend has not changed and remained firm.
Let's look at revenue and operating income. The e-commerce business, centered on Rakuten Ichiba, continued to grow even after last year's increased demand due to stay-at-home trends. Both revenue and operating income steadily increased.
Here is a breakdown of our operating profit. In our marketplace business, Rakuten Travel was affected by last year's Go To travel campaign. On the other hand, Rakuten Ichiba's operating profit increased as a result of increased user loyalty. In the Logistics business, we established JP Rakuten Logistics, our new joint venture with Japan Post in the third quarter. JP Rakuten Logistics succeeded Rakuten Logistics business, which led to improved year-on-year results. The e-commerce penetration ratio in Japan is increasing year after year; and in 2020, it was 8.1%. This is still low compared to the other countries, so further growth is expected in the future.
Growth rate of Rakuten's e-commerce service are exceeding industry average despite the current conditions. Rakuten will continue to aim for further business expansion as our e-commerce penetration ratio increases.
At Rakuten Ichiba, the number of users making purchases and the frequency of purchases per user both continue to grow. So we are maintaining a higher user retention rate. Along with Rakuten Ichiba growth, cross use with each of our e-commerce service is also steadily increasing. We will continue to focus on expanding cross-use and aim to maximize our users' LTV.
As an e-commerce operator, we believe we must expand our logistics capabilities in order to meet growing demand for e-commerce going forward. Through collaboration with Japan Post, we will improve user satisfaction and support revenue expansion by making logistics more efficient for our merchant. JP Rakuten Logistics has started operation of its Chuorinkan fulfillment center. Currently, the number of deliveries from Rakuten Super Logistics is increasing, and we are aiming for further expansion going forward.
In addition, we are conducting drone delivery trials and achieved the first round-trip delivery in Japan conducted without observers. Going forward, we will make practical use of drone in order to make deliveries more efficient and promote regional revitalization and CO2 reduction in regions where traditional deliveries are difficult.
In addition, Rakuten Travel is promoting a variety of pandemic-related initiatives for our customers, business partners and society at large. Most recently, we are supporting a large-scale vaccination operation in several regions by expanding our workplace vaccination centers.
FinTech segment achieved increased revenue as the customer base of each service expanded and usage as a main service increased due to initiatives to promote cross-use. Rakuten Card posted year-on-year decrease in profit. This is mainly due to last year additional government subsidies for the promotion of cashless payment and upfront investments, such as acquiring a new Rakuten Card user for the post-pandemic market and the marketing initiatives aimed at ecosystem expansion. This factor contributed to our growing industry presence.
Rakuten Securities incurred more cost for customer acquisition and expansion of asset service, but we believe these upfront investments are necessary for future growth. Customer base expansion continued to be strong. In October, the number of Rakuten Cards issued exceeded 24 million.
Rakuten card shopping transaction value continued to grow at a fast pace. Its industry market share reached 21.4%. Rakuten Bank's usage as customer's main account is increasing. We achieved steady growth in the number of payroll accounts and transaction made. Rakuten Security is expanding its asset business, which generate stable profit over the medium to long term. The number of investment trust accounts and the amount of contribution have increased significantly.
In the insurance business, Rakuten life started selling dementia insurance as a new form of insurance in response to Japan's aging society. Contract acquisition is steadily increasing.
Rakuten Payments succeeded in introducing customers to other Rakuten Group services by releasing a new UI for the Rakuten Pay app with expanded functionality for users. As a new measure to expand our merchant base, we launched a campaign for small- and medium-sized stores are planning for Rakuten Pay for the first time, giving them 1 year of Rakuten Pay QR payment effectively free of charge.
In June, Rakuten Card begun offering a second Rakuten Card to customers in order to expand our wallet share. The number of second card issued exceeded 0.5 million at the end of September. The amount spent per customer increased by an average of about 60%, this will contribute to huge GMS growth. Rakuten Card has set our next set of goals, the Triple Three: 30 million cards issued, shopping transaction value of JPY 30 trillion, and 30% market share in the Japanese credit card industry.
A transaction value of JPY 30 trillion will put us on the same scale as global industry players. We are confident we can make our presence much bigger. We also believe that achieving the Triple Three contributes to the growth of not only our FinTech businesses but the Rakuten Group as a whole.
Rakuten Bank has increased the number of Rakuten Card withdrawal accounts, and Rakuten Securities has significantly expanded its investment trust business since launching Rakuten Card credit settlement. The payment ratio of Rakuten Card in Rakuten Ichiba GMS is around 70%, demonstrating a synergistic effect.
Rakuten Bank is preparing for its IPO. We believe this will let us manage operations more autonomously, lead to greater strategic growth and further contribute to the Rakuten Ecosystem. Every day, more people are shifting their daily activities into the Rakuten Ecosystem thanks to Rakuten Card. FinTech businesses will continue to promote cross-use with Rakuten Card as a point of entry, aiming to expand the customer base and the profit base of all our FinTech companies.
Rakuten Mobile's network build-out is progressing at a rapid pace. At the end of September, there were over 30,000 4G base stations on air. As another 10,000 base stations are also ready to come online as soon as we take delivery of semiconductor components, we're looking forward to a smooth and steady rollout.
We expect to achieve our target of 96% population coverage for 4G in spring next year. While the global semiconductor supply shortage has impacted our previous goal of 96% coverage by this summer compared to the plan originally submitted to the regulator, we're still about 4 years ahead of schedule.
Thanks to this progress in the build-out of our network, we are now ready to make solid inroads into switching off the roaming support we have had from our partner, KDDI. From October 1, we've started to gradually decrease these roaming areas, shifting nearly 40 prefectures from reliance on roaming to Rakuten's network.
Our single service plan, Rakuten UN-LIMIT VI, has been very well received for offering unlimited data usage at a low price. That said, for those in roaming areas, there is a data usage limit of 5 gigabyte per month. By accelerating the transition from roaming, more customers will be able to use our unlimited data plan at a lower price. We expect this to boost data usage for existing customers. And as the roaming areas decrease, we will be able to woo those new customers who may have been concerned about free data limits.
Here, you can see the number of applications has increased steadily even without the 1-year free campaign period, which ended in April. We expect the ongoing transition from roaming to our own network to further accelerate customer acquisition.
Here are the Mobile segment results for the third quarter. We saw revenue grow over the previous quarter. This is thanks to the increase in the number of users coming off our 1-year free campaign. The revenue increase from these users outpaced the revenue lost from MVNO users migrating to the MNO service with 3-month free campaign.
On the cost side, network-related costs continue to rise as we increase coverage, resulting in a larger operating loss. As we switch over areas to Rakuten's network, we expect roaming cost to come down after the next switchover scheduled for April 1. In addition, the increase in fee paying customers can be expected to contribute to smaller losses from the second quarter next year.
We were ranked as a 5G global leader and best in Japan in both 5G downlink and 5G uplink speed by Opensignal 5G Global Mobile Network Experience Awards. These are testaments that we are on the path of success.
We have now started Phase 2 of our journey with Rakuten Symphony. We aim to empower industry, society and individuals to transform themselves through cloud, edge and automation technology. With a vision to connect everything to fulfill the potential for a sustainable society, Rakuten Symphony will redefine the telco landscape with its unique approach.
We introduced a concept of transparency. Our customers today can engage with us on a full transparent cost model, eliminating friction and establishing true partnership approach with our customer. Component-level transparency and hardware cost plus approach to software and services will disrupt this industry for the better.
And most recently, I am very delighted to announce to you one of the most advanced products that we have announced in Mobile World Congress, Los Angeles. It is a disruptive solution for the first time in telco industry, combining radio access, network and transport, serving OpenRAN and legacy in 1 environmentally hardened, high-performance platform. This is Symware. It is the new Radio-as-a-Service platform that Rakuten Symphony is introducing to the market.
We also have introduced a new way of consuming telco application in an app store-like approach. We use Madina, ourselves and making available to our customer, making network rollout frictionless and automated.
RCP next-generation OSS provides a simplified architecture, standardized modern and cloud native. We have made headways in securing one of the largest OpenRAN virtualized network with 1&1 in Germany and working closely with Telefonica on redefining the evolution of a brownfield networks into OpenRAN era.
There are a few examples that Rakuten Symphony is already engaging with to help through this transformation journey. We currently have over 100 engagement globally with telcos in all geographies. The future, I believe, is bright for Rakuten Symphony. The future is bright for mobile operators as they transition to 5G leveraging Symphony disruptive solutions.
Here are our third quarter financial results. Revenue was up double-digit year-on-year. This was due to the strong growth of domestic e-commerce, including Rakuten Ichiba and Rakuten Seiyu Netsuper. The sports business and overseas businesses, which was significantly affected by the pandemic last year, also recovered. Non-GAAP operating income declined due to higher depreciation costs reflecting an increase in base station in the Mobile businesses.
However, non-GAAP operating income, excluding Mobile, Logistics and the investment business, which are in the strategic investment phase, showed very strong growth year-on-year. In addition, IFRS operating income improved by more than JPY 30 billion year-on-year, partly due to the gain resulting from the step acquisition of Altiostar.
Here is a breakdown of non-GAAP operating income. Domestic e-commerce and other Internet service drove profit growth. Rakuten Ichiba achieved profit growth due to steady increase in new users boosted by continued strong retention rates of new user gained during the pandemic, even after last year's increased demand that arose from stay-at-home trends.
Logistics costs were reduced as Rakuten's Logistics business was succeeded to JP Rakuten Logistics, our joint venture with Japan Post. Going forward, we will work to further improve logistics quality and cost efficiencies.
Other Internet Services showed a significant improvement in profits, as Rakuten Rewards and the sports businesses recovered. Profits from Viber also increased.
In the FinTech segment, high levels of cashless return subsidies were recorded at Rakuten Card in the third quarter of last year. Upfront investments such as membership acquisition, with an eye on the post-corona world and marketing aimed at expanding the group ecosystem also led to a decline in profit. But Rakuten Card's presence in the industry is steadily increasing.
In the Mobile segment, although profits continue to decline due to upfront investment, our base station rollout is progressing well, and population coverage is currently over 94%.
As shown here, other internet services have improved significantly. We are starting to achieve profitability. Our Business Portfolio Committee has focused on various cost reductions through business concentration and selection, and we are seeing results.
The sports businesses and overseas businesses, which were negatively affected by the pandemic, have recovered. In particular, Rakuten Rewards is now back on track, showing strong profit growth as the adverse effect of the pandemic subside and following the rebranding from Ebates to Rakuten.
Here is a reconciliation from non-GAAP operating income to IFRS operating income. IFRS operating income improved as we recorded a gain on the step acquisition of Altiostar.
In April 2019, Rakuten reorganized its group structure. We aimed for swift decision-making by clarifying the accountability and streamlining the organization and operations. Management is now able to optimize the allocation of resources effectively.
This April, we changed the company name to Rakuten Group. Our competitiveness and mobility was further enhanced by better capital efficiency. We are accelerating the autonomous growth of Rakuten Ecosystem and further enhancing services through advanced technology.
In September, we announced the start of preparation for an IPO of Rakuten Bank and the decision to incorporate Rakuten Symphony. Both are expected to strengthen the financial base of the group as a whole and accelerate the autonomous growth of Rakuten ecosystem.
In the banking industry, in particular, business models are changing. New institutions such as digital banks and challenger banks are growing rapidly by leveraging their own unique ecosystems. These banks will play a leading role in the future cashless era.
Their market valuation is also proving to be completely different from conventional banks. Rakuten Bank aims to grow by ensuring capital flexibility by an IPO. It intends to establish a new model for banks, both as the core of Rakuten Ecosystem and as a pioneering bank.
In October, 2 rating agencies, JCR and R&I, announced that they would maintain their current credit ratings. We believe that the announcement of Rakuten Bank's IPO preparation positively affected their decision. And this is just one example of the variety of financing options this Rakuten Group has available. We do not need to rely on the interest-bearing debt only.
Rakuten has set membership value as an important KPI. While FinTech continued to perform strongly, membership value decreased due to the rebound experienced in e-commerce-related businesses membership value, which surged last year during the pandemic. However, membership value increased by 16% in 2-year CAGR. Rakuten will aim to continue to increase membership value and corporate value by expanding our ecosystem.
Thank you for joining our third quarter results presentation. Please allow me to share one final but important KPI. Rakuten has helped fully vaccinate nearly 0.5 million people in Japan against COVID-19. Just 5 months ago, no one at Rakuten had any experience with vaccinations.
Rakuten culture is known for getting things done. Whether it's helping vaccinate Japan's population or building mobile base stations across Japan at unprecedented speed, this can-do culture is what drives Rakuten to achieve its disruptive and ambitious goals. Thanks for watching.
Welcome back. Thank you for joining our live question-and-answer session on Rakuten Group's 2021 Third Quarter Financial Results. Now that you've had a chance to watch a summary of our financial performance, our management team is here, ready to answer questions progress.
Please allow me to introduce them, Hiroshi Mikitani, Kenji Hirose, Masayuki Hosaka, Yoshihisa Yamada, Tareq Amin, Kentaro Hyakuno, Yasufumi Hirai, Makoto Arima and Kazunori Takeda.
We'll start by taking questions from the media first and then investors. Let's get started.
[Interpreted] Well, ladies and gentlemen, thank you very much for coming to the -- or joining the Rakuten Group's 2021 Third Quarter Financial Results Meeting from here on. It is the Q&A session from the media and investors and analysts. This Q&A session will be conducted using simultaneous English and Japanese interpretation. Please select the language you would like to hear in your audio feed from the Zoom navigation bar at the bottom of your screen. Please do not select mute original audio. When the interpreter speaks, the original volume will be lowered, and you will hear the interpreter's voice overlaying the speaker.
The presentation materials shown have been aligned with Japanese. If necessary, please download the presentation materials from the Investors page on the corporate side. And we will address the questions from the media and then the questions from the investors and analysts. [Operator Instructions] Please note that we can only accept questions regarding the results. [Operator Instructions] Thank you. So if you have a question, please. So the first from Ishikawa, Freelancer. Please ask your question.
[Interpreted] So my name is Ishikawa, Freelancer. So the KDDI financial announcement and the President, Takahashi-san, say the users are moving to Rakuten. In order to avoid that, they have started the campaign to set the basic fee at JPY 0. And now due to that campaign, how is it impacting onto your business?
And next, in DOCOMO, they will not participate in zero plan? Do you have any comment about that?
[Interpreted] Well how should I say the about the inflow and outflow of the usage with other provided, I shouldn't make a comment but the 2.0 that they announced the other day, Polvo 2.0, I think after that, the 8 is reflected on to their number. But looking from the entire picture, well, we have the net increase. And in other words, we have the inflow of users from outside telco provider. So from the big picture point of view, we don't see any big impact on our business due to that campaign.
So from the entire point of view, the same period -- comparing to the year before, we have about double the new application to our services. And Polvo 2.0, we don't have -- we don't see any impact on our business.
And next thing is about the number of MNP, which is increasing. That's how we feel today. So the -- not a net increase and also the inflow from other provider has been increasing today. Thank you very much.
[Interpreted] Thank you very much. So next question. And from NHK, Mr. Okatane, you have your raise-hand function turned on. So please mute yourself and ask the question.
[Interpreted] Okatane from NHK speaking, can you hear me?
[Interpreted] Yes, we can hear you.
[Interpreted] So again, mobile is the theme I'd like to ask you about. So the timing of you turning into a profit, I think you said that 2023, but what is your take on the current progress or progress to take? And you said MNO, the users is 4.1 million. So what is your evaluation? Is it satisfactory or not as to the increased rate?
[Interpreted] Okay. Basically, using our own network is where we have -- we can provide better experience by far. And for example, the amount of data that is used by the users, I think it's about double probably. So there's a market difference. And therefore, using our own network at the end of March, it will reach more than 95%, 96%. So accordingly, experience -- user experience will be improved as well. So new applications, it's about double the number last year. So if we can continue with this trend of growth, then roughly speaking, as for application, I don't see any problem going forward.
Now switching to our own network means the data usage will go up and ARPU will go up as well. And various bundling services, bundling will increase in ratio. And so ARPU increase in new subscribers as well as Symphony, about JPY 300 billion worth of contract. So it will increase to maybe JPY 100 billion going forward. So then when you consider that, yes, we say being in the black on a per month basis in 2023, I think we will be able to realize that. I hope this answers your question.
[Interpreted] Yes. Thank you.
[Interpreted] So the next question is from Yomiuri Newspaper, Mr. Ichikawa, please.
[Interpreted] So I'm Ichikawa from Yomuri Newspaper. I have 2 questions. May I ask 2 questions. So I have 2 questions. First, about Rakuten Bank IPO preparation. So what is the current progress towards IPO? And I think there are likely subsidiaries for the IPO. Why did you choose Rakuten Bank to go public? And then about the minority shareholder, how are you going to handle them? Because including that, just let me know the progress of the situation. And is there any plan to make other subsidiary go public.
And the second one is the partnership with Japan Post. Outside of logistics, such as the payment or insurance area, is there any progress? Or is there any to be stated, if you have any, please let us know that?
[Interpreted] And first of all, bank IPO preparation, it's progressing smoothly. So the reason why we decided them to go public is because, first of all, we have to think of the independency of the entity because there is a duration from the FSA. That is the first reason. And the second is about the capital. Capital flexibility is very important. On the asset side, as mentioned in this presentation, I think -- so when we acquired e-bank, it was about several hundred billion yen of the deposit balance, which grew up to JPY 7 trillion today. And every day -- so 7,000 to 8,000 accounts are newly opened given that we need more capital as we move forward. These 2 reasons are why we decided to select Rakuten Bank to go public.
And the other possibility of the IPO, nothing is decided at this point in time. Basically, -- so we want to have the business -- the style under the uniform style. And then we have to think about the importance of the capital of that business. So we have to be really flexible. So as for all transactions -- so the transaction must be done. Therefore, the -- according to the other commercial law, we have to abide by the governance and compliance. That is no problem and also the Rakuten Group, the company, the shareholders, I think we can contribute to the profit as well.
And then the partnership with JP in the area of logistics, it's really significant. And as for JP partnership or after a certain period of time, those -- maybe they will work with other companies. However, we have a partner -- business partnership, including capital. It's not just a money. So the logistics nationwide will have to be really accurate to deliver the product. That is very important. So even -- so maybe they will have some -- they can take advantage of this partnership.
And I believe EC is a very important to JP. And also, outside of that, the -- some partnership in the financial areas as we made a joint announcement before, and we have been working quite smoothly for those items. And then Rakuten Mobile will provide various initiatives, including IoT. It's something we are discussing together. That would be the current state. So I think we are creating really great synergy together. Thank you very much.
[Interpreted] Thank you. Next, from Suhan Shimbun, Mr. Kawanishi, you have a question, go ahead.
[Interpreted] Kawanishi from Suhan Shibu Newspaper. Can you hear me well?
Yes. We can hear you.
So e-commerce, I have 2 questions on that. E-commerce, this time was really steady and good. Now of course, there has to be this one round of people staying home, but I think I didn't grow as much, I think. But what was the reason in your analysis for a good performance despite that?
And also, this joint venture with Japan Post, what is the synergistic effects? And what about impact on DX, among others, if you can share with us anything, please?
[Interpreted] Okay. So Mr. Takeda, please?
[Interpreted] This is Takeda speaking. So e-commerce, especially Rakuten Ichiba, with regard to Ichiba, new subscribers at a high rate retained. So they stay with us. On top of that, the area -- not just in the area that they made a purchase, but they actually purchased products in other areas. So in other words, the scope is expanding. And so I think that was one of the key factors in terms of the customers.
And from the side of the merchants, well, e-commerce is where you have a peak and then you try to grow it further, and we have what's called a super sale. And we also have what's called a marathon. In other words, these campaigns this time this year as well has really grown as well or grown the performance. So more than 50,000 merchants have been working with us, and we were able to really reach this stage and good performance as a result of that collaboration.
And supporting that, yet another factor is this introduction of the threshold for free distribution. In the past, people might have wondered how much they have to pay for the delivery because that was one of the hindrance or boundary before people make a decision to purchase online. However, thanks to the merchants understanding, they have agreed to this policy, and they are really cooperating with that. So this conversion has been realized very smoothly. So I think that really made a tremendous contribution to making the foundation even firmer. Thank you.
[Interpreted] Okay. So almost nearly JPY 5 trillion domestic e-commerce size. So it's not just -- well, actually, for new ones as well, synergistic effects Rakuten Mobile, Rakuten Point Partners being involved as well. I think overall, the user has increased in number. And as for the repeat ratio since the peak due to COVID-19, I think we have been able to keep that peak level. And genre strategies is paying off. In other words, we are doing quite well in that, for example, fashion and we have good -- better performance than competitors. So the Rakuten brand has taken root. That's another factor.
And for user experience, social functions as well as search functions, recommendation functions, leveraging AI, I think this is thanks to the engineering power that we possess. And also, as Mr. Takeda just explained, for logistics, cost is another, of course, aspect. But in addition, we can actually deliver huge amounts of products. So we have a structure in place to enable that. Thank you.
[Interpreted] Thank you very much. We have a time constraint. So we can take 2 more questions from media due to time constraint. And the next question, from Ketai Watch, Sekiguchi-san. Please ask your question.
[Interpreted] So I'm Sekiguchi from Ketai Watch. Mobile business, customer acquisition is something I want to ask. And the first question is, any initiatives. I think you had the iPhone campaign. And from a pricing perspective, comparing to competitor, I think it's quite unique and relatively low price, a similar price to the Apple. So this kind of initiative in this quarter is only 3 months. But including the next quarter, what are the impact from these initiatives to your business? How do you view about this?
And the next question is customer acquisition momentum. You disclosed the data number of subscribers.In quarter -- Q3, the -- I think it had been slowed down comparing to the previous quarters. But as Mikitani-san mentioned, the application has become double comparing to the year before. But now you released the break. That's why this number increased or you have increased the coverage more. So I just want to get some impression.
[Interpreted] So I mentioned a double. So compared to the same month of the previous year, we had the new application comparing to the same month of the previous year. But this data on a monthly basis, we see improvement in every month last year -- sorry, this year, as of the end of March. So we had the 1-year free campaign that was finished. And then we had lost demand increase in February and March. So excluding that, then we receive the double the number in this particular month.
And then these are the pace is increasing. So we want to make this double to triple, and that is the current strategy. One of the important point is to expand the native coverage. Because even if you go beyond the 5 gigabyte and 1 mega Bps as -- that is happening today, but we can eliminate that if they can use our native network. So this will expand to the 96% of the population coverage, which will the increase of customer satisfaction because they feel more comfortable with our service. And as for the marketing and of course, users who are using our native the network give us a better feedback to us. So we would like to enhance our marketing initiatives based on those feedbacks.
And iPhone, the pricing strategy. So not comparing to other providers, we regard them as not the device. So we are -- we want to generate more profit from the subscription, not selling devices. Unlike from other companies, we have ecosystem and ecosystem revenue will increase. This is different from other providers. For example, other services can be used like 20%, 30%, including AC and the Rakuten Bank if you just joined the Rakuten Mobile. So we see a great synergy among group companies within this ecosystem. So we have a basis to increase the revenue as a group company. So in the overall device strategy, that allows us to set an aggressive strategy given this entire ecosystem.
[Interpreted] Thank you very much. So final question. The person raising the hand is a freelancer, Mr. Onishi. You have a question, please.
[Interpreted] This is Onishi speaking. I have a question to Mikitani-san. Globalization of Rakuten. Rakuten Mobile has RCP, which is really competitive, competitive technology, available to offer. And that as a trigger, I think you will go further global. But how do you try to plan on using the ecosystem in relation to the globalization using RCP? Because I don't see that really clearly yet. In Japan, I think you're almost complete in the area of fintech or e-commerce and then you have mobile added on to that. And so you have that ecosystem here. But how do you plan on expanding that ecosystem elsewhere outside of Japan? What is the broad picture or strategy going forward?
[Interpreted] Okay. Well, Rakuten basically, I think, is triplet, 3 children. E-commerce is one. Another is a finance business. And the third one is Rakuten Symphony included software. So these are the tri-pillars or triplets that we run as a business in Japan, but we would like to expand that and deploy them in overseas markets as well.
So with regard to the triplets, why Rakuten Symphony has so much competitiveness? Because Rakuten Mobile is here, because for the first time, software technology is used in developing the network that was considered impossible in the past. And there is an explosive cost advantage, and that is being made aware in the minds of a lot of people around the world now. And so new mobile companies, not included, but top of the top telco companies are wanting to and are talking with us on equal footing. Why was that made possible?
Well, actually using Rakuten Mobile services, using these virtual network. So this is a physical proof. It's not just talking about things, but it's real. So Japan or a Japanese company being able to offer a platform that can be deployed in other markets, I think this is one of the rare opportunities for Japan to really lead the way.
Now when we created Ichiba, it was quite different business models, buy now, pay later model is now available. And e-commerce is defined differently than in the past. It's not just online, but online to offline is now another mode. So ID of Rakuten numbers are 1.5 billion already. So we can make this into a membership club, point club of Rakuten, can then be deployed in the entire global market so that efficient warehousing -- no, that's not what we're trying to realize or build, but rather be more efficient -- Rakuten Reward is a good example because it is doing quite well even today. And so we would like to deploy that in the global market. And Viber, among other businesses, can also be successful. Viber is becoming successful as well. Of course, we don't need to connect everything, but that's the way forward as I see it.
[Interpreted] And that concludes Q&A session With Media. So next, we would like to take questions from investors and analysts. [Operator Instructions] We will receive the questions only related to our result. [Operator Instructions] So if you -- so the first from HSBC, Mr. Neale Anderson, could you ask your question?
I had 2 questions relating to Rakuten Symphony fees. And specifically, the brownfield operator sounds out there. So recent media reports suggest that weaker 2G support at Altiostar is delaying rollout. So the first question is, can you comment on that?
And secondly, what do you think the biggest challenges for existing operators integrating open run? They seem to be very keen, but in practice, it seems to be quite complicated. So where do you think the main areas are?
Okay. Tareq, do you want to go ahead?
Yes. So let me address the first question, which is about brownfield. So obviously, I think when it comes to greenfield, we have proven the point that the technology is stable, mature. And I would say it is almost now a -- the standard approach for building a blueprint network to have Symphony architecture and the design of greenfield operators.
Our biggest now -- next approach for growth is to tackle brownfield. What we are really, really excited about is partnership and collaboration with Telefonica. We think -- this is a massive opportunity. And I think this is a big responsibility for us to prove that Open RAN technology, open cloud architecture is not only secluded to greenfield operator. So for us, it's just about scale, putting the energy and resources. And I think the key partnership that we look at is tackling the proof-of-concept market with Telefonica for brownfield proof point.
The second question is what are the challenges for existing operators to adopt OpenRAN technology. I always said that if you look at the strategies for Rakuten, whether it's in mobile or it is in Symphony, the 4 pillars of our strategy, one of the fourth one was, to me, the most critical point is about the organization. OpenRAN cloud architecture requires a specific expertise around cloud and software. These skill sets are the ones that an operator would need to invest in. And I would say it's not necessarily about just the technology of OpenRAN. It's just about modernization of the organization. I'm being ready to approach a new world in which the fabric of the network is driven by software. So yes, I mean this is my answer for the 2 questions.
If I may just add, I think the interest level, as Neo, you mentioned, from big gigantic carriers has completely changed. I think that's because of Rakuten Mobile success. And we proved it is going to work for 4G, 5G, for sub-6 and millimeter wave. And industry research has done so much research about the performance of our network, which is outstanding, sometimes even beating the very big telcos, which is based on the legacy technology. And it is far more flexible, scalable and agile.
So now I think the industries is expecting this stuff. Big transformation is going to take place. Like 1 year ago, they are still kind of hesitant and even didn't want to believe, to be very honest. Now they are seriously considering basically changing their religious belief to depending on hardware-based legacy vendors to the company like Rakuten Symphony.
[Interpreted] Thank you very much. From the Q&A form, there is a question, I'd like to read it out. Astris Advisory, David has asked 2 questions. First, network construction in the fourth quarter, how much funding will that require from Rakuten in this period? Is this JPY 10 billion?
[Interpreted] [indiscernible] was third quarter a peak in mobile losses.
How much -- I think the first question was about how much funding.
Yes.
So the way we structure the contract and the advantages of Rakuten Symphony, it's a completely software-driven implementation for us. So most of our dependency, I think that Mickey mentioned a bit earlier in his opening speeches. We are using system integrator, which is Techmando and Accenture. To do the implementation, our contracts are done back-to-back to minimize any capital expenditure that would inflow from us in the early construction days. So most of our activities is really purely focused on software implementation. And Rakuten as Symphony is not accountable or responsible for the physical build, which is the site development and the construction of the sites. We're accountable for providing software architecture, software integration, IP network integration, radio access software, OSS and the operation of the network. So inflow of cash from Rakuten to support this product is not significant at this stage.
And with regard to the financial forecast for Rakuten Mobile business, there are basically several factors we need to consider. One is, as Tareq has been expanding, we are expecting continuous revenue growth for Rakuten Symphony, which can be turned profitable from the year 1. And the second is how much roaming cost can we reduce.
This is a little bit not under 100% our control because we have requested KDDI to turn off some of the stations. But they have the rights to decide when to turn it off. We have, of course, until the end of March. So the speed of turning off roaming is not only decided by us, but also, it's basically under the jurisdiction of KDDI.
Generally, people are starting to use more data. People started to understand the cost advantage of using Rakuten Mobile. So data volume is just increasing, increasing, increasing, which is good for us in the long term, but that may have a little impact. We do not believe that we're going to do another massive, massive marketing campaign. So generally, fundamentally, financial performance should improve. But there are some still moving parts.
[Interpreted] Okay. Moving to the next question from Citi Group. So Mitsunobu-san, please ask your question.
[Interpreted] So I unmute myself. I have 2 questions and one by one. And the first question. So the 12 months from July and onward, I think the other -- what is the impact of the ARPU and MNP? What is the net increase in the MNP? Sorry, I think I asked 3 questions at 1 time.
[Interpreted] So in terms of the consumer behavior, we don't see any big change, as mentioned earlier. So our native network area and the roaming area, app difference between the 2, I can -- we do not disclose the number, but there is a gap between the 2. Therefore, as we expand our native network area, this will be widened. And the -- from the ARPU perspective, for example, 10 minutes, the free phone. So LTE can be used and also the various bundle service are introduced. So ARPU is increasing from here.
And as for the cancellation of the services, there are some fluctuations, but the -- I think it's moving quite smoothly given the up and down. And after 1 year of the free campaign, we had some ups and downs, but now it's under control.
[Interpreted] What about the MNP?
[Interpreted] MNP, it's increasing. It's growing. So we're -- I cannot say we receive a lot of the traffic most. I think we cannot say that -- if it is the industry data, please refer to that industry data. I'm not in a shoes to say where we received the highest traffic. I think the migration happened from all the players. We haven't seen a great difference, which are the providers. Migration is big. So if you have any other industry data, please refer to that.
[Interpreted] And the second question, in Hirose-san's presentation slide about the Rakuten Bank valuation, the PBL presentation, the material, KakaoBank and others are exemplified like PB 6x to 10x. And my question is this. So the expected growth rate over the past 5 years, Rakuten Bank, the OPM and recurring profit, I think the 3% growth. In the challenger banks, the growth rate is different from Rakuten Bank. So my question here is, how are you going to increase the -- your or the growth rate? And is there any target number of the growth rate? If possible, could you share that information?
[Interpreted] So I mean, this is the challenging bank. I think these banks not generate the revenue as we do. Why are we going to go public. We want to have more capital flexibility so that we can grow our profit. So asset growth. So these 4 banks in the category of Challenger Bank, I think the asset is something we have to highlight and the compliance stability are great. And the Rakuten ecosystem background, sorry, JPY 100 million. But when it comes to the active -- the 50 million or 60 million active users and the basis we have within our ecosystem, given that fact, to be honest, the other future ambition the number of account that we can go on par with the other mega bank. We believe we can reach that level.
So that should be part of our business model. And how to increase our asset size is another important factor. We have to have the adequate capital and not -- focusing on the margin. We have to distribute or take a balance of risks. And then there is a possibility that we can expand and, for example, the buy now pay later, which we haven't focused a lot. But the Rakuten Finance for the buy now pay later can be done at Rakuten Bank. So this is another thing. And we believe there is a great potential to grow our business from this area. So we have been operating quite safely in this capital. The capital safety will be maintained, but we want to have the other ticker, the capital, then we can take the risk for our business growth.
[Interpreted] Next, local management. David, please?
Thank you for the opportunity to ask a question. Mickey, you said earlier that you do not plan on having a big marketing campaign for mobile subscribers. Let's say by early next year, when you have 96% national coverage, what are you thinking about by that time? Will you go all out and try to drive up the subscriber numbers in a big? Way because by that time, you won't have to pay these hefty roaming fees to KDDI.
Second question, if we are allowed to -- a second question is about the IPOs of some of your non-Japan operations, for example, like eBay. Do you believe it is ready for any IPO in the U.S. like NASDAQ after Rakuten Bank?
So again, we do not have a plan. And for deploying massive marketing campaign for Rakuten Mobile, I think we are seeing very healthy, natural growth of the new sign-ups. Again, we are -- we have doubled from previous year. And now I would like to triple it. So this continuous growth is pretty important for us. And then we have to be -- make sure that we do not really get the free nonprofitable users. We want to focus on the profitable users as much as possible, including ecosystem, not just a stand-alone basis.
So now we are doing deep analysis of the data, who is profitable, who is not profitable. And we are going to probably do more personalization of the campaign and so forth. So it depends, of course. I'm not going to say -- definitely, we're not going to do it. If we see that we are 120% confident, this is going to be a massive return, we may. But we are just continuously analyzing. But one thing I can tell you is the feedback from the people who switched from KD and roaming to Rakuten native network is extremely good.
With regard to the IPO of our non-Japanese entities, I will not be -- decline or the possibilities. That's as far as I can mention about it.
[Interpreted] So moving to the next, Kazahaya-san, please.
[Interpreted] So Kazahaya from Credit Suisse. Two questions. First, in your presentation from Yamada-san, talk about the profitability improvement timing, is the Q2 in 2022 that was set by Yamada-san. And so far, it was quite uncertain. So you couldn't clarify this. But this time, you mentioned this time line. So why have you come up with this time line?
[Interpreted] How can we reduce the roaming cost, at which timing, that was unclear in the past. But the base station construction is quite visible today. So now it's clear. And then as of October timing, we reduced the number of roaming. And in the KDDI contract, it will not directly impact onto the P&L after doing some month.
In April next year, we will have another large scale running off. And then -- at that timing, we will see some great improvement in the P&L after the April switch off. And we have been constructing our base station. And then still the network, the cost did increase given that to Asia. But net-net, when we calculate -- so Q1 of the next year will be the bottom. And then from Q2 and onwards, the profitability becomes better. And now we have become confident, and that's what we want to communicate to the investors.
And another point I would like to highlight is Q1 of the next year is likely to be bottom -- And I'm not saying it's getting worse from here. But from here to the Q1 of the next year, maybe the loss would go up. However, it's very small. So this is the line. So this other pace would continue and from Q2 and onwards, the situation get become better. That is how we view.
[Interpreted] May I move on to the next question? I have a question about the card. So I think you announced the midterm plan, the 3 -- triple 3 and in order to achieve triple 3. So what is the most challenging part to achieve these triple 3? That is my question.
And also, this will not finish of your business. After you achieve this, then you will see the next path. When you achieve these triple 3 goals, and what will be the business opportunity after that? Maybe this is still imagination point, if you can share any idea after the achievement of that. So what is your illusion?
[Interpreted] Hosaka-san, please.
[Interpreted] So the reason why we announced this triple 3 at this timing is because -- so Japan is quite lagging behind in terms of cashless payment and the government is promoting cashless payment. And after the COVID situation, we believe the cashless payment would be accelerated. So there might be some cash -- zero cashless payment happening in near future. I'm really confident about that. So the conventional growth will be accelerated.
And what we have experienced in this pandemic is comparing to other companies, we have the -- we have maintaining our GTV and keep growing because the card has been used by our customers and then the number of cardholders reached 1 million in 3 months. So given that pace, I think this trend will accelerate even after the COVID situation.
So the reason why we announced this triple 3 at this timing is because to ask the card growth acceleration is really meaningful. It's not as for the fintech, but it will bring the positive growth to the entire ecosystem of Rakuten, and that will be the trigger. That's why -- then we have to or must achieve these 3, and this is quite likely to happen, and we can achieve it and the 30% share after we receive the 30% GTV share, still the card market is behind. But our service for all the card-related services, after we become here, this will become the standard of card services. And then the -- I think the customer will use our cards more, and we actually feel that from our second card issuance.
And then second thing, looking at the Korea situation today, at the end of the day, I think we can get the 90% share. The card share is above the JPY 70 trillion. And comparing to the other payment, I think the market share would grow up. So the JPY 30 trillion is just a starting point. And then from here, the Rakuten Card will become more profitable and grow with profit, which will give positive impact to the entire Rakuten ecosystem. Thank you.
[Interpreted] So the -- well, Rakuten Card has this medium-term plan issued as well. So at one point, sometime in the future, impact on fintech overall or e-commerce business overall. Maybe if you can share with us any numbers regarding those, that will be appreciated. That's my request. Thank you.
[Interpreted] We'll look into that.
[Interpreted] Okay. We have limited time. So for questions from the investors and analysts next will be the final question. CLSA Insurance, Oliver Matthew please. Mr. Matthew.
I have a question about mobile. Compared to last year, your sales are up JPY 10 billion and your costs are up JPY 54 billion. Could you give us a little bit more explanation what's driving the increase in the sales and in the costs?
So obviously, last year, we had -- we were in the midst of this 1-year free campaign. So fees from subscribers driving up sales. And also, we added the iPhone to our mix of devices. So all those things combined are pushing up sales. In terms of cost, it's -- mainly, the network cost is increasing because of the number of base stations that we have built.
And also, the data consumption is increasing significantly. That's why -- and now we are providing 3 months free, I think, right? 3 months free, is it?
Yes.
And that's -- so in order to recognize revenue, we have to wait for 3 months.
Thank you, Mickey.
So marketing hasn't really changed that much?
Marketing hasn't really changed that much. I mean there are ups and downs depending on quarter from for quarter, but overall, it's -- as Mickey said, we are not running huge marketing campaigns, so not that significant changes.
I'm afraid it is...
Thank you very much.
Thank you, Oliver, for your question. I'm afraid it is now time to wrap up. Mickey, would you have any final comments?
Again, I think it was a very, very good quarter for us. And with regard to the mobile, now we are getting very, very confident that we can rebuild the nationwide extremely good coverage, which is unprecedented in this industry globally and with a new technology. Symphony will be unbelievable business for us. I think that's very, very encouraging. These are the 2 twins of our mobile business. So together, I'm hoping that we will fulfill our kind of the pledge that we're going to reach to 1 month single months breakeven by the end of 2023, which is probably very, very doable. And then after that, this kind of business is going to be awfully profitable.
And the synergy we have been monitoring among the services, including Rakuten Mobile, Rakuten Card, Rakuten Bank, Rakuten Ichiba is very, very amazing. And we also started to be very, very diligent about making every single business we have profitable. That's one of the reason that our -- what we call red business, money-losing business is turning profitable or dramatically shrinking their loss.
Again, with regard to the capital policy, many people are -- many investors are interested about whether we're going to bring the independent subsidiaries, public or not. Again, it will depend on the funding requirements. But I just wanted to let everybody know that we have a capacity to do so if you intend to do so. Of course, there are pros and cons, but I think the value of the portfolio of companies which we own is unbelievably good, including the overseas businesses. So -- and then we will work on how we can be more transparent with regard to midterm the kind of the budget we have internally to external investors and analysts.
Thank you for joining today's session. I hope you enjoyed it and a deepened understanding of Rakuten businesses and ecosystem. It's not so simple, as I assume. But I think the diversity of the business portfolio is our strength. We demonstrated even during the midst of the pandemic. Our business were kind of neutral. Some businesses are going to hit. Somebody enjoyed. So I think that's the strength of the kind of a diversified ecosystem company for online and also for the offline. And our technology is very, very strong. So that's about it from myself. And then I hope we'll see you in 3 months. Thank you very much.
Thank you, Mickey, and thank you to everyone for your questions and time. If you have any further questions, please don't hesitate to reach out. And this concludes Rakuten Group's 2021 Third Quarter Financial Results Conference. Thanks again for joining.
[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]