TOKYO -- Rakuten Group Inc. netted a loss of 25.1 billion yen ($229 million) in the first quarter of the year, hampered by its year-old telecommunications business even as its e-commerce and fintech segments brought in a record rise in revenues.
Chairman and CEO Hiroshi Mikitani implored investors to focus not on short-term loss but on Rakuten Mobile's potential to deliver "big profitabilities" in the future. Revenue for the group rose 18.1% to 391.5 billion yen year-on-year in the January to March quarter, which is also the company's first fiscal quarter.
"If we want to have a 20 to 30% recurring profit ratio, I think we can do that. But if we do that, growth will stop," Mikitani said at a press conference on Thursday.
The e-commerce group, dubbed the Amazon of Japan, has taken on incumbents across sectors of Japanese business from retail to financial services, most recently seeking to disrupt the telecommunications sector with a cheap mobile data plan at a flat rate of 2,980 yen per month.
Revenue growth was anchored by the flagship e-commerce business in Japan, with both purchase value and frequency growing by over 15% in the first quarter. Internet services raked in 212.1 billion yen in revenue, a 17.6% raise from the previous year.
Profit for Rakuten's fintech business grew by 23.8% to 24.6 billion yen, as the pace of new Rakuten Card accounts accelerated with 1 million members joining in the past three months, for a total of 22 million.
The expanding consumer base for Rakuten Card contributed as well to growth in the e-commerce, online banking, securities brokerage and e-payment businesses, according to the fintech group President Masayuki Hosaka.
Rakuten Bank, notably, saw increased profits despite negative interest rates delivering sluggish earnings to traditional banks. The number of payroll accounts doubled in the first quarter, meaning customers have chosen the bank as their primary account. New accounts now total 10.52 million.
"We expect to exceed 11 million accounts in the coming months," said Hiroyuki Nagai, president of Rakuten Bank.
New brokerage accounts reached 250,000 in March, totaling 650,000 in the quarter, the company reported. This puts Rakuten Securities in pole position to close the gap with SBI Securities, Japan's leading online brokerage.
Mikitani and other executives emphasized the conglomerate's "ecosystem premium," as investor questions focused on increased costs from building base stations and customer acquisition for the mobile and communications business.
"We believe RCP is going to have a significant impact in terms of revenue projection," said Chief Technology Officer Tareq Amin, referring to Rakuten Communications Platform. "There is about $1 trillion that will be spent on 5G and a good portion of that is the market we're going after."
Despite Rakuten Mobile lagging far behind NTT Docomo and SoftBank Mobile with only 3 million subscribers as of March, Communications Group Chief Yoshihisa Yamada said the mobile service served as a gateway for new members to the Rakuten ecosystem, with 18% of new Rakuten users coming from mobile.
"We expect more revenue from Q2 onwards as base station costs are reined in," Yamada said, adding that the mobile unit aims to break even by 2023.
To reach its goal of building 44,000 4G cell towers, Rakuten raised 242.3 billion yen from issuing new shares to Japan Post Holdings, Tencent Holdings and Walmart. Rakuten shares surged 24.1% last month upon news of the investment.
While Rakuten executives on Thursday said the Japan Post partnership would yield more mobile subscriptions through application counters at post offices, as well as savings from e-commerce logistics, Tencent's new 3.7% stake has attracted scrutiny from Japanese regulators wary of data transfers to China. Rakuten shares closed down 3.64% on Thursday.