By Sam Nussey
TOKYO (Reuters) -Japan’s Rakuten reported a first quarter operating loss of 76.2 billion yen ($564 million) on Friday, hit by its money-losing mobile business.
The e-commerce and fintech group posted a January-March 2023 loss of 102.7 billion yen for the mobile business, although that was narrower than in the same period a year earlier.
Rakuten founder and CEO Hiroshi “Mickey” Mikitani originally outlined plans to become Japan’s fourth major mobile carrier, promising to create a low-cost nationwide 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, often frowned on in other economies, are common in Japan.
Rakuten said on Friday it will sell its stake in supermarket chain Seiyu to U.S. private equity firm KKR & Co Inc for 22 billion yen just three years after agreeing to buy the shares from Walmart Inc.
In net income terms, Rakuten has now lost 735 billion yen in a little over four years, having posted an annual loss for the last four years running, including a record loss last year, according to Refinitiv data.
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.
U.S. dollar-denominated bonds issued in January have an annual interest rate of more than 10%.
The group will continue “acceleration of asset divestitures such as minority investments” along with other capital raising measures, an earnings presentation said.
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”.
Over the last 3 years, Rakuten shares have returned a negative 27%, including dividends, compared to a 52% positive return in the TOPIX index when dividends were taken into account.
($1 = 135.0500 yen)
(Reporting by Sam Nussey; Editing by Christopher Cushing and Alexander Smith)