Rakuten sells mobile assets to Macquarie for up to $2 billion

Rakuten Group, parent company of Japan's newest mobile operator, on Thursday shared some – but crucially not all – details of a sale and leaseback arrangement it has brokered with Macquarie and a group of infrastructure investors.

The consortium will acquire a portion of Rakuten's mobile network assets for somewhere in the region of 150 billion-300 billion yen, or US$1 billion-$2 billion. Rakuten Mobile will continue to operate and manage the network assets through the leaseback element of the deal, which has a 10-year duration.

We have no idea how big "a portion" of Rakuten Mobile's network might be. Given the price range ascribed to the deal, it may well be that the companies themselves have not fully worked out the details yet.

Rakuten Group said it will "promptly announce the final amount and other conditions in due course." The firm is due to publish its second quarter financials on Friday, so we could glean more information then, but equally there could be a longer wait if the parties are still hammering out the T&Cs.

While the details of the deal are not fully clear, Rakuten's motivation is. The firm has already spent a huge amount of money rolling out a new mobile network in Japan and although its capital spending is coming down, it still needs to keep investing. And it is not yet profitable. Therefore it is monetising the very assets it is still paying for.

Rakuten has earmarked capex of ¥100 billion (US$684 million) for this year but expects spending to come in at a "subdued level" in 2025, with no significant investment associated with network expansion, it said.

Rakuten Mobile passed the 6.5 million customers mark in the first quarter; its base is growing, but it remains a minnow compared with market leader NTT DoCoMo, which has close to 90 million. It turned in ¥62 billion ($424 million) in revenue during the quarter, an increase of 7.1% on-year, and its operating loss narrowed significantly, but still came in at ¥73 billion, or just under half a billion dollars; it posted an EBITDA loss of ¥33.5 billion.

It has made much of its goal of reaching profitability by driving revenue growth and keeping costs down as its network spend starts to wind up. It is shooting for monthly EBITDA breakeven by the end of this year and annual breakeven in 2025.

The sale and leaseback of its mobile network assets is part of that broad plan.

"I am delighted to announce this innovative partnership with Macquarie Asset Management, one of the world's leading infrastructure investors. They strongly believe in our vision for the future, and together, we've made our financial foundation even stronger," said Rakuten Group chief executive Mickey Mikitani.

"Rakuten Mobile is already well on its way to profitability, and with our new initiative, we will continue to build on this momentum as we aim to reach profitability even faster and become the top mobile carrier in Japan," Mikitani said.

That last point might be something of a stretch, depending on how Rakuten measures mobile leadership. But bringing in some cash for those network assets will certainly help it meet its funding needs in the short term and bring it closer to breakeven.