A new kind of telco? How Rakuten is pursuing economies of scope
New technologies, together with a supportive policy agenda and more flexible spectrum licenses, are lowering the barriers to entry in telecoms, while cutting the cost of connectivity. These trends could give rise to a new kind of telco, as exemplified by Rakuten Mobile in Japan and Reliance Jio in India. Although global internet platforms, such as Google and Amazon, are unlikely to expand deeper into consumer connectivity and risk a backlash from partners and regulators, smaller digital commerce players could enter this market as they push for an advantage in economies of scope against the economies of scale of the internet giants.
Rakuten’s push into mobile telecoms is part of a broader strategy to build deeper data-driven relationship with consumers in Japan: the chart above shows the central position of mobile connectivity within the large ecosystem of services it offers its customers. At the heart of the company’s strategy is a reward programme, which encourages consumers to use its shopping, content, and online banking products. As consumers use the same ID across 43 different services, Rakuten can award them loyalty points each time they buy something within the ecosystem. Presenting its financial results in November 2020, Rakuten Mobile estimated the total value of this membership (lifetime value minus customer acquisition costs) was 7.8 trillion yen (almost US$75 billion) at the end of the third quarter of 2020.
Rakuten’s focus on maximising customer lifetime value across a broad portfolio of services points to how telcos could build deeper and more valuable relationships with consumers.
See our in-depth research on driving consumer revenues:
Commerce and connectivity: A match made in heaven?
Consumer strategy: What should telcos do?
Reliance Jio: Learning from India’s problem solver
Cloud gaming: New opportunities for telcos?
How telcos can flex their physical strength
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