Rakuten Shares Jump by Up to 16% After Mobile Unit Cuts Losses
(Bloomberg) -- Rakuten Group Inc. gained the most in almost three years after losses narrowed in its mobile operations on a rise in subscribers and telecommunication revenues.
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Shares jumped as much as 16% in early Tokyo trading on Thursday after the e-commerce pioneer said its wireless signups grew 34% in the December quarter to almost 6 million subscribers. That boosted total subscribers for its mobile services by almost 30%, helping the troubled mobile unit log an adjusted quarterly operating loss of ¥68 billion ($453 million). The business had a loss of ¥106.4 billion the previous year.
“There’s a sense of relief to see progress,” SMBC Nikko Securities Inc. Senior Analyst Kuni Kanamori said in a note to investors in Japanese.
Rakuten has been struggling with mounting losses and debt ever since its 2020 foray into Japan’s saturated wireless carrier market dominated by larger rivals NTT Docomo Inc., KDDI Corp. and SoftBank Corp. That’s even as its mainstay internet services and banking arms reported strong profit growth.
Rakuten has been ramping up a marketing push to win more users, and is slated to win a break-even target of 8 million to 10 million subscribers this year, founder and Chief Executive Officer Hiroshi Mikitani said during an earnings briefing Wednesday.
The company has been fighting to shore up finances hurt by five straight years of losses. Earlier this month, Rakuten sold $1.8 billion worth of junk bonds offering a yield of 12.125% — the highest of its kind. It previously sold down its stake in its money-making online banking unit, which listed last year.
The company will “flexibly consider” further asset sales to raise financing, Rakuten Chief Financial Officer Kenji Hirose said. The company is not considering raising funds in a way that would dilute shares this year, he added.
Rakuten Jumps on Internet Services Segment Profit: Street Wrap
The cost to insure against nonpayment of Rakuten bonds with credit-default swaps declined. According to a trader, the indicated mid-price this morning is about 435 basis points, compared with 470 basis points yesterday. Yield premiums of Rakuten’s dollar-denominated bond also narrowed, with spread of a bond due February 2027 dropping about 20 basis points to 544 basis points overnight.
--With assistance from Ayai Tomisawa and Kana Nishizawa.
(Updates to add credit-default swap moves)
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