With three greenfield operators - Rakuten, Dish and 1&1 Drillisch - at various stages of deploying their open RAN, cloud-native 5G networks, 2022 could turn out to be a pivotal year for the mobile telecoms industry. However, all three will need to overcome significant challenges during the year.

Rakuten: Subscriber Growth Challenge

Rakuten’s most pressing challenge is to ramp up subscriber growth and demonstrate that an open RAN, multi-vendor network operator can compete against incumbents in a very competitive and mature market. The operator maintains that it will break-even by the end of 2023. Using a conservative target of 20 million subscribers, Counterpoint Research estimates that Rakuten needs to at least double its 4Q 2021 subscriber acquisition rate consecutively every six months in order to do this (Exhibit 1). This would involve adding more than 4 million subscribers in the last quarter of 2023. This can only happen with a concerted marketing campaign - which costs money!

On its earnings calls, Rakuten has repeatedly stated that it has no plans to initiate a marketing campaign.  Counterpoint Research speculates that there may be several reasons for this:

• Network coverage - despite reaching 96% 4G population coverage, it still lags its rivals, all of whom offer 99% coverage, perhaps a deciding factor for customers who frequently roam outside Japan’s metropolitan areas. Also, some cell densification will probably be required to iron out any remaining network problems. Clearly, the last thing Rakuten needs is a backlash from consumers if coverage and reliability are not up to scratch across the whole network!
• High capex spending – despite plans for an IPO of its banking business plus some investment asset disposals, Rakuten’s finances are already stretched due to high mobile infrastructure capex. Success in the retail market will require a lot of investment and an expensive marketing campaign at this time might not go down well with the financial markets.

Exhibit 1:  Subscriber Growth Path to Reach Break-Even by 2023

As a result, Rakuten may be biding its time. Nevertheless, at some point it will need to commit to marketing if it is going to have any hope of achieving success in the retail market. Although it offers the lowest-priced data packages, particularly for high data users, lower pricing alone does not seem to be sufficient to attract customers in their droves. This may be due to the lack of marketing but also because the number of customers interested in high-data packages at present is limited. However, this will inevitably change with the transition to 5G. And Rakuten is confident that it will benefit, as it believes that it will be able to offer much more competitive pricing than rivals due to its network cost advantages.

Dish: Imminent Deployment Targets

For Dish, the major challenge in 2022 is network deployment. In fact, network planning and deployment is a major challenge for any greenfield operator, whether traditional or open RAN, with many factors, for example, spectrum availability, outside their control. In addition, negotiations with tower companies - often involving 20-year leases - are complex and invariably take longer than expected. For greenfield operators deploying new, untested technologies, there is the additional challenge of integrating and optimizing all the new infrastructure.

At its recent earnings call, Dish maintained that it will satisfy regulatory requirements and launch commercial services in all its 27 markets by the 14^th of June. However, with just over 10 weeks remaining, this looks increasingly unlikely. Counterpoint Research understands that Dish’s agreement with the FCC makes allowances for issues outside its control - such as supply chain problems - which would allow for timelines to be adjusted. An FCC extension therefore looks likely!

1&1 Drillisch: At the Network Planning Stage

Meanwhile Drillisch also looks as if it will struggle to meet its 1,000 radio site deployment target by the end of the year. The German MVNO has a regulatory requirement to provide 25% population coverage by 2025 and 50% by 2030. A complicating factor is the expected auction of 800 MHz band spectrum in Germany in 2026. Acquiring some of this low-band, high coverage spectrum would help Drillisch reduce its number of radio sites. However, there is no guarantee that it will be successful. Clearly, this makes business planning more difficult and may lead to additional delays.

A Window of Opportunity?

Greenfield operators have a window of opportunity to leverage their network advantage to capture 5G market share. However, with legacy CSPs fast migrating to cloud-native 5G, the clock is ticking for all three.  Rakuten has barely started mainstream deployment of its 5G network while the other two are still on the starting blocks!

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