The Rakuten Group announced today, Wednesday, that it has agreed to export low-cost 5G virtual communications technology to German wireless operator 1 & 1, with a deal valued at more than $ 2 billion.
1 & 1, a relative newcomer to the telecommunications industry, is the first customer to make full use of Rakuten’s virtual network technology that supports 5G connections. Rakuten has received contracts to design, maintain and operate the network.
According to an informed source, the deal will earn Rakuten between 250 billion yen and 300 billion yen ($ 2.29 billion and $ 2.74 billion) over the next 10 years.
The subsidiary Rakuten Mobile researches and develops virtual network technology that is expected to reduce maintenance and operating costs by around 40%. The network operator sees the technology as a trump card for the success of the mobile communications business introduced last year.
Not only does Rakuten plan to take the technology over to its local network, the group plans to make the technology available to overseas airlines as well.
1 & 1 is a mobile virtual network operator that borrows connectivity from infrastructures from other providers. In Germany alone, the company has more than 10 million contracts.
With immediate effect, 1 & 1 wants to become the fourth largest airline in Germany behind market leaders such as Deutsche Telekom with its independent network.
A virtual network defines data processing in cloud software and not on dedicated devices. Lower hardware requirements reduce network maintenance costs. In the US, Dish Network will launch its own wireless virtual private network this year.
Rakuten’s 5G technology was recognized this year at MWC, the Mobile World Congress in Barcelona. The group plans to expand its customer list and generate more than 1 trillion yen in revenue from technology delivery.
Rakuten’s mainstay and financial arm, Rakuten’s e-commerce business, has done well. However, the mobile communications business remains in the red due to investments in network development and sales promotion.
Investments in the wireless business resulted in Rakuten as a group posting net losses in both 2019 and 2020. Currently, the cellular segment is struggling to grow its profits as monthly cellular charges are low, ranging from 2,980 yen to free. Exporting telecommunications technology has become essential for Rakuten to make quick profits in the wireless business.
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