Rakuten Group Inc. (RKUNY) reported a robust start to FY 2024, with its Q1 earnings call revealing an 8% year-on-year revenue increase to ¥513.6 billion. The company's strategic project, Rakuten Mobile, is on the verge of profitability and saw a substantial rise in subscribers, contributing to a ¥9.6 billion increase in M&O service revenue. Rakuten's non-GAAP operating income saw a significant jump, with a ¥43.5 billion year-on-year improvement.
The successful issuance of US$2 billion and ¥50 billion in senior notes has alleviated liquidity concerns. Growth was noted across Internet, Fintech, and Mobile segments, with the Fintech segment, including Rakuten Bank and Rakuten Securities, showing notable revenue and profit increases. The company's ecosystem is beginning to enhance both profitability and revenue, with further plans to expand cashless payment services and integrate various financial services.
Key Takeaways
- Rakuten Group's revenue rose by 8% year-on-year to ¥513.6 billion in FY 2024 Q1.
- Rakuten Mobile is nearing profitability, with subscriber growth and a ¥9.6 billion increase in M&O service revenue.
- Non-GAAP operating income improved by ¥43.5 billion compared to the previous year.
- The company issued US$2 billion and ¥50 billion in senior notes to address liquidity.
- Growth was observed in the Internet, Fintech, and Mobile segments, with the Fintech segment showing significant revenue and profit improvements.
- Rakuten aims to increase Japan's cashless payment ratio to 70-80% and plans to expand payment services and enter insurance and banking.
- Rakuten Mobile's EBITDA improved by ¥33.7 billion, with adjusted EBITDA reaching ¥4 billion for the quarter.
Company Outlook
- The company is focused on improving profitability and expanding its core business for mid- to long-term financial soundness.
- Rakuten Mobile aims to increase ARPU through various strategies, including increased data usage and promotion of services within the ecosystem.
- Rakuten is committed to becoming the "Red Hat of the mobile world" and plans to leverage its acquisition of Robin.io to enhance its cloud strategy.
Bearish Highlights
- Despite strengthening the customer base, e-commerce growth has slowed due to price hikes.
- The company is working to optimize marketing costs and focus on daily necessities for positive growth.
Bullish Highlights
- Rakuten Mobile's ARPU has increased to ¥3,068, with a goal to further increase it.
- The company is capitalizing on its Open RAN strategy, positioning itself as a leader in commercially proven Open RAN software.
- Rakuten Symphony is gaining attention and has the potential to disrupt the industry.
Misses
- Specific figures for subscriber trends were not provided, but the company stated that it remains strong with individual customers and highly profitable with corporate clients.
Q&A Highlights
- CEO Hiroshi Mikitani emphasized the quality of services and the company's strategy for leveraging AI to enhance shopping frequency and delivery efficiency.
- Mikitani also discussed the potential impact of private 5G and open licensing on the business's future.
- The company's focus on sustainable growth and quality of offerings was reiterated, with confidence in Rakuten Mobile's software technology being a showcase for its capabilities.
InvestingPro Insights
Rakuten Group Inc.'s (RKUNY) performance in the first quarter of 2024 reflects its strategic initiatives and their impact on the company's financials. Here are some insights based on real-time data from InvestingPro and InvestingPro Tips that could provide additional context for investors:
- The company's market capitalization stands at $10.88 billion, indicating a significant presence in the market.
- Rakuten's Price to Earnings (P/E) ratio is currently negative at -5.48, with an adjusted P/E ratio for the last twelve months as of Q1 2024 at -4.67. This negative P/E ratio is reflective of the company's lack of profitability over the last twelve months, as also noted by an InvestingPro Tip.
- The company has shown a revenue growth of 7.27% in the last twelve months as of Q1 2024, aligning with the reported 8% year-on-year revenue increase in the article. This growth is a positive sign for investors looking at the company's performance.
InvestingPro Tips highlight that Rakuten holds more cash than debt on its balance sheet and has a valuation that implies a strong free cash flow yield. These could be seen as indicators of financial health and potential for investment returns, respectively. Additionally, Rakuten is recognized as a prominent player in the Broadline Retail industry, which may offer a competitive advantage in its market segment.
The company's share price has experienced a large uptick over the last six months, with a 38.06% total return, reflecting investor optimism. However, it is important to note that Rakuten does not pay a dividend, which could be a consideration for income-focused investors.
For those interested in a deeper analysis, there are additional InvestingPro Tips available for Rakuten on https://www.investing.com/pro/RKUNY. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With these insights, investors can gain a more comprehensive understanding of Rakuten's financial position and industry standing.
Full transcript - Rakuten ADR (RKUNY) Q1 2024:
Operator: Thank you very much for joining us today. I would like to offer Rakuten's Group Inc. FY 2024 First Quarter Consolidated Financial Results. So already on the 15:00 hours, we have disclosed the earning call summary. Rakuten Group, Inc. corporate website, please refer to them from the Investors Information page. And you may have not received smooth feed [ph], other video or audio. In the button that is at the bottom of your screen, you'll be able to be redirected to a different server. And also, we have generated a subtitle generated by AI. It has not been edited or confirmed and verified by human. So, there may be some incorrect information in the subtitles. So, I'd like to see for your kind understanding. So, without further ado, I'd like to invite Mr. Mikitani for his presentation.
Hiroshi Mikitani: Hello, everyone. And most of you, I presume, are attending third video of 2024 the first quarter consolidated financial results like to start this presentation. So first of all, the large theme that I would like to deliver to you today in terms of our future, of course, strategic project, Rakuten Mobile, which you have engaged on. And this in terms of EBITDA on a single month turning us black, we are now making a very smooth progress with the profitability. And in fact, Rakuten Mobile, the single, of course, unit in terms of EBITDA, for instance, the acquisition of new customers, the cost, it could be that ecosystem. There is a major contribution made to our ecosystem. And based upon all these and embracing this EBITDA already on an EBITDA basis, we are around the corner in making the business profitable. On top of that, today, I would like to bring to you the overall highlight and segment by segment results and at the same time, financial status quo and a future outlook and a strategy. And of course, in terms of AI and artificial intelligence, how we harness these new technologies, what I'd like to bring to you. So, starting with the highlight of our performance as for the revenue. On a year-on-year basis, about 8% increase was observed of ¥513.6 billion. This is record high for first quarter. Rakuten, Ichiba and Travel, the domestic market was quite steady in its growth. And in addition, the overseas business also made progress in a steady fashion. And also, we have expanded our customer base and also transaction volume or value rather has increased. And as for mobile growth in Rakuten Mobile subscribers boosted. And so, M&O service revenue by Japanese ¥9.6 billion year-on-year was achieved. And non-GAAP operating income has seen a tremendous improvement. Operating income plus ¥43.5 billion year-on-year. So, we have seen improvement. So Domestic EC as well as overseas business profitability has improved dramatically. And also, the Internet services, significant profit improvement in growth. Rakuten Card profitability improved and Rakuten Payment turned profitable. So, at one time there were some views expressed, but for commission, for example, the financial status is quite stable. And so even before compared against the pre-zero commission level, the Rakuten Securities has the profit level back to those levels. And also cost optimization was conducted in Rakuten Mobile. Therefore, the situation has been improving. And as a result, before depreciation, that is depreciation, that is EBITDA is ¥52.8 billion that's consolidated EBITDA. And therefore, cash flow also has improved accordingly. And therefore, well, we have corporate bond issued. We successfully issued US$2 billion denominated senior notes and ¥50 billion senior notes denominated in Japanese yen. And so, liquidity gap for 2025 maturities are largely addressed. So please rest assured. So, I would like to move on to the segment-based presentations, Internet first. So, in terms of the revenue, it's plus by 5.4% by ¥285.5 billion non-GAAP. The operating income is 14.8% positive, so thereby ¥13.6 billion positive. So of course, to a certain extent, the minority investment, there are some, of course, elements that needs to be embraced. And if that is going to be excluded 63.3%, a large, of course, growth has been exemplified by this business. And of course, this is the SPU optimization is one of the bigger, of course, factor. At the same time, in terms of some of the subsidy of this government by the support to have people travel, that has been already concluded. So, there are negative factors, but still we are seeing a large amount of growth in terms of the profitability. So the Domestic EC, on the surface, it looks as though it's minus by 4.7% and of course, ¥1.3 billion in terms of GMS. But we are not pursuing for quality rather than volume. So therefore, there are some sort of the users that are turning deficit, we are going to have a very sound and healthy, of course, customers that generate profit for our overall business. And Rakuten Ichiba, the competitiveness is consistently is very strong. And at the same time, the Domestic EC GMS growth rate is in the quarter on air is 1.5 percentage point improved. So Rakuten Travel inbound, of course, total GTV is now within a lot of inbounds, so plus by 243%. And for advertisement, plus by 7.2%. And Rakuten TV, overseas that is 43.8% year-on-year growth, the amount of users are increasing. So therefore, we have exceeded over 100 million people altogether. And Global II, of course, Rakuten Kobo is a digital book. We have now a total of 65.7 million people that have registered, so year-on-year plus by 6.3%. So, color-based ink, the readers, gestural reader is also very, very smoothly growing and profitable. And also locked in by per, we have increase of 5.4%, so accounting for 1.5 billion people. And what's doing very smoothly, Rakuten Viki, again, we are seeing the number of users increasing by 23%. So, tolling to the amount of 86,8 million people together. So, I'd like to break this down in more detail. So, SPU, the revision of the SPU. So first of all, a unique user -- the number of unique users is growing steadily. And on the right-hand side of the chart is the graph here's the graph. The of course, utilizing other service and being a subscriber of Rakuten Mobile and inclusive of that, we are seeing a reduction on non-contributors. And also, at the same time, Domestic EC non-GAAP, as I have mentioned, operating income, the onetime temporary factor, if you exclude that, then it's increased by 20%. So, interbaseline is 20% growth. I think we'll be able to say that. And also, large competitors' strategy is needed. So, we're putting a lot of emphasis in logistics as well. So, logistics services, by introducing them, some of the merchant compared to non-merchant utilizing, it's a growth by 12.5% compared to nonuser of a logistics service versus our users. And in actual terms, as you can see here. The six large warehouse, out of that, four of them already is now full capacity. And other logistic business, there are various, of course, efficiency and optimization that has been implemented. So therefore, in the future, we are going to foresee improvement of the profitability and also in term GM, as the growth could be quite larger contribution that we'll be able to expect out of. The overseas business, as you can see, it is quite obvious the large improvement being made and the so called in terms of 2.5 billion improvement in terms of operating profit. Next is Fintech segment. Now overall, in all business segments, we have realized increase in revenue and profit has been improved, has been growing in a major fashion. And Rakuten Securities also registered increase. And therefore, the revenue increased by 15.1% year-on-year, namely ¥193,500 million. Non-GAAP operating income increased by 47.4% year-on-year reaching ¥39.3 billion Highlights include a 12.5% increase year-on-year of Rakuten Card Shopping GTV to reach ¥5.6 trillion. Rakuten Securities General Accounts is over ¥10 million now. So last month, it actually went beyond ¥11 million. And also, Rakuten Securities deposited asset is increasing by about 50%. I think it's in excess of ¥30 trillion now. And Rakuten Bank accounts, the total number is ¥15.24 million as of last week, I think. Well, actually, JR-East collaborating virtual bank, I think is making steady progress. And so, and Rakuten Bank deposit balance on a standalone basis has increased 15.4% year-on-year ¥10.5 trillion and directing card shopping GTV that is ¥5.6 trillion and up 19.2% is the operating income margin, which is showing a very strong growth. And non-GAAP operating income is ¥15.3 billion and therefore this is an increase of 22.7% against last year. And Rakuten Securities, the number of accounts is increasing. And NISA accounts, 5.2 million accounts already. We are amongst the top or the top in Japan now in this area. And operating income, ¥6.9 billion, which is plus 18% year-on-year. And Rakuten Bank, this is the highlight of the performance, as you can see here. So, things that I haven't mentioned, ROE, 14.1% and capital adequacy ratio, 10.9%. Therefore, the balance sheet is quite healthy. And Rakuten Payment, competitors like PayPay, D Payment, au PAY, there are many payment platforms. But R Pay has ranked the first, according to MMT Institute. In terms of overall satisfaction, we ranked number 1. Downloading of the apps is quite growing steadily. And finally, in first quarter, we have this operating profit for the first time. And Rakuten Payments and Rakuten Point Business, including these are the numbers that are inclusive of those businesses. And now the forecast or what we expect for the future. Now 2010, that's 14 years ago, the cashless ratio, in Japan was 13.2% or so. But now it has come or close to 40% penetration. And at the end of the day in the future, maybe we will be on par with the Western countries, 70% or 80% cashless payment ratio is expected. And if you look at other markets, Rakuten credit card, cards and Rakuten Bank, debit card included, QR based or barcode based Rakuten Pay. Is there as well Rakuten Point, Rakuten Edy and Rakuten Cash? These are the different payment methods that we offer. There's no other fintech company that offers so many options. And in addition, about ¥30 trillion worth of transactions is realized through these services quite strong, and that is due to the strong teamwork. And in addition to that, of course, we're going to make further improvement of our payment services, but also provide higher value, items such as insurance as well as banking services. So we will continue our efforts so that more people will leverage those services as well. In the near future, what is likely to happen is regarding, Rakuten Card, which has been issued for more than 30 million and Rakuten Card that these people have, they have Rakuten Card and Rakuten Pay functions the integrated. So that there will be more synergistic effects and that will boost the total number of people using the functions. And Rakuten Pay, Rakuten Card, Rakuten Edy, these are to be integrated. And so, and [indiscernible] will be also be available on the same terminal. And Rakuten Card, Rakuten Pay are used quite frequently. But on the other hand, there are high-value services by Rakuten Bank, insurance and life insurance and securities as well, maybe not so frequently used, but higher lifetime value. And as we announced the other day, we're going to have this integration of the Fintech business. We will have reorganization of the Fintech businesses of ours. In doing so, the Financial Services Agency, as well as others will be involved and there will be the wallet and others that will be brought outside of this framework. So, the Mobile segment of our business. In other words, the mobile segment of Rakuten Symphony is included. So overall, the same thing last year, because of the German company business transaction, it is profited by ¥100 billion. So, but in terms of non-GAAP, last year comparison, it is going to be plus by ¥30.7 billion in non-GAAP. So, EBITDA, ¥33.7 billion improvement. So, we have been able to shrink the losses. So, this is the revenue and non-GAAP operating income. So as a group overall, so this is, as you can see here, this is going to be the chart. So Rakuten Mobile, in terms of fixed assets and including that EBITDA last year, the first quarter, it was minus ¥54 billion. And this is, again, Rakuten Ichiba are doing their shopping and transaction and Rakuten Bank being utilized and Rakuten Card, the utilization volume goes up. And those are a large portion of the business, in a quarter by quarter business. This effect is going to be ¥12 billion. So therefore, if you include that altogether, the adjusted EBITDA is on the quarter basis, is ¥4 billion already that have achieved. So, by making this business profitable, Rakuten Group, the ecosystem, will they make it's starting to contribute to our profitability and our revenue. And in terms of Iran [ph], in terms of service, it is going to be ¥36.6 billion, so it is a total of the number of ¥6.8 million. So BCP, the Visa (NYSE:V), the second SIM at a time of emergency. So, the profitability is high. But inclusive of that, we are seeing that average adjusted MNO churn rate is 1.27%. So the other, of course, are on par with other carriers. It is coming to a quite good area. So ARPU is ¥2,024. So, let me proceed and show you the actual scenario of what is happening.
Unidentified Company Representative : Okay. What I would like to draw your attention to is the overall ARPU contribution for the entire group. So, ¥3,068 is what we have achieved so far. Not all are gross margin or profit, however, uplift, all included, then we reach more than ¥3,000 now.
Unidentified Company Representative : We concluded the first and the second phase and now in the third phase. And it is going to make major contribution of our business and to the ecosystem. And three carriers are we're going to be included within this sort of the game of playing with the three carriers. So, in terms of to, ¥680 million to ¥800 million, ¥810 million. And ARPU, of course, MBA, NBAO, MVCV [ph], what we need to do. And on the monthly cost, it's going to be ¥23 billion to ¥25 billion. So, introduction of AI, we'd like to further reduce these numbers. So why it is doing very smoothly and well? It's the roaming, it has expanded. So that inclusive in terms of quality of the communication has improved. So, 99.9%, we'll be able to cover the population. And in terms of the acquisition of the contract from ecosystem, we are now seeing a great acquisition from our ecosystem overall. And in terms of on top of the roaming, what we are pursuing as a strategy is Open RAN and also virtualization. So, around the world, it is highly evaluated and not that alone. The actual, of course, quality survey that has been conducted, many, of course, the item and indices in many carriers, we are a single number one winner of these ranking, especially 5G upload speed, download speed for these areas, we have been very highly evaluated on these segments. And in terms of coverage, how about OpenSignal? Have a no signal availability survey. Out of 100, how many of them with no signal availability? As you can see on the graph, 1.2 somewhat percentage to in the 12-month and plus, we have been able to make improvement by 0.57 percentage point. So, in terms of 77 percentage plus have said that the quality have improved. So, setting the price and fairness, democratization of mobile phone. And at the same time, we are going to establish the most strong connectivity. So, we're working towards the best connectivity. Now the new roaming contract is the basis for the network expansion, which is underway. And platinum band to be realized at an earliest possible timing. In May, already the test run has started, so that we can start commercial operation in June. And then for subways and indoor areas using platinum bound in some cases, we're going to make improvements in connectivity. And 5G expansion will be promoted further. And network density will be enhanced further. And the 5G is plotted here. In Kanto region, for example, it will go to 1.6 times, the coverage as of now compared to now. And Tokai area, 1.7 times, coverage. In Kinki or Kanto area, again, it's expanding. And platinum band, as we have been explaining, you have this diagram in the second box there. We are currently using the mid-band 1.7 gigahertz band radio head, but 700-megahertz compliant radio head will be attached so that we can use it for platinum band as well. And investors might wonder why can this be done at a lower cost, because we are manufacturing this at a new type of factory. That's the answer. And then in 2026, space mobile is going to be used broadband will be used so that we have 100% population coverage. That is our target. So whether you're in Tokyo or in Tsugaru Strait, or in Hokkaido, prairies, or if you're, in the ocean, basically, you will be able to get connected in the case of emergencies as well, and number of users has been increasing steadily as well 426,000 cases in Q1 also has experienced. And since February, we have this family program, the youth program as well as the most recent one, which is the kids’ program that was announced, which were all well received. And Rakuten Card being at the center, there are synergistic effects being felt as well. It's not just about Rakuten Card, but Travel, Ichiba and Rakuten Pay as well. And also, baseball and soccer there are synergistic effect everywhere that we're trying to extent to the maximum possible. So, if you look at the ecosystem overall ARPU contribution is worth about ¥1,055 and ¥9.8 billion push up or lift up in the group profit. So, it will be 2.5 plus. And of course, there will be various services used as Rakuten Mobile as an entry point, for example, plus 53% Rakuten Ichiba annual GMS increase. And also, Rakuten Travel annual GMS actually had 88% increase. And therefore, we have the Saikyo Family program, Youth program as well as Kids program that have been announced. So that ¥3,068 ARPU is what we have now. And so, two years ago, used to be ¥1,045, however, it has gone up to over ¥3,068. And of course, we're trying to improve or increase the ARPU further. And data usage is increasing. That's one factor. We offer only single plan and so the more data usage, the higher revenue. And by people using our services, the convenience on their part will increase. For example, Link, Rakuten Link, threefold increase of the impressions in the past year for Rakuten Link is what we have seen. And also, for corporate mobile, it's not just them using the service, but for Rakuten Group as well as our partners who provide various services, we can actually promote and contribute to those other services as well.
Unidentified Company Representative : Rakuten Symphony the largest sort of a mobile phone trade fair, mobile, global mobile conference. We have ORAN software, which we have announced that is going to be open. And having discussion with many people, Rakuten Mobile success is going to change the status quo and the norm of the mobile phone. And I've been told you already changed the norm, and you had already disrupted the conventional world. And the Open RAN and software also is going to make further advancement. So Rakuten Open RAN software, what are we trying to do is, as you can see, the Open RAN software, there are hundreds of thousands of software that are being utilized, like Linux, Linux, source code to our affiliated companies that we want to make open. And so far, transparency in terms of strategy that we are going to engage ourselves on. So therefore, in other words, Linux in the world of Linux, Red Hat has succeeded in the world of Linux. In terms of mobile phone network, we are going to pursue to become Red Hat of the mobile world. And the other is a cloud strategy. In fact, the Robin.io, which we have acquired, this company in the cloud for the mobile phone network on top of that, the general enterprise cloud is doing very well in United States and Europe as well. And having said that, on top of that, our own proprietary Rakuten 1 Cloud, which we have developed, we're going to multiply or integrate these two in order to convert them as Rakuten Cloud, Domestic Cloud. We are going to launch them. So, to do so, not only cloud, but the Rakuten zone developed generated AI, Rakuten AI, and of course, comprehensive strategy alliance being concluded by with Open AI as well. So, on cloud, we're going to empower AI capability as well. And last but not least, this is how AI is going to be utilized, but our Chief Digital Officer, Ting Cai, is going to describe the strategy later on. But from me, I would like to just give you a high-level image. We have the initiative called 2020 and we made the announcement of the strategy. So, what it means that utilizing AI and leveraging them, specifically marketing productivity is going to improve by 20% and operational productivity improved by 20%. And at the same time, client productivity is going to be made 20% efficient. So Rakuten Ichiba in terms of editing and customer service, copilot will be utilizing AI is already empowered. And we're going to see that further rolled out. So, one example of that is that Rakuten Mobile, where we are today is in other words, at the time of entry, it was a human sort of intensive support. So, ¥2.2 billion support fee was necessary. And utilizing AI by launching services, first quarter, we have been able to achieve a 70% reduction by 989 million. So therefore, Rakuten Mobile not alone, but all businesses will be able to implement them. And at the same time, what we are really trying to do is, for us, the Generative AI, the development of generative AI on top of that, operation will also be made further productive. So engineering code assistance or various documentation, again, it's not manual intensive, but utilizing AI and customer support at the same time, the logistics segment. And furthermore, in the center, it is quite ambitious but utilizing AI, optimizing marketing efficiency and direct business or to our merchant price and optimization inventory will be recommended by AI and optimization of advertisement. And in terms of AI search, you can find by means of recommendation. So that's already the area AIs already have been extensively utilized. So, in the future, U.S. is going to be centered on voice as well. So therefore, the concierge function also further is going to be enhanced going forward. So, this is all I have for you from me. Thank you.
Kenji Hirose: Hirose is my name. I'm in charge of finance. I'd like to give an overview of the financial strategy first. This might be a repetition, but mid- to long-term financial soundness is what we are aiming for on three pillars. Profitability improvement, as Mr. Mikitani already explained, the core business will grow its growth, profit growth will be increased. And so, achieve profitability on annual consolidated non-GAAP OI basis in fiscal 2024. And also, for Rakuten Mobile, monthly EBITDA based annual increase as well as annual basis as well. And efficiency improvement, yes, we have been improving our efficiency and we will make further efforts. And SPU, various revisions will be underway. Marketing-related improvements are being worked on. And also working capital improvement and also cash conversion cycle being optimized. And I was already mentioned and internal cash flow will be increased as a result of that. And by using AI we are going to further improve our efficiency. And financial soundness being maintained for interest-bearing debt, we will increase rather decrease. We have been decreasing that, but we will continue that. And also, proactive debt maturity management is next, which I will explain a little more later but we will take more proactive actions to finance this. So, and we have already done that. And to a large extent, I think this issue or concern has been addressed. And the third one is a credit rating improvement so that we will have a very financial sound financial basis. And let me talk about refinancing risk in 2024 and '25. So, the redemption was ¥321 billion, but we have already addressed them. Redemption, of course, we wanted to redeem 100%. However, there are still some remaining that is ¥145 billion that is still remaining and the funding is on the right-hand side. And so, we have had additional sales of Rakuten Bank and Rakuten Securities shares. And also, we have issued this corporate bond, senior notes issued. And then that's for the 2024 maturity. And ¥400 billion is the amount for 2025, 2 billion U.S. denominated senior notes. And we also have Japanese yen denominated in private placement. So that is ¥350 billion. Now domestic hybrid bonds, the maturity will come in November, December. And ¥76 billion, we will use the products that receive equivalent equity certification. And so, we are addressing that as well. And of course, depending on the market situation as well as other situations, corporate bond type class shares might be issued or hybrid bonds being issued. But we will have this call on the first call day. And past due self-funding mobile segment, free cash flow improved dramatically, EBITDA will be improved dramatically. But in addition, the capital expenditure will be or CapEx will be reduced. And so that is our plan for free cash flow improvement. And Internet service free cash flow, EBITDA will continue to increase and cash conversion cycle will be shortened, so that internal cash will increase. So, these are the measures that we plan on doing. And Fintech, we will, of course, have dividends as well as management fees coming in. Also, so 2024 self-funding will be established. And then beyond that point, we will have free cash flow being realized. And with regard to the project to reduce cash conversion cycle, the entire company has been improving, trying to improve the cash conversion. And so, we're trying to have improvements or prolongance of the payment terms, for example. And so there have been various measures undertaken. And also, at the same time, in addition to the accounts receivable and accounts payable ratio improvement, we're revising and analyzing points program as well. Minimum ¥50 billion non-fintech cash will be generated. And we still have upsides to that amount. So, we're on a path to further soundness in financial basis. Thank you.
Ting Cai: Good afternoon, everyone. My name is Ting. I'm speaking from the Silicon Valley today. After meeting with many companies here, I truly believe Rakuten is in a unique position to develop cutting edge AI technology and to bring the benefit of AI across multiple industries. We continue to push our strategy to leverage our unique data, ubiquitous channel to deliver our flywheel, so we can continue to accumulate our sustainable competitive advantage. While strategy is important, execution is even more crucial. Next slide please. In Q1, we demonstrated strong momentum on all fronts. We continue to scale our deep learning application and shift our first Generative AI application to merchants and continue to develop and incubate our future technology for consumers. Next slide please. And last year, we shipped Semantic search for fashion and in January, we shipped for Ichiba and in 2024, we're going to scale semantic search applications to 10 additional services across Rakuten Group. In addition, we're going to leverage our deep learning foundation to extend from search to recommendation to advertising. Next slide please. And the beauty of Rakuten AI solution is that our solution is so easy that we can enable merchants to use it right away in their existing flow and tours. In Q1, we launched IMS assistant for merchants, so they can quickly analyze merchant reviews and draft responses to their customers and they can leverage Rakuten AI to understand the data and grow their sales. And for advanced users, we also launched Rakuten AI University, so they can learn about Rakuten AI technology and broader industry knowledge as well to for the best of their advantage. Next slide please. In UK, we also launched Rakuten AI 7 billion. As you know, 7 billion is the number of parameters for a large language model and today, large language model is growing bigger and bigger. The largest model today is over 1 trillion parameters. As the number of parameters grows, the cost of operation is also growing and here at Rakuten, we can leverage our data to develop cost effective model. Rakuten AI 7 billion is probably the best cost-effective open model for Japanese language and Japanese audience and recently, Llama launched open 8 billion model and our performance is comparable with that. And in the open Rakuten AI 7 billion performance, even better than the Google (NASDAQ:GOOGL) Gamma 7 billion model. As Miki mentioned earlier, we have a broad portfolio of AI product. We continue to help the entire Rakuten Group to improve its operation whether it's customer support, software engineering and documentation translation and search and advertising and from all experiences to operations. So, we have a lot to come to share with you later. Today, I want to thank everyone at Rakuten to participate in the ionization effort, and I'm very excited about progress and look forward to share more with you later. Thank you.
Hiroshi Mikitani: So, this concludes our financial results announcement. Thank you very much.
Operator: Thank you very much for joining us for the fiscal 2024 first quarter Financial Results Announcement QA Session. So, this will be a QA session for the press. And so, these are the six participants for this Q&A session. Now there are some housekeeping announcements as to the Q&A session. This session will be simultaneously translated between English and Japanese. So please select the language of your choice from the Zoom (NASDAQ:ZM) Navi bar [ph]. And please do not select mute original audio. When the interpreter speaks, the original volume will be lowered and you will hear the interpreter's voice overlaying the speaker. The presentation materials shown have been aligned with Japanese. If necessary, please download the presentation material from the investor page on the corporate side. [Operator Instructions]. Mr. Ono [ph] from Yomiuri Shimbu Newspaper, please.
Unidentified Analyst: So about mobile business, I have two questions. The growth of the users or subscribers is one question. Looking back on the business in April, until the end of the year, I think there were last minute increase for the corporate customers. So, I think that was one of the key drivers. Now family plans like your family, among others, have been introduced. And so, of the growth of subscribers, especially B2C, how much, acceleration have you seen? How do you view that situation? That's my first question. Second question is about your thinking about the ARPU, MNO ARPU and ecosystem ARPU. These are positive numbers that you showed us. Now towards profitability, above 2,500, and I think that is a number. Is that ARPU, strictly speaking? Or is that a correct understanding or not?
Unidentified Company Representative: Okay. So, about this, the subscriber or the circuit, user growth, I think there are three parts. One is corporate customers. One other is new individuals, becoming our subscribers. And the third one is individuals leaving us, a churn that is. And for April, news subscription as well as churn both improved dramatically. So, improvements on both ends. The causes or the factors behind this, family program and the youth program. At that time, kids’ program was not offered yet, because it came in April. But in addition, collaboration with Rakuten Card, functioned quite well. And therefore, referrals are coming, people coming from the ecosystem is one that grew. And also, the network quality and coverage giving people peace of mind, I think they have more confidence in the quality and the coverage now. And therefore, more than the specific measures pushing up this number, I think the overall new subscription, is increasing. And ARPU is your question as well. ¥2,000, well, we want to push it up to 2,500 on a standalone basis, and we will continue our efforts to realize that. For the entire group, however, we're not, doing business on a standalone basis. But rather, once one becomes a user of Rakuten Mobile, Rakuten Group loyalty will increase. They will be more loyal, to the group overall. And so, I think that is a bigger piece or factor. And 1,050, well, I think that is the current number, but group synergies will push it up to 1,500 or 2,000. That is what we would like to see happen.
Operator: So, from NHK. Nishigata.san [ph]. Thank you for raising your hand.
Unidentified Analyst: My name is Nishigata from NHK. So, there are two questions that I would like to ask. The first question, in the financial business, in the restructuring, what are the objectives that you do have? I would like to ask this intent from you. And non-financial fintech, you are working with the other companies, or you may have considered alliances with other entities. So, I would like to see your opinion on this. This is the first question. The second question is regarding mobile. In terms of operating profit, the profitability, when would that be is the question I would like to ask. Thank you, very much.
Unidentified Company Representative: So, well, probably there are several reasons. But one of them, governance-wise, there's a high synergy effect in the financial industry and verticals. Of course, money-related center around on Rakuten Bank, Rakuten Card, Rakuten Securities. And they are supporting these, of course, functions overall. And cross usage is also very large in this segment. So therefore, the corporate governance and business strategy-wise, it's one sort of cluster. Business strategy-wise, it lowers the silos of barriers between different discipline. So that is good for the business. And the other is Rakuten Group as a whole. In a way, it's a new sort of a structure for being a group company, meaning that high synergy effect. And from the investors' eyes, they need to look into financial, mobile, travel, and overseas business, and e-commerce. There are a lot of so many disciplines that need to be followed. It's a lot of hard work. So therefore, to make it into one big sort of a cluster blanket from the investor side, it's easier to see about our business. So that is the reason why we're now working on the reorganization of our company, and we're considering and pursuing this goal. In the Mobile, non-GAAP OI, the timing of when it is going to be profitable, we are not going to make that public. So, I am sorry. I would like to refrain from answering that question. But the answer is I would like to realize that as quickly as possible.
Unidentified Analyst: Non-financial interim reorganization and also alliances with the other entities, what is your plan? If you have a good plan or idea, please let me know. I would love to hear from you. Thank you.
Operator: Next, Mr. [indiscernible], a Freelance Journalist, please.
Unidentified Analyst: Ishino, a freelance journalist. I have two questions. First, in the past few years since the start of the business, in Q1 or right before the Q1, and I think in the Mobile segment, you actually revised the plans. But I think this year, you didn't have that plan change. And, therefore, the SAIKYO plan that you have now. Do you intend to continue that for some time? You have, of course, the Youth as well as the Family. So is it correct to understand that the plan has been sort of crystallized and it will continue? Is that a correct understanding? And ¥2,500 to ¥3,000 ARPU is your target. But I think, when you look at other competitors' ARPU, it would go up by several ¥100. So, ¥1,000 push up is a hard improvement that you might want need to make. So, what is really the progress on that right now?
Unidentified Company Representative : As for the pricing or the plan, cell phone or mobile phone pricing is something that we wanted to make more fair for people to use, especially those that are using a lot of data, unlimited SAIKYO plan, Family discount of ¥2,880 before tax, I think is offered, which is quite attractive in our view. In addition to that, as a major strategy, higher value-added services are to be added. I think that's another aspect that is needed. And Rakuten Link, in the MIC or communication for not just app store, but communication, I think we are, the cabinet has already decided that this will be made more open. And so, advertisement revenue applications in Rakuten Link is effective already, but we have not been able to sell that service to the maximum yet. And therefore, we would like to consider that as well going forward. And the third point is various business deployment using data or leveraging data. In other words, effectively, we will increase the ARPU by doing that. And also going forward, and security enhancements will be important. AI services will be added maybe, is another attractive option that we can offer in the future. Therefore, those are the kinds of services that we would like the people to use. So that will translate into ARPU improvements. And with 5G ARPU will go up, quite a lot because when you use 5G in Osaka area, we're using that or offering that in a full scale. And, of course, the value or rather the volume will increase as a result of 5G being more prevalent. Therefore, wider spread of 5G network speed will be higher. And that means more data will be needed, high resolution will be needed, therefore more data. And so that is what we're expecting and also bundling it with the Hikari service and Turbo will be leveraged in a strategic fashion. So, we would like to increase ARPU in a strategic manner. And so, and my answered both of your questions together. But again, it's been only four years since we started and various services have been offered, but improvements options are being realized and bundling. How we can best bundle services together, is something that we would like to and we plan on carrying out this year.
Operator: So, from [indiscernible] please.
Unidentified Analyst: Thank you, very much for the opportunity. Well, from the past you have been saying the new roaming contractor, KDDI (OTC:KDDIF). On KDDI side, there are some delay that I've heard. And in terms of what you have described, in 99.9%, the actual coverage has been already achieved, meaning that more of all or completely the KDDI network could be fully utilized. And you're at this point in time, but there's still some marginal area remaining is the question that I'd like to ask, number one. And number two, service utilizing AI. You talked about the specific strategy for AI. But behind it, the recommendations or doing something behind under the water is the image that kind of I kind of assume. But the users, various users of Rakuten service. So really something that is quite evident to say, okay, this is what AI is utilized. What kind of service would be available for the user to really appreciate the usage of AI? So in terms of roaming, exactly as you described, we are at that state and are platinum bound to utilize them more effectively. And by 2026, within '26, there is a direct of course, a link from the satellite and that is what we are considering. So therefore, in a way, the easy connectivity is going to be number one, is something that we would like to realize. And also, regarding AI, well, for instance, the past recommendation is more or less, the past purchase history. The recommendation is calculated based on the past purchase, but that was the main gist of it. But the data is going to be fully leveraged in order to evolve the recommendation. So, on a real-time basis, submitting recommendation on real time or simply Rakuten Mobile user, you or generative AI could be utilized at quite affordable price. So that is what we are planning for, is implementation on our part. So behind it, well, it's an operational efficiency. We would like to achieve 20% improvement. And if we can achieve that, it's an explosive improvement in terms of profitability. So somehow, we'd like to make this feasible.
Operator: Thank you. We have limited time. Therefore, we would like to entertain just two more questions from the press. Next, [indiscernible] Watch.
Unidentified Analyst: I have two questions. One is Platinum Band related. You have conducted this testing two weeks ago at the end of April. So, what are some of the challenges that you identified or what are some of the positive feedback that you have now? In relation to that, I think it was an investment of ¥54 billion in 10 years. I think that was a forecast beforehand before. But has that changed or not is my question? The second question also is about mobile, how to maintain customers and increase the stock? When you think about the churn rate, compared to one year ago, churn has come down to about half, which is quite low now. According to what you mentioned, Mr. Mikitani, the Family program is quite effective. That's one factor. Now if you just focus on churn rate coming down, is it because of the effective program that you have been offering? What about the terminal sales? Looking at a separate data sheet, this term will compare to last year year-on-year basis. Maybe the terminal sales has come down. At least that's how I can interpret that. But in other companies, competitors, maybe terminals, they want people to use over a longer period. And so that has to do with the stocking or stocks as well. So, do you see any challenges that requires certain measures to address the situation? Please.
Unidentified Company Representative : Okay. Platinum Band first. Now according to the business growth going forward, that might have some impact. But this is 3 megahertz being the focus, rather limited bandwidth. And focus is more on coverage at 99.9%, population coverage 99.95% or 96% is what we would like to bring it up to. And therefore, capacity, it's not really our primary focus right now. And 1.7 gigahertz, that we're working on, software upgrades have been realized in the meantime as well as uplink, downlink, fine tuning of those. And the effective coverage is increasing quite dramatically as a result of that software upgrade. I think we're doing it ourselves, which is a major factor in our view. And also, congestion, capacity expansion. Again, by having our own software upgrades, I think we can make improvements there as well, which is a major differentiating factor against other competitors. As of now, as far as I have been told with regard to platinum band, the emissions test that we have conducted was a great success. That's my view as well, meaning I don't think there's any challenge. That's how we see it. Now churn, yes, it's improving quite well. One factor there is the network quality improvement as well as the coverage increase. And another factor is with regard to the use of the ecosystem, because I use of ecosystem will benefit the users, we have, people have more awareness about that and the family program at the center, there are several, well, there's only one plan, single plan that we offer. However, there are many incentives that can expand from thereon. As for the terminal sales, frankly or honestly speaking, shim free is the way forward in this society. Therefore, discounting the device, too much discount is what we want to avoid. Of course, there is regulation there as well. But rather than focusing there, even with that level, we need to and we should grow and we need to have a strategy to enable us to do that. And so we want the pricing, the mobile payment to be kept low. So, it's not marketing strategy that depends solely on the sales of terminals, which may have been the strategy in the past. However, rather than that, we want to strike the right balance to optimize the performance revenue wise.
Operator: So, this will be the last question. So [indiscernible] please.
Unidentified Analyst: My name is [indiscernible]. So, this time, it is not included in the financial results. But from May, there is a special Rakuten Campaign. Welcome home, Rakuten Campaign. So due to some net of reason, they have churned and left, but they have returned. And I think there's a special campaign for these people returning. But only about two weeks now. But I'd like to seek how this program is doing.
Unidentified Company Representative: Well, I don't remember the specific number, but it's very well received, very popular. And so many points could be accumulated. ¥2,900 the no limit family plan available. It sounds very attractive and many people are returning.
Unidentified Analyst: [indiscernible] can you share a word or two on this, please?
Unidentified Company Representative: Already had been well explained. But if I can supplement, it's kind of has been pointed out. It just has started the campaign itself. So, we need to further analyze the situation. But the network is doing very well, and the number of subscribers is increasing. And so therefore, the ecosystem, the benefit compared to the past is increasing. And then many people are interested at the moment. So therefore, running this campaign has been launched. So, I believe that more than what we have anticipated, the evaluations are very high. So continuously, I would like to do our utmost. So, thank you very much.
Operator: So that concludes a special Q&A session from the media. We would like to conclude the session. Thank you very much for participating in the session. Thank you.
Unidentified Company Representative : Thank you very much for joining our live question-and-answer session on Rakuten Group's 2024 First Quarter Financial Results. So, this is a session with the investors and analysts. And these are the six members that are here to answer the questions. And there are some explanations needed for the Q&A session. The session will be simultaneously interpreted between English and Japanese. [Operator Instructions]. The presentation materials shown have been aligned with Japanese. If necessary, please download the presentation materials from the investor page on the corporate site. [Operator Instructions]. So we now would like to open to questions from the analysts and investors. So, first question comes from CLSA, Oliver. Please make sure that you are unmated and then ask the question.
Oliver Matthew: Thank you. I have a question about the e-commerce market in Japan. What kind of industry growth you're seeing? And I see you mentioned the GMV declined. What is your outlook for GMV growth? And finally, you mentioned there are some unprofitable customers you are getting rid of. Could you tell us a little bit more about this customer group and how you determine they are unprofitable? Thank you very much.
Kazunori Takeda: Takeda from in charge of e-commerce. So, regarding your first question, in this term, the trend that we see is in terms of the customer base, the foundation has been strengthened, quite a bit, and we are very relieved. And many people will make purchases on our platforms. And so, this is something that we want to see continue into the future. But since last year, there has been various price hikes, especially home appliances that are higher priced. People are refraining from buying those home appliances. And in the past, there have been promotions done so that people see the prices be more reasonable or affordable, however. And we have actually optimized our marketing costs among others. And but actually, so the growth has come down, has been reduced. However, in addition, aside from those, for daily necessities, including food, it's a positive growth against last year as well. Against Q-on-Q against last year, this equivalent quarter, it has been growing. So, in Japan, especially food has not seen, high percentage of e-commerce in the overall market. So, hopefully, the merchants will grow in this segment.
Unidentified Company Representative: We did this rule change of Super Point Up program. And also last year, we had a huge subsidy for travel from Japanese government, and that has been kind of gone. And we are seeing a very strong fundamental growth as a matter of fact. So Q3, Q4, we're expecting, we're going to start seeing the growth. On top of that, all these UX improvement, including AI and the fact that we are really trying to enhance the synergy with Rakuten Mobile and e-commerce is getting stronger and stronger. So, we are now shifting basically from heavily dependent on just points, which we are kind of to be very honest, we started to really look into who we are making reasonable return and who we are losing continuously, these people may be just chasing after the points and everything. This is not only for e-commerce, but including credit card and banking and everything. So now we are optimizing our marketing expense and investing into the healthy user, which we will make of course, it's very convenient for them to buy but also making for us reasonably good revenue as well. So, we are very, very confident. If you look at over two years, I think we are still stronger than our competition, as a matter of fact.
Operator: So, HSBC Securities, Neale.
Neale Anderson: Two questions, please, both on Rakuten Symphony. The first question is, are you able to give any guidance for revenue growth, for this year? And the second one, it looks like it's still difficult to convince existing operators to adopt Open RAN, technology. So, I wonder if there's any technology changes or anything else that that might change or accelerate that coming up. Thank you.
Unidentified Company Representative: I think, the fact that, we started to kind of open license our source code. It's getting a very, very strong attention from many players all over the world. And this is probably one of the biggest disruption we want to make. Because now, because of the success of Rakuten Mobile, all these operators, if you ask CEOs, they are convinced that Open RAN is the only future for them. Because as far as you use legacy RAN, legacy hardware, it is going to be very difficult to use AI to optimize your operation, and also it is very difficult to use AI to reduce your cost. The movers’ law doesn't apply to legacy platform. So, they are convinced. But at the same time, it is not easy for them to just get rid of everything and just jump on to, let's use ORAN. It takes time for especially big players. But even if you ask all these CEOs, they are very, very convinced. But what we have decided to do is instead of selling our ORAN software to our network clients, we said, even our competitor, you can use our source code. And then this is very similar to Red Hat's strategy. And I have been talking with all the cloud players, all the big IT companies, all the CEOs, and they are extremely intrigued. Because now everybody is kind of developing the same thing, right? Ericsson (BS:ERICAs), Nokia (HE:NOKIA), Samsung (KS:005930), Mavenir, everybody is trying to develop what we have already developed. And factually, you may want to check, but we are the only company which have Open RAN for 4G. Other companies are developing 5G, but they don't have 4G, which is much more complicated than 5G, as a matter of fact. And then they have no plan to build 4G software, but they need 4G software. If you wanted to bring down TCO down, you need to have 4G and 5G because otherwise it's going to have a legacy 5G and Open RAN 5G, it's going to be redundant. The beauty of Rakuten Mobile is our 5G and 4G lives on the same hardware, just on the same radio software, right? So that's so powerful. That's why our network quality is very, very superior. And everybody started to realize, oh my God, this is the future. But then we're looking for, okay, I need to test this, I need to test this. Yes, it will take time for big guys to completely replace their legacy platform. But it is now, what we told to them, okay, we're going to open source. Some, even the government wanted to have our source code, right, because of the security reasons. Department of ABC, Department of XYZ, they need wireless access. And wireless access has been a black box for everybody. So, we are going to open up this black box to basically not to everyone, but most of the players, they can use source code. They will pay us a membership fee, and they will pay as they scale, which is going to be much more economics for them than developing what we have already developed. So, this Open RAN, I should say Open RAN strategy, and why we can succeed is we are the only 100% commercially proven Open RAN software company in the world, in Japan, in Germany, and we have tested in 25 countries. We have tested interoperability with almost all cloud, almost all OS and many, many radio unit hardware’s. So that's we are really trying to make huge disruption for Open RAN. So, keep tuned, right? And we are super excited. And with regard to the overall revenue of, Symphony, of course, if you sell the hardware, it is going to be pretty big as a matter of fact, but that's not really so profitable business for us. So, we wanted to refocus just on software and selling software for, Robin.io, which we are going to rename it to Rakuten Cloud, very good. OSS, very good. And finally, RAN has been moderate, but the interest rate is very strong. But with this new strategy, I think we will become the biggest disruptor in radio industry.
Operator: We have limited time. Therefore, questions from the analysts and investors will, the next one will be the final question. So [indiscernible] from Bank of America Securities.
Unidentified Analyst: Thank you. I have two questions. First is about mobile business, the subscriber trends, January and March period for individual and corporate customers, what are the situations for new subscriptions or subscriptions overall? And April onwards, I think you said that things are quite growing steadily. So, what is the expected net increase in April to June? What is your expected rate? Do you foresee acceleration there? So that's first question. Second question is about a different segment, which is e-commerce. Timu is coming from China and competitors are strengthening their membership. And I think there is a return of the momentum, so to speak, of your competitors as well. Therefore, the domestic e-commerce competitive landscape, how do you view that now? It's my second question.
Unidentified Company Representative: Unfortunately, individuals and corporate customers or subscribers, we don't announce that. But individuals is where we are quite strong at. At the same time, BCP, we intentionally exclude that portion. BCP is for example, if something is wrong, goes wrong, you still can have this second shim using Rakuten. So, in terms of lifetime value, the individuals and corporate, actually corporate customers has higher lifetime value because we don't need to give them points. That's an honest answer. And the churn rate is very, very low, extremely low. In case of other competitors, I think the network cost to begin with as well as the fixed cost was quite high. Therefore, maybe their formula would be different from our formula, the calculation formula that is. But in our case, the profitability of our corporate customers, especially in terms of LTV, it's very high. And April and June timeframe, basically for corporate customers, there was this last-minute demand at the end of March. So that was in fact the case. But it is going quite steadily and growing well. And individual customers, I think there is an acceleration going on. I think you can see it as such. Yes. And as for e-commerce, China, the transboundary EC e-commerce, I think it depends on how you view it or think about it. In the past, there were situations, for example, companies starting with W, for example, offering very low price on services popular among young people. However, didn't take root quite easily. So things did happen. And I think, maybe we don't need to compete against those people. Lower price, not high quality. Well, that's not how we think, but rather high-quality experience with Rakuten is what we want people to experience. And people who value the ecosystem of Rakuten is what we would like to approach, providing them with high quality services, high quality, opportunities for shopping, for example. That is what we would like to base ourselves on. That's our approach. Now our competitors, of course, are providing good services. I'm sure they do. And so there should be a friendly competition, so to speak, but including mobile business, these comprehensive capabilities that we have in the mid- to long-term will win much, larger numbers of loyal customers. That's our view. And AI being leveraged using data is something that we can use for more frequent shopping by customers. And also in regards to sustainability, the delivery services can be made more efficient. And what's more, most of all, you know, Rakuten Mobile users shop 55% more, likely to shop more, 55% in Rakuten Ichiba. Therefore, we're looking at the entire capacity or capabilities that were power, providing stable services so that people can feel this peace of mind in doing the biz, purchase, making purchases among others. It's not just about top-line growth that we're after, but rather we're after quality. I think we have entered that phase of going and pursuing quality.
Operator: This concludes our Q&A session with the investors and analysts. Finally, Mr. Mikitani will say a few words in closing. I didn't have anything prepared.
Hiroshi Mikitani: So once again, due to your cooperation and support, Rakuten Mobile is now on an upstream wave and trajectory. And this is a good experience on our part. So, the superficial GMS and superficial sales, we're not going to go after those numbers alone. But mid- to long-term, more sustainable journey or trajectory needs to be created. And that I think is an important aspect of our business. Financially speaking, of course, refinancing is now succeeding at the moment. And internal cash flow improvement. Again, since our foundation, it has been a strong momentum. We have been able to respond to that quite effectively. So, the financial sort of concerns, so to speak, is now gone. And therefore, in the future, we would like to accelerate our speed for growth. And that is, of course, our ambition. But in terms of the quality, we'd like to put more emphasis in the quality of our offering. And the strategy regarding open run, we hope that you would take a close look and be tuned in terms of what we are trying to do. The Red Hat sales, a few years ago, it was ¥2.5 billion. But market cap is 3 trillion close too as of now. So therefore, operating system and RAN, the software, it's a different world. But in various devices, it's going to be connected to the network. So, the most important area, of course, is the RAN. So private 5G is coming and within that, the open licensing strategy that we have is indeed, if it does succeed, it is going to be a big turning point, an inflection point for our business. In a way, Rakuten Mobile have two roles to play. One is a business when you're running soundness with business. The other is our software technology. It's a test case of our software. It's a place to showcase the effectiveness of this capability. So, by succeeding our software business also would grow in the future. In Japan, it's a very unique positioning that we do have in the Japanese marketplace. So, I hope that you will take be tuned and take a close look in terms of activities. So, thank you very much for joining us today.
Operator: That concludes Rakuten Group, Inc. 2024, the first quarter financial result presentation. Thank you.
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