Rakuten Group, Inc. (OTCPK:RKUNY) Q2 2022 Earnings Conference Call August 10, 2022 6:30 AM ET
Company Participants
Hiroshi Mikitani – Chairman, President and CEO
Kazunori Takeda – Group EVP, President of Commerce Company
Conference Call Participants
Mitsunobu Tsuruo – Citigroup
Yoshitaka Nagao – Nomura Securities
Kazunori Takeda – Credit Suisse
Operator
Good afternoon ladies and gentleman and thank you for joining Rakuten’s 2022 Second Quarter Financial Results Meeting. We have disclosed the latest consolidated financial reports at 3 P.M. today. You can view this data on our corporate website’s page for investors along with the presentation documents used in this meeting.
Please allow me to introduce the speaker Hiroshi Mikitani, First Mikitani will give a presentation about the latest financial results. Miki, please? Can you hear me?
Hiroshi Mikitani
Yes. Good afternoon ladies and gentleman. There have been some staff members that have contract contracted COVID-19. And therefore, this is an online meeting that we have arranged at the last moment. I hope you understand. So without further ado, I would like to start the second quarter financial results meeting of Rakuten Group. So, first of all, highlight of the earnings and then I will update you on the progress made in the different segments.
So highlight of the results for domestic EC ecommerce very steady, very favorable, especially in USA and Europe. Other global EC companies are actually struggling for the most part, but for our group, plus 12.3% year-on-year growth was registered compared to pre-COVID period, 17% CAGR growth has been registered every year. And on a global level Rakuten rewards Amazon and other companies have been struggling during this period. However, our GMS has been quite grow strong. So including payment, plus 23.9%. year-on -year almost 24% is the growth that we have registered for a global GTV and FinTech card, Ginko Bank and the securities, all these FinTech companies had a steady growth in terms of the card holders as well as accounts.
Card shopping, especially by far we’re the number 1, 28.8% growth year-on-year. And for mobile business, we will come back to this but we have cost structure that is highly efficient, and new technology is leveraged. That is really opening up a new horizon for the new era and it is running stably at a very high performance level. And so Rakuten ecosystem is being leveraged and that is very good in terms of winning new customers. Therefore, in the future, we will become the number 1 Japanese mobile player and of course, we will go overseas as well.
And for key KPIs global GTV, as I mentioned already, a trillion Japanese yen, so about almost 24% year-on-year growth and domestic ecommerce GMS of 1.32 trillion, so plus 12.3% year-on-year and consolidated revenue 13.5% year-on-year, excluding mobile 12.6% year-on-year for non-GAAP operating income that is Japanese yen 45.2 billion yen, so very steady. And for Rakuten card shopping GTV plus 28.8% year-on-year for Rakuten card issued almost 30 million is in our horizon in our view. 15.5% growth year-on-year and Rakuten’s security general accounts it’s over 8 million, it is actually 8.05 million which is a growth of 28.9% year-on-year. So Rakuten ecosystem is leveraged in order to increase general account numbers. And 15.4% year-on-year percentage growth for Rakuten bank accounts, so almost 13 million now. So very steady growth here as well.
Now, I would like to focus now on the ecommerce part in Japan 30.2% sales growth and 30.4% growth. So this is the operating income that we have increased and [17.4%] increase in FinTech so operating income 26.5 billion.
For mobile segment, deficit of 124 billion yen and so this will be bottoming out this term or this quarter. And from here on, there will be improvements made going forward. Excuse me. So, network coverage first already we have a 4G 48,000 and by year 2023 it will reach 60,000 stations, population coverage 99% or higher is what we are aiming for and we are on track towards that.
And finally, Rakuten mobile, there has been some major failure or faults in other carriers. And there have been other cases of such failure. But the question then is how can — why are we Rakuten mobile have such a stable network? How is it designed to enable that, let me explain that just a little bit. There are four parts to that one is redundancy in the structure. We’re using the cloud, therefore, this is easily done for us. And everything is using software, therefore, all the components and their performance can be monitored real time and visualized real time. So, monitoring is done real time. And the third point is virtualization. So, various software might go down but replica can be made very easily. And a human intervention is to be minimized as much as possible. That’s our basic stance.
Unidentified Company Representative
And so, in building Rakuten mobile network, we have focused on four primary areas to provide the level of reliability and resiliency that is unparalleled in the world. Number 1 is redundancy. Our network runs on common hardware appliance, and it gives Rakuten mobile unbelievable ability to replicate hardware architecture across all network function.
Number 2 is observability, we are one of the few mobile operators in the world that have the ability to provide new real time latency to observe 1,000s and 100s of 1000s of network functions in our network.
Number 3, which is the major technology revolution that we have done is virtualization. Through software virtualization, we’re able to manage complex network architecture, manage resiliency and deliver better reliability than the existing mobile networks across the world.
And Number 4, our relentless focus on automation, machine driven AI/ML models to do configuration and changes in the network avoid any manual interruption that could happen due to human error. We think this level of reliability does not exist in any of the networks worldwide. That’s what makes us network unique. And we think this is the right DNA and architecture for the quality of Rakuten mobile in Japan. Thank you, Miki.
Hiroshi Mikitani
So later if you have any further questions about this part, please do ask later. And as you might know, 1 gigabyte or less used to be for free for those users. However, as of 1st of September that zero charge will no longer be the case, we are finishing that campaign. And by the end of October, that will be totally gone. Well as of now, in September, on a per user case basis a monthly sales will be improved by more than 50% compared to before. In addition, on a per user basis, the ARPU of course will be increased via expansion of option plans as well as expansion of content services. So these are some of the measures that we’re planning on carrying out to improve the ARPU. So, we will come back to mobile later. So let’s move on.
Unidentified Company Representative
As for the segment profit comparing to the previous quarter 11 billion yen improvement was made. And then the bottom, the last quarter was bottom and then we are going to improve our profitability as we move forward in the next year and we want to make a profit in a single month and that is what we are aiming at.
So before going to the mobile, I would like to talk about the domestic EC and FinTech and as for the domestic EC, as mentioned earlier. So comparing to the year before, we have [Indiscernible] in the domestic EC GMS, which is 1 trillion 315 billion yen. And then more than this GMS growth segment the revenue grew higher and which is closer to 200 billion yen, [Indiscernible]. And among that, so looking at this agreement, operating income it is 220 billion and then they grow higher than the GMS. And then mostly higher than GMS. That’s what I usually talk and this is the golden formula. Now, we are realizing that.
And let me go detail on each business in the Rakuten Ichiba. For the retail industry we have been struggling however, compared to them back then Ichiba grew much higher. And the Rakuten — so the COVID now we see some BA-5 and it spread again. However, comparing to the peak time 2.2% reduction and that is the recovery we made so far. And as for the next super– online supermarket it’s performing pretty well.
And then Rakuten fashion. So the department store and the supermarket and also the specialized stores comparing to them these fashion business is growing pretty well as well. And then Rakuten is a point. So Rakuten EC business the cross use within the Rakuten EC is growing, Rakuten Ichiba and the travel and the users are using the both services and has been increasing by 56.4%. And then, plus Rakuten online supermarket by 30.9%. And the golf reservation site GORA and Rakuten Ichiba grew by 15.1%.
And then hair salon or beauty salon reservation can be made as Rakuten beauty and the Rakuten into the combination it’s 13.4% plus. And then Rakuten Fashion and Rakuten Ichiba cross use grew by 10.6%. And let me elaborate travel more. So domestic, the total reservation, they more over 20% made through Rakuten Travel, that’s our impression.
So 2019, which is a pre-COVID period comparing to pre-COVID period the reservation rate went up by 14.0%, So about 25% sometimes, the Travel around 25% we already achieved.
And then now illustration of the seventh wave of COVID-19. So, we have to monitor closely, we will actually, reservation mainly on the ledger. So, if we see more recovery that this will become much stronger.
And the next is about online supermarket make super and probably I think we have become one of the leading companies in this area and then the GMS is 14.6% plus YoY basis. So what we jointly [Indiscernible] say you as a logistics center and the shipping from here, just focusing on that is 43.6% plus YoY and the goal of the GMS which will be the 100 billion yen in 2025. And comparing to that and the goal, I would like to improve the profitability of the business from here.
And now the logistics sector we have the [Indiscernible] Ichiba and Yokohama in Kanagawa and [Indiscernible]. And in Osaka we have expanded our logistic center. With that the nationwide supermarket we are providing platform to support that.
And next is about fashion. So often, people refer to [Indiscernible] town in this area and Rakuten Ichiba Rakuten fashion combined two of them. So the fashion related GMS total is 266 billion yen and then which is about to reach 300 billion yen. So not just scale, but also we are sustaining the growth rate. So in the fashion industry, so Rakuten presence, become stronger.
So, next is about the logistics. So this is a joint venture with Japan Post as a result, so we can utilize the existing JP network and then provide services as a universal service that’s ready. And the Rakuten super logistics. So, this is our logistics, we have and there are the more than 5,000 merchants are using this logistics, and then we have to reduce cost. So, we tend to use the existing Japan Post system and the logistics.
But recently, JP Rakuten logistics warehouse, which is the RFC. So, we are a direct delivery to the delivery station, which allow us to reduce costs substantially. So, the biggest growth factor is what are we able to maintain this kind of growth rate, and that is to adoption of a free shipping threshold. So, now, 93.3% of the merchants adopted this free shipping threshold. So, our target was above 95% adoption rate, then once I think we want to achieve this before the end of this calendar year at least 95%. And then, as for the shipping other cost, it’s improving, in the Rakuten Ichiba, I should have touched upon this.
And then the merchants who have adopted this comparing to those who do not adopt. So, 17.3 points gross rate become the difference between those two different types of merchant. And this is one of the biggest growth driver of our businesses.
And other internet services, particularly Rakuten [Indiscernible]. So, it’s performing pretty well. And the revenue is grown by 18.2%, which is about 70 billion yen. Unfortunately, as you know, Ukraine situation Ukraine last year situation, due to that? In the Viva, we actually have the 98% penetration rate of the smartphone users in Ukraine diver and in Russia, when many users are using this Viva however, from these two nations, so, anticipated revenue would not be generated given that. So initially we assumed the big profit from Viva however, February and onward, we were not able to generate revenue from here. And if this is excluded, and then it should be about 300 million yen above comparing to the previous year. So we would see some reservation for this to Asians.
And the next is about the investment business and Rakuten capital and Venture Capital is conducted under this working capital and comparing to the competitor to maybe the skate is very small, but about 140 billion yen investment was made. And then the exited amount is about 190 billion yen and the remaining although the market is downtrend, we still have 108 billion yen so I our basis, it’s about 20%. So in terms of our investment businesses, we see steady progress is under the challenging environment today.
Next is FinTech. So if it takes segment Highlands 6.3% increase in revenue and 75% increase for the non-GAAP operating income for this segment. And the golden formula that I talked about is at play. Unfortunately, when you think about GTV a credit card is steadily growing. And so it’s not included in the golden formula but in 6.3% increase in revenue and 17.0% increase in the operating income. So, about 26.5 billion yen.
So, I would say Rakuten Card shopping transaction value is doing very, very well 28.8% year-on-year increase. So 4.5 trillion Japanese yen, almost, that is really by far the largest number I think that we can share with you.
And in the three year period on a continuous basis 25.5% increase and CAGR has been realized. So not just ecommerce, but daily necessities and also housing related or habitation related businesses. Our own growth and I think the two worth of Rakuten is a combination of offline and online and we are really leveraging that and the results are being showing here.
Now Rakuten Ginkgo, we have announced that we will list this, and we have announced that mid to long-term vision as well in March this year 12.3 million is the number but 15% growth is expected to reach approximately 25 million and deposit balance from 7.7 trillion to 20 trillion is the target. When we purchased the e-bank, it was several 100 billion. I think that was the cash balance but then it has grown so much. So I think there’s a lot of potential for further growth and ordinary profit.
In the Q3, 2022 it was about 106 billion, but it will reach to 200 billion approximately, that is the ordinary income and 20% increase CAGR is expected or the target is that for ordinary profit to reach approximately 70 billion. So for Rakuten Bank, for the results of the quarter, I think this is being announced or disclosed on a separate occasion. I hope you will take a closer look at it, but I can say that it’s growing very steadily.
Next is Rakuten Securities. So 8.50 million accounts plus 34.2% year-on-year growth and domestic equities retail trading market share in Japan is shown here. And the share is already 33.5% compared to last year that is an increase of 6.6 points. And asset under management 16.5 trillion, so again, year-on-year growth, so 28.8%. So, the top position has been acquired, and we would like to expand the gap with others.
Rakuten Insurance Group digital transformation DX is being promoted and profit wise, we have been growing very steadily. And for FinTech, well, on the surface, should I say or not, but the balance sheet overall for the entire group is getting larger and larger. That’s one fact. And also, the more capital we have, the more potential that we have for increasing our revenue and profits and income.
So for Rakuten Bank already in July that is last month, we have applied for listing of the shares with the Tokyo Stock Exchange. And for Rakuten Securities Holdings, we are already preparing for the IPO. Therefore basically, in the middle of — during next year, we are targeting for an IPO.
So next is mobile. So as mentioned at the beginning, the first one is about the cost structure, the world first fully virtualized technology, and I will touch this upon later in Rakuten Symphony portion. And the information security has become really important today. This is drawing attention from the world Nokia, Finland and Ericsson, Sweden and Samsung, South Korea and [Indiscernible] China.
So when it comes to Japan and the U.S. so the Rakuten Symphony has the U.S. technology, I think you can think in such a way and with that technologies, Sony, we are trying to do software and we have made that happen.
And the Rakuten Group, customer acquisition power and also the increasing network coverage, which is high quality. So we have been realizing this and redirecting card business and the other card industry have become overwhelming number 1, so we would like to follow the same path in this mobile industry. And Rakuten Mobile with the entrance to the market or the smartphone or the price has become decreased as we move into this market. So Rakuten Mobile, we want to democratize the mobile market that is what we are aiming at.
And then what we announced in July, which is UN-LIMIT VII, and this is the biggest strategy turning point or the evolution in other words. So two and a half years ago, we just started, Rakuten Mobile just started two and a half years ago, and we have to have a user, we need them to use our services. And also, in order to export Symphony technology, it is needed. Therefore, we came up with the board pricing strategy to the end, and these zero end users and we had many of them. But we decided not go with this. So basically, the three segments, we want to focus one is Rakuten Group Ecosystem, who have purchased items in the Rakuten Ichiba.
And using the Rakuten Card we have many of them. So we would add as a point to this so that we can strengthen this know your ecosystem users including myself, many users, many people use the point acquired in ecosystem and pay the mobile fee. So many of them are actually using mobile as a service for free because of using the point and zero end users. But they can become the smart users and the people who use more than 20 gigabyte data or actually there are more users using above 100 giga users. So Rakuten Ecosystems for your customers, and also smart users and then the heavy data users. So these three segments will be our target to increase ARPU. And then price advantage and we want to improve the quality much more and then the marketing strategy and we will try something new.
So, MNO, amount for MNOs our price is very low. And then after that, there are a MNOs other brands, but the in the most price range and the Rakuten UN-LIMIT VII is overwhelmingly the low price. So using the heavy data users for heavy users Rakuten UN-LIMIT VII, which is a single plan it’s easy to understand. So this means let’s say so the download vary the sizeable gain but they usually they use 7 to 8 gigabytes. So it is quite attractive because they don’t have to think different range of the prices. Therefore, in this context, we are democratizing the price and how much data has been, how much data is used the other companies average is about monthly 9.3 gigabyte that is the average of other carriers and Rakuten Mobile which is 14.4 gigabyte. And then the data per person is increasing.
On the right hand, this is about the estimation and this was the provided by Miki and the total data usage will be changing. So the more data you use the higher the app. And cost structure comparing to the existing technology, initial CapEx 40% reduction and OpEx 30% plus reduction we have achieved this.
As for the quality, so this was provided by [Indiscernible] the investigation results, research result data. So comparing to other countries network to Asian, our network quality is very high that is how we are evaluated by this research.
On the other hand, we need to strengthen the connectivity of indoor and then Rakuten Casa, which is the Femto. And now we are installing them, and actually 850,000 Rakuten Casa was installed. And so we would like to cover the higher than 100,000 and then as per for the high floors skyscraper, we see some weak network connectivity that was a feedback we received. So the high rise buildings over 20 floors, we want to use antenna outside the building to cover the network connectivity. And as for subways, so we are standing here above the 95% is already supported, but we are going to support 100%. And then the next spring and onward as for the capacity, we will actually expand sequentially.
And then CapEx 2021, as you can see from the diagram and the basic, the CapEx was 350 billion yen. And then the right to use asset was 147 billion. And then about the capitalization for specified base stations, which was 47 billion, but we have been promoting or progressing. So this investment the amount would be reducing in this year it is about 300 billion yen and then 2023 and onward it will be decreasing.
So this chart is one of the very important chart. So this is based on the application. So this does not include the churn. So as per Tokyo 23 world would have already achieved 9.4% of the application rate. So 9.4% of the Tokyo 23 world population, subscribe to Rakuten, but the coverage is still 85% or some areas less than 5%. So the station will be going up to 60,000. So in each of the prefecture, we want to cover around 99%. So this is a hypothesis if that is the case, and then this application rate would get closer to 12 million people. So this is a very important point. So we’ve only get into this business two and a half years. We have been doing well so far. And then once we achieve the 60,000 base stations and then according to the application or the basis, we want to reach these 12 million people.
As for the marketing, so far, we have been targeting the entire nation. However, we would like to strengthen the region specific to marketing and we did the test pilot [Indiscernible] we see the application rate increase by 24% to 23%. So the advertisement inside the train, and also the hosting events, including these activities or we have been approaching the nationwide but we will like to conduct the region specific marketing as we move forward.
So I talked about synergy with the Rakuten Ecosystem. I think this is important. It used to be 0%. But then it has grown to 11.9% in other words that much people are using Rakuten Mobile and we would like to bring it up to 30%. And I think that is not unrealistic. It is something that we can envision.
And synergistic effects as I’ve mentioned many times Rakuten Mobile subscribers once they become subscribers, a little more than 50% of them actually will likely to purchase in Rakuten Ecosystem or rather 40% increase rather. In any case Rakuten Mobile subscribers, if we get 10% of the total population, then it’s 12 million and then 15% increase in GMS and in Rakuten Ichiba is expected as a result. Their mobile is therefore a prime program for Rakuten overall.
And for among the new users 21% of them are coming in through the Rakuten Mobile channel so to speak, so for continuous growth into the future. Rakuten Mobile will hold the key. And so what specific services do they use? Rakuten Mobile users or subscribers tend to — well, actually, for these users that are new to Rakuten in the first place 60% of those Rakuten Mobile subscribers by in Rakuten Ichiba 40%, use Rakuten Point Card and 20% of those people hold a Rakuten Card now and start using the card. So in one year’s time, more than three services are used by the same person. So what we have targeted was such that it would be reversed of the mobile strategy until recently, but I think this is paying-off.
Now, you might be wondering or concerned about the next item and that is churn. How many have left us? Well, for those users that used to use less than 1 gigabytes? Yes, it is true that there has been some increase in the churn amongst these users. However, about 80% of those people who churn data usage for them was less than 1 gigabytes. In other words, zero yen users are 80% of these people. And also there are some areas where coverage is not perfect. So, but we are making improvements in resolving that issue of coverage.
Therefore, that will be gone soon. And for the paying customers, there is a net increase in such paying customers. What I’m trying to say here is, there is this shift to paid users. So cost wise this is a plus and also profit wise it makes a whole lot of difference. And UN-LIMIT VII was disclosed and then after that, there are 8.3 point increases of the people who are using Rakuten Mobile less than main line and also heavy users using 20 gigabytes or higher has increased by 5.7 points. In other words, they are using Rakuten Mobile in earnest.
And the group challenge going forward is how to win young customers. And again, there is a gross 8.5 points increase amongst those young segments 20s and 30s. And these young people tend to use a lot of data. Some people might use 100 gigabytes or higher. For these heavy data users 2,980 yen per month is what we charge. But in other carriers, it might be 15,000 yen or 20,000 yen that the carrier might charge them for the same amount of data, but 2,980 yen is what we charge. Software is what we use, therefore new things can be tried. ESIM for example, Rakuten Mobile can be activated in about five minutes.
There were some major failure in other carriers and so second line might become a necessity for some people, so activation on the very same day of application. And so ESIM is also very important. If you have two lines of course Rakuten mobile will be less expensive. So make Rakuten Mobile the main line is what I would recommend everybody.
And Rakuten Carrier Email is already started and also officially from October we’re starting these services for enterprise customers but POC is already started and we are steadily winning new corporate or enterprise customers.
Now going forward to accelerate winning new customers number portability is done through two steps or two steps. In other words, you have to go to the older carrier to apply for this switch over but then led by the Ministry of Internal Communication you might see it will be switched to a one -stop mobile number portability procedure and this is a data on churn and of course, before July there were zero yen users but they left us however, that has settled quite a bit already and in November this year or by November it will go back to how it was before and also there will be less churn going into the future.
And as for the profit and loss, as I said before, Quarter 1 was the bottom and as we promised you for Q2, we have improved by 11 billion yen. And so, there are some elements for further improvements. And the so called area and services is now stopped and there is expansion of options services and that is doing very well and also improvement in network translating into subscription acquisition and 6% to 7% of the total traffic is roaming, but 5 gigabyte is the maximum the upper limit and that is one factor behind that we are expanding our own Rakuten Network. So, there will be no such upper limits and roaming cost will be dramatically reduced as a result as well. So, these are the factors.
Unidentified Company Representative
Rakuten Symphony. So, it drew our attention from global market in 2019 world first fully virtualized cloud native network was launched and running on software in other words, aligned with that we acquired Innoeye. So this is a network management or design, software and operation. And then Altiostar [Indiscernible] base station and application related things or signup experiences, which is done by a [Indiscernible] and then the various application including link, the mobile operators in the last year [Indiscernible] cloud architecture, the cutting edge the company evolving. These companies were acquired.
As a result of this is a great chart. So maybe it might be difficult to understand from the investor’s point of view. But they usually operated outsource to other company and partner with them to work however, in case of a Rakuten Mobile, Rakuten Symphony, so they have almost full stock of the software and then a cheap high performing solution. So this is one of the biggest thing that we can highlight and cloud network and various software to be linked on this same word platform. And to users, let’s say charging to users or customer handling interface.
So digital experience, now it’s enriched. And then the overseas like AT&T are paying attention in this intelligent operation and they are actually using this intelligent operation. So, this is the SaaS or software network or the player who can represent Japan and I think we have become that position well today about 115 pipeline we have and then existing customers is 13 among that 101 this is a German company. They are using the Rakuten technology in end–to-end. So this is a big project.
In other words, this is the pipeline by region that boosts the existing customers in pipeline by region. And just for your information this 101 company so the real test, friendly user trial started.
Software, in a real text commercialized basis this is the world first case I believe. And then they’ve achieved the speed which is 1 gigabit per sec and then latency time 3 mili sec unbelievably speed was achieved through the software architecture or sometimes when we — investors ask what is about the Rakuten Symphony’s technology they inquire us and from my point of view, so we have been great at the cost efficiency and the performance. And then AI learned stable operation has been achieved through this technology and overseas in content business.
As you can see from here Rakuten TV, we have about 16 million users and plus 64% YoY and VIKI, this is also profitable business and the number of registered users plus 32.6%, YoY, which is about 60 million and the Kobo, about 60 million and Viber, about 1.4 billion and particularly these days, and we see a good performance in Southeast Asia. However, unfortunately, Ukraine, the revenue is not growing although the number of user has been increasing, but we have to understand the situation and the Rakuten Rewards, and then GMS plus 5%, and in Q2 as introduced to the analyst already. So obviously the US major EC, the providers struggling. However, as for the Rakuten Rewards we grew steadily. In the last month, but the sustainability ESG is a topic before closing the presentation.
So the United Nations Global Compact, we joined this, and the second one is the Ukraine Humanitarian Aid, already as a donation, it went beyond 1.3 billion yen, and that we made this amount of the donation already. And then we have been selected as a constituent of global major ESG indices. So this is a social responsibility as a company, and also well the pride of our employees and also the branding to our end users. So including these meaning this is really important to be selected as a constituent of global measure ESG. So on a continuous basis, so the alternative energy and the shift to alternative energy, including that not just for the Rakuten Group including our partners, we want to promote these are the eco friendly things.
And last but not least. So we want to make further growth toward 2030. And now we are developing the plan to that end. Sorry for a long presentation. This concludes my presentation. Thank you very much. Thank you very much for you listening.
Unidentified Company Representative
Thank you. So this is the end of the financial results briefing section. Thank you very much.
Question-and-Answer Session
Operator
Ladies and gentlemen, thank you very much for joining us on the second quarter 2022 Rakuten Group financial results briefing session. From here on we would like to have a Q&A session with the press. I’d like to introduce the people on stage. Hiroshi Mikitani, Kenji Hirose, Masayuki Hosaka, [Indiscernible], Kazunori Takeda. So these are the five members from the management team. I’d like to now explain how this will proceed. So the question and answer session will be simultaneously translated. Please choose the language of your choice from the menu bar. And please do not choose the mute original audio. During translation domain the speakers volume will go down and the interpreters voice will be the main sound that you will hear and please download the relevant material from the website if you need to look at English material.
And please raise your hand, if you would like to ask a question. If you’re using PC and for smartphones, click on more and then raise the hand using that function. And also make sure that you’re un-muted before asking the question after your name is called. And also for the press, you can actually input your question in the Q&A forum as well which is shown at the very bottom of the screen. And please ask questions regarding the financial results only. And also please limit your question to two and please ask them at one time. If you have any question please raise your hand. Thank you. Mr. [Indiscernible].
Unidentified Analyst
I have one question to Mr. Mikitani, first of all progress mobile business. As you mentioned earlier, there your plan has been discontinued, maybe. But I think the number of subscriber compared to last year is down. So what is your evaluation of the current level of the number of subscribers?
And one other question is Rakuten Bank and Securities IPO, the thinking behind they have been announced already. So apparent subsidiary IPO or its being listed for in terms of governance, maybe the investors don’t like that. But despite that, you’re doing it. And I think the share price is about half of what it used to be last year. So maybe, is it because of the cancellation of the conglomerate structure or what is the reason?
Hiroshi Mikitani
Mobile, as you know, users, there used to be quite a lot of such users, but excluding that about 30% is the growth rate. That is a real subscription base. So of course, we started our network from scratch. So we had to start by offering very generous plans. But we would like to make it more true to life. And so zero yen users excluded it’s 30% plus increase. So it’s not like total transformation of the customer base. But I think the users that we will have going forward will be really sound user, so to speak, for our business. So I think that was a good step. And as I mentioned earlier, there are some differences amongst different areas that there’s more concentration in the urban areas. So area network, of course, will be improved further. And also area specific marketing will be promoted and strengthened. So that 12 million yen, people subscribe, is what we would like to realize as soon as possible.
And Rakuten subsidiary listing , there are different aspects here. I think that Rakuten Group is really diversified now. And each of the companies in the group are profitable. And so, so called internet conglomerate, I don’t think there is any such conglomerateanalysts investors for these people as well. We’re trying to make things easier and clearer to see. So that’s one objective. And Rakuten Bank especially by having more capital, we can actually expand the scope of our business is what we’re trying to realize.
So the interest rate now is 0%. So we want to take necessary measures not to really have too high, much how high risk but a little risk and a little return. Well, we’re trying to make sure that there’s going to be the synergy within Rakuten Group. Of course, the data can be leveraged not about individual brands or shares. But our hotel finance, for example. Rakuten Travel data can be leveraged so that there can be an overwhelming differentiation realized, and Rakuten Mobile data can be used to understand the demographic trends. In other words, data has the great advantage and also synergy with Rakuten Card.
But of course, because we’re talking about bank, so we have to have this arm’s length relationship, and especially for finance FinTech companies, the rigid financial services agencies guidance is there and therefore it is an independent company. And therefore, with all these in consideration, we have decided to have this IPO and security seems similar story. But I think we want to make things clearer and easier to understand. Thank you.
Operator
The next is from [Indiscernible]. Please start your question.
Unidentified Analyst
So I have two questions related to mobile business. And the first question is in your presentation, zero yen termination, and then you mentioned that the profitability improved. What about the range of profitability improvement? Maybe you cannot mention about the absolute amount. So is there any referential data that you can share with us? And then the inflow and outflow flow-in and flow-out what would be your estimation? So that is the first question.
And the second question is about mobile business contribution to other businesses, and you talked about the cross use, and then the, the spending amount is highest among other users. So looking at the mobile business only probably you used to have a negative number, but the looking at the cross use with other businesses, I believe there is some contribution. So if you have any image to share, please let us know.
Hiroshi Mikitani
So could you look at the page 58, 58 comparing to the year before 11 billion yen profit improvement was made and then from November and after. So we had the some cash back, and the point back in September and October, so they don’t have to pay virtually, but the after November, they have to pay 980 yen for monthly charge, and then probably some the churn may happen with that. But we will be able to see a good profit improvement at that timing. In the about one cost. Well, it’s getting expensive and today. So the 7% of the data usage is roaming and then it has become the 6% or so, they use it before that 78% was a roaming the ratio, but now we reduced it to this level.
And as was of the churn so, the roaming, there is a limitation of 5 gigabyte usage. So, if it goes beyond and then the speed will slow down by 1 mega bps, this is a service for the roaming and this portion by reducing the roaming area, we want to eliminate this portion with that we would like to reduce the churn rate. And the reason of the churn there are two things as mentioned in my presentation, first of all roaming area, there is a limitation of 5 gigabyte data usage that is one and the second reason is about even regardless of the roaming network coverage is not sufficient enough.
And then by covering it 99% we want to eliminate this portion. And also I would like maybe to draw attention here. In September ASD rocket satellite will be launched with that from sky or the space. So the for the Rakuten Mobile, even the population coverage is about 99%. But when it comes to the mountainous area or the populated area, they cannot go into that area. But that is not the case to us.
From the geographical point of view, we can cover 100% with this satellite launch. And this is another big differentiation factor. So these are the two problems that we can resolve. And then we can reduce the portion of the churn. And then what will be the battlefield is who can use the unlimited data usage. Who can provide that and then application basis, it went up to 10%. And that is a big reason. So we want to expand this to the nationwide and cover more. So what was your second question?
Unidentified Analyst
Sorry. The second question is about mobile business contribution to other businesses.
Hiroshi Mikitani
We are actually at the quantifying that. But it’s not disclosed to the outside it’s growing largely about so in the future ARPU bases above 1,000 yen or high, I think we can reach that level. So including this ARPU portion and then how should we allocate from the profitability point of view and it’s not decided yet, but so profit contribution from the mobile business is very big and new users to the Rakuten Ecosystem 20% of them are from the Rakuten Mobile and once they join you from the mobile then they will become a loyal user to our ecosystem. So not just with the 12 million users may be to 15 or 20 million users ecosystem, so not just for the 12 million users, maybe the 15 or 20 million users. It has been we’ll be living in the Rakuten Ecosystem. And the mobile with the 2,980 yen and then they have the points like the 1,000 yen or so, so they can use the actually the free for the mobile services because they have a lot of points to cover that. Thank you very much.
Operator
Thank you. Next [Indiscernible], please.
Unidentified Analyst
I have two questions, first about domestic EC, global EC companies are struggling but you’re doing very well. Now I think that is partly due to Rakuten Travel, but shopping EC for example, what is the situation surrounding a shopping EC maybe the numbers might be difficult for you to disclose. But please answer that? And also there is logistics efficiency improvements and I think Mr. Mikitani showed his willingness to do the same day delivery for example, if you have any prospects for that, please share that with us too?
Hiroshi Mikitani
Takeda?
Kazunori Takeda
This is Takeda speaking, I’m in charge of ecommerce. So about your first question about ecommerce. Yes, it is true that, well Travel its back to 2019 level and during the COVID period what used to be offline shifted to online. In other words, people are making online reservations and the number there since we have less constraints, it is increasing and also because of the campaigns by the governments can that is in Japanese, they also had a positive effect. So in the second quarter, this proved to be really positive.
And not only that, when people go out of their houses or travel, ecommerce or you might think that it might become sluggish as a result, but now, actually, during the COVID period, we actually developed this customer base, which is quite strong. And in addition, people experienced the fact that it is very convenient, they’re used to that convenience and that is becoming the norm for many of them as a result in terms of the number of purchases made as well as the unit purchase that they make and they have increased in both and so Rakuten Travel as well as Ichiba Rakuten ecommerce, merchandize are being purchased online and also like leisure wise golf or beauty related businesses.
Again, people are going out than before, for example, playing golf and that is becoming more popular and in beauty. Again, people go out and then they have to take care of their hairstyles, so all of these come into play. And overall ecommerce has grown quite steadily as a result. So that’s what you see in the results of Q2 As for logistics, there are different steps that we have taken so far, Japan Post we have a joint venture with them and as a result, the number of shipment points so to speak, have been increased because Japan Post, post offices are the different locations around Japan and we can cover the entire land of Japan.
At the same time warehouse not just in area but Osaka area or Kansai area as well as in Kyushu. We have different warehouses being built in different regions. So that inventory can be stored closer, physically closer to the destinations the users. So delivery efficiency and speed increase was realized.
And then this direct shipment between the warehouse and the shipment outpost and also last among one mile is the final step. So, we have taken all these steps gradually so, that at the end of the day there will be safe and secure distribution or delivery to the customers. I am not going to talk about the specific period, but in two to three-year period, we will clear all these steps so that ecommerce share will be 10% or higher. In other words, towards that we would like to make sure that logistics will contribute to realize in that goal. Okay, let me add to that one element there is the free shipment threshold was introduced and I think that had a major impact. And with that, of course, there were many various measures taken and so 99% or so has been covered by that threshold.
And in terms of [JORA] included food is doing very well. Fashion in the past I used to struggle a little bit, but Rakuten Fashion now has become a high brand site. So Rakuten Fashion Week Tokyo is realized as well or carried out and that is adding on to that and so 8.6 is the number you see here. What used to be the supply chain issue leading to some struggles in the home appliances segment, but because of the really hot summer there are goods for to prevent a heat or protect ourselves against heat that has added on to that and cosmetics a super high brand cosmetics are already included and people are traveling or going out. So all of these are positives and packaged media. Rakuten Book Network is the wholesale company in that is doing well okay as well as well. And so, all of them are doing quite fine. And therefore overall we are doing very well I would say.
Operator
It is almost time to close the first part. So let us take two more questions. [Indiscernible] please start your question.
Unidentified Analyst
So from April about 220,000 to 230,000, you reduced, is this higher than your expectation or lower than your expectation? That is the first question. And about 230,000 the churned users do you have any message to them?
Hiroshi Mikitani
So well, so general end users, actually they left and among them actually no usage at all. They didn’t use our service app or some of them are so we want to convert the users to paid users. So we accepted a certain amount of churn and also who left the Rakuten Mobile but we are evolving and the 5G is coming. So we are using the cutting edge technology. And you can acquire points among the Rakuten Ecosystem and we increased it. So looking at this in a comprehensive the picture and when the timing comes, I will let those people to consider coming back to Rakuten Mobile. That’s my feeling today. Thank you very much.
Operator
And final question from [Indiscernible].
Unidentified Analyst
I have two questions. One question is so churn after stopping this zero-yen plan, as you explained earlier, for segments other than zero-yen, maybe just partially but there were like 20% or so defecting or churn from those segments as well. So what do you think about those people who are paying but still leaving Rakuten? What do you think? And you mentioned you’re targeting 12 million subscribers, and by when do you think you want to reach that level? Can you elaborate a little more about your targets, please?
Hiroshi Mikitani
Those people who are leaving us or have left us the reasons I already touched on. So maybe there are people who are in the roaming areas, 5 gigabyte is the upper limit. And once they go beyond that network speed will go down. And so maybe that’s one reason for the churn and therefore, Rakuten’s own network has to be built out that should be speed up accelerated. And these people leaving us of course, there are different carriers that they might have gone to Docomo, Rakuten, KDDI.
Of course, there are people who are switching from one carrier to another. But the paying customers, I think there has not been or there is no change from how things were before. And further decline in those segments, actually 97% is the population coverage now, but 99% coverage is what we’re trying to realize in order to keep them with our — in our subscriber base. And as for subscribers, of course, they are expected to grow with the expansion of the population coverage, the build out of the network. And also for marketing, we are having area or region specific marketing strategies. So at the right timing, we will announce other such targets for our new customer acquisitions. It’s nearing 30 million Rakuten Card Holders, and compared to that as well, I think the speed is much faster with Rakuten Mobile customer acquisition, therefore, at an earliest possible timing 12 million or even 50 million is what we’re planning on, would like to reach. But we haven’t really announced the exact schedule for that. So please forgive me, I cannot share that with you. Thank you so much
Operator
So this concludes our Q&A session for the media.
Hiroshi Mikitani
Thank you for joining our live question and answer session on Rakuten Group’s 2022, second quarter financial results. Now we would like to entertain questions from investors and analysts. Please allow me to introduce the people on the stage. Hiroshi Mikitani, Kenji Hirose, Masayuki Hosaka, Kazunori Takeda, these five people.
So, let me talk about how we proceed this Q&A session, and this Q&A session will be simultaneous translated into English and Japanese. Please select the language you would like to hear in your audio at the bottom of your screen. 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 investors page on the corporate site. And for those joining either from their PCB and SD participants I guarantee you will find [Indiscernible] hand to ask a question. If you’re joining from your mobile phone, please tap more and then tap raise hand in order to ask a question.
If your name is called, please make sure your microphone has been un-muted before asking your question. If you are joining by phone, [Operator Instructions]. We will un-mute you so that you can ask a question, and you can also inquire by queue and a form at the bottom of the screen. So if you have any question please raise your hand. Okay, from Citi Group Tsuruo please un-mute yourself and ask your question.
Mitsunobu Tsuruo
Thank you very much for giving me an opportunity to ask a question. The first one is a mobile future profitability improvement outlook. So, looking at your chart today in Q4 a 30% of the loss would become the around 100 billion yen in your chart, so the 20 billion yen, improvement, 25 billion yen improvement so, what will be the contribution fact to make this happen? And what would be your idea specifically the ARPU and roaming cost, how will it be changing towards that? And that is the first question.
Second question is about the free cash flow situation. So in Q2, so, you had a very big negative free cash flow in non-financial areas about the 490 billion yen, how do you see the future what will be your option to resolve that funding option? These are the two questions.
Hiroshi Mikitani
So, as for the specific number, we do not disclose the specific number outside therefore. So, which is about 100 billion yen or so, I cannot mention anything because we don’t disclose information as shown on the chart ARPU improvement. So, because of having zero end user that would happen November and after and then that will be improving after that. However, even today data usage volume has been increasing.
So, we see some natural improvement and the acquisition of subscribers, as I spoke to the media previously, so zero end user excluding zero end user about the 30% plus a profitability had 30% plus increase comparing to the year before and that is another contribution factored profitability and since we launched this UN-LIMIT 7 and we have some heavy users from the beginning and the running cost in Q2. So, the roaming percentage is about 6% to 7%, we are using the KDDI roaming for that, but today it is 6% to 7%. But the action — we have been gradually reducing the roaming usage and that that everything is not reflected into the Q2, I think that is another big factor. And free cash flow, [indiscernible] ask other.
Unidentified Company Representative
Speaking as for the free cash flow outlook. So, they Rakuten Mobile in 23 the profit in a single month is what we are aiming at and that is communicated and of course the depreciation cost must be built so EBITDA or the profit would happen before that. And other business including other businesses and overall cash flow will become the positive. The timing is not so far future. And then the mobile CapEx which is needed before the end of the year was already funded. So from the financial point of view, there is no big the burden. On the other hand, as you know, we have been working on the IPO a bank so the other financial other positions improvement will be done through that. That’s all for me. Thank you very much.
Operator
Thank you. Next Bank of America securities, Nagao Yoshitaka, please.
Nagao Yoshitaka
I have two questions as well. First question, the domestic ecommerce GMS. I think it was quite a steady but can you elaborate on that you didn’t talk about that to a certain extent, but can you be more specific? For example, is it the frequency that is increasing or is it the unit price or ARPU, is it a program that is leading to enhanced frequency. I think other competitors are actually strengthening their programs as well. So were there any impact in that area or not? That sort of details will be appreciated. My second question is the following. It’s also about a mobile, in the past, I think, in the latter half of 2022, on a operating income basis, I think you were trying to be in the black on a monthly basis. But you changed the strategy this time. And therefore, this standalone, profitability schedule or timeline, has there been any change in your prospects or not? That’s my second question.
Hiroshi Mikitani
Okay, so Takeda should answer the first question, please.
Kazunori Takeda
Yes, Takeda in charge of commerce, ecommerce. So you’re asking for more details. So regarding accounts, of course, cross usage and also mobile among others, we see increasing trends there. And for cross usage, I talked about this or we talked about this already, but Ichiba at the very center, there are cross use with other services within the ecosystem. And we’re running through various campaigns to promote such cross use. And as a result, many new subscribers, but not just them, but the wallet share in each of the users have been improved or increased as well. And as for frequency, well, during the COVID pandemic, the users became more loyal to us. They are what we call diamond users, such diamond users are on the increase. In other words, the frequency of purchase is for sure increasing for these people. And especially on a regular basis, we have super sale and marathon campaigns and other campaigns and there’s higher recognition for such campaigns.
And these people are registered every time and such registered users are increasing as well. So overall, the total number of users is increasing the frequency is increasing. And we talked about the different genre or segments where the increase has been witnessed as well talked about that, for each of the areas or segments the per purchase amount per transaction is increasing. So each might be small increase, however, it has added up to a major increase that we have announced. Thank you.
Hiroshi Mikitani
And if I may add, on Page 21 of the appendix I talks about mobile 81.2% is the number that is shown there. So these users are actually purchasing on a regular basis, new customers, or maybe the unit purchase price might not be increasing that much. However, still overall, it is increasing. And there are more and more people who purchase everything online in Rakuten. And so cross use is really impactful in this regard. So Rakuten Point contribution is really big, I think. And for mobile, standalone profitability.
Of course, we have our track strategies for turning into the black of course, there are things that we can disclose and things that we cannot disclose yet. So sometime in the future, of course, we will disclose what we can disclose. And so these are some of the things that we have been doing. And ARPU, the data usage being increased is what we are trying to realize, so that ARPU overall will be increased. And also for enterprise customers, there’s a lot of interest and there are a lot of inquiries. In other carriers, I think maybe the contribution level by enterprise customers it’s not so high. However, when the cost is low for us, our carrier I think this is a really strong, attractive point for potential enterprise customers and there’s a lot of interest, and of course they have ongoing contracts so they can switch over overnight.
However, when we meet with them about one-fourth of the potential, customers actually decide that they will switch to Rakuten and that we have more than 400,000 customers of Rakuten. So we are running our marketing or sales activities, focusing on those customers and the other companies who were not able to do that. They condensed to kind of enterprise contract, or was not really practiced by other carriers. But I think enterprise our corporate market is going to be quite large. So finally, we have come to this stage where we can carry out such as sales activities with the enterprise customers. Thank you.
Operator
Okay, then next is from HSBC [Indiscernible].
Unidentified Analyst
Good afternoon guys. Two questions, please, both on mobile. The first one relates to data traffic costs, I understand that the roaming costs payable to KDDI declining. But previously, you’ve mentioned that the increase in traffic has increased costs. So now it sounds as though you’re aiming for higher values as your data usage is already higher than peers. So can you give us any guidance on how you expect that to evolve?
And the second one relates to that? It’s about 5G. Now, I assume that you would like to move as many users as possible to 5G as quickly as possible, it’s more efficient. Are you able to give any detail on what your current 5G coverage is? And where you expect it to be by the end of the year? Thank you.
Unidentified Company Representative
So the KDDI rolling forecast is a little bit difficult because of that, not only our decision record discussion is KDDI. But our aggressive target is of course, we can reduce as much as possible. But right now, as Miki mentioned about current total traffic is are almost 7%. But ;ole still, some of the total traffic is a fixed percentage, right, the total area is still remaining in the rural area, and also a part of like the inside of building in urban as well. But our penetration, building construction, the antenna penetration, is that going forward to the rural area right now. So a little bit difficult to say right now. But like question is, we want to reduce as much as possible in the near future. It is okay.
Unidentified Company Representative
I think it’s dramatically going down. We do not disclose the number, obviously, data usage is growing. But I think it is going down significantly. But at the same time, we cannot cover too much about details of any agreement. But we have some kind of fixed cost coverage we have to pay to KDDI. And anyhow, it’s going down dramatically. With regard to [Indiscernible] bilateral agreement with KDDI. So please understand that we cannot tell you how much we’re giving to KDDI, I think. But that’s a significant amount. And then it’s coming down dramatically. With regard to 5G, we have build an [Indiscernible].
Unidentified Analyst
Yes.
Unidentified Company Representative
5G video sessions. But please be careful when you talk about 5G. There is two type of 5G one is what we call a 5G with low band like they convert it to 5G and even not really gain any benefit basically. What we’re talking about is a 5G. And we do think this is very, very important to offload the traffic because we have much bigger the bandwidth and this is not only for active mobile, this is also true for other carriers that there is an interference issue with the satellites base station of the satellite broadcasting companies. And we have to be powered down 5G relay stations especially in Tokyo, but that kind of restriction is gone in most of the western part of the Japan and then that will be gone in 2023. So after that, I think we’re going to have no 5G coverage. And then I think we are carefully planning smartly where we want to be with 5G and the traffic wise, this is why the carriers do but it’s not that significant yet. There we have the massive 5G that — so forth, more than 50% of traffic is going to 5G.
Kazunori Takeda
I would add, just telling elaborate about efficiency. For us whether it is 4G or 5G it’s really is not a large obstacle to move customers from one technology to the other. I think we’ve talked about this before the nature of this virtualization of the infrastructure gives really unparalleled efficiency and our ability to fast track the deployment of 5G is also really not a very significant effort. So, we’ve deliberately selected to deploy massive MIMO as a standard technology for 5G and that’s having significant benefit.
But as Miki said, keep in mind that in Tokyo itself, we still need to operate at max ARPU power to realize full efficiency of this 100 megahertz spectrum that we have in sub six. So I think our plan is progressing well, but we need to really remove this restriction from the earth satellite interference to deliver on max capability for true 5G performance in Tokyo area specifically.
Unidentified Company Representative
But that’s just a matter of time.
Operator
Okay. In the interest of time, next will be the final question Credit Suisse Kazahaya, Kazahaya, please.
Takahiro Kazahaya
Kazahaya from Credit Suisse. Mr. Mikitani. Thank you. In the interest of time, I will just ask you one question about mobile in the synergy effects of Rakuten Mobile to the ecosystem is of interest to me. In the media part of the Q&A. You said ARPU 1,000 yen approximately is the number you gave. Now, let’s say ARPU 1,000 yen is the synergistic effect that would be on an annual basis 12,000 yen per person and if you have 5 million and then with the number, it might be 120 billion if you have that many customers, so 1,000 yen, it is based on gross profit or what is the profit there or the expectation that you can draw from this. I’d like to hear more about that.
Hiroshi Mikitani
There are two parts to that and one is ostensive contribution on the surface. That is Rakuten Ichiba, maybe one 1,000 rather 6,000 yen more purchase by one person, and then the ratio would be multiplying that by 10%. So that would be a 600 yen. So that’s one way of thinking. But is it a 600 yen total that translates into profit?
No, it’s not going to be 100% profit. So what’s the ratio that you apply is the question. So gross profit is not what we’re basing it on, but rather operating income contribution, how much contribution is it, is what we are going to or need to capture, on the surface about 50% increase means 12,000 going up by 6,000 yen to 18,000. So, travel card all of these included of course 600. So I think then if you just add them all together, it will be over 1,000 on a gross profit level, but of course, you have to think about the marginal profit before tax how much increase we will have is what we’re really focusing on.
And in addition what is the target that we should focus on this one thing, But setting that aside for now, of course, there are different ways that you can get a profit. Of course, there are competitive situations that was not so clear in the past Amazon live video or doing shopping using Amazon and others are there are different things that emerge that we were not aware of in the past.
So with agreement, of course how we can make contribution to the distribution or the GMS and also opportunities for advertisements is another area. So Rakuten Mobile users, the loyalty level is very, very high, unbelievably high. And therefore, if it’s an increase of 15%, then Rakuten Ichiba, maybe increased by to 20 billion yen to 30 billion yen is what you might get as a result, okay. So, mobile alone on a standalone basis tends to draw attention, but you think you have to think about the profits that you can make in the entire ecosystem and that is a unique strength of Rakuten Group. So, I hope you will give us more detailed explanation in the next briefing session or beyond. Thank you very much.
Unidentified Company Representative
Yes. From next time on, we will try to include that information. Low price is one of course, one piece but was it in September or October move I will have SPA, SPU. So, super point up mobile used to be outside of that campaign, but it will be included. And so, once it is subject to SPU the card, the bank, the security they benefited from SPU super point up and mobile law join that group. So, I think there will be inflow as a result of that mobile joining SPU.
Takahiro Kazahaya
Thank you very much I look forward to the future developments. So, thank you very much.
Operator
So, now, we will like to finish the Q&A session for the investors in the analysts. Thank you very much. We will like to have [Indiscernible] make a closing comment.
Unidentified Company Representative
So, well to be honest, the Rakuten stock price is valued very low. So there are two factor that is undervalued. First one is the Rakuten Mobile to deliver. So investors concern to Rakuten Mobile that is one reason therefore, so this is a profitable business and grow great businesses and I want them to get the confidence. So we will like to enrich the disclosure of the information related to this business. On the other hand, the technology itself will it the very great and then the world mega carriers are interested in our technology Amazon, AWS, ecommerce they have double wheel and just like that Rakuten. The mobile is the Rakuten subscription and symphony, these are the two wheels to run. And that’s what we would like to do in this mobile. And one deal may be a several 100 billion yen.
And what I want you to understand is why Rakuten Mobile is successful with virtualized technology, and please come over to our [Indiscernible] and then you will understand what is differentiate — what is different from others, and basically, the Rakuten Mobile. So, this is a test drive to improve this basic technology and other companies went failure why, why all over them when failure because they do not have the people and also they do not have any test drive only Rakuten Mobile develop technology by itself and then run it and then sell that complete technology to other companies, because we have established this business model and then including the U.S. the world, the large operators are paying attention on our technology and sometimes the operator to criticize our technology because it may disrupt their business, but the one and achieved the latency 3 milli sec and the speed and this is just like a Guinness record result they made. So looking at the fact what they have achieved, this will make a great difference.
And as for the business contract, and if we carry our technology even if we cannot reach 25% it is possible for us to reach around 10% in the near future. And today, what we haven’t covered is that advertisement business, which is a 26%, it’s still growing plus 26% YoY I should have mentioned this. So the entire ecosystem, the source is arbitrage. So where do we generate the source? Is a question. So you can define what do you want to find and easy to purchase? That is one thing, but the biggest thing is utilizing the data, and then develop appropriate advertisement. And we have like 160 or 170 million yen of advertisement revenue to we want to grow it up to 200 billion yen to 400 billion yen it’s possible.
So in order to do so the OTO strategy must be developed with the encoding and say you need super end mobile. So how can we make this business into the profit? I think it’s important to you however, if we can reach that 12 million subscribers or 20 million subscribers, how much the profit can or revenue can we generate it, maybe you can do the math using this spreadsheet. At this point in time, but what we can say is in the past two and half years, we have the less than 6 million subscribers this is quite a remarkable results. And then we have some external environmental factors but please believe in our ecosystem power, then it’s a matter of time that we go surplus, the 12 million and what is very important we have to establish the end-to-end base station that is really important. The coverage is important.
So if we have a good cost structure, it will win. So why Rakuten Card win? I think the same factor applies to Rakuten Mobile why the Rakuten Bank now have the 30 million accounts and the 70 million profit. So Rakuten mobile will be generating more profit than these, the existing businesses and as I mentioned before, the contribution to the entire Rakuten Ecosystem is the profound. So in this context, Rakuten Bank we are going to list the Rakuten bank and so the Rakuten, we are going to the surface how much we are discounted, and so that we can promote the understanding of our businesses among the investors and they having a heavy capital. So we can have the profit contribution above the dilution is possible 30% dilution, and then if we can double the profit, and then we can have a big contribution to the parent company. And also specific capital gain from there will become big. That’s how we see. So, net-net, I will like at the look of business in a comprehensive manner. Thank you very much.
This concludes the Rakuten Group companies 2022 Q2 financial results briefing session. Thank you very much for your attendance.
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