Telecoms: The two-tier market widens
Communications
Astris expects the strong-two / weak-two divide in Japanese telecoms to persist and likely widen through Q2. KDDI and SoftBank Corp screen best, supported by network-quality-led pricing power and lower reliance on promotional spend to retain subscribers, while 20%+ growth in data centres and Cloud / AI provides an additional offset to core mobile pressure. NTT / Docomo is the key swing factor for the sector, with the gap between Q1 growth and full-year guidance implying a meaningful step-down in profitability as it defends share. Rakuten Mobile is the highest-risk name into Oct as its KDDI roaming footprint is reduced, with the exact post-Sep arrangements still being finalised and network quality the key catalyst investors should track. Given historically low Japanese churn, Astris would not expect a clean read on Rakuten’s post-roaming subscriber trend until the Q3 print in early Nov.
Financials
The shares have re-rated but remain attractive given Rakuten Bank's strong balance sheet and low-cost base with undemanding valuations compared to its Asian digital banking peers. The bank is well positioned to benefit from the negative interest rate policy exit in Japan, with its low LDR, high cash balances, growing loan book and healthy capital ratio. It continues to leverage off the Rakuten Group eco-system, as a low-cost source of new customers; nearly a third of clients use Rakuten Bank as their primary Japanese bank.
Financials
IPO adds an attractively valued Japanese neobank to the globally listed neobank universe; furthermore, the Rakuten Group ecosystem is a powerful tool for customer acquisition and retention. On efficiency metrics, Victor Galliano shows how Rakuten Bank scores well vs. its key domestic peers as well as global comparables. At the announced issue price of ¥1,400, Rakuten Bank’s PBV ratio implies an attractive 25% discount to its core Japanese peer SBI Sumishin Net Bank, for similar ROE.
