Although Europe's four major telecom operators – Vodafone, Orange, Deutsche Telekom, and Telefonica – had signed memorandum of understanding on the implementation of Open RAN (O-RAN) based networks in Europe in early 2021, Rakuten Mobile's ongoing operating losses have put uncertainty to O-RAN's future.

Rakuten Mobile is the only major telecom operator to adopt the O-Ran architecture for its 5G network, but the financial results of the company for the first quarter of 2021 showed an expansion of 265% on year in its operating losses to JPY97.2 billion (US$880 million), the largest in the past five quarters.

The company's operating margin also reached negative 141.7%, down 77.4% on year.

However, Rakuten Mobile's revenues still grew JPY19.1 billion and 38.5% from a year ago to JPY68.6 billion for the first quarter of 2021. The figures show the company has continued to see its mobile business growing, but the high costs from its operation kept the company suffering losses.

Theoretically, O-RAN's architecture is able to cut operators' capex by 40% compared to the traditional method and 30% in terms of operating expenses, but Rakuten Mobile has continued to experience losses.

Digitimes Research believes white-box equipment and virtualized networks from O-RAN can cut expenses for 5G network establishment and its afterward operation, but some hidden costs may still influence the operators.

Since traditional RAN system is usually handled by one contractor and all parts including RU, CU, and DU, can all be integrated by the contractor to reach optimization, but white-box equipment is all offered by different suppliers, resulting in higher difficulties to reach optimization and may require more time to conduct tests.

Although Rakuten began deploying its 5G network in Japan at the end of 2018, the company has been seriously behind in establishing base stations and needed to sign an internet roaming agreement with competitor KDDI to offer its customers better connections.

The company's schedule to begin the operation of its 4G/5G networks has also been deferred many times, with Japan's Ministry of Internal Affairs and Communications even demanding the company to submit an adjusted plan. It showed using white-box equipment to establish 5G network could impose extra time and operating costs, which will be devastating to companies.

Disunified settings and algorism among white-box equipment sets offered by different suppliers also cause another issue to optimize the network. Comparing the high quality of Internet offered by Japan's four major telecom carriers NTT docomo, KDDI, SoftBank, and Rakten Mobile in 2020, Rakuten Mobile was only ranked at the last in terms of transmission efficiency and users' satisfaction.

Rakuten's business strategy of trying to become a price killer in Japan's telecom market has also not achieved much success. Despite its keen promotion of providing free services for the first year and a package more than 70% cheaper than competitors, the company is only able to attract around four million new users or 2.1% of nationwide mobile users, since it began offering the plan.

Because of its weak operation, some market observers believe Rakuten Mobile may step out of the telecom industry, while telecom operators have also started losing confidence with O-RAN architecture, especially about whether the macro cell is able to fully support 5G public network demand.

However, Digitimes Research has seen more companies pushing O-RAN for private enterprise networks or a replacement of small cells. Since private enterprise networks still require some time to take off, while small cells only account for less than 10% of the whole RAN market, if O-RAN is being positioned only for niche applications, it may undermine its related ecosystem and long-term development.

The memorandum of understanding signed by the four major operators in Europe is meant to give a boost to O-RAN's momentum, but whether O-RAN could obtain support from users will still need to be watched.