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Japanese OTT communications app Line has launched itself as a mobile virtual network operator (MVNO) in Japan. Line will offer affordable data SIM cards and smartphones with unlimited usage of Line services including messaging, video sharing, and voice calls. Line is the most used messaging service in Japan and is popular not only for its communications services but also for a range of digital services including media and payments. Line recently had a successful $1.3bn IPO on the New York and Tokyo stock exchanges. This is Line’s first service deployment following the IPO.

Line is set to gain a large user base as an MVNO

Line launched its MVNO service on September 5, 2016, making available 20,000 SIM subscriptions. This will be followed by a mainstream launch on October, 1. The OTT player is offering branded smartphones with SIM cards which start from JPY500 ($5) for 1GB of data usage. The bundle also includes free unlimited access to certain Line services such as video sharing, messaging, and voice calls. Line is working on making Facebook and Twitter usage unlimited as well, targeting heavy users of social media in Japan. To offer mobile services, the OTT player has rented network infrastructure from NTT DoCoMo and has become an MVNO.

Ovum expects that the widespread popularity of Line in Japan will enable it to quickly gather a large user base as an MVNO. In addition to SIM cards, Line is launching low-cost Android smartphones and tablets. Both the SIM cards and handsets will be branded as Line Mobile. Line will enable users to purchase SIM cards and smartphones online initially, although over time the company intends to establish an offline presence through retail stores.

Ovum regards the low-cost data-centric bundle as the first step for Line as an MVNO. As Line evolves in the MVNO space, Ovum expects that it will enable more services that can be bundled into its price plans, such as Line Music services. As the SIM cards grow in popularity, we can expect a wider range of bundles being offered which will allow users to customize their bundle depending on their usage of Line and other social media services.

The Japanese MVNO market is fairly crowded, with most players focusing on unlimited affordable data plans as a strategy to gain market share. For example, in 2015, Rakuten launched an MVNO in Japan, even though it does not have as strong a presence in the communications domain as Line has (despite owning global OTT communications player Viber Media). Line can leverage its highly engaged 61 million-strong monthly active user base in Japan to make its MVNO offering a success.

Across the world, OTT players are pursuing diverse strategies to forge closer relationships with their customers through offering mobile connectivity services. Google is probably the most advanced in its strategy for connectivity services among OTT players, offering broadband connectivity through Google Fiber and Project Fi as well as free IP communications services such as Allo, Duo, and Hangouts. It is clearly competing against traditional telco services. Facebook, meanwhile, is working on connectivity services such as Aquila, a solar-powered drone that provides Internet access, and WhatsApp has partnered with operators such as E-Plus to offer branded SIM cards.

If Line is successful in the MVNO space, other OTT apps are likely to follow suit. Therefore Ovum expects other OTT players to keep a close eye on how the Line MVNO fares.

Contrary to popular belief, Line becoming an MVNO will not affect mobile operators in Japan because the market has already reached a level of high data usage. This means that Line’s launch of unlimited voice and messaging services will not threaten the traditional telcos. Also, Line will rely on NTT DoCoMo’s network to offer its mobile services, securing the telco’s positon in the value chain. If Line is able to amass a large enough user base and successfully branches into other digital content services (such as music, magazine subscriptions, and video), it will emerge as a formidable player in the mobile services market.


Further reading

OTT Communications Tracker: 3Q15, TE0003-000889 (December 2015)

2016 Trends to Watch: Communications Services, TE0003-000894 (January 2016)

The Regulatory Position on Telco–OTT Partnerships, TE0007-000925 (July 2015)

Telco–OTT Partnership Series: Netflix and Pay-TV Operators, TE0003-000805 (November 2014)

Telco–OTT Partnerships Tracker: 1H15, TE0004-001033 (July 2015)

“Video, music, and social media dominate telco–OTT partnership deals,” TE0003-000829 (February 2015)

Digital Economy 2025: The Future of Communications, TE0009-001524 (May 2016)

Deutsche Telekom’s managed OTT service is a step into the future for voice, TE0014-000398 (March 2016)


Neha Dharia, Senior Analyst, Consumer Services

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