Japanese mobile operators were braced for the worst last year. They faced an aggressive newcomer, Rakuten Mobile. Yoshihide Suga, the new prime minister, was calling for price cuts. The earnings of the local oligopoly — NTT DoCoMo, KDDI and SoftBank, a telecoms subsidiary of the investment group of the same name — were under threat. Coronavirus and Rakuten’s problems rolling out 5G have granted the incumbents a reprieve.

The industry mood is nevertheless sour after months of ferocious competition and the relentless cost pressures created by 5G. A former employee of SoftBank has just been arrested on suspicion of taking 5G trade secrets before joining Rakuten, whose main business is ecommerce. SoftBank plans to file a lawsuit against Rakuten’s mobile subsidiary as a result.

Rakuten had been expected to be a big disrupter. It has been offering unlimited data at prices half those of rivals. Mr Suga’s promise to lower plan prices was expected to be equally transformative.

Chart shows Japan mobile market share by number of subscriptions

Instead, reality has been rough on Rakuten. Stumbling blocks emerged early, with pandemic-related disruptions delaying its planned 5G launch last year. Connection speeds and coverage lagged behind rival services in the early days. The infrastructure and marketing costs of the challenger are ballooning.

Mr Suga has also been driven off course. Coronavirus cases are surging. The state of emergency is expected to be widened beyond Tokyo. While operators have made some cuts to mobile fees, they have not heeded calls for a 40 per cent reduction.

Japanese telecom stocks have underperformed the broader benchmark Nikkei 225 Index for years, reflecting the saturated market and looming regulatory risks. For example, KDDI shares trade at 11 times forward earnings, at the bottom of a relatively narrow five-year range.

How should investors react, given that pricing pressures have been far weaker than expected? The three biggest operators should be able to hold on to ebitda margins well above 20 per cent. Rakuten has failed to make the splash it hoped for. Phone charges will be a very low priority for Mr Suga for many months to come. Japanese mobile stocks are a better investment than they have been for years.

Our popular newsletter for premium subscribers Best of Lex is published twice weekly. Please sign up here.