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African Rainbow Capital (ARC) currently values Rain at R15.03 billion, which makes the company much more valuable than Telkom.
ARC was launched by billionaire Patrice Motsepe in 2016 and the company is listed on the Johannesburg Stock Exchange (JSE) on September 7, 2017.
Armed with strong empowerment credentials and excellent leaders, ARC invested in a wide range of companies in financial services, agriculture, property, telecommunications, BPO, and mining.
ARC’s investment portfolio includes many prominent companies, such as Alexander Forbes, A2X, TymeBank, EOH, Metrofibre, Rain, Afrimat and Val de Vie.
In its financial results for the year ended June 30, 2020, ARC said that its investments had an intrinsic portfolio value of R11,139 billion.
A large contributor to this valuation (27.9% of the total value of the ARC fund) is Rain, in which he has a 20.7% stake.
ARC values its 20.7% stake in Rain at R3,111 billion, which means that the total valuation of the mobile operator is R15.03 billion.
It is also interesting to note that ARC’s valuation for its stake in Rain is worth more than ARC’s market capitalization of R2.96 billion.
This valuation is increasing all the time. The table below provides an overview of Rain’s valuation since ARC purchased a 20% stake in the operator in July 2017.
| Rain Rating by ARC | |||
| Date | ARC Participation in the Rain | ARC share value | Rain’s rating |
| December 2017 | 20.0% | R1,892 billion | 9.460 billion rand |
| June 2018 | 20.0% | R2.114 billion | R10.570 billion |
| December 2018 | 20.0% | R2.330 billion | R11.650 billion |
| June 2019 | 20.6% | R2.508 billion | R12,175 billion |
| December 2019 | 20.7% | R2.712 billion | R13.101 billion |
| June 2020 | 20.7% | 3,111 million rand | R15.029 billion |
Rain’s assets
As the fifth largest mobile operator in South Africa, Rain aims to be a complete, data-centric mobile service provider.
Rain’s key assets are spectrum licenses with an allocation in the 1,800MHz and 2,600Mhz bands, a rapidly expanding mobile network and a growing subscriber base.
Rain had 5,500 active 4G sites and 447 active 5G sites in South Africa at the end of April 2020, with plans to increase its footprint to 1,500 sites by December 2021.
Ultimately, more than 2,000 5G towers are planned in larger metropolitan areas across South Africa.
The company is generating revenue through its roaming agreement with Vodacom, 4G mobile and fixed subscriptions and 5G fixed subscriptions.
Neither ARC nor Rain reveal subscriber numbers. The latest figure comes from October 2019 when Rain had around 100,000 4G mobile data subscribers.
ARC said the national lockdown required more people to work remotely, significantly increasing the demand for affordable internet connectivity.
Rain experienced an increase in the number of subscribers during the COVID-19 period and managed to grow its subscriber base well above the expected growth.
“While this growth is encouraging, Rain’s ability to control customer churn will be critical,” said ARC.
Rain versus Cell C and Telkom
Rain’s lack of inherited sources of income puts him in a great position for the future, and he definitely has plenty of valuable assets.
However, there are doubts about its valuation in relation to its financial performance and subscriber growth.
Unlike other companies with investments in unlisted telecommunications businesses, such as Remgro with SEACOM and Blue Label with Cell C, ARC does not release financial figures or subscriber numbers for Rain.
Without financial data or an asset record, it is impossible for analysts to accurately calculate Rain’s value.
This uncertainty has created speculation among industry players who spoke to MyBroadband that the carrier is overpriced.
They highlighted that Liquid Telecom, which has more valuable spectrum assets, a national fiber network and excellent corporate clients, was acquired for R6.55 billion in 2016.
Rain’s valuation of R 15 billion also exceeds Telkom’s current market capitalization of R 12.4 billion, which, by comparison, has some of the most valuable telecom assets in South Africa.
Telkom’s assets include millions of subscribers, the country’s largest fiber network and an extensive mobile network.
Telkom also has more spectrum than Rain, owns properties across the country worth billions, and has a strong presence in the corporate telecommunications market.
ARC, however, is not looking to change its reports on Rain. He said he only has a 20.7% stake in Rain, which means he is a minority shareholder.
“Coupled with the fact that Rain is a private company, it means that ARC is not in a position to deliver information to the free market,” Ainsley Moos, ARC spokesperson, told MyBroadband.
He added that they have released key information to the market, which they have also agreed with Rain’s management.
The table below provides an overview of how Rain compares to Telkom and Cell C in terms of assets and valuation.
| Mobile operator comparison | |||
| Business | Telkom | Cell C | Rain |
| Subscribers | 12.0 million | 11.8 million | 0.1+ million |
| Mobile data | yes | yes | yes |
| Fixed wireless data | yes | Not | yes |
| Voice services | yes | yes | Not |
| Fixed line broadband | yes | yes | Not |
| National mobile network | yes | yes | yes |
| National fixed telephone network | yes | Not | Not |
| Mobile spectrum | |||
| 900 MHz | – | 22 MHz | – |
| 1,800 MHz | 24 MHz | 24 MHz | 34 MHz |
| 2,100 MHz | 30 MHz | 30 MHz | – |
| 2,300 MHz | 68 MHz | – | – |
| 2600 MHz | – | – | 15 MHz |
| 3500 MHz | 28 MHz | – | 142 MHz |
| Valuation | R12.4 billion | 0 billion rand | 15 billion rand |
Rain rating
The following table provides an overview of Rain’s rating.
Now Read: Rain Explains Why It Doesn’t Offer Mobile 5G
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