African Rainbow Capital (ARC) released its interim financial results for the six months ended 31 December 2020, which revealed that it values Rain at R17.1 billion.
Rain’s valuation showed exceptional growth over the last three years, rising from R9.46 billion in December 2017 to R17.15 billion now.
This makes Rain one of South Africa’s most valuable telecommunications players, with a valuation close to Telkom’s market cap of R22 billion.
To fully understand Rain’s success, you have to go back to 2015 when MultiSource acquired Wireless Business Solutions (WBS) which gave it access to valuable 4G and 5G spectrum.
MultiSource had two powerful shareholders – Paul Harris and Michael Jordaan – who saw the value of the spectrum and have excellent deal-making skills.
They successfully negotiated an agreement with Vodacom which gave them access to the mobile operator’s extensive national infrastructure.
In return, Vodacom subscribers could roam on Rain’s new network which helped Vodacom to increase their network capacity and improve service levels.
With all the building blocks in place, WBS was rebranded as Rain in 2017. In June that year, it launched its first commercial services.
The agreement with Vodacom helped Rain to rapidly roll out a 4G network, and roaming revenue helped Rain to fund this rollout.
While the network rollout and roaming agreement were doing well, the uptake of Rain’s products was initially slow. This changed when the pandemic and lockdown hit.
Rain’s mobile and 5G subscriber signups increased from 10,000 and 20,000 per month before the lockdown to 60,000 and 80,000 after the lockdown hit.
Vodacom also experienced a surge in traffic, which in turn resulted in a big spike in roaming revenue for Rain.
Rain was therefore a huge beneficiary of the change in behaviour because of the COVID-19 pandemic.
During the lockdown, it continued its network expansion and at the end of December 2020 had nearly 7,000 active 4G sites.
Rain’s 5G coverage is also growing. By the end of last year, it had 685 active 5G towers and is aiming to increase this to 1,150 towers by February 2022.
The subscriber and network growth, coupled with increased roaming revenue from Vodacom, helped to increase Rain’s valuation by R7.7 billion over the last three years.
The table below provides an overview of Rain’s valuation between December 2017 and December 2020.
|Rain Valuation by ARC|
|Date||ARC Shareholding in Rain||ARC’s Shareholding Value||Rain’s Valuation|
|December 2017||20.0%||R1.892 billion||R9.460 billion|
|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%||R3.111 billion||R15.029 billion|
|December 2020||20.4%||R3.493 billion||R17.148 billion|
Great news for shareholders
Rain’s rapid growth is great news for the company’s shareholders who have seen an excellent return on investment.
Rain currently has 10 shareholders, with the main shareholders – the Harris family, Michael Jordaan, ARC Investments, and Willem Roos – owning 91% of the company.
Quarme Private Equity Investments – with Paul Harris and his daughter, Nicola Harris as directors – is the largest Rain shareholder at 41.36%.
African Rainbow Capital is the second largest at 20.37%, followed by Willem Roos’ Pluvial at 11.75% and Michael Jordaan’s Montegray Capital at 11.53%.
Institute X Idea Incubators, with Phumlani Moholi and new Rain CEO Brandon Leigh as directors, is also a significant shareholder.
The table below provides an overview of Rain’s shareholders and the relative value of their shareholdings.
It should be noted that these figures are based on an ICASA filing last year and that there may have been slight changes since then which are not in the public domain.
|Rain’s Main Shareholders|
|Quarme Private Equity Investments||41.36%||Paul Harris
Johan van Zyl
Johan van der Merwe
|Montegray Capital||11.53%||Michael Jordaan||R1.98 billion|
|Ata Fund 1||6.42%||Nicola Harris
|Arakot||3.41%||Catherina Heunis||R0.58 billion|
|Institute X Idea Incubators||2.30%||Phumlani Moholi