{"id":367418,"date":"2020-09-15T08:04:27","date_gmt":"2020-09-15T06:04:27","guid":{"rendered":"https:\/\/mybroadband.co.za\/news\/?p=367418"},"modified":"2020-09-15T14:07:41","modified_gmt":"2020-09-15T12:07:41","slug":"rains-extraordinary-valuation","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/cellular\/367418-rains-extraordinary-valuation.html","title":{"rendered":"Rain’s extraordinary valuation"},"content":{"rendered":"

African Rainbow Capital (ARC) currently values Rain at R15.03 billion, which makes the company far more valuable than Telkom.<\/p>\n

ARC was launched by billionaire Patrice Motsepe in 2016 and the company listed on the Johannesburg Stock Exchange (JSE) on 7 September 2017.<\/p>\n

Armed with strong empowerment credentials and excellent leaders, ARC invested in a diverse range of companies in financial services, agriculture, property, telecoms, BPO, and mining.<\/p>\n

ARC\u2019s investment portfolio includes many prominent companies, like Alexander Forbes, A2X, TymeBank, EOH, Metrofibre, Rain, Afrimat, and Val de Vie.<\/p>\n

In its financial results for the year ended 30 June 2020, ARC said its investments had an intrinsic portfolio value of R11.139 billion.<\/p>\n

A big contributor to this valuation \u2013 27.9% of ARC fund\u2019s total value \u2013 is Rain, in which it has a 20.7% stake.<\/p>\n

ARC values its 20.7% stake in Rain at R3.111 billion, which means it the mobile operator\u2019s total valuation is R15.03 billion.<\/p>\n

It is also interesting to note that ARC\u2019s valuation for its shareholding in Rain in worth more than ARC’s market cap of R2.96 billion.<\/p>\n

This valuation is creeping up all the time. The table below provides an overview of Rain\u2019s valuation since ARC bought a 20% stake in the operator in July 2017.<\/p>\n

\n
\n\n\n\n\n\n\n\n\n\n
Rain Valuation by ARC<\/strong><\/span><\/td>\n<\/tr>\n
Date<\/strong><\/td>\nARC Shareholding in Rain<\/strong><\/td>\nARC’s Shareholding Value<\/strong><\/td>\nRain’s Valuation<\/strong><\/td>\n<\/tr>\n
December 2017<\/td>\n20.0%<\/td>\nR1.892 billion<\/td>\nR9.460 billion<\/strong><\/td>\n<\/tr>\n
June 2018<\/td>\n20.0%<\/td>\nR2.114 billion<\/td>\nR10.570 billion<\/strong><\/td>\n<\/tr>\n
December 2018<\/td>\n20.0%<\/td>\nR2.330 billion<\/td>\nR11.650 billion<\/strong><\/td>\n<\/tr>\n
June 2019<\/td>\n20.6%<\/td>\nR2.508 billion<\/td>\nR12.175 billion<\/strong><\/td>\n<\/tr>\n
December 2019<\/td>\n20.7%<\/td>\nR2.712 billion<\/td>\nR13.101 billion<\/strong><\/td>\n<\/tr>\n
June 2020<\/td>\n20.7%<\/td>\nR3.111 billion<\/td>\nR15.029 billion<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<\/div>\n

Rain\u2019s assets<\/h3>\n

As South Africa\u2019s fifth mobile operator, Rain aims to be a full-service mobile provider, focused on data.<\/p>\n

Rain\u2019s 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.<\/p>\n

Rain had 5,500 active 4G and 447 active 5G sites in South Africa as of the end of April 2020, with plans to increase its footprint to 1,500 sites by December 2021.<\/p>\n

Ultimately more than 2,000 5G towers in larger metro areas throughout South Africa are planned.<\/p>\n

The company is generating income through its roaming agreement with Vodacom, 4G fixed and mobile subscriptions, and 5G fixed subscriptions.<\/p>\n

Neither ARC nor Rain is disclosing subscriber numbers. The latest figure comes from October 2019<\/strong><\/a> when Rain had around 100,000 4G mobile data subscribers.<\/p>\n

ARC did say that the national lockdown required more people to work remotely, which significantly increased the demand for affordable internet connectivity.<\/p>\n

Rain experienced a surge in subscriber numbers during the COVID-19 period and managed to grow its subscribers base far excess of forecast growth.<\/p>\n

\u201cAlthough this growth is encouraging, Rain\u2019s ability to control customer churn will be critical,\u201d ARC said.<\/p>\n

Rain versus Cell C and Telkom<\/h3>\n

Rain\u2019s lack of legacy revenue streams places it in a great position for the future, and it definitely has many valuable assets.<\/p>\n

There are, however, questions about its valuation in relation to its financial performance and subscriber growth.<\/p>\n

Unlike other companies with investments in unlisted telecoms businesses, like Remgro with SEACOM and Blue Label with Cell C, ARC does not release Rain\u2019s financials or subscriber numbers.<\/p>\n

Without financial data or an asset register, it makes it impossible for analysts to accurately calculate the value of Rain.<\/p>\n

This uncertainty has created speculation among industry players who spoke to MyBroadband that the operator is over-valued.<\/p>\n

They highlighted that Liquid Telecom \u2013 which has more valuable spectrum assets, a national fibre network, and excellent corporate clients \u2013 was acquired for R6.55 billion in 2016.<\/p>\n

Rain\u2019s R15-billion valuation also exceeds Telkom\u2019s current market cap of R12.4 billion, which, in comparison, has some of the most valuable telecoms assets in South Africa.<\/p>\n

Telkom\u2019s assets include millions of subscribers, the country\u2019s largest fibre network, and an extensive mobile network.<\/p>\n

Telkom also has more spectrum than Rain, it owns properties across the country worth billions, and it has a strong foothold in the corporate telecoms market.<\/p>\n

ARC is, however, not looking to change its reporting on Rain. It said it only holds a 20.7% interest in Rain, which means it is a minority shareholder.<\/p>\n

\u201cCoupled with the fact that Rain is a privately held company, it means ARC is not in a position to release information to the market at liberty,\u201d ARC spokesperson Ainsley Moos told MyBroadband.<\/p>\n

He added that they have released key information to market, which they have also agreed on with the Rain leadership.<\/p>\n

The table below provides an overview of how Rain compares to Telkom and Cell C in terms of assets and valuation.<\/p>\n

\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Mobile Operator Comparison<\/strong><\/span><\/td>\n<\/tr>\n
Company<\/strong><\/td>\nTelkom<\/strong><\/td>\nCell C<\/strong><\/td>\nRain<\/strong><\/td>\n<\/tr>\n
Subscribers<\/strong><\/td>\n12.0 million<\/td>\n11.8 million<\/td>\n0.4 million<\/td>\n<\/tr>\n
Mobile data<\/strong><\/td>\nYes<\/td>\nYes<\/td>\nYes<\/td>\n<\/tr>\n
Fixed wireless data<\/strong><\/td>\nYes<\/td>\nNo<\/td>\nYes<\/td>\n<\/tr>\n
Voice services<\/strong><\/td>\nYes<\/td>\nYes<\/td>\nNo<\/td>\n<\/tr>\n
Fixed-line broadband<\/strong><\/td>\nYes<\/td>\nYes<\/td>\nNo<\/td>\n<\/tr>\n
National mobile network<\/strong><\/td>\nYes<\/td>\nYes<\/td>\nYes<\/td>\n<\/tr>\n
National fixed-line network<\/strong><\/td>\nYes<\/td>\nNo<\/td>\nNo<\/td>\n<\/tr>\n
<\/td>\n<\/tr>\n
Mobile spectrum<\/strong><\/td>\n<\/tr>\n
900MHz<\/strong><\/td>\n—<\/td>\n22MHz<\/td>\n—<\/td>\n<\/tr>\n
1,800MHz<\/strong><\/td>\n24MHz<\/td>\n24MHz<\/td>\n34MHz<\/td>\n<\/tr>\n
2,100MHz<\/strong><\/td>\n30MHz<\/td>\n30MHz<\/td>\n—<\/td>\n<\/tr>\n
2,300MHz<\/strong><\/td>\n68MHz<\/td>\n—<\/td>\n—<\/td>\n<\/tr>\n
2,600MHz<\/strong><\/td>\n—<\/td>\n—<\/td>\n15MHz<\/td>\n<\/tr>\n
3,500MHz<\/strong><\/td>\n28MHz<\/td>\n—<\/td>\n142MHz<\/td>\n<\/tr>\n
<\/td>\n<\/tr>\n
Valuation<\/strong><\/td>\nR12.4 billion<\/strong><\/td>\nR0.0 billion<\/strong><\/td>\nR15.0 billion<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<\/div>\n
\n

Rain valuation<\/h3>\n

The table below provides an overview of Rain\u2019s valuation.<\/p>\n

\"\"<\/a><\/p>\n

\n

Now read: Rain explains why it does not offer mobile 5G<\/a><\/h3>\n","protected":false},"excerpt":{"rendered":"

African Rainbow Capital values Rain at far more than Telkom’s market cap, raising questions whether Rain is over-valued.<\/p>\n","protected":false},"author":23,"featured_media":284496,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"idle","_sma_x_autopost_error":"","_sma_x_post_id":"","_sma_facebook_post_id":"","_sma_instagram_post_id":"","_sma_threads_post_id":"","_sma_x_attempts":0,"footnotes":""},"categories":[14],"tags":[44951,45831,35,40184,43716],"class_list":["post-367418","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cellular","tag-african-rainbow-capital-arc","tag-arc","tag-headline","tag-patrice-motsepe","tag-rain"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/367418"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/23"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=367418"}],"version-history":[{"count":2,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/367418\/revisions"}],"predecessor-version":[{"id":367422,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/367418\/revisions\/367422"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/284496"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=367418"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=367418"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=367418"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}