Mobile network operator Rain’s valuation has climbed to R25.91 billion according to the estimates of African Rainbow Capital Investments (ARCI), dwarfing Telkom’s market cap of R17.79 billion.<\/p>\n\n\n\n
According to ARCI’s half-year results released last week, Rain’s valuation grew by nearly R1 billion between 31 June and 31 December 2024.<\/p>\n\n\n\n
This was after the fund invested a further R172 million in Rain, bringing its total shareholding in the mobile operator to 21.76%. It values its stake at R5.639 billion.<\/p>\n\n\n\n
At 27.2% of the fund, Rain is the single largest investment held by ARCI, where South African billionaire Patrice Motsepe is a shareholder and chairman.<\/p>\n\n\n\n
In under eight years, Rain’s valuation has surged by R16.45 billion, growing from R9.46 billion in December 2017.<\/p>\n\n\n\n
Because of these outsized gains, Rain’s valuation is a regular topic of discussion among industry players.<\/p>\n\n\n\n
Telkom is a logical point of comparison, as ARCI is effectively saying that Rain is more valuable than South Africa’s oldest network infrastructure provider.<\/p>\n\n\n\n
Telkom is a telecommunications giant that spent most of its life as a state-protected monopoly. It has amassed significant assets, including over 170,000km of national, regional, and last-mile fibre infrastructure.<\/p>\n\n\n\n
Its total fibre network footprint dwarfs every other player in the market, even though Vumatel’s network connects more homes than Telkom’s Openserve.<\/p>\n\n\n\n
In addition to its fixed-line infrastructure business, Telkom has a mobile network operator that competes directly against Vodacom, MTN, and Rain. Telkom also has a consumer Internet service provider and an enterprise IT division.<\/p>\n\n\n\n
For these and other reasons, Rain’s valuation raises eyebrows in the industry.<\/p>\n\n\n\n
One of the complaints from investors is that very little financial or operational data is available about Rain.<\/p>\n\n\n\n
Despite regular questions around the issue, ARC has been reluctant to share any meaningful financial figures on Rain.<\/p>\n\n\n\n
The low level of transparency around Rain’s operations and its finances gives investors little confidence in its valuation.<\/p>\n\n\n\n
Another thing bothering investors was whether Rain would be able to maintain its low capital expenditure model.<\/p>\n\n\n\n
The cost associated with building and maintaining a network crushed Cell C, and the same could happen to Rain.<\/p>\n\n\n\n
Last year, the only detail ARC co-CEO Johan van Zyl was willing to divulge was Rain’s earnings before interest, taxation, depreciation, and amortisation (Ebitda) \u2014 R2.5 billion as of 30 June 2024.<\/p>\n\n\n\n
He would not provide any information about revenue, profit, capital expenditure, or subscriber numbers.<\/p>\n\n\n\n
Trying to explain why he would not divulge subscriber numbers, he said the average revenue per user (ARPU) for mobile phone subscribers is much less than their broadband subscribers.<\/p>\n\n\n\n
“To come with subscriber numbers here and there and just lump them all together will not make sense,” he said.<\/p>\n\n\n\n
However, he would not give a breakdown of mobile phone and broadband subscribers or their ARPUs.<\/p>\n\n\n\n
“We have to get away from those kind of metrics. The Ebitda number is an all-encompassing number at this moment in time,” he said.<\/p>\n\n\n\n
“It tells you where we are. We have grown it very nicely from last year, and we expect to add another 25% to it this year.”<\/p>\n\n\n\n
However, even when limiting the comparison to only Ebitda, Rain’s valuation remains questionable.<\/p>\n\n\n\n
Telkom reported Ebitda of R10 billion in its annual results for the period ended 31 March 2024 \u2014 quadruple Rain’s.<\/p>\n\n\n\n
In its latest quarterly trading update, Telkom also reported the Ebitda of its mobile division for the past four quarters.<\/p>\n\n\n\n
Combined with data from its Q3 2024 trading update last year, it is possible to calculate an annual Ebitda for Telkom Mobile that lines up exactly with Rain’s reporting period.<\/p>\n\n\n\n
Telkom Mobile’s annual Ebitda on 30 June 2024 was R5.3 billion \u2014 more than double Rain’s.<\/p>\n\n\n\nMeasure<\/th> Rain<\/th> Telkom<\/th><\/tr><\/thead> Market cap \/ valuation<\/strong><\/td> R25.91 billion<\/td> R17.79 billion<\/td><\/tr> EBITDA<\/strong><\/td> R2.5 billion (June 2024)<\/td> Mobile only:<\/em><\/strong>
R5.3 billion (June 2024)
Total:<\/em><\/strong>
R10 billion (March 2024)<\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\nARCI’s delisting plan<\/h2>\n\n\n\n