The Company That First Brought Commercial 5G To Africa Is Now Valued At Over USD 753 Mn

In October 2019, Rain rolled out what was Africa’s first commercial 5G network, shaking up the telecoms landscape of South Africa where it began operations.

The data-only operator which is under the auspices of African Rainbow Capital Investments (ARC) seems to have come a long way.

ARC has released it financial results for the 6 months to December 2019, revealing that the its service provider, Rain, is now valued at ZAR 13.1 Bn (over USD 753 Mn)

The data-only firm now accounts for 27 percent of African Rainbow Capital Investments fund’s value, up from 26.8 percent 6 months before.

ARC Investments aims to provide shareholders with long-term capital appreciation by indirectly investing in a diversified portfolio of unlisted and listed investments.

In the second half of 2019, the investment holdings firm picked up an additional 0.2 percent shareholding in Rain for ZAR 21 Mn (USD 1,208,216), which left the provider a value of ZAR 10.5 Bn (USD 604,108,365).

Rain, which is the fifth mobile operator in South Africa, has its spectrum as its major asset. The firm has an allocation in the 1,8000 MHz brand and the 2,600 MHz band. Its income streams comprises 5G subscriptions, 4G data sales, roaming and reseller income.

It currently has more than 3,000 active LTE sites, which ARC says is expanding according to plan as per achieving nationwide connectivity and improving on the quality of its network.

“Rain has a significant business-to-business division and intends to build a dedicated national LTE-Advanced network that will eventually facilitate an environment where open access to the Internet becomes a reality in South Africa, with the best possible quality and Internet speed, at affordable rates,” the investment firm said it its interim report.

The valuation for Rain, however, seemed to have sent mixed signals. By being worth ZAR 13.1 Bn, the data-only service is now has a higher value than than the combined market caps of Blue Label Telecoms and Telkom.

The valuation is also worth more than the ZAR 2.712 Bn market cap of ARC itself. But in response to these concerns, African Rainbow Capital said it uses a discounted flow model with a discount rate of 16.4 percent to come up with Rain’s valuation.

The DFC model is used to estimate the value of an investment based on its future cash flows.

“Overall, the growth prospects for Rain remain optimistic. Revenue growth has been encouraging and significant progress is being made to further improve on network performance and stability,” ARC Investments said. “Rain is well positioned to become a major player in the 5G data market.”