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The lockdown and subsequent demand for data have seen Rain quadruple subscriber growth rate in recent months and helped the operator to become cashflow positive long before expected.

This is feedback from African Rainbow Capital (ARC) co-CEO Johan van Zyl, who was speaking to MyBroadband after the company released its annual results.

ARC holds a 20.7% shareholding in Rain, which is the largest contributor to the company’s intrinsic portfolio value of R11.139 billion.

ARC’s R3.111 billion valuation of its 20.7% shareholding in Rain, which values the operator at R15.03 billion, has raised eyebrows among some analysts.

Van Zyl, however, explained that Rain’s strong revenue growth, subscriber increases, and low debt justifies this valuation.

He highlighted that they use a discounted cash flow model for the valuation and included minority and marketability discounts to ensure a conservative figure.

ARC has traditionally not released much operational data about Rain, but van Zyl and Rain CEO Willem Roos have now provided more details about the company.

Roos told MyBroadband Rain currently has just over 400,000 subscribers and is rapidly increasing its user base.

Before the lockdown Rain signed up between 10,000 and 20,000 new mobile and 5G subscribers per month.

This has now quadrupled to between 60,000 and 80,000 sign-ups per month because of strong demand for data services during the lockdown.

The company’s churn is also much lower than anticipated, which further helps its subscriber growth.

What is particularly impressive is the rise in average revenue per user (ARPU), which is approaching R400 (VAT inclusive).

The higher ARPU is a result of many people signing up for Rain’s unlimited 5G products, which are priced between R699 and R999 per month.

The growth in subscriber numbers and ARPU has helped Rain to become cashflow positive far sooner than expected.

Roos, however, cautioned that while Rain is generating a positive EBIDTA, the business still requires further CAPEX-related cash to build out the 5G network.

Rain hopes to generate profits in the next year or two.

Big growth plans

Rain has experienced exceptional growth during the lockdown, but the company has no plans of slowing down.

Rain raised R720 million in June to support the rollout of its 5G network, which had 447 active sites in South Africa as of the end of April 2020.

The company is planning to increase its 5G footprint to 1,500 sites by December 2021, and ultimately more than 2,000 5G towers in all larger metro areas.

Rain’s LTE network is also continuing to grow, which is partly thanks to increased traffic on Vodacom’s network.

Rain has a roaming agreement with Vodacom, and with the growth in mobile traffic during the lockdown, roaming revenue has seen a big jump.

The partnership also gives Rain access to Vodacom’s sites and facilities, which makes it possible for Rain to roll out its LTE network faster and with far less capital than competitors.

With this rapidly growing mobile network and the increased demand for data, Rain has comfortably beaten its financial and subscriber targets.

Van Zyl told MyBroadband Rain has reached milestones they only expected to attain next year, which is very encouraging.

Roos said they are looking to reach 2 million mobile and fixed-broadband subscribers over the next five years.

Rain’s operational data

The table below provides an overview of Rain’s latest operational data.

Rain’s Operational Data
Measure Numbers
Number of subscribers 400,000
Subscriber growth 60,000 to 80,000 per month
ARPU Approaching R400 (Inc VAT)
4G sites (April 2020) 5,500
5G sites (April 2020) 447
Valuation R15 billion
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