Rain is now more valuable than Telkom
African Rainbow Capital Investments (ARCI) values mobile network operator Rain at R25.91 billion, exceeding Telkom’s R17.79 billion market capitalization. This valuation, revealed in ARCI’s half-year results, reflects a near R1 billion increase between June and December 2024.
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ARCI’s 21.76% stake in Rain, now valued at R5.639 billion, represents its largest investment. Rain’s valuation has surged by R16.45 billion since December 2017, sparking industry debate, particularly in comparison to Telkom.
Telkom, a telecommunications giant with extensive infrastructure, including a vast fibre network and a mobile operator, is considered a logical benchmark. However, ARCI’s valuation implies Rain is more valuable.
Investors express concerns over Rain’s limited financial and operational transparency. ARCI has been reluctant to disclose key metrics, citing reasons that fail to alleviate investor scepticism.
The viability of Rain’s low capital expenditure model also raises concerns, given the challenges faced by Cell C. ARCI co-CEO Johan van Zyl only disclosed Rain’s R2.5 billion EBITDA as of June 2024, refusing to share revenue, profit, subscriber numbers, or capital expenditure.
Even when comparing EBITDA alone, Rain’s valuation appears questionable. Telkom’s annual EBITDA was R10 billion, and Telkom Mobile’s was R5.3 billion, both significantly higher than Rain’s.
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Amidst investor criticism regarding asset valuations, ARCI plans to delist from the JSE and re-domicile to South Africa.
ARCI’s offer to acquire remaining shares at R9.75 per share, representing a premium over recent trading prices, aims to address limited liquidity and the share price’s discount to net asset value.
“The ARCI share price also does not reflect the true value of the investment… meaning that investors… are not receiving the true value of their investment,” the company stated.
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