Rain almost twice as valuable as Telkom

Mobile operator Rain is now valued at over R23 billion, which is significantly higher than the combined value of Telkom and Cell C, two of its main competitors.

Rain’s latest valuation was revealed in African Rainbow Capital Investment’s (ARCI) recently released interim results for the six months through December 2023.

ARCI’s intrinsic net asset value (INAV) increased by 4.6% to R16.03 billion, and INAV per share increased by 12.9% to R11.15.

ARCI is an investment holding company with a diversified portfolio of investments picked to deliver long-term capital growth to investors.

Some of its most prominent investments include financial investments such as TymeGroup – the parent company of the digital banking company TymeBank – and Alexander Forbes.

However, ARCI’s most significant investment is a 21% stake in Rain, which makes up 27% of its total fund.

The latest ARC results show that Rain has reached a valuation of R23.08 billion, a figure difficult to grasp for a company about which little is known about its financial position.

To put this into perspective, one can compare this valuation to that of Telkom – an industry player that has been around since the 1990s.

Telkom’s latest financial results revealed a total asset base of R61.4 billion, which includes a vast wireline network across the country, with operations in and outside South Africa.

It has a total ownership equity book value of R25.2 billion and generated R43.14 billion in revenue during its last financial year.

Telkom currently trades at a market cap of around R13 billion, with its share price having lost 65% of its value over the past five years.

Notably, Telkom has significantly underperformed its industry peers and reported a shocking R9.9 billion loss in its last financial year.

This largely explains why Telkom shares are losing value and why it trades at such a discount on its equity book value.


However, comparing Telkom’s market cap to the value of Rain has made many investors question the reliability of Rain’s valuation.

Currently, Rain’s valuation is almost twice as much as Telkom’s market cap.

ARC co-CEO Johan van Zyl said at the company’s interim results presentation that Rain has turned profitable based on EBITDA, which increased to R2.3 billion.

He noted that Rain’s free cash flow is “nicely positive and growing” and that it was on track to achieve an EBITDA figure of over R2.5 billion for the year ended February 2024.

This means Rain would generate only half the EBITDA Telkom made in the first six months of the 2024 financial year, when it reported a R5.03 billion EBITDA figure.

However, it all boils down to profitability. If Rain could justify its valuation with profits, investors would not question it.

ARCI has been very reluctant to share any meaningful information on Rain’s profitability, which means investors could only speculate on the company’s performance.

Vodacom is South Africa’s most profitable telecoms giant. During its last financial year, it translated 40% of its EBITDA into net profits.

Assuming Rain is as profitable as Vodacom, it would generate a net profit of R1 billion. This means that Rain’s valuation would translate to a P/E ratio of 23 times, significantly higher than that of Vodacom (10.30) and MTN (7.41).

CompanyMarket cap/valuationP/E ratio
VodacomR193 billion10.30
MTNR157 billion7.45
RainR23 billion23*
TelkomR13 billionN/A


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