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Picture: 123RF/SAM74100
Picture: 123RF/SAM74100

Nearly six months after it initially proposed to join forces with Telkom, Rain is gearing up to enter SA’s competitive mobile market in the second half of 2023. This is according to African Rainbow Capital (ARC) Investments, which owns a fifth of the data-only provider. 

In January Telkom and Rain abandoned merger talks. Market players had indicated they were not convinced that a tie-up with Rain was best for Telkom, many still hoping for MTN to buy out the fixed-line company. 

Rain tabled a formal nonbinding proposal to merge with Telkom in September, a few weeks after a public rebuke from the Takeover Regulation Panel for not following due process. While Rain initially pitched a deal that appeared to be a simple combining of assets with Telkom, the Patrice Motsepe-backed tech firm proposed the potential acquisition with new Telkom shares.

Rain has primarily been a data only provider, focused on fixed internet provision to homes. With Telkom having been the fastest growing mobile operator for a number of years, a merger would have given Rain a good entry point into the mobile market. 

Even then, Rain appears to be moving forward with its ambitions, making plans to enter a market with more than 100-million SIM cards. 

“What we’ve concentrated on until now is the home, which is around a fixed device. This is what we’ve been focused on, which is data driven,” Johan van Zyl, co-CEO of ARC Investments, told Business Day on Thursday. 

“You need different types of spectrum to do that [mobile]. That’s what we acquired in the spectrum auction that happened last year. We acquired much more of the sub-1GHz spectrum — 700 to 900MHz.”

Despite its small size, the telecom company emerged as one of the winners of the Independent Communications Authority of SA’s (Icasa’s) much anticipated spectrum auction in March 2022.

Icasa raised R2.65bn from the first-round auction of government-controlled airwaves that are licensed to mobile phone companies, with Rain spending R1.15bn and Telkom writing a R1.5bn cheque. This indicates the firepower that Rain — even as the smallest participating player — had brought to the auction. 

Vodacom and MTN took up the lions share, with the government netting R14bn.

“We were well-placed in the data frequencies and not so well placed in the mobile. And now that we’ve acquired [spectrum], we will be rolling out mobile, so that people can actually use our service for voice.”

As to when South Africans can expect to make use of such a service, Van Zyl says “it will be in the second half of this year”.

This comes as the investment group reported that the low-cost data provider remained ARC Investments’ most valuable asset, with its value unchanged at R3.635bn, accounting for 26.6% of the fund. 

Rain remains on course to deliver earnings before interest, taxes, depreciation and amortisation of more than R2bn for the year to end-February 2023, the group said.

Nevertheless, Rain was negatively affected by load-shedding and battery theft, which raised its cost base. ARC Investments said these issues were expected to remain a challenge in the short term even as demand stayed robust.

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