Rain extends 5G network to cover 7m households

Data-only network Rain, which pioneered 5G connectivity in South Africa, now covers seven million households with the next-gen connectivity technology.

So says Vivian Ngalo, Rain chief communications officer, in an e-mail to ITWeb.

However, she says the delays in the country’s digital migration programme are inhibiting the company’s efforts to further expand its network coverage.

Ngalo explains that Rain offers wholesale services to other telcos and retail products directly to consumers across 4G and 5G.

“Rain launched its direct 4G retail services in 2018 and the continent’s first 5G standalone network in 2019. Rain bought 2x10MHz of 700MHz and 20MHz of 2600MHz spectrum for R1.43 billion at the recently concluded spectrum auction,” she says.

“Rain now has a comprehensive and balanced portfolio of licensed spectrum that features both capacity and coverage bands. The 700MHz band specifically establishes Rain’s position as a full-service retail 4G and 5G network provider; however, it is impacted by the successful Etv challenge that postponed the switch-off of analogue TV in this band.”

In June, South Africa’s Constitutional Court ruled for Etv in a dispute with the communications and digital technologies minister over digital migration.

The free-to-air broadcaster, joined by Media Monitoring Africa and SOS Support Public Broadcasting, argued that minister Khumbudzo Ntshavheni’s decision to determine the analogue switch-off date to be 31 March, amended by the high court to 30 June, must be declared unlawful.

Besides this impediment, Ngalo says Rain continues its network rollout and currently has over 8 900 sites.

“Rain’s 5G network has over 1 500 sites and is SA’s largest, covering over seven million households.”

Meanwhile, business mogul Patrice Motsepe’s African Rainbow Capital (ARC) has pumped an additional R56 million into Rain.

This emerged when ARC yesterday announced full-year financial results for the 12-month period to 30 June.

ARC owns a 20.3% stake in the data-only network.

Rain’s other major shareholders include investment vehicles owned by former FNB CEO Michael Jordaan, Rand Merchant Bank co-founder and CEO of FirstRand Paul Harris, and former OUTsurance CEO Willem Roos.

In a statement, the Motsepe-owned company says the value of the ARC Fund’s interest in Rain has increased by 9.7% for the year under review.

According to ARC, the reason for this increase is three-fold.

“Firstly, Rain continues to deliver well on both 4G and 5G sales. Demand for these products has been sustained throughout and post the easing of COVID-19 restrictions, which has seen employees return to their offices for work.

“Secondly, the increased valuation also considers Rain’s business plan post the spectrum auction, which was completed in March and April 2022.”

ARC believes the utilisation of the additional spectrum is expected to positively impact Rain’s cash-flow.

“Thirdly, the increased valuation is also as a result of a R56 million additional investment,” says ARC in a statement.

It notes that Rain achieved its budgeted R1 billion EBITDA for its financial year ended February 2022.

This is regarded as a significant achievement as it achieved break-even in the February 2021 financial year, it says.

The ARC Fund’s share in the value of the investment in Rain increased from R3.3 billion at 30 June 2021 to R3.6 billion at 30 June 2022.

Commenting on Rain’s prospects in the market, Christopher Geerdts, BMIT MD, says: “Until now, Rain’s retail strategy has been to be more of a niche player in the broadband market rather than try to take on the large mobile operators head-on in the broader mobile market.”

According to Geerdts, this strategy has proven to be very effective, especially with 5G, where it benefited from the early award of spectrum ahead of competitors.

“It is interesting to note that ARC’s own recent comments are to the effect that they ‘already have substantial market share in the fixed space’, which emphasises the home broadband aspect of its focus.

“At the same time, its advances to buy Telkom suggest it also sees inorganic growth as a means to become a head-on competitor in the broader mobile market.”

He adds that with its current service offerings of fixed-wireless broadband, Rain has gained significant market share in the broadband space, and has also penetrated the mobile market to some extent.

According to BMIT’s primary consumer surveys, such as its Digital Lifestyle Study, Rain already has more than 10% of the entire household broadband market, up from nowhere a few years ago, says Geerdts.

“Rain’s pricing has always been highly-attractive relative to the major mobile operators, even with speed-restricted specifications on the entry-level packages. It has also outpaced these major operators with its 5G rollout, although MTN is now starting to catch up. Vodacom and MTN have always been able to compete successfully on capex outspending, but they still need to improve their prices further to compete with Rain’s ongoing and promotional offers.”

Geerdts points out that the main challenge for Rain in terms of broadband subscribers is to be able to extend its coverage rapidly enough to be able to capitalise fully on its attractive offers.

He adds the agreement Rain had with Vodacom to provide active sharing services has helped the data-only network to expand coverage, whereas Vodacom now has its own spectrum so will rely less on Rain’s network.

“On the other hand, Rain now has access to its own sub-GHz spectrum, which should help to accelerate deployment in a more cost-effective manner.

“Whilst an emerging operator, Rain has always maintained a sharp focus in offering consumer broadband. As they grow, they still have the ability to expand the market to offer direct enterprise solutions. They can also add additional mobile services, especially now that they have a large, established customer base.”

He believes Rain can now take advantage of its sub-GHz spectrum to expand and improve coverage at lower cost.

“However, they do only have 20MHz. This is enough to offer entry-level broadband speeds on this spectrum. On the other hand, they have been awarded additional spectrum at higher bands to increase their overall capacity.”