Late mobile entrant Rain to face off with MVNOs

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 05 May 2023

Telecommunications operator Rain has entered the mobile market. The telco, which used to provide data-only services, is launching a 4G mobile network, offering high-definition voice calls, data, SMS and national 4G mobile coverage.

With its new RainOne mobile platform, telecoms analysts believe Rain will remain smaller than giants Vodacom, MTN and Telkom, but will have to fight it out with burgeoning mobile virtual network operators (MNVOs).

In March, Rain’s shareholder − billionaire Patrice Motsepe’s Africa Rainbow Capital − said the telco was imminently looking to go live with a mobile offering.

Up to now, Rain has primarily focused on the home internet market. It began by launching SA’s first 4G data-only network in 2018, and the country’s first commercial 5G network in 2019.

According to the firm, its 5G network has since expanded from metros to smaller towns and regions, covering over seven million households.

After acquiring spectrum in the 2022 auction, Rain says it is overlaying its existing 4G network with a new layer that provides for more comprehensive reach.

“This has now positioned Rain to enter the market as a full mobile network operator, thus becoming the fourth telco after Vodacom, MTN and Telkom, with a network that offers national coverage in voice, SMS and data,” says the company in a statement.

With both its national 4G mobile network and extensive 5G network, Rain is now combining home and phone into one plan, branded RainOne, it adds.

RainOne includes unlimited 5G home WiFi, plus free monthly calls and data for two phones, each with 2GB of free data and 60 minutes of free, high-definition voice calls every month for R559 month-to-month, without long-term contracts.

“The convergence of home and mobile voice and data offerings in one affordable plan is an innovation we are confident will appeal to South Africans. We recognise that our customers have family members, so with RainOne, we are catering not only for their need to access the internet from home, but also outside on their mobile devices,” says Brandon Leigh, CEO of Rain.

“Now customers have another option for mobile services from a provider that has already established a strong reputation in the home internet market. The expansion of Rain's network, both in terms of 5G coverage and spectrum acquisition, indicates we are serious about being a major player in the mobile market as well.”

Dobek Pater, telecoms analyst at Africa Analysis, observes that Rain is building its market-entry strategy around price and cross-selling mobility to its existing fixed broadband customer base.

“As seen in the past, the new market entrant typically comes in with heavily-discounted prices to gain a foothold in the market,” says Pater. “In the long-term, however, that starts to put pressure on profits and slows network expansion.”

For the medium- to long-term, he adds, Rain may need to focus on a different value proposition. “The operator may already be looking at 5G as a mobile offering to capitalise on its growing 5G network.”

Pater believes the larger operators are likely to remain fairly unaffected with respect to their voice products, especially within their premium customer base.

He notes MTN and Vodacom, especially, have strong contract subscriber bases that are unlikely to switch.

“Depending on the quality of the Rain mobile services, some individuals may opt to use Rain as a second service provider (a second SIM) to take advantage of more attractive pricing. This may drive some of the uptake of Rain mobile SIMs. However, ultimately, Rain is a ‘late-comer’ to the mobile market, particularly 4G, which it is launching with.

“We have the past examples of Cell C and Telkom, illustrating it is possible to gain customers, maybe even quickly, following a lower price strategy, but in the longer term, this is not sustainable for a smaller operator.

“Therefore, Rain is likely to remain a smaller operator in the market, but it is not unthinkable that in time it may move to number three or four in the market,” Pater says.

Building blocks

Christopher Geerdts, MD of market analyst firm BMIT, believes Rain has as good a chance as most MVNOs.

He points out that while the banks and retailers have a captive base for their loyalty-based mobile services, Rain also has a captive base of home broadband customers, who may choose to add a mobile service.

“However, the banks and retailers have millions of customers, while Rain’s home broadband user base is sub-one million. They do have an advantage over MVNOs in that they are already positioned as a significant mobile operator in terms of their fixed-wireless offerings.”

To win market share, Geerdts urges Rain to maintain a strong value proposition, coupled with compelling marketing.

“They had this combination with their fixed-LTE/5G services, with attractively-priced uncapped broadband offerings that appealed to those who could not yet access fibre, along with effective marketing campaigns and messaging.

“They were able to offer instant gratification – with the router delivered to customer homes and then plug-and-play month-to-month. They need to offer something similar in mobile, which they appear to be doing.”

Geerdts adds the launch offering is bundled with the telco’s home router service. “They need to piggy-back on this offer, and a level of uptake from existing customers to scale enough to sustain the mobile business.

“They must have national roaming – which seems to be in place. The details of this are not yet provided, but the service needs to be of a high quality, especially since they are presumably seeking to differentiate themselves by offering high-definition voice, which allows for noticeable clearer audio, which many customers have grown accustomed to on their Teams and Zoom conversations and when they make WhatsApp calls.”

Necessary persuasion

Pater notes that with a customer base of over 500 000 households, Rain has access to a large addressable market that it can easily target.

“To retain any initial gains, Rain will also need to significantly ramp up its customer support if it is to begin to pose a genuine threat to the larger operators. The current Rain (household) customers already use mobile services from other service providers.

“Rain would need to convince its fixed wireless customers to also buy mobile services from it. Offering low prices and/or bundled solutions may be attractive, but not always sufficient to churn customers from the currently used service providers. It may also depend partly on the current Rain customers’ experience with Rain’s fixed wireless services.

“The challenge for Rain, however, is that they are coming into the market when there is a high MVNO activity. That can potentially take away some of the attention from them as a new entrant in the mobile space.”