Rain on track to exceed budgeted R1bn EBITDA

Samuel Mungadze
By Samuel Mungadze, Africa editor
Johannesburg, 17 Mar 2022

African Rainbow Capital (ARC)-owned data-only network Rain is on track to exceed its budgeted R1 billion earnings before interest, taxes, depreciation and amortisation (EBITDA) for the year ended February 2022.

ARC, which today reported its interim results for the period to 31 December 2021, says this achievement is exemplary considering Rain achieved breakeven only in the last 12 months.

EBITDA is considered a more reliable indicator of a company’s financial soundness, and also demonstrates the firm's worth to potential buyers and investors, as well as painting a picture regarding growth opportunities.

Commenting on Rain’s EBIDTA, ARC says: “The company is likely to continue to benefit from developments in its operating environment. Demand for its products remains strong, even as COVID-19 restrictions are relaxed and employees return to the office.

“Rollout of 5G coverage progresses well to include more towns across the country, as well as expanding coverage in metros.”

Further, ARC says, the Rain valuation for 31 December 2021 remained largely unchanged.

“This is due to delays in the spectrum auction and uncertainty regarding the timing, cost and size of additional spectrum being allocated to Rain.”

Rain Networks has since participated in the spectrum auction held earlier this month, forking out R1.15 billion for two chunks of 10MHz spectrum in the 700MHz band.

Meanwhile, ARC says it injected an additional R257 million into its digital banks, TymeBank and TymeGlobal, during the period, as part of the scheduled capital requirements.

Commenting on TymeBank, which has been in operation for 36 months, having launched publicly in February 2019, ARC says: “The COVID-19 pandemic and the various levels of the national lockdown since March 2020, with resultant economic pressure on the consumer, adversely impacted a number of the bank’s projects.”

Despite these challenges, it says: “TymeBank has demonstrated resilience as it maintains momentum in the number of bank accounts being opened, active accounts and launching new products.

“The fair value of the TymeBank investment was adjusted to reflect the post-money value of the recently closed capital raising, during which Tencent and the CDC invested in TymeBank and TymeGlobal. TymeBank received $150 million as part of the capital raised, while TymeGlobal received $30 million.”

In December last year, TymeBank raised capital from Chinese internet and technology giant Tencent and CDC Group, the UK’s development finance institution, to scale up operations.

The capital raised was to fund and grow TymeBank in SA and also fund GOTyme in the Philippines, where it secured a digital bank licence in partnership with the Gokongwei Group.