Rain’s worst nightmare

Rain is realising that it is tough to be the fifth mobile operator in South Africa. Financial pressures and increasing competition are destroying its value proposition.

Rain used to be a disruptive force in South Africa’s mobile and broadband market with affordable uncapped products.

No other mobile operator could touch the value it offered its subscribers. It was unlimited all the way.

Rain dismissed warnings from industry veterans like Vodacom CEO Shameel Joosub that uncapped mobile products are risky.

It told South Africans it was committed to continue offering uncapped data products to home and mobile users.

Fast forward to 2024, and Rain has become just another mobile operator struggling to remain relevant and competitive.

It replaced its three uncapped 4G packages with a 4G SIM product with 2 GB of data, 60 minutes, and 100 SMS messages for R165 per month.

Its value proposition is worse than other products in the market, especially when looking at the growing number of mobile virtual network operators (MVNOs).

Afrihost’s AirMobile has a 2GB data-only package for R60.00 per month and offers a 10GB package for R150.00 per month. Both are cheaper than Rain.

People looking for a bundled data and voice package with 2 GB of data and 60 voice minutes, the same as Rain, will pay R124.40 at AirMobile.

Telkom is also more affordable. Its FlexOn 2 contract bundle offers 2 GB of data, 75 minutes, and 500 SMSs for R129 per month.

For people who call a lot, MTN Superflex offers 10GB of data and unlimited local calls and SMS for R299 per month.

Some mobile virtual network operators roaming on MTN’s network offer 5GB of data and unlimited calls and SMSes for R199 per month.

Simply put, Rain’s new mobile product will not attract new users because of its value proposition.

Another problem is that Rain’s voice-over-LTE calling is not supported on all phones. That means you need a custom dialer to make voice calls.

MyBroadband Insights’ latest data shows that Rain’s network is significantly worse than those of its competitors.

Rain’s average download speed of 21Mbps is much lower than MTN’s at 82Mbps and Vodacom’s at 80Mbps. It is also much slower than Cell C and Telkom.

The table below compares Rain’s new mobile product with other offerings in the market.

Rain’s dwindling 5G value proposition

Rain is betting the farm on its Rain One products, which bundle a fixed broadband connection with free monthly calls and data for two phones.

Rain One home costs R625 per month, while Rain One business costs R795. The main difference is that the latter comes with calls and data for five phones.

Rain will still have to prove that bundling fixed broadband with a mobile offering is a winning formula.

Many people and businesses have little value for this bundled offering and prefer to use Vodacom and MTN for their mobile needs.

Another challenge for Rain is that going all-in with its Rain One offering diminishes the value proposition of its 5G fixed wireless offering.

Those looking for a home broadband product will compare prices for fixed 5G products, and Rain is falling short.

Telkom has cut the price of its entry-level 5G products to R499 per month, significantly cheaper than Rain’s R625.

Although Rain offers more value through its mobile offering, it will not be a consideration for many consumers. They want an affordable broadband connection, and nothing else.

There is also the issue of Telkom’s 40Mbps speed limitation and its 1TB fair use policy. However, this is enough for most households.

Many Internet service providers offer even cheaper fixed-wireless products, including Supersonic, Axxess, and MTN.

The table below shows how Rain’s 5G home product compares to other fixed wireless products on the market.

It is tough to be the fifth mobile operator

Rain is learning the hard way that it is difficult to be the fifth mobile operator, especially if you have to build and maintain a mobile network.

When it launched, Rain had a fantastic deal with Vodacom, where Vodacom built and maintained its 4G network.

Vodacom was spectrum starved and partnered with Rain to get access to its spectrum through a roaming agreement.

Although the networks are separate and have no spectrum pooling, it helped Vodacom gain more capacity in areas with congestion.

However, a new agreement and the 2022 spectrum auction changes the dynamic. Vodacom is now less reliant on Rain’s network to serve its customers.

Rain is also rolling out and maintaining its own 5G network, which is costly. It does not have Vodacom’s backing in this endeavour.

Rain is now a fully-fledged mobile operator with significant costs and challenges. It is difficult for smaller operators to make money.

Sasfin Securities’ David Shapiro said telecommunications companies are no longer the cash cows they used to be.

Few markets can sustain more than two mobile operators. In South Africa, Vodacom and MTN dominate, and the others fight for survival.

Another challenge, Shapiro said, is that people want to get great mobile services but don’t really want to pay for it.

It is also a capital-intensive business. Networks have to continually upgrade their technologies and networks, which costs billions.

“The smaller players have got it tough. If the big gorillas really want to stomp on you, they will,” Shapiro said.

Rain has an uphill battle to remain relevant in an increasingly competitive mobile and broadband market.

Its network does not match Vodacom and MTN’s, and its value proposition is starting to lag behind many of its competitors.

It is not clear how Rain will regain its mojo and make headlines again for being a disruptor.