SENTECH’S PRESENTATION TO THE PORTFOLIO COMMITTEE ON COMMUNICATIONS ON ITS ANNUAL REPORT 2008 Date: 11 November 2008

OVERVIEW Sentech Team Opening remarks by Chairperson Broadcasting signal distribution performance Telecommunications Performance Performance Measures Performance against Budget Cash Flow Highlights Balance Sheet Highlights Operating Expenses 2008/2009 Budget DTT Funding DTT Funding Summary NWBN Funding Additional Opex Funding

SENTECH TEAM Mr. Colin Hickling Chairperson Mr. Thabo Leeuw Non Executive Director Dr. Sebiletso Mokone-Matabane Chief Executive Officer Ms. Beverly Ngwenya Chief Operating Officer Mr. Mohammed Siddique Cassim Chief Financial Officer Mr. Dingane Dube Executive: Regulatory & Government Affairs Mr. Monde Ndleleni Specialist: Stakeholder Relations

CHAIRPERSON’S OPENING REMARKS 1. 2007/08 challenging for the Board, management, employees and stakeholders largely due to lack of funding. To date, including the recent MTEF there is still not much progress in resolving the lack of adequate funding. After profitable period in the late 1990s and early 2000s, Sentech’s financial position has deteriorated significantly, due to anticipated funding for rollout plans for a national broadband wireless infrastructure that did not materialize. In terms of PFMA, as a schedule 3b entity, Sentech requires approval of Minister of Finance to raise loan funding. Reclassification to schedule 2 would give greater flexibility and the opportunity to be more responsive to opportunities within the ICT space. Funding challenges impacting on Sentech’s status as a going concern and affecting our attractiveness as an employer. 5.

CHAIRPERSON’S OPENING REMARKS cont. 4.1 Digital Terrestrial Television: Sentech applied for total funding of R955 million for the capital costs and R917 million for dual illumination. Only R650 million allocated for capital costs and none for dual illumination. Exchange rate fluctuations have increased the capital costs requirements. 4.2 National Wholesale Broadband Network: Original budget request was R3,1 billion. Only R500 million was allocated and there is still no firm commitment to provide the balance. The costs have increased to R3,8 billion.

CHAIRPERSON’S OPENING REMARKS cont. 4.3 FIFA 2010 World Cup: total required funding has been allocated. 4.4 Participation in undersea cable: At the direction of the Department of Communications (DoC), Sentech is now participating in Uhurunet. Based on the Uhurunet business plans, Sentech will invest the R21 million allocation 5. 2007/08 Sentech reported modest pre-tax profit of R28 million attributable to interest earned on the funds allocated by Government. 6. The Board has approved a turn around strategy for the business and require a reclassification of Sentech to schedule 2 to enable the Company to raise funds with greater flexibility thus reducing the dependence on the fiscus.

BROADCASTING SIGNAL DISTRIBUTION PERFORMANCE Sentech television and radio networks continued to perform above service level targets: The television networks achieved an average 99.8% availability against a target of 99.4%; and The radio network achieved 99.9% availability against a target of 99.5%; and Jointly with the SABC, Sentech continued to expand television and radio coverage to achieve universal access. Digital Terrestrial Television (DTT): Sentech successfully completed phase 2 of the migration.

TELECOMMUNICATIONS PERFORMANCE The telecommunications networks achieved 99.97% availability against a target of 99.8%. Sentech finalised and submitted the business plan for the rollout of NWBN. Phase 1 of rollout plan is Dinaledi schools: It was anticipated that 233 schools provided with coverage by March 2009; In year one only Sentech requires R671 million (CAPEX) and R221 million (OPEX) for the rollout to 233 schools. Only R500 million allocated; Pre-roll out implementation work is continuing in terms of the project plan to the extent that Sentech does not enter into long term financial commitments; and Actual coverage to 233 schools will not be achieved by March 2009, due to delay in finalization of business and funding model.

PERFORMANCE MEASURES Turnover growth Gross profit growth Company 2008 2007 2006 2005 Turnover growth Gross profit growth Operating profit growth Return on equity Return on operating assets Gross profit margin Operating profit margin Debt equity Gearing ratio Interest cover % 0.12 8.68 9.07 15.05 (6.06) 1.54 39.09 6.73 553.42 104.33 (1.14) (181.15) 3.51 0.59 (16.49) (13.85) 1.08 0.26 (7.61) (6.24) 25.10 26.75 28.63 22.45 2.55 0.39 (9.78) (10.55) times 1.80 0.82 0.69 0.60 2.26 1.27 1.17 1.22 * 0.13 (2.87) (2.59) * No ratio calculated for the current year as the company is in a net interest received position

PERFORMANCE AGAINST BUDGET COMPANY Actual Budget Variance Var % 724,076 881,037 (156,961) (17.82%) 705,643 885,081 179,438 20.27% 18,433 (4,044) 22,477 555.81% 18,336 (16,278) 34,614 212.64% Revenue Expenditure Operating profit Net profit Although sales were below target, we surpassed our budget objectives through expenditure savings and the benefit of interest income on the Government Grants received. This resulted in a profitable situation for the first time since 2003.

CASH FLOW HIGHLIGHTS

BALANCE SHEET HIGHLIGHTS

DTT FUNDING YEAR TASK ANNUAL CAPITAL COST TOTAL FUNDING REQUIREMENT ANNUAL CAPITAL COST ALLOCATED FUNDING DIFFERENCE (SHORTFALL) Year 1 Preparation (mainly infrastructure) R 95 mil Year 2 [2007/08] Preparation and project pilot Year 1 planned overflow installations Satellite distribution systems Gauteng DTT coverage in Gauteng and Bloemfontein R 120 mil Year 3 [2008/09] DTT roll out in metropolitan areas to achieve approximately 56% of total population terrestrial coverage R 262.7 mil R 150 mil R 112.7 mil Year 4 [2009/10] DTT roll out in denser areas in the country to achieve approximately 78% of total population terrestrial coverage R 231.4 mil R 81.4 mil Year 5 [2010/11] Balance of areas to achieve   approximately 92% coverage of total population terrestrial coverage (current SABC 2 coverage) R 250.9mil R 100.9mil Total   R 960 mil R 665 mil R 295 mil CAPEX Shortfall of R 295 million compared to initial funding request based on Euro 1 = R10 Total CAPEX Shortfall of R 417 million compared to initial funding request based on Euro 1 = R13.25

DTT FUNDING Cont. Dual illumination 2009 2010 2011 2012 Total R’000 DTT dual illumination 152 100 224 800 263 800 277 000 917 700 The dual illumination period commences on 1 November 2008 and end on 1 November 2011. No funds have yet been allocated for DTT dual illumination.

DTT FUNDING SUMMARY Total Shortfall/Funding Requirement 2010 2011 2012 CAPEX 194 100 100 900 295 000 ROE Variation 90 000 32 000 122 000 Dual illumination 376 900 263 800 277 000 917 700 Total for DTT 661 000 396 700 1 334 700

NWBN FUNDING YEAR FUNDING REQUIRED 2010 1,749,931,370 2011 1,136,801,545 2012 242,589,140 2013 154,645,765 TOTAL 3,283,967,820 Total funding is R3.8 billion, less an amount of R500 million received in February 2008. Outstanding funding requirement is R3,3 billion.

ADDITIONAL OPEX FUNDING   (R'000) PRMA 135,717 RECAPITALISATION 300,000 435,717

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