Presentation to:. The Portfolio Committee on Presentation to: The Portfolio Committee on Telecommunications and Postal Services Organisation: SENTECH Presentation on: Performance Information Period of Reporting: 2017/18 Quarter 1 Date of Presentation: 20 February 2018

PERFORMANCE OVERVIEW FOR THE REPORTING PERIOD Summary of Performance Status for period under review: Seven KPIs versus nine KPIs for the first quarter have been achieved. Continuing business revenue was 2% (R7m) below budget (R306m actual vs R312m budget). Total revenue was 4% (R14m) below budget (R338m actual vs R352m Budget). An EBIT of R50m above budget has been achieved. Expenditure was 12% below budget (Actual R275m versus Budget R313m). Net profit was up by 68% (Actual R78m versus Budget R46m). Finance income R7m above budget (R15m actual vs R8m budget). Progress has been made on mitigation of strategic, operations and emerging risks.

PERFORMANCE OVERVIEW FOR THE REPORTING PERIOD Significant Achievements / Highlights: SENTECH achieved an EBIT of R50m above budget (Actual R63m versus Budget R13m due to less operating expenditure for the period under review. Areas of Under-Achievement: The organisation missed its revenue target (Actual R305m vs Budget R312mdue largely to poor performance on connectivity services. The organisation achieved overall organisational objective rating of 19.5%. This KPI is dependent on achievement of other objectives and it was mainly affected by missed revenue targets.

Performance Information Annual Target   Quarterly Target Actual Performance Status Explanation of Variance R1 275.8 million R312 million R306 million Not achieved This missed target was due largely to poor performance on connectivity services R138 million R13 million EBIT of R 63 million achieved Achieved This overachievement performance was due to there being less operating expenditures in the quarter 6.5% of Actual NPAT for the 2017/18 Financial Year Achieve 20% of budgeted Enterprise and Supplier Development Spend 35% was spent The KPI has been over- achieved due to increased activities for SEED 550 DTT national viewer sites installed and field trial experience tested Develop project plan and viewer measurement plan Project plan and viewer experience measurement plan completed This was achieved due to better project management In the Corporate Plan, this KPI was read as “ 550 DTT national field sites installed”, however, an amended was requested to read “Develop project plan viewer measurement plan” for Quarter 1.

Performance Information Explanation of Variance Annual Target   Quarterly Actual Performance Status Explanation of Variance Weighted average availability based on product revenues of 99.80% Weighted average availability network of 99.93 achieved Achieved Overachieved due to better network management Customer satisfaction level of 80% achieved Monitoring Tool for Customer Survey recommendations completed and implementation started Monitoring Tool has been developed and implementation has started Achieved due to better planning

Performance Information Explanation of Variance Annual Target   Quarterly Actual Performance Status Explanation of Variance Performance rating of 3.6 for the 2017/18 Financial Year 25% of Organisational objectives achieved   19.5% of organisational objectives Not Achieved As this KPI is depended on achievement of other objective, it was mainly affected by missed revenue targets 85% of the 2017/18 approved Training Plan interventions implemented 20% of training interventions completed 23.5% of training interventions were completed Achieved This KPI has been overachieved due to better execution of training plan   South African-based Satellite business plan and funding proposal submitted to Shareholder subject to feasibility study results Submit project proposal to DTPS for approval Project proposal was submitted to the DTPS Achieved The KPI was achieved as a result of good planning and effective engagement with relevant stakeholders to provide required information

Financial Information

Financial Performance Q1 June 2017

Financial Performance Revenue Per Service   Jun-17 YTD FY2018 Service Actual Budget Variance R '000 % TV 51 976 51 971 5 0% 156 225 155 912 313 FM 26 955 25 494 1 462 6% 78 696 76 370 2 325 3% MW 829 - 2 484 (0) (0%) SW 2 165 2 304 (139) (6%) 6 758 6 815 (57) (1%) DTH 14 047 13 738 309 2% 41 236 39 629 1 607 4% Facility Rentals 6 081 5 420 661 12% 18 357 16 246 2 111 13% Connectivity 795 5 081 (4 285) (84%) 1 996 14 968 (12 972) (87%) Continuing business 102 849 104 837 (1 988) (2%) 305 753 312 425 (6 672) Dual Illumination 12 763 12 772 (9) 32 199 39 210 (7 011) (18%) Sundries (com) 1 100% 2 Total revenue 115 614 117 609 (1 995) 337 954 351 635 (13 681) (4%)

Product and Network Performance

Product and Network Performance National Network Performance - FY2018 Q1 Network Services SLA Target SENTECH Performance R'000 Weighted Ave Terrestrial Television 99.7 99.90 156225 54.69 FM Radio 99.94 78696 27.56 Medium Wave Radio 99.5 100.00 2484 0.87 Short Wave Radio 99.88 6758 2.37 Satellite 99.8 99.99 41236 14.45 TOTAL   285399 99.93

Product and Network Performance

Risk Management

Risk Management The below tables details the risk mitigation action carried out by management for Quarter 1 against the planned risk mitigation activities: Strategic Risks Risk Description Contributing factors Status update Impact of proposed changes to the regulatory environment and absence of policy SOC rationalization Uncertainty of whether post-ASO ECNS licensees will be permitted to act as multiplex operators Absence of policy direction on digital radio Clarity was provided that SENTECH and BBI will merge and the high-level approach towards the merger was provided Broadcasting policies are under review.

Risk Management The below tables details the risk mitigation action carried out by management for Quarter 1 against the planned risk mitigation activities: Strategic Risks continued Risk Description Contributing factors Status update Financial sustainability Increased costs of operations (e.g. energy, Satellite, etc. Over reliance on one customer (SENTECH’s financial sustainability should the customer not be able to pay for services rendered) Delayed ASO which has an impact in dual illumination and technology obsolescence Complexity of DTT commercialization Credit downgrade of South Africa by the rating agencies Exposure to foreign exchange rates fluctuations Integrated Talent Management framework developed which will form the basis of a talent management plan Implementation of university collaboration to build an adequate talent pipeline Strategic partnership engagements with potential suppliers Vacancies advertised for additional skills and capacity MOU for research skills has been signed with CSIR  

Status of implementation Risk Management Operational Risks: Operational risk assessments were conducted with all business units against operational objectives. The risk registers have been analyzed and condensed into the risk themes, namely, skills capacity, regulatory, revenue sustainability and customer related. Theme Risks Mitigations Status of implementation Skills and Capacity Lack of skills to monetize conformance testing, cyber security specialist and research Lack of capacity for FM replacement and DTT optimization Inadequate skills and capacity to sell outside South Africa Overloading of resources Source required skills through strategic partnerships and outsourcing. Skills transfer Prioritization of resources for key project and revenue generating projects Training and Development   Integrated Talent Management framework developed which will form the basis of a talent management plan which includes the development of career pathways, organizational training plan, implementation of bursary programme to enhance skills. Implementation of university collaboration to build an adequate talent pipeline Strategic partnership engagements with potential suppliers that includes skills and capacity Vacancies advertised for additional skills and capacity MOU has also been signed with CSIR for research skills.

Status of implementation Risk Management Operational Risks: Operational risk assessments were conducted with all business units against operational objectives. The risk registers have been analyzed and condensed into the risk themes, namely, skills capacity, regulatory, revenue sustainability and customer related. Theme Risks Mitigations Status of implementation Regulatory Delays in the draft policy directive on digital sound broadcasting SENTECH interests may not be holistically addressed in the regulatory submission Publication of obligations that may not be affordable to SENTECH Liaison and engagements with the regulator Participation in the regulatory processes and engagement with the shareholder   Continued engagement with the regulator and participation in the regulatory processes. The regulator has been engaged on the obligations. Revenue Growth Increased competition Delays in revenue realization Slow response to the market Lack of innovation Integrated planning and cross functional service teams Operationalization and implementation of strategies Africa business case is being implemented. Customer related risks Affordability of community and commercial broadcasters Inadequate SLA alignment with third part agreements Inadequate communication with customers Inadequate NMS Unreliable VSAT and DTT platforms Reduce high impact costs Explore alternative effective solutions Implement a central complaint process Full implementation of NMS Optimization of DTT and VSAT platforms Network monitoring has been implemented, OPS is currently optimizing NMS. The deployment and migration is 95% complete. The new VSAT hub is reliable and stable. Cost containment procedures are being implemented & alternative solutions are also being sought.

Risk Management New And Emerging Risks : There are one emerging risks that have been identified during the quarter. This risk was previously reported under the DTT register as well as in the strategic register aligned to the changes in regulatory environment. The following table details the emerging risk: Event Emerging risk Action plan The change of the Minister of Communications post cabinet reshuffle by the President. The Minister of Communication wants to reverse the policy directive on STB encryption that was issued by the previous minister of Communication. This will result in further delays in DTT implementation. Monitor the development and participate in the public policy process.

Our People

Our People Number of Employees 550 Employee Turnover 1.8%

Enterprise Development Objective Activity Q1 Progress update Further action 1.Stimulate and support growth in the ICT sector   Development of ICT industry as per demand plan Develop a small business innovation development plan Efforts to partner with industry initiated to address the lack of SMME’s in critical high expenditure areas SENTECH participated at the Vision 2030 Summit to co-create innovative solutions and source partnerships for industry focused developmental activities Co-creation of SMME development plan through partnerships Follow through on partnerships initiated Develop an ICT Industry Day concept SMME incubation programme Identify a incubation service provider Tender request out for a incubator service provider To start an incubation programme

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