2009/10 BUDGET, STRATEGIC PLAN & PRIORITIES SENTECH LIMITED PRESENTATION TO THE PORTFOLIO COMMITTEE ON COMMUNICATIONS ON ITS BRIEFING 2009/10 BUDGET, STRATEGIC PLAN & PRIORITIES Date: 12 June 2009 DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

SENTECH TEAM Chairperson: Mr. Colin Hickling Chief Executive Officer: Dr. Sebiletso Mokone-Matabane Chief Financial Officer: Mr. Siddique Cassim Chief Operating Officer: Ms. Beverley Ngwenya Executive Regulatory & Mr. Dingane Dube Government Affairs: Specialist Stakeholder Mr. Monde Ndleleni Relations: Company Secretary: Adv Rachel Ramokhufi Non – Executive Director: Mr. Tau Mashigo Non – Executive Director: Dr. Yvonne Muthien DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

PERFOMANCE AGAINST 2008/9 STRATEGIC OBJECTIVES OVERVIEW SENTECH TEAM SENTECH MANDATE PERFOMANCE AGAINST 2008/9 STRATEGIC OBJECTIVES 2009 – 2011 CORPORATE PLAN STATUS ON KEY PROJECTS NATIONAL WIRELESS BROADBAND NETWORK (NWBN) DINALEDI SCHOOLS PARTICIPATION IN UNDERSEA CABLES SQUARE KILOMETRE ARRAY (SKA) CONCLUSION DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

SENTECH MANDATE – ELECTRONIC COMMUNICATIONS ACT 36 OF 2005 (“the ECA”) The ECA amended the main object of Sentech to incorporate convergence of broadcasting and telecommunications. Accordingly, the ECA stipulates that the main object and business of Sentech “shall be to provide electronic communications services and electronic communications network services…” DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

KEY STRATEGIC OBJECTIVES 2008/9: 2008 – 2011 CORPORATE PLAN STATUS AS AT 31 MARCH 2009 NETWORK PERFORMANCES: Availability of signal distribution for TV transmission = 99.8% Availability of signal distribution for radio transmission = 99.7% Availability of VSAT network = 99.6% Availability of Carrier of Carriers network = 99.6% Achieved. DIGITAL TERRESTRIAL TELEVISION: Digital switch on – 1 November 2008 40% population coverage by 31 March 2009. *subject to timeous transfer of total funding requirements and publication of Digital Migration Policy. Switch on achieved on 30 October 2008. Due to the delays in the finalisation of a frequency plan and DTT migration regulations, only 33% was achieved by 31 March 2009. DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

STRATEGIC OBJECTIVES 2008/9: 2008 – 2011 CORPORATE PLAN STATUS AS AT 31 MARCH 2009 2010 FIFA WORLD CUP SOCCER: Acquire land at NASREC to build the second teleport. Finalise the detailed designs of the second teleport. 2009 CONFEDERATIONS CUP: Provide satellite infrastructure to the 2009 Confederations Cup stadiums. Secure the required satellite bandwidth. Achieved. The land at NASREC has been secured on lease from the Department of Public Works. The network/technical designs for the second teleport have been finalised. Mangaung, Royal Bafokeng, Ellis Park and Loftus Versfeld completed. RETAIL BROADBAND: Exit retail broadband – MyWireless and Biznet. Implementation is still in progress. Financial write-off of assets effected in the 2008/9 Annual Financial Statements. DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

STRATEGIC OBJECTIVES 2008/9: 2008 – 2011 CORPORATE PLAN STATUS AS AT 31 MARCH 2009 NWBN: Approval by DoC and National Treasury of the business and funding model. implementation of NWBN that would primarily focus on schools, hospitals, clinics, Thusong Post Offices and Government in urban, rural and under serviced areas by 31 March 2009; Subject to approval of business and funding model, connect 233 Dinaledi Schools. Business and funding model submitted to the DoC and National Treasury based on funding requirement of R3.1 billion. Dinaledi Schools: The DoC is engaging with the user-departments to finalise their requirements. This includes confirming the list of schools. Thereafter provide them to Sentech to determine the extent of the rollout that can be achieved with the R500 million. FINANCIAL PERFORMANCE: Loss of R59 million in 2008/2009 Financially sustainable by year 7 (2015/2016), with no dependence on the fiscus on the basis that the Consolidated Business Model (as per the Corporate Plan) is approved. Achieved. Sentech projected a before tax profit (excluding extraordinary items e.g. impairments etc.) DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

OTHER ACHIEVEMENTS: 2008/9 FINANCIAL YEAR Universal access to television and radio: Rolled out 9 low power transmitter sites in the Karoo and Kgalagadi. More sites underway in 2009/10. Commissioned 19 Community radio stations – Gauteng, Mpumalanga, Eastern Cape, Western Cape, Free State and Kwazulu Natal; and 1 Community TV. Bridging the digital divide: Mpumalanga Schools project VSAT connections at Post Offices Mobile Home Affairs Offices South African Weather Services DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

2009 – 2011 CORPORATE PLAN: ENVIRONMENTAL OVERVIEW (EXTERNAL) the Department of Communications (DoC), has to balance the interests of Sentech, as its shareholder with its role as policy maker. There is a need for consensus between the Minister of Communications / DoC and Minister of Finance / National Treasury with regard to the mandate of Sentech, specifically on the telecommunications business. This has extended discussions over the years, to the detriment of Sentech. There is a view within Government that Sentech should not compete with private operators as it is funded from public funds. There is lack of coordination on an overarching ICT strategy, implementation plans and associated budgets with various Government departments and structures having distinct competencies at local, provincial and national level. E.g. Municipalities, Infraco, SITA etc. DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

2009 – 2011 CORPORATE PLAN: ENVIRONMENTAL OVERVIEW (EXTERNAL) cont. - ICASA intends to regulate Broadcasting signal distribution tariffs. Sentech engaged a reputable international consulting firm to assist in formulating the new tariff structure to be implemented in the digital environment. Sentech requested funding from the State for networks of frequencies (multiplexes) for dual illumination The State has already allocated R330 million towards operational costs associated with dual illumination There is a short fall of R558 million Should the State make up for the short fall, then broadcasters will not pay Sentech to transmit digital signal, during dual illumination period. DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

2009 – 2011 CORPORATE PLAN: ENVIRONMENTAL OVERVIEW (INTERNAL) Sentech maintains its broadcasting and telecommunications networks effectively and efficiently, based on its highly experienced technical teams. The Sentech networks currently and for the foreseeable future will operate at and above customer service level. Aged radio networks (FM, SW, AM) which will need to be upgraded. Sentech is affected by the national skills gap. This has resulted in operators poaching staff from each other with some offering share schemes and huge remuneration packages. Staff recruitment, retention as well as succession planning is therefore a challenge for the Company. Key critical technical staff is close to retirement. In-house skills development and skills transfer programmes are therefore very critical. DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

2009 – 2011 CORPORATE PLAN Strategic objectives: focus on key competency - broadcasting signal distribution - by defending current market and expanding services into other African markets. Exit retail broadband (as per directive from DoC/National Treasury) by terminating MyWireless and Biznet. Consider other business/funding models for the rollout of NWBN in order to achieve Government objectives. DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

2009 – 2011 CORPORATE PLAN cont. Strategic objectives: Implement a turnaround strategy for VSAT which is a platform that we are using to provide connectivity to Government Departments/agencies e.g. Mpumalanga Schools project, Mobile Home Affairs offices etc. The turnaround strategy is based on two elements: Government business and multinationals. Implement a turnaround strategy for Carrier of Carriers. DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

2009 – 2011 CORPORATE PLAN: INCOME STATEMENT DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

2009 – 2011 CORPORATE PLAN: BALANCE SHEET DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

2009 – 2011 CORPORATE PLAN: BALANCE SHEET DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

2009 – 2011 CORPORATE PLAN: BALANCE SHEET DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

2009 – 2011 CORPORATE PLAN: CASH FLOW DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

2009 – 2011 CORPORATE PLAN: CASH FLOW DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

STATUS ON KEY PROJECTS: DTT Objectives of the migration to DTT are to: Upgrade to digital the aged analogue television infrastructure which is more than 30 years old. Comply with ITU requirements that analogue signals will not be protected post 2015. Introduction of more television services and licencing of more broadcasters therefore stimulate the development of local content. Possible revenue generating source for Sentech with the awarding of more broadcasting licences / services. DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

ORIGINAL DTT PROJECT PLAN YEAR TASK Year 1 Preparation (mainly infrastructure) Year 2 [2007/08] Site preparation and project pilot Year 1 planned overflow installations Satellite distribution systems Gauteng DTT coverage in Gauteng and Bloemfontein Year 3 [2008/09] DTT roll-out in metropolitan areas to achieve approximately 56% of total population terrestrial coverage Year 4 [2009/10] DTT roll-out in denser areas in the country to achieve approximately 78% of total population terrestrial coverage Year 5 [2010/11] Balance of areas to achieve   approximately 92% coverage of total population terrestrial coverage (current SABC 2 coverage) Year 6 Analogue termination DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

ORIGINAL DTT PROJECT PLAN cont. Relative year/ Population Coverage Annual Capital Expenditure (CAPEX) GOVERNMENT ALLOCATION PROJECT STATUS OPEX (Dual Illumination cost) (Dual Illumination OPEX) 2007 Phase 1 R 95 m R95 m Completed 2008 Phase 2 R 120 m R120 m 2009 Phase 3 (47% population coverage) R 262.6 m R150 m In Progress 2010 Phase 4 (63,3% population coverage) R 231.4 m R160 m *(R10m) Commenced 1 April 2009 R 152.1 m R100 m 2011 Phase 5 (75,5% R 250.9 m R161 m *(R11m) R 224.8 m R110 m 2012 Phase 6 (Approx.84% Not part of the original project plan. R159 m *(R9m) R 263.8 m 2013 Year 7 (92% population coverage and Digital Switch Over (DSO) R 277 m * Total R 960 m R845 m R 918 m R330 m *Shortfall R115 m R 588 m * Year on year inflation adjustment DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

STATUS ON KEY PROJECTS: DTT cont. Despite the various challenges that Sentech experienced, the digital switch on took place on 30 October 2008, 2 days earlier than the due date as prescribed by Cabinet. Dual illumination commenced as at 30 October 2008 and Sentech is operating the pilot for SABC and etv. Sentech achieved 33% population coverage as at 31 March 2009. The planned 47% could not be achieved due to delays in finalising the DTT Spectrum Plan and policy implementation. Phase 4 commenced on 1 April 2009 and will continue until 31 March 2010. The objective is to achieve 63,3% population coverage by 31 March 2010. Subject to timeous finalisation of the DTT spectrum plan and policy implementation. DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

STATUS ON KEY PROJECTS: DTT cont. Challenges: Shortfall in funding allocations and the spread of allocations as per 2009 Budget Speech will result in Sentech not achieving the Analogue Switch Off (ASO) date of 1 November 2011 as prescribed by Cabinet. ICASA and the industry are still working on the DTT Spectrum Plan which impacts on the rollout. With ASO the Sentech broadcasting signal revenue will reduce due to available spare capacity and this makes it critical for ICASA to start working towards licencing more broadcasters / services. Minimising frequency interference during the migration to DTT. DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

STATUS ON KEY PROJECTS: CONFEDERATIONS CUP 2009 AND 2010 FIFA WCS Role of Sentech is to provide backup satellite infrastructure as part of the Government Guarantees. DoC and Sentech concluded a contract to regulate this relationship. Sentech allocated R300 million in the 2008 Budget Speech. R200 million was paid over to Sentech in 2008. The outstanding R100 million is for bandwidth and operational costs during the 2009 Confederations Cup and 2010 FIFA WCS. DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

NATIONAL WIRELESS BROADBAND NETWORK Initial business plan provided for no debt funding. Based on the allocation of only R500 million National Treasury is of the view that we raise the balance from the market. (social dividend). World Summit on Information Society (WSIS): Building an information society – where all irrespective of age, gender, race, location and economic status has access to information. “BRIDGING THE DIGITAL DIVIDE” Millennium Development Goals: Use ICT for development to improve the quality of life. Reduction of cost of communication in South Africa through access to infrastructure and liberalisation of ICT sector. DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

NATIONAL WIRELESS BROADBAND NETWORK cont. Rollout of a national broadband wireless network: balance rural and urban areas; under-serviced and affluent areas; balance social dividends with financial sustainability. Sentech not to compete with private sector – provide network on a wholesale basis – catalyst to reduce the cost of communications and stimulate economic development. Total capital requirement in 2008 was R4.4 billion of which the fiscus requested to fund R3.125 billion over 5 years. The balance of R1,3 billion funded from the project cash flows. DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

NATIONAL WIRELESS BROADBAND NETWORK cont. If Government’s allocation is only limited to R500million, and the difference raised from the market, the funders will dictate the business model which will have implications on the following: promise of lower connectivity prices will be compromised. Millennium Development Goals will be achieved at a very slow pace, as rural areas may be covered later. DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

DINALEDI SCHOOLS PROJECT - In terms of Government 16 APEX of priorities (apex priority 3), Sentech was mandated to provide: Connectivity of 500 Dinaledi Schools; and Connectivity of clinics, hospitals, Thusong Service Centres, Thusong Post Offices, Libraries, Heritage sites, Government and Tribal offices within the coverage area of Dinaledi Schools. Since 2007, Sentech submitted numerous business and funding models for the rollout of the Dinaledi schools project. As at the last business plan in 2008, Sentech required R 3,8 billion as this will be a national network. DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

DINALEDI SCHOOLS PROJECT cont. Sentech had also provided DoC with an alternative rollout model using VSAT as part of phase 1 to provide connectivity to the 500 Dinaledi Schools. These schools would later be provided with connectivity under the NWBN project. DoC however expressed a preference for rolling out a Wimax standard capable network. The DoC was of the view that Sentech should immediately utilise the NWBN funding allocation of R500 million. Bearing in mind that at R500 million the project is not financially sustainable and the risks of contravening good governance principles inclusive of PFMA. Discussions are ongoing to finalise the business and funding model. DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

PARTICIPATION IN UNDERSEA CABLES There are currently 5 sub-marine cable initiatives namely: Seacom, BahariCom/Uhurunet, EASSy, Dark Fibre Africa (DFA), West Africa sub-marine cable (Infraco). Sentech has been allocated R 21million to participate in the EASSy undersea sub-marine cable. DoC instructed Sentech not to participate in any cable but BahariCom/ Uhurunet. DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

SQUARE KILOMETRE ARRAY (SKA) The SKA - the largest and most sensitive radio telescope ever. It is likely to consist of thousands of dishes, each 10 - 15 m in diameter. South Africa submitted a bid in 2001 for the SKA to be located in South Africa. This project is an initiative under the Department of Science & Technology. DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

SQUARE KILOMETRE ARRAY (SKA) cont. The SKA core array will have to be located in a remote area as the relevant radio emissions are in the range of a few hundred MegaHertz, a frequency band now crowded on earth with TV and cellular telephone transmissions. Ideally, the core SKA array should be located in the centre of a 100 km diameter radio interference-free reserve, like a nature reserve. If built in South Africa, the core of the SKA will be in the Karoo region of the Northern Cape Province. - South Africa and Australia are the only two countries remaining on the shortlist to site this mega telescope. A final decision on the site is expected by 2010 and construction should start in 2014. DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

SQUARE KILOMETRE ARRAY (SKA) cont. Sentech has high power transmitters within the 100km diameter radio interference-free area. Sentech has to vacate the required frequency band used for radio and television transmissions by replacing current high power transmitters with numerous low power transmitters in order to continue providing radio/television transmission to communities in that area. - This has cost implications for Sentech and would require Environmental Impact Assessments (EIAs) and procurement of low power transmitters. DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

CONCLUSION Broadcasting signal distribution is profitable. Telecom’s could be profitable, subject to funding. Policy issues that are threatening the core. Since the ECA is technology neutral it is important that Shareholder reconfirm the mandates of SOEs in the ICT Sector i.e Sentech, SABC and Infraco DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09

THANK YOU DD/krs/Presentation to PCC on Sentech's briefing 2009/10 budget FINAL 12 JUNE 09