PARLIAMENTARY PORTFOLIO COMMITTEE ON dd PRESENTATION TO THE PARLIAMENTARY PORTFOLIO COMMITTEE ON COMMUNICATIONS 25 MARCH 2010 CAPE TOWN

OVERVIEW 1. Sentech Team 2. Achievements: 2009 Corporate Plan dd OVERVIEW 1. Sentech Team 2. Achievements: 2009 Corporate Plan 3. Strategic Plan and Budget: 2010 – 2013 Corporate Plan 4. Project Status: DTT and 2010 FIFA World Cup Soccer 5. HR Strategy Participation in Uhurunet Conclusion

SENTECH TEAM Dr. Sebiletso Mokone-Matabane: Chief Executive Officer Ms. Beverly Ngwenya: Chief Operations Officer Mr. Mohammed Siddique Cassim: Chief Financial Officer Mr. Dingane Dube: Executive Legal & Regulatory Adv. Matlakala Monyai: Company Secretary Adv. Rachel Ramokhufi: General Manager Office of the CEO Mr. Monde Ndeleni: Government Relations

ACHIEVEMENTS 2009 CORPORATE PLAN

ACHIEVEMENTS: 2009 CORPORATE PLAN Future plans For the year ended 31 March 2009, the Company reported “Profit from continuing operations” of R148 million. For the year ended 31 March 2010, we anticipate the business at operational level to break even. For the 2010 – 2013 Corporate Plan period the BSD business will continue to be profitable. All major network performance performed at the required customer service levels. Continue to operate the networks at or above customer service level agreements.

ACHIEVEMENTS: 2009 CORPORATE PLAN cont. Future plans To date rolled out 16 low power transmitter sites in Western Cape (incl. Greater Karoo), Kgalagadi area (Northern Cape), Limpopo and Free State. Total population coverage +/- 70 000. Rollout at least 15 additional sites per FY. This is a total of at least 45 low power transmitter sites rolled over the 2010 – 2013 Corporate Plan period. Sentech provides broadcasting signal distribution (BSD) to 47 community radio stations with estimated population coverage of +/- 12 million. Continue to provide BSD to community radio stations. Sentech will continue discussions with DoC and MDDA to determine a model that will ensure financial sustainability of community radio stations. Rolled out DTT infrastructure that is capable of providing just over 50% population coverage. (33% population coverage on air) Based on the Final Frequency Spectrum Plan by ICASA, switch-on the DTT network to provide 56% population coverage by 31 March 2011.

ACHIEVEMENTS: 2009 CORPORATE PLAN cont. Future plans Provided and operated the back-up satellite infrastructure at four stadia hosting the 2009 FIFA Confederations Cup as part of the Government telecommunications guarantee to FIFA. The local satellite feed (Government guarantee) performed at 100% availability. Implement infrastructure at the balance of the stadia (6) hosting the 2010 FIFA WCS. Build the 2nd teleport which will also serve as back-up for Sentech’s STP teleport. Hand over infrastructure to FIFA on 1 June 2010. Sentech provided VSAT connectivity to: Mpumalanga schools project (525) Mobile Home Affairs Officers (87) South African Post Office (SAPO) (74) The number of VSAT connections planned: Mpumalanga schools project (1300) Mobile Home Affairs Officers (200) South African Post Office (SAPO) (172) Free State Provincial Department of Education

LOW POWER TRANSMITTER ROLLOUT Below are sites rolled out and switched on to date: In the Greater Karoo – Western Cape Prince Albert Leew Gamka Nelspoort Merweville Klaarstroom In the Kgalagadi area – Northern Cape Heuningvlei Severn Loopeng Laxey

LOW POWER TRANSMITTER ROLLOUT cont. In the North – Limpopo Indemark Mpzema/Phadzima Mavhunga In the Cape – Western Cape Agter-Witzenberg – (To be completed end March 2010) Genadendal In the South - Free State Villiers Phillipolis

COMMUNITY BROADCASTERS

STRATEGIC PLAN AND BUDGET 2010 – 2013 CORPORATE PLAN

MANDATE Electronic Communications Act (No. 36 of 2005) “…to provide electronic communications services and electronic communications network services in accordance with the Electronic Communications Act.”

MARKET SIZE AND GROWTH POTENTIAL PRODUCTS/SERVICES SENTECH MARKET SHARE CONTRIBUTION TO REVENUE GROWTH PROSPECTS Television (TV) 92.6% 68% Market saturated. DTT presents growth prospect FM 98% 29% Market saturated Low growth prospect Medium Wave (MW) 86% 1%

MARKET SIZE AND GROWTH POTENTIAL cont. PRODUCTS/SERVICES SENTECH MARKET SHARE CONTRIBUTION TO REVENUE GROWTH PROSPECTS Direct to Home (DTH) Vivid (Free To Air) N/A 22% Moderate growth rate Business Television and Radio (BTV) 10% 5.6%

MARKET SIZE AND GROWTH POTENTIAL cont. PRODUCTS/SERVICES SENTECH MARKET SHARE CONTRIBUTION TO REVENUE GROWTH PROSPECTS Short Wave (SW) 18.5% 20.4% Low growth rate Facility Rental 22% 19.5% Moderate growth rate * VSAT 7.6% 3.7% Moderate growth rate * Carrier of Carriers (CoC) 1.38% 10% Low growth * To be consolidated with the new telecommunications business plan currently under development.

LEGISLATIVE AND REGULATORY DEVELOPMENTS WITH SIGNIFICANT IMPACT ON BUSINESS Risks: Public Service Broadcasting Bill SABC divided into public broadcasting, commercial and international. Sentech is declared common carrier for the SABC only in terms of public broadcasting services; declaring all Sentech’s broadcasting main sites as essential facilities; making Sentech tariffs transparent; and ICASA to regulate Sentech tariffs.

LEGISLATIVE AND REGULATORY DEVELOPMENTS WITH SIGNIFICANT IMPACT ON BUSINESS cont. Mitigation strategy (ies): Role clarity between SoEs in the same sector, in order to optimise State investment; Sentech will implement a facilities leasing strategy; Sentech has engaged an international consulting firm NGB to assist with formulating a tariff model in the DTT environment; and Customer Retention.

LEGISLATIVE AND REGULATORY DEVELOPMENTS WITH SIGNIFICANT IMPACT ON BUSINESS cont. Risks: DTT Final Spectrum Plan: ICASA has adopted a Final Frequency Plan as opposed to the Sentech Complimentary Frequency Plan (SCFP); and This results in technical and financial implications for the project.

IMPLICATIONS OF FINAL FREQUENCY SPECTRUM PLAN Some of the implications of the FSP are as follows: It is not possible to replicate the current analogue television coverage. The deployment of additional sites to address the coverage shortfall and differences between analogue and digital is not technically feasible and financially viable. Significant portion of the population would be deprived of the benefit of receiving DTT coverage by means of low-cost indoor-portable receive antennas.

LEGISLATIVE AND REGULATORY DEVELOPMENTS WITH SIGNIFICANT IMPACT ON BUSINESS Mitigation strategy (ies): Sentech has analysed the implications of the FSP and submitted a report to the Department of Communications for consideration and approval. Sentech will continue engaging ICASA on the implications of the FSP.

LEGISLATIVE AND REGULATORY DEVELOPMENTS WITH SIGNIFICANT IMPACT ON BUSINESS cont. Risks: DTT Regulations and Digital Migration Reasons Document: The Regulations will substantially erode Sentech’s revenue as: There is a provision for 2 network of frequencies (multiplexes); 1 multiplex is allocated for SABC services and the other multiplex for commercial broadcasters, etv and M-net. The Regulations have financial implications for Sentech.

LEGISLATIVE AND REGULATORY DEVELOPMENTS WITH SIGNIFICANT IMPACT ON BUSINESS cont. Risks: Digital Migration Reasons Document: ICASA has resolved that encoding and multiplexing is not a licensable activity and it is not an activity that falls under electronic communications network service. Sentech role is now reduced to transmission excluding encoding and multiplexing. There are financial implications for Sentech.

LEGISLATIVE AND REGULATORY DEVELOPMENTS WITH SIGNIFICANT IMPACT ON BUSINESS cont. Mitigation strategy (ies): Sentech will commercially position itself to be appointed broadcasting signal distributor and multiplex operator for the future multiplexes post analogue switch off.

BUSINESS STRATEGY 1. Core Strategy: Broadcasting signal distribution Analogue television until Digital Switch Over. Low Power transmitters expansion in partnership with SABC (15 per FY). Digital Terrestrial Television (DTT) 2010 FIFA Soccer World Cup (satellite back-up infrastructure) Radio: FM, MW, SW DTH Business Television and Radio Facility Rental Other (consulting) Investigate the provision of mobile TV infrastructure and value added services to broadcasting signal distributors (e.g. subscriber management, interactive services, etc). Funding to implement this strategy is in place: Cash flow from business operations; DTT and 2010 WCS funding allocations.

BUSINESS STRATEGY cont. Growth strategy options: geographic expansion / diversification into related industry Geographical expansion (Africa strategy): The strategy option is to acquire and/or build and/or operate and/or maintaining similar BSD networks beyond the SA borders. Funding model will be dictated by the business plan.

BUSINESS STRATEGY cont. Diversification into telecommunications: Rollout a converged telecommunications network offering data, voice and video – including providing coverage to the 500 Dinaledi schools. Currently, Sentech has started the process of a new telecommunications business plan which has to be financially viable. Funding to implement this strategy: R500 million funding allocated and the balance to be dictated by the business model.

BROADCASTING TARIFF HISTORY Sentech increases its tariffs annually on 1 April, based on the CPIX rate, thus ensuring that its customers receive a professional service at an affordable cost.

KEY PERFORMANCE AREAS/INDICATORS: 2010 - 2013 Table 1: Key Performance Area Key Performance Indicators Performance Forecast   2010/11 2011/12 2012/13 Terrestrial analogue television Performance of network at SLA. 99.7% Achieve revenue target: Retaining current customer base. R373,853,000 R411,238,000 R452,598,000 Rollout and switch on of low power transmitters. 15 Digital Terrestrial Television (DTT) 99.8% Number of sites rolled out (cumulative based on ICASA frequency plan) 40 80 113 DTT Population coverage. 56% 80% 84%

KEY PERFORMANCE AREAS/INDICATORS: 2010 – 2013 cont. Table 2 Key Performance Area Key Performance Indicators Performance Forecast   2010/11 2011/12 2012/13 FM Performance of network at SLA. 99.8% Achieve revenue target: Retaining current customer base. R 160 624 000 R 176 897 000 R 194 586 000 Revenue growth: 3 new community radio broadcasters and 3 ad-hoc broadcasters per financial year. R 191 000 R 210 000 R 231 000 Medium Wave (MW) 99.5% R 5 163 000 R 5 679 000 R 6 246 000 Short Wave (SW) R 27 676 000 R 28 368 000 R 29 077 000

KEY PERFORMANCE AREAS/INDICATORS: 2010 – 2013 cont. Table 3 Key Performance Area Key Performance Indicators Performance Forecast 2010/11 2011/12 2012/13   Direct-to-Home (DTH) Performance of network at SLA. 99.8% Achieve revenue target: Retaining current customer base. R 26 083 000 R 28 691 000 R 31 560 000 Revenue growth: 2 new TV channels and 2 new audio channels per financial year. R 306 000 R 336 000 R 370 000 Business Television (BTV) and Radio (In-Store Radio) 99.5% R 8 415 000 R 9 257 000 R 10 182 000 Revenue growth: R 40 000 R 44 000 R 48 000 Facility Rental R 24 994 000 R 27 493 000 R 30 243 000

KEY PERFORMANCE AREAS/INDICATORS: 2010 – 2013 cont. Table 4 Key Performance Area Key Performance Indicators Performance Forecast 2010/11 2011/12 2012/13 Telecommunications business plan Formulation, submission and approval of business plan and funding (As per recommendations in the Corporate Plan 2010/2013). √ Rollout of NWBN VSAT Performance of network at SLA. 99.8% Achieve revenue targets R29 284 000 R55 640 000 R105 715 000

KEY PERFORMANCE AREAS/INDICATORS: 2010 – 2013 cont. Table 5 Key Performance Area Key Performance Indicators Performance Forecast 2010/11 2011/12 2012/13   Financial Debtors collection (days) 30 days Human Resources Achieve employment equity targets as per the Employment Equity Plans. √ Achieve skills development targets as per the Skills Development Plans. Broadbased Black Economic Empowerment (BBBEE) BBBEE contributor status. Level 4 Level 3

PROJECT STATUS: DIGITAL TERRESTRIAL TELEVISION (DTT) AND 2010 FIFA WORLD CUP SOCCER

DIGITAL TERRESTRIAL TELEVISION (DTT) Project status and plans: Sentech has to date procured and rolled-out transmitter infrastructure to cover just over 50% of the population. However, due to delays in the finalisation of the Frequency Spectrum Plan the DTT network has been switched on to provide only 33% population coverage. The objective of Phase 5, commencing 1 April 2010 is to install infrastructure for two multiplexes at five high power transmitter sites, five medium power transmitter sites; and two low power transmitter sites. Sentech will achieve 56% DTT population coverage by 31 March 2011 based on the current Budget allocation.

2010 FIFA WORLD CUP SOCCER Project status and plans: Sentech is currently installing infrastructure at the balance of the stadia (6) hosting the WCS (four of the 10 stadia are ready as infrastructure was installed for the 2009 Confederations Cup). Building of the 2nd teleport is currently underway. Sentech will hand over the required infrastructure to FIFA on 1 June 2010.

HUMAN RESOURCES STRATEGY

HR STRATEGY HR strategic objectives for 2010 – 2013: Organisational Alignment: Continuous alignment of HR practices to Company Strategy, Culture and People. Recruitment and Retention: Sourcing and retaining the right people, at the right levels, with the appropriate competencies to lead, implement and facilitate business change imperatives. Employment Equity Skills Development & training The overall objective is to align skills retention with recruitment, skills development and employment equity. Internship programme Employee Bursary scheme Sentech Educational Fund National Youth Skills Development Programme

STAFF COMPLEMENT AS AT 28 FEBRUARY 2010   Male Female Total OCCUPATIONAL LEVELS African Coloured Indian White Top Management 1 2 3 7 Senior Management 16 14 9 44 Professionally Qualified & Experienced Specialist & Mid-Management 30 4 42 12 101 Skilled technical & Academical qualified workers, Junior Management, Supervisors, Foremen & Superintendants 92 70 65 5 276 Semi-skilled & discretionary decision making 37 19 77 Unskilled & defined Decision making 36 41 TOTAL 212 27 23 130 110 11 26 546 Total Permanent

HEAD COUNT REPORT: WOMEN Level African Coloured Indian White TOTAL Top Management 3 Senior Management 9 1 10 Mid Management 12 2 4 18 Junior Management 65 5 14 88 Semi-skilled 19 7 33 Unskilled 110 11 26 154

PARTICIPATION IN UHURUNET

PARTICIPATION IN UHURUNET At the directive of the Department of Communications (DoC), Sentech withdrew its participation in EASSy to participate in Uhurunet. Sentech currently does not have equity participation in Uhurunet. Sentech currently has a landing rights agreement with Uhurunet, in terms of which: Sentech through its ECNS licence gives Uhurunet the right to land in South Africa; The right is not exclusive to Uhurunet. Sentech could give that right to any other interested party; and There are potential revenues for Sentech. Sentech has requested DoC for permission to participate in other undersea cables.

2011 BUDGET ASSUMPTIONS

INCOME STATEMENT * Increase in dual illumination revenue in line with increased footprint

BALANCE SHEET

BALANCE SHEET

RATIO ANALYSIS

CASH FLOW

CONCLUSIONS BSD business is profitable. Regulatory & Policy Risks. DTT growth opportunities: licensing dependent Regulatory & Policy Risks. Strengthen capital structure of the business. Telecommunication business plan.

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