1. 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

2. 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.

3. 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.

4. Performance Information
Annual
Target
Quarterly Target
Actual Performance
Status
Explanation
of Variance
R 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.

5. 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 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

6. 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

7. Financial Information

8. Financial Performance
Q1 June 2017

9. Financial Performance
Revenue Per Service
Jun-17
YTD FY2018
Service
Actual
Budget
Variance
R '000 % TV
51 976
51 971 5 0%
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
(1 988)
(2%)
(6 672)
Dual Illumination
12 763
12 772
(9)
32 199
39 210
(7 011)
(18%)
Sundries (com) 1
100% 2
Total revenue
(1 995)
(13 681)
(4%)

10. Product and Network Performance

11. 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

12. Product and Network Performance

13. Risk Management

14. 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.

15. 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

16. 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.

17. 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.

18. 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.

19. Our People

20. Our People
Number of Employees
550
Employee Turnover
1.8%

21. 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

22. Thank You!