1. TRANSTEL proud partner at the birth of the second national operator TRANSNET Transtel Prepared for the Parliamentary Portfolio Committee on Communications

2. TRANSTEL proud partner at the birth of the second national operator TRANSNET Outline Introduction to Transtel Transtel present and future Progress towards the SNO Convergence in communications Towards the Information Society

3. TRANSTEL proud partner at the birth of the second national operator TRANSNET Transtel overview l Largest private telecommunications network operator (PTN) in the Southern hemisphere l Annual revenue of more than R 700m (70% internal to Transnet, 30% external) l Country-wide digital transmission network (8000 km optical fibre; 14000 km microwave) l Existing customer base: –Voice: 132 exchanges; 65 000 ports; 140m calls per annum –Data: 67 nodes; 3420 ports; 3700 point-to-point services –12 000 mobile radio terminals (230 high sites) l Project management / installation experience –Installed 3000 sites for MTN, 900 for National Lottery l Satellite customers in 17 African countries l Over 1 400 employees in 140 places Transtel depots South Africa

4. TRANSTEL proud partner at the birth of the second national operator TRANSNET Transtel customers Transnet: All divisions and subsidiaries Other customers in South Africa including: –SITA (State Information & Telecommunications Authority) –SITA Inc –arivia.kom –SA Post Office –DTI –MTN –ACSA (Airports Company of South Africa) –Eskom International Customers, predominantly in Africa: –Include banks, retail stores, educational institutions and other public telecommunications companies

5. TRANSTEL proud partner at the birth of the second national operator TRANSNET Transtel’s position Transtel exists as the result of a Private Telecommunications Network licence that allows Transnet to have its own networks In a de-regulated market, a PTN can no longer compete in generic telecoms services Transtel’s Enterprise Voice/Data, and International services will migrate out of Transnet into a public operator (SNO) Transtel’s safety-critical Transport Telecoms will remain within Transnet

6. TRANSTEL proud partner at the birth of the second national operator TRANSNET Transport telecoms services Basic transmission/access copper Dedicated rail fibre transmission Train radio systems: Various Common bearer infrastructure Other mission critical –Shared use of trunked radio –Port control/operations, containers

7. TRANSTEL proud partner at the birth of the second national operator TRANSNET Enterprise telecoms services PABXs and voice services Audio and video conferencing Leased lines (Transmission) Frame relay supporting IP services Ethernet/IP Virtual Private Networks Internet access provision Broadband wireless access Broadband copper access (xDSL)

8. TRANSTEL proud partner at the birth of the second national operator TRANSNET Telkom SNO Enterprise telecoms: Future Transtel Data Transtel Voice Converged Voice, Data, Internet Customers Transtel services are delivered on dedicated Voice and Data networks The SNO will give customers access to a range of new, converged services The SNO will provide a resilient new backbone, and be an alternative to Telkom for public telecoms traffic

9. TRANSTEL proud partner at the birth of the second national operator TRANSNET PAS -10 Ku-band Transtel International (Satellite) PAS -10 C-band PAS -1R C-band

10. TRANSTEL proud partner at the birth of the second national operator TRANSNET Transtel satellite in Africa Active Opportunities Unexploited

11. TRANSTEL proud partner at the birth of the second national operator TRANSNET Project Services - Achievements Full Services Network – Transtel and Eskom –Joint deployment of national optical fibre network and equipment Digital transmission networks for railways –Ore line: 800 km digital microwave from Saldanha to Sishen –Coal line: 500 km optical fibre cable installed at 4 km per day Installation of Radio Base Stations for MTN –2142 sites out of 3200 built up in MTN’s first five years –Have won new contracts for deployment in specific regions Installation of LANs for SAA/Galileo –900 LANs installed in 24 months SA National Lottery –500 VSATs installed in the first 20 days

12. TRANSTEL proud partner at the birth of the second national operator TRANSNET New opportunities Provision of basic PTN services to VANS Provision of VoIP through VANS licence Expansion of international services Provisos: –Spare PTN capacity available to the market is currently very limited – scaled for Transnet –Capital-intensive nature of telecoms limits opportunities whilst within Transnet

13. TRANSTEL proud partner at the birth of the second national operator TRANSNET The reasons for an SNO remain… Essential large scale facilities competition –Telecoms value chain is dependent on basic facilities –A choice of wholesale supplier and price is critical A player to challenge Telkom on equal footing –Licence, regulatory, tackle anti-competitive practice A large, viable infrastructure investment plan Access to the only other national backbone –Cheaper facilities over existing rights-of-way –Brings the alternative infrastructure to the market A new competitive provider in the market An environment for partnership and sharing

14. TRANSTEL proud partner at the birth of the second national operator TRANSNET Progress made towards the SNO Eight years of legislative and regulatory preparation for a second operator –Telecommunications Act and Amendments –Drafting of multiple regulations by ICASA Three years of network implementation by Transtel and Eskom Enterprises Alignment of business plans between identified shareholders Preparation of draft licence conditions Work with market, partners and customers

15. TRANSTEL proud partner at the birth of the second national operator TRANSNET Convergence and legislation “Convergence” probably a misnomer; real issue is market structure. Convergence need not be legislated; it is happening despite legislation. The creation of universal, fixed & mobile licences is good, but radical Any new legislation must: –Have a sound basis in the principles of telecommunications regulation –Control players with Significant Market Power, and essential facilities –Not remove, but replace regulations with appropriate new regulations –Encourage and promote the deployment of telecommunications facilities –Deal with issue of Local Loop Unbundling of the incumbent’s copper lines –Deal effectively with transition of existing licences, to ensure continuity –Apply light touch regulation to services and application (class) licences Direct funding of the regulator by licence fees remains the ideal. Some concerns about the policy framework, which has not been fully articulated to guide the legislature in finalising new legislation. Without broadband, there is no convergence. However, there is no published broadband policy for South Africa, or any mechanism proposed for the setting of targets broadband access rollout.

16. TRANSTEL proud partner at the birth of the second national operator TRANSNET Spectrum and facilities Giving extensive rights to a large number of facilities-based (network service) operators on application, has the potential to create environmental chaos. Other countries do not typically give many players such rights. Certain frequency bands may require a particular minimum allocation to build a viable business; similarly, there may be an optimum number of players for a viable, competitive market (e.g. 3G). Licence fees obviously need to be proportional to the value of spectrum allocated or facilities rights secured in a licence. The number of facilities-based (individual) licences needs to be limited: –To ensure a predictable environment for infrastructure investments –To ensure efficient and appropriate use of the frequency spectrum –To provide for control of rights of way and other environmental issues

17. TRANSTEL proud partner at the birth of the second national operator TRANSNET Convergence – Mobile and Fixed Wireless 0.384 2 Bandwidth (Mbps) Network Mobile Fixed 2G 3G 3G applications getting “bigger, better and more beautiful” Wireless/mobile specific broadband applications Fixed network applications go wireless/mobile 4G Broadband, “Extreme bit rates” NB WBBB 20 E v o l v e d 2G E v o l v e d 3G

18. TRANSTEL proud partner at the birth of the second national operator TRANSNET CDMA2000 technology trial Transtel has assisted in putting together a trial of CDMA2000 (3G mobile) technology in South Africa. The trial is led by Qualcomm, the inventors of CDMA, in partnership with Ericsson (South Africa), MTN, Transtel, the CSIR, and Wits University. Trial supports an 800 MHz sharing study by ICASA. The trial will demonstrate the following: –Use of upper 800MHz band without impacting broadcasting –Use of CDMA2000 for fixed-mobile and full mobile services –Highest capacity, lowest cost per subcriber for voice services –Very high speed data (EVDO), up to 2 Mbits/s –Full roaming onto GSM infrastructure (dual-band phones) –Applications including e-learning, telemedicine, Internet ICASA has issued the temporary frequency licence Trial will take place through February and March

19. TRANSTEL proud partner at the birth of the second national operator TRANSNET SNO key success factors A clear, consistent policy timeline for the duration of the SNO business plan Proportional rights and obligations for facilities-based operators, now and under new legislation Regulatory controls on players with Significant Market Power (currently three) Carrier preselection (immediate) and number portability (during 2005) as required by the 2001 Act Access to additional appropriate fixed-mobile frequency spectrum (e.g. 800 MHz, 450 MHz) Access to international optical fibre routes at cost (level playing field for competition) Community Service Obligations and rollout targets aligned to broadband convergent access needs Ideal: Access to Telkom copper Local Loop (Shared)

20. TRANSTEL proud partner at the birth of the second national operator TRANSNET The new digital divide Mobile teledensity has overtaken fixed teledensity as the measure of access to telephony, but this is no longer the real issue… Only a tiny fraction of the world’s 100 million broadband connections are in Africa Digital divide is no longer about telephones, but about access to the Information Society World Summit on the Information Society 2003 recognised the need for broadband

21. TRANSTEL proud partner at the birth of the second national operator TRANSNET Converged (IP) Network Converged (IP) Network Broadband and convergence Multi-service Connection! Broadband access Bundled products

22. TRANSTEL proud partner at the birth of the second national operator TRANSNET Broadband and Internet: Global 0% 7.4% 4.0% 1.4% 0.3% 0% 10.7% 700 -- 600 -- 500 -- 400 -- 300 -- 200 -- 100 -- 0 -- 1995 1996 1997 1998 1999 2000 2001 2002 Broadband as % of Internet users Internet Broadband Source: ITU Internet report: Birth of Broadband

23. TRANSTEL proud partner at the birth of the second national operator TRANSNET Broadband policy for South Africa South Africa needs broadband True broadband = 1 Mbit/s or more Both for consumers and businesses Mobile (3G) has a role, but different Backbone and international bandwidth Need a proper wholesale market –Bitstream (wholesale DSL) –Shared access (proposed by ICASA) –Local Loop Unbundling

24. TRANSTEL proud partner at the birth of the second national operator TRANSNET The Information Society “An enabling environment at national and international levels is essential for the Information Society … The rule of law, accompanied by a supportive, transparent, pro-competitive, technologically neutral and predictable policy and regulatory framework reflecting national realities, is essential for building a people-centred Information Society. Governments should intervene, as appropriate, to correct market failures, to maintain fair competition, to attract investment, to enhance the development of the ICT infrastructure and applications, to maximize economic and social benefits, and to serve national priorities.” The Declaration of Principles of the World Summit on the Information Society, Geneva, 2003

25. TRANSTEL proud partner at the birth of the second national operator TRANSNET A vision for telecoms Sustainable competition to drive down the cost of telecommunications in South Africa Facilities-based competition with appropriate individual licensing Regulation to control Significant Market Power and essential facilities An open, competitive telecommunication services market with class licensing