1. SENTECH’S PRESENTATION TO THE PORTFOLIO COMMITTEE ON COMMUNICATIONS ON ITS ANNUAL REPORT 2008
Date: 11 November 2008

2. OVERVIEW Sentech Team Opening remarks by Chairperson
Broadcasting signal distribution performance
Telecommunications Performance
Performance Measures
Performance against Budget
Cash Flow Highlights
Balance Sheet Highlights
Operating Expenses
2008/2009 Budget
DTT Funding
DTT Funding Summary
NWBN Funding
Additional Opex Funding

3. SENTECH TEAM Mr. Colin Hickling Chairperson
Mr. Thabo Leeuw Non Executive Director
Dr. Sebiletso Mokone-Matabane Chief Executive Officer
Ms. Beverly Ngwenya Chief Operating Officer
Mr. Mohammed Siddique Cassim Chief Financial Officer
Mr. Dingane Dube Executive: Regulatory & Government Affairs
Mr. Monde Ndleleni Specialist: Stakeholder Relations

4. CHAIRPERSON’S OPENING REMARKS
/08 challenging for the Board, management, employees and stakeholders largely due to lack of funding. To date, including the recent MTEF there is still not much progress in resolving the lack of adequate funding.
After profitable period in the late 1990s and early 2000s, Sentech’s financial position has deteriorated significantly, due to anticipated funding for rollout plans for a national broadband wireless infrastructure that did not materialize.
In terms of PFMA, as a schedule 3b entity, Sentech requires approval of Minister of Finance to raise loan funding. Reclassification to schedule 2 would give greater flexibility and the opportunity to be more responsive to opportunities within the ICT space.
Funding challenges impacting on Sentech’s status as a going concern and affecting our attractiveness as an employer. 5.

5. CHAIRPERSON’S OPENING REMARKS cont.
4.1 Digital Terrestrial Television: Sentech applied for total funding of R955 million for the capital costs and R917 million for dual illumination. Only R650 million allocated for capital costs and none for dual illumination. Exchange rate fluctuations have increased the capital costs requirements.
4.2 National Wholesale Broadband Network: Original budget request was R3,1 billion. Only R500 million was allocated and there is still no firm commitment to provide the balance. The costs have increased to R3,8 billion.

6. CHAIRPERSON’S OPENING REMARKS cont.
4.3 FIFA 2010 World Cup: total required funding has been allocated.
4.4 Participation in undersea cable: At the direction of the Department of Communications (DoC), Sentech is now participating in Uhurunet. Based on the Uhurunet business plans, Sentech will invest the R21 million allocation
/08 Sentech reported modest pre-tax profit of R28 million attributable to interest earned on the funds allocated by Government.
6. The Board has approved a turn around strategy for the business and require a reclassification of Sentech to schedule 2 to enable the Company to raise funds with greater flexibility thus reducing the dependence on the fiscus.

7. BROADCASTING SIGNAL DISTRIBUTION PERFORMANCE
Sentech television and radio networks continued to perform above service level targets:
The television networks achieved an average 99.8% availability against a target of 99.4%; and
The radio network achieved 99.9% availability against a target of 99.5%; and
Jointly with the SABC, Sentech continued to expand television and radio coverage to achieve universal access.
Digital Terrestrial Television (DTT): Sentech successfully completed phase 2 of the migration.

8. TELECOMMUNICATIONS PERFORMANCE
The telecommunications networks achieved 99.97% availability against a target of 99.8%.
Sentech finalised and submitted the business plan for the rollout of NWBN. Phase 1 of rollout plan is Dinaledi schools:
It was anticipated that 233 schools provided with coverage by March 2009;
In year one only Sentech requires R671 million (CAPEX) and R221 million (OPEX) for the rollout to 233 schools. Only R500 million allocated;
Pre-roll out implementation work is continuing in terms of the project plan to the extent that Sentech does not enter into long term financial commitments; and
Actual coverage to 233 schools will not be achieved by March 2009, due to delay in finalization of business and funding model.

9. PERFORMANCE MEASURES Turnover growth Gross profit growth
Company
2008
2007
2006
2005
Turnover growth
Gross profit growth
Operating profit growth
Return on equity
Return on operating assets
Gross profit margin
Operating profit margin
Debt equity
Gearing ratio
Interest cover %
0.12
8.68
9.07
15.05
(6.06)
1.54
39.09
6.73
553.42
104.33
(1.14)
(181.15)
3.51
0.59
(16.49)
(13.85)
1.08
0.26
(7.61)
(6.24)
25.10
26.75
28.63
22.45
2.55
0.39
(9.78)
(10.55)
times
1.80
0.82
0.69
0.60
2.26
1.27
1.17
1.22 *
0.13
(2.87)
(2.59)
* No ratio calculated for the current year as the company is in a net interest received position

10. PERFORMANCE AGAINST BUDGET
COMPANY
Actual
Budget
Variance
Var %
724,076
881,037
(156,961)
(17.82%)
705,643
885,081
179,438
20.27%
18,433
(4,044)
22,477
555.81%
18,336
(16,278)
34,614
212.64%
Revenue
Expenditure
Operating profit
Net profit
Although sales were below target, we surpassed our budget objectives through expenditure savings and the benefit of interest income on the Government Grants received. This resulted in a profitable situation for the first time since 2003.

11. CASH FLOW HIGHLIGHTS

12. BALANCE SHEET HIGHLIGHTS

13. DTT FUNDING
YEAR
TASK
ANNUAL CAPITAL COST TOTAL FUNDING REQUIREMENT
ANNUAL CAPITAL COST ALLOCATED FUNDING
DIFFERENCE (SHORTFALL)
Year 1
Preparation (mainly infrastructure)
R 95 mil
Year 2
[2007/08]
Preparation and project pilot
Year 1 planned overflow installations Satellite distribution systems Gauteng DTT coverage in Gauteng and Bloemfontein
R 120 mil
Year 3
[2008/09]
DTT roll out in metropolitan areas to achieve approximately 56% of total population terrestrial coverage
R mil
R 150 mil
R mil
Year 4
[2009/10]
DTT roll out in denser areas in the country to achieve approximately 78% of total population terrestrial coverage
R mil
R 81.4 mil
Year 5
[2010/11]
Balance of areas to achieve   approximately 92% coverage of total population terrestrial coverage (current SABC 2 coverage)
R 250.9mil
R 100.9mil
Total
R 960 mil
R 665 mil
R 295 mil
CAPEX Shortfall of R 295 million compared to initial funding request based on Euro 1 = R10
Total CAPEX Shortfall of R 417 million compared to initial funding request based on
Euro 1 = R13.25

14. DTT FUNDING Cont. Dual illumination
2009
2010
2011
2012
Total
R’000
DTT dual illumination
The dual illumination period commences on 1 November 2008 and end on 1 November 2011.
No funds have yet been allocated for DTT dual illumination.

15. DTT FUNDING SUMMARY Total Shortfall/Funding Requirement 2010 2011 2012
CAPEX
ROE Variation
90 000
32 000
Dual illumination
Total for DTT

16. NWBN FUNDING YEAR FUNDING REQUIRED 2010 1,749,931,370 2011
1,136,801,545
2012
242,589,140
2013
154,645,765
TOTAL
3,283,967,820
Total funding is R3.8 billion, less an amount of R500 million
received in February Outstanding funding requirement is
R3,3 billion.

17. ADDITIONAL OPEX FUNDING
(R'000)
PRMA
135,717
RECAPITALISATION
300,000
435,717

18. THANK YOU