1. 1 SENTECH PRESENTATION TO THE PORTFOLIO COMMITTEE ON COMMUNICATIONS Date: 07 March 2008

2. 2 AGENDA 1.Sentech strategy, timeframes and targets in rolling out wireless broadband 2.Funding strategy for the general operations of Sentech 3.PFMA classification of Sentech 4.Retention and development of staff

3. 3 TEAM MEMBERS ChairpersonMr. Colin Hickling Chief Executive OfficerDr. Sebiletso Mokone-Matabane Chief Financial OfficerMr. Siddique Cassim Chief Operating OfficerMrs. Beverly Ngwenya Executive: Regulatory & Govt. Mr. Dingane Dube Affairs Specialist: Stakeholder RelationsMr. Monde Ndleleni

4. 4 Broadband wireless strategy 2003 business model: combination of retail and wholesale, urban and rural. The strategy not successful due to funding and high gearing. MyADSL rated MyWireless as best product in terms of speed and reliability.

5. 5 Broadband wireless strategy 2005 Business model (BOTT): combination of retail and wholesale, urban and rural. R1,2billion debt funding secured. Business structure not approved.

6. 6 Broadband wireless strategy 2007 Business Model: wholesale, combination of urban and rural. Rollout to schools, hospitals, clinics, Thusong post offices and Government.

7. 7 Broadband wireless strategy Sentech Ltd Network Owner and Operator ISPs VANS PTNs Public Sector Other Other Value Added Service Providers NationalProvincialLocal USALs Socio- Economic Customers Sentech’s Wholesale Customers

8. 8 Broadband wireless strategy Phase 1 Coverage Area: Urban and under serviced areas within the urban areas Phase 2 Coverage Area: Secondary towns Phase 3 Places of Interest Phase 4 Rural Areas Phase 5 Densification

9. 9 Broadband wireless strategy

10. 10 Broadband wireless strategy Rand Annual Cash flow Cash flow Cash flow trend 2008200920102011201220132014201520162017

11. 11 Broadband wireless strategy Total capital requirement is R4.4 billion of which the fiscus requested to fund R3.125 billion No debt funding Wholesale price: R100 private sector; and R75 public sector. Cash flow positive from year 6 Supports Sentech’s return to profitability within 6 years

12. 12 Consolidated: Existing Business and NWBN

13. 13 Total Funding Requirements from National Treasury 200720082009201020112012 Total FundingR’000 Broadband - Amount requested - 911,931 665,958 1,077,411 296,927 172,881 - Amount allocated by NT - 500,000 DTT Capex - Amount requested 95,000 120,000 262,700 231,400 250,900 960,000 - Amount allocated by NT 95,000 120,000 150,000 665,000 DTT Opex (Dual illumination) - Amount requested - - 152,100 224,800 263,800 277,000 917,700 - Amount allocated by NT - - - - - - - 2010 FIFA World Cup - Amount requested - - 200,000 100,000 - - 300,000 - Amount allocated by NT - - 200,000 100,000 - - 300,000

14. 14 Broadband wireless strategy YearFunding RequirementBudget Allocation Year 1 2007/2008R912millionR500million Year 2 2008/2009R666million- Year 3 2009/2010R1077million- Year 4 2010/2011R297million- Year 5R173million- TotalR3,125billionR500million

15. 15 Broadband wireless strategy Rollout of wholesale national broadband wireless network: catalyst in the market and using ICT for development. DOC: Sentech rollout to Dinaledi Schools and hospitals, clinics, Thusong Post offices and Government Departments within coverage area (Apex of priorities). National Treasury allocated and transferred R500million, subject to following conditions: exit retail and focus on wholesale, business plan should be sustainable and raise the additional funding from the market.

16. 16 Broadband wireless strategy If Government allocation only R500million, and the difference raised from the market: (1)Sentech roll-out first in lucrative markets to service the debt (2) The promise of lower connectivity prices will be reviewed (3)Millennium Development Goals will be achieved at a very slow pace, as rural areas will be covered later (4)The entire business and financial model will change

17. 17 Broadband wireless strategy Way forward: DoC and National Treasury must agree on: Policy: business model/priority areas Funding: debt equity ratio to be set by Shareholder

18. 18 PFMA CLASSIFICATION Public Finance Management Act (PFMA) is a very good legislative tool for the state to exercise proper supervision over State-Owned Enterprises (SOE’s), of which Sentech is one. Sentech is currently classified under PFMA Schedule 3B. Other entities reporting to the State in this category includes, amongst others, Accounting Standards Board, Legal Aid Board, and Financial Services Board. The constraints on the day to day running of an SOE impacts on the ability to timeously respond to business opportunities. In order for Sentech to operate effectively, it is imperative that the Sentech Act be amended to classify the Company as a Schedule 2 entity under the PFMA.

19. 19 Staff retention, training & development Skills shortage Retention strategy: retention bonuses and training, both locally and internationally Sentech School of Technology: -Internal staff training -Learnerships -Internship programme

20. 20 THANK YOU