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SENTECH’S PRESENTATION TO THE PORTFOLIO COMMITTEE ON COMMUNICATIONS ON ITS ANNUAL REPORT 2008. Date: 11 November 2008. OVERVIEW. Sentech Team Opening remarks by Chairperson Broadcasting signal distribution performance Telecommunications Performance Performance Measures
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SENTECH’S PRESENTATION TO THE PORTFOLIO COMMITTEE ON COMMUNICATIONS ON ITS ANNUAL REPORT 2008 Date: 11 November 2008
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
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
CHAIRPERSON’S OPENING REMARKS 1. 2007/08 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.
CHAIRPERSON’S OPENING REMARKS cont. 4.1Digital 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.
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 5. 2007/08 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.
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.
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.
PERFORMANCE MEASURES * No ratio calculated for the current year as the company is in a net interest received position
PERFORMANCE AGAINST BUDGET 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.
DTT FUNDING 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
DTT FUNDING Cont. 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.
DTT FUNDING SUMMARY Total Shortfall/Funding Requirement
NWBN FUNDING Total funding is R3.8 billion, less an amount of R500 million received in February 2008. Outstanding funding requirement is R3,3 billion.