Presentation to Parliamentary Portfolio Committee on Telecommunications & Postal Services

14 November 2014

The Purpose of Broadband Infraco

Slide 2

DTPS Vision 2020

100% of South Africans will have access to broadband services at 2.5% less of the populations average monthly income

NDPBroadband Infraco’s purpose is in line with the NDP of establishing national, regional and municipal fibre-optic network to provide the backbone for broadband access.Broadband Infraco operates on the premise that national backhaul, provincial backhaul and districts backhaul require state intervention, thus allowing private investment to lead the way in the access market.

SA ConnectBroadband Infraco’s roll-out of long distance backhaul fibre to underserviced areas will enable provincial governments to leverage such broadband infrastructure and services for economic growth, job creation initiatives and poverty reduction efforts.

Digital Readiness

BBI boast an open access network and supports public and private investments in the telecommunications sector.Delivery of 28 PoP to underserviced areas.Broadband Impact Economic Metrics:• For every 1% increase in

broadband penetration GDP increases by R4.83bn

• For every R1 spent on broadband society benefits R2.53

Digital Opportunity

Skills and institutional capability Internship Programme (10 interns)Broadband Infraco Staff: Average age of 34 years

Digital Development

Broadband roll out is aligned to national government programmes.

Aggregation of public sector demand (SITA 10 year contract

•Enterprise development and localisation

Digital Future

Long term collaboration of existing infrastructure providers:EskomTransnet Freight and RailPRASAProvincial governmentWACS – consortiumDFA

Slide 3

Broadband policies and regulations

Broadband Infraco Act

The ECA Amendment Act, limits the operational scope of Class ECS licences to district municipalities only and given Broadband Infraco’s national operations, the Class ECS licence is not a viable option

2010 issued with ECNS licence

2014 applied for ECS licence

Explore partnership with other SOC’s within DTPS

ICT Policy Review Committee

2012 requested membership to PRC while under DPE

November 2014 requested membership to PRC

USAASA has finalised its National Strategy and the Funding Manual

Broadband Infraco supported the USAASA MTEF application

USAASA

ICT Policy Review PanelInfrastructure & Services Sub-Committee

Broadband Infraco is actively participating in the Infrastructure and Services Committee of the Panel

Shareholder Capitalisation

• Broadband Infraco is a significant investor in the 5.1Tbits/s West Africa Cable System (WACS) Project.

• The cable connects South Africa (SA) to the United Kingdom (UK), with landing stations in Portugal and along the west coast of Africa.

• Lower cost, sustainable and efficient international bandwidth;

• Positions SA for future economic growth as it connect SA to key global knowledge economies of the world.

• Swaziland: Created new route that goes through Pietretief then Mahamba

• Namibia: Created new route Aries, Schuibsdrift then Onseepkans

• Mozambique: Kamedien to Komatipoort on the TFR fibre

• Zimbabwe: Soekmekaar to Beitbridge

SADC CONNECTIVITY• Duff to Stanger to Zinkwazi then

Athene• North Station to Durban : creation of

parallel link• Oribi, Eros & Kokstad• Increase capacity on the Golden

triangle i.e. 38 PoP and Fibre deployment

• Internet Protocol: Scalable network:• Ermelo to Geluksplaas then Witbank • Provisioning services to Secunda• Welkom• Bethlehem to Sorate• Megawatt to Bloemfontein

deployment of fibre• Uniondale , Louterwater then

Melkhout• Grahamstown alternative route

connecting Rhodes university• NSN, Belabela, to Modimolle, then

Polokwane

WACS CONNECTIVITY EXPANDING ACCESS ENABLING GOVERNMENT

• Connected Government through SITA.

• This was to have the South Ring between Gauteng, Kwa-Zulu Natal Western Cape.

• Testing Equipment

• Monitoring system

• Transmission equipment

Broadband Infraco Implementation as at 2012

WACS ESKOM (assets) R377 300 000TRANSNET

(assets)R34 163 000

SELF BUILD R779 011 000 OFFICE & COMPUTER EQUIPMENT R13 955 000

R1, 8 billion

R440 534 000

Resultant Network12 681km of fibre

144 PoP

Slide 4

Slide 5

What does each axis represent?

Customers

Revenue

Cost of Sales

A significant growth of our customers from 1 to 14, including signing SITA as an anchor client

Decline in 2013 due to the end of Rights of Use (ROU) with Neotel. More customers acquired and a positive trend is expected.

Efficient management of Cost of Sales.

Consolidated Customers, Revenues & Cost of Sales

Customers, Revenue and Cost of Sales

Delivery of Mandate and outcomes

Delivery of Mandate

As at 31 March 2012 As at 31 March 2013 As at 31 March 2014 Year to Date

Kms of Fibre 

 12681km  12793km (112km added) 13 000 KM Geographic Coverage

Access Points  

 144  152 162 PoPs

SADC Connectivity 

  4 PoPs  5 PoPs (Beitbridge PoP added) Connected all SADC neighbouring countries (Ramatlabama connected)

International Access 

 Only SADC  WACS connected national terrestrial network

Business Operations 

None  Insourcing completed, OSS/ BSS designed.

Implemented Phase 1 of the ERP system. User requirements specifications for Phase 2 in progress

Security around 54 Mesh 

None One (1) site secured (Athene site). Thirteen (13) sites planned for this next financial year.

IP Update to date 

IP/MPLS on  Golden Triangle

No expansion - currently using Ethernet over SDH as workaround.

Expansion to 3 priority provinces planned for this year (Limpopo, Mpumalanga and Eastern Cape)

Slide 6

Broadband Infraco alignment to Broadband Policy Targets

Areas OutcomeInitiatives

Northern Ring Upgrade Limpopo Mpumalanga

Capacity increased for 160 Gbps -> 480Gbps

MTS upgrade Eastern Cape, KZN, Gauteng & Western Cape, Northern Cape

From 40 Gigs to between 80 Gig – 120 Gig

SADC All 6 neighbouring countries Capacity155 Mbps – 40 Gigs

• Renewed 40% of obsolete transmission equipment

Broadband Policy Target

• Broadband access in Mbps User Experience• 50% at 5 Mbps 2016• 8 895 kms of fibre• 158 PoPs nationally• R50 billion

Slide 7

What has Broadband Infraco done

Slide 8

Transformation and Enterprise Development

Broadband Infraco runs a graduate

internship programme that targets

the development of scares Network

Engineering skill-pool in South

Africa to meet current and future

industry needs.

The first intake was in January

2010, with three successful follow-

up groups to date.

Of these, 6 interns have been

absorbed into permanent

employment.

There are currently 10 interns

recruited in 2013, to complete the

programme in December 2014.

Young women in ICT/Engineering

Enterprise & Supplier Development

Spend on BWO

R11.4 mil YTD

Spend on BYO

R1.2 mil YTD

2014Indirect jobs

created 7 YTD

Basadi in Telecoms

The program aims at transforming the Telecommunication Sector through the empowerment of Black Women, Youth and Small Medium and Micro Enterprises (SMME) Nationally.

Date of

roadshow

06th Jun 2013 13 Jun 2013 27th Sep 2013

Venue of

Roadshow

Indaba Hotel Nafcoc offices,

KZN

Polokwane Royal

Hotel

No. of delegates

who attended

153 47 111

No. of women

registered

+ 400 13 15

Slide 9

Strategic Objective KPI Target

Ensure Business Sustainability

& Network Saleability

(60%)

Network performance rebates paid as percentage of gross revenue

≤3%

Company Sustainability

Cash at the end of the year ≥R100 mil

Measure EBIDTA based on budget ≥(116.6) mil

Overall increase in capacity sold at STM-1 equivalent in the Golden Triangle, Northern Ring and other routes

10% increase(113 STM-1)

Network Improvement(20%)

Extend the network and enable the connection of the 2nd anchor customer (Cell C

75 services by 1 Jan 2015

Mandate DeliveryEstablish new open access PoPs 5 PoPs by 31 December 2014

Establish a laboratory at Broadband Infraco premises

Fully functional Lab by 31 March 2015

Economic Transformation(20%)

Training spend as percentage of payroll 3

Socio-economic transformation

Increase in number of engineers in training per annum

10

Increase in number of direct jobs created baseline+2% (3 employees)

Increase in number of indirect jobs created 10

Allocation of BBBEE budget discretionary spend 70%

Percentage increase on black owned entities spend 40% spend of BBBEE

Percentage spend of Youth Owned entities 10% spend of 40% spend on BOE

Percentage spend of Women Owned entities 10% spend of 40% spend on BOE

Amount spend on People with disabilities owned entities

300000

CSI projects completed Interactive whiteboards and internet facilities and Maths equipment

Shareholder Compact 2014/15

Significant projects: SITA and Cell C

Slide 10

SITA

• The State Information Technology Agency (SITA) has appointed Broadband Infraco to provision and manage 54 SITA Next Generation Network (NGN) 1GE services for a period of 10 years, commencing on the 1st of August 2014.

Province Fibre (KM) PoP

Northern Cape 9.08 KM -

Western Cape 23.84 KM 1

Eastern Cape 64.68 KM -

Free State 9.69 KM 1

North West 14.47 KM -

KZN 32.9 KM -

Gauteng 73.7 KM -

Limpopo 13.09 KM -

Mpumalanga 10.55 KM -

Cell-C• Cell C appointed Broadband Infraco to provision 125

Broadband services for 5 years effective 1 June 2014. • Broadband Infraco has to extend its existing network

via fibres to Cell C and terminate it directly at the Cell C premises.

Province Fibre (KM) PoP

Northern Cape 1.5 KM -

Western Cape 190 KM -

Eastern Cape 87 KM 1

Free State 43 KM -

North West 100 KM -

KZN 114 KM -

Gauteng 174 KM 1

Limpopo 6 KM -

Mpumalanga 65 KM -

Both projects:•Expand the network and enable access•Enable independence from Neotel•Provide coverage in all 9 provinces•3rd Party metro networks are being utilised to avoid duplications

Slide 11

Challenges and Mitigation

Securing funding

Autonomy of the network

Attracting critical and core skills

Role of Non ICT SOCs with ICT

assets

Coordination of provincial, district,

metro and municipality broadband roll

out

Challenges

Ongoing Engagement with the Department on funding support

Reprioritization of Capital Projects to manage cash flow: Capex revised from R529 to R386 million

Submitted R170 mil short term government guarantee application to Executive Authority

A memorandum of Investment submitted to the DBSA. This is meant to solicit a funding structure for commercially viable projects.

Broadband Infraco intends to apply for a subsidy in terms of section 88(1)(b) of the ECA Amendment Act of 2014

Develop a compelling employee value proposition

Develop a commercial model for engaging the non ICT SOC’s

Propose a framework for engaging Provincial and local government efforts

Mitigations

Slide 12

Thank You