SENTECH SOC LIMITED Corporate Plan 2015-2018
Presentation to the PPC on Telecommunications and Postal Services
14 April 2015
SENTECH SOC LTD Corporate 1 Plan 2015-2018 CORPORATE PLAN
1 FOREWORD
2 COMPANY PURPOSE
3 ALIGNMENT TO SHAREHOLDER PRIORITIES
4 PERFORMANCE REVIEW
5 MARKET OUTLOOK
6 BUSINESS STRATEGY: MTEF 2015 - 2018 7 STRATEGIC PROGRAMS AND PROJECTS
8 FINANCIAL PLAN
9 KEY PERFORMANCE INDICATORS
SENTECH SOC LTD Corporate Plan 2015-2018 2 FOREWORD
• SENTECH hereby presents the Company’s Corporate Plan for the Medium Term Expenditure Framework (MTEF) for 2015 – 2018 which was tabled to Parliament by the Honorable Minister of Telecommunications and Postal Services.
• The Corporate Plan was also submitted to National Treasury as required in terms of Section 52 of the PFMA and Treasury Regulation 29.
• As one of the primary enablers of Government interventions in the Information Communication and Technology (“ICT”) sector, SENTECH’s business strategy is informed by and aligned to the Shareholder’s Medium Term Strategy Focus (“MTSF”) objectives, the Strategic Goals of the Department of Telecommunications and Postal Services (“DTPS”) for the same period, as well as the Company’s internal objectives as adopted by the Board of Directors from time to time. • For this MTEF period, the Board is re-committing SENTECH to a singular business strategy theme:
“To provide and operate communications network services that enable all broadcasting and content services to be accessible by all South Africans”
SENTECH SOC LTD Corporate Plan 2015-2018 3 FOREWORD: SENTECH of the Future
• In order to ensure that the Company employs the required focus into the execution of the expanded business strategy, the Company has resolved to operate along a business unit structure and specifically, through four (4) distinct business units that will separately manage Broadcasting Signal Distribution Services, Digital Media Services, Connectivity Services and Public Safety Services.
• For the broader communications industry, the Company will consolidate its current capabilities in the management of transmitter networks and network facilities, to offer specialized and focused third party networks and facilities management services.
• The Company believes that given the current rapid development of technologies to enable machine-to- machine communications, it can facilitate adoption of such technologies in South Africa through the deployment and operation of open-access Internet-based machine-to-machine networks. The Company envisages that application of such interventions in the public sector will result in significant value being added to the efficiency of certain public sector operations.
• Finally, the Company has reflected on the skills sets required to efficiently operate certain public safety network services. In this regard, the Company believes that the skills it uses in the management of its broadcasting signal distribution transmitter networks for television, FM, MW and SW radio services and also in the management of the related network facilities are unique and applicable in the operation of some public safety services. During the MTEF period, the Company will therefore pursue opportunities to deploy these skills in specific public safety network services.
SENTECH SOC LTD Corporate Plan 2015-2018 4 CORPORATE PLAN
1 FOREWORD
2 COMPANY PURPOSE
3 ALIGNMENT TO SHAREHOLDER PRIORITIES
4 PERFORMANCE REVIEW
5 MARKET OUTLOOK
6 BUSINESS STRATEGY: MTEF 2015 - 2018 7 STRATEGIC PROGRAMS AND PROJECTS
8 FINANCIAL PLAN
9 KEY PERFORMANCE INDICATORS
SENTECH SOC LTD Corporate Plan 2015- 5 2018 COMPANY PURPOSE: Vision, Mission And Values Statements VALUES
VISION • Integrity: We act with honesty, fairness and openness; To be a world-class provider of sustainable • Quality Customer Service: We are committed communications platform services in South to proactively ensuring high values of customer Africa and the rest of the African Continent. satisfaction and building a relationship based on trust;
• Innovation: We endeavour to develop and
MISSION support creativity and responsible risk-taking;
To provide and operate communications • Accountability: We deliver on our promises network services that enable all broadcasting and take responsibility for our actions; and and content services to be accessible by all • Social Responsibility: We endeavour to fulfill South Africans. our mandate in a manner that benefits our employees, customers, suppliers, communities and the environment in all the areas that the Company operates in.
SENTECH SOC LTD Corporate Plan 2015-2018 6 COMPANY PURPOSE: Public Service Mandate Context
• To date, SENTECH’s Public Service mandate is primarily provided for in:
o The SENTECH Act (No. 63 of 1996), as amended: Communications Services
“... to provide electronic communications services and electronic communications network services in accordance with the Electronic Communications Act.”; and
o The Electronic Communications Act (No. 36 of 2005): Broadcasting Signal Distribution Services
“...to construct, maintain and operate an electronic communications network for the provision of electronic communications services, electronic communications network services and broadcasting signal distribution services as a common carrier … to broadcasting licensees upon their request on an equitable, reasonable, non-preferential and non-discriminatory basis”.
• In addition, the Company’s public service remit is also informed, guided and governed by a range of Legislations and Regulations, including, but not limited to the Constitution of the Republic, the Companies Act, the Public Finance Management Act and Treasury Regulations.
SENTECH SOC LTD Corporate Plan 2015-2018 7 COMPANY PURPOSE: Our Customers
• The Corporate Plan is also informed by the current and future needs of our primary stakeholders – our Customers.
• The Board has committed the Company to work closely with its customers in exploiting new ICT technologies to find solutions that will ensure that South Africa’s broadcasting and content distribution industry stays at the cutting-edge improving connected experiences for our customer’s content consumers.
SENTECH SOC LTD Corporate Plan 2015-2018 8 CORPORATE PLAN
1 FOREWORD
2 COMPANY PURPOSE
3 ALIGNMENT TO SHAREHOLDER PRIORITIES
4 PERFORMANCE REVIEW
5 MARKET OUTLOOK
6 BUSINESS STRATEGY: MTEF 2015 - 2018 7 STRATEGIC PROGRAMS AND PROJECTS
8 FINANCIAL PLAN
9 KEY PERFORMANCE INDICATORS
SENTECH SOC LTD Corporate Plan 2015-2018 9 ALIGNMENT TO SHAREHOLDER PRIORITIES
SHAREHOLDER STRATEGIC GOALS AND OBJECTIVES_MTSF 2015 - SENTECH STRATEGIC PLAN 2020 ALIGNMENT STRATEGIC GOALS STRATEGIC OBJECTIVES Provide input into the development of the policies, regulations and SG 1: Enable the programs that enhance the viability maximization of investment in SO 1.1: Inclusive economic growth community broadcasting and the the ICT sector and create new through the development and digital content sector based on competitive business implementation of ICT policies, operational insight into various opportunities for the growth of legislations and strategies. regulatory, technical and business the ICT industry for socio- interactions in the communications economic development. industry and strategic insights into the future of digital content systems.
SG 2: Ensure that ICT infrastructure is accessible, SO 2.1: Increased Broadband coverage Sentech will actively participate in the robust, reliable, affordable and and affordable access to government DTPS development of the SA secure to meet the needs of services for all households by 2020. Connect implementation plan. the country and its people.
SENTECH SOC LTD Corporate Plan 2015-2018 10 ALIGNMENT TO SHAREHOLDER PRIORITIES
SHAREHOLDER STRATEGIC GOALS AND SENTECH STRATEGIC PLAN OBJECTIVES_MTSF 2015 - 2020 ALIGNMENT STRATEGIC GOALS STRATEGIC OBJECTIVES Implement an Enterprise Development strategy that supports Local ICT SMME SO 3.1: Growth and the development of SG 3: Accelerate the socio- Procurement and develops the SMMEs to improve their sustainability economic development of entrepreneurship capabilities for the through the use of ICTs. South Africans and facilitate content industry and in particular, the the building of an inclusive digital media content sector. Information Society through Ensure that the Company’s Digital partnerships with business SO 3.3: An inclusive information society Multimedia platform services are and civil society and the 3 through partnerships with business, civil provided on open access principles to spheres of Government. society and the 3 spheres of enable access to all stakeholders in the government. broadcasting and content distribution value-chain.
SENTECH SOC LTD Corporate Plan 2015-2018 11 ALIGNMENT TO SHAREHOLDER PRIORITIES
SHAREHOLDER STRATEGIC GOALS AND SENTECH STRATEGIC PLAN OBJECTIVES_MTSF 2015 - 2020 ALIGNMENT STRATEGIC GOALS STRATEGIC OBJECTIVES
SG 4: Improve Departmental Ensure that SENTECH has the performance and enhance the SO 4.1: Efficient and effective oversight to appropriate corporate governance role of ICT SOE’s as the SOCs. structures and policies to enable delivery arms of Government. effective Shareholder oversight. SO 5.1: South Africa’s active participation Ensure that SENTECH submissions in bilateral and other African International on policy and regulatory Forums to advance the SA ICT Agenda. development processes are informed by global benchmarks, with particular SG 5: Contribute to the global focus on Africa and developmental ICT Agenda prioritizing Africa’s SO 5.2: Trade and Investment states. development. opportunities for the ICT sector in South Ensure that SENTECH’s stakeholder Africa. engagement model support Shareholder’s African and Global initiatives.
SENTECH SOC LTD Corporate Plan 2015-2018 12 CORPORATE PLAN
1 FOREWORD
2 COMPANY PURPOSE
3 ALIGNMENT TO SHAREHOLDER PRIORITIES
4 PERFORMANCE REVIEW
5 MARKET OUTLOOK
6 BUSINESS STRATEGY: MTEF 2014 - 2017 7 STRATEGIC PROGRAMS AND PROJECTS
8 FINANCIAL PLAN
9 KEY PERFORMANCE INDICATORS
SENTECH SOC LTD Corporate Plan 2015-2018 13 PERFORMANCE REVIEW : 2011 -2014
SENTECH has in the past number of years presented a Corporate Plan which was financially focused due to the nature of the Company’s historical challenges. This position has now changed with the Company not only having improved its corporate governance systems but also having improved its financial position significantly. The Company has nonetheless still managed to perform significantly well in respect of its other objectives, as set out in the strategic framework of 2011-2012.
The performance review highlights this performance under the headings
• Public Service Mandate
• Operations
• Financial Performance
• Corporate Governance
• Human Capital
SENTECH SOC LTD Corporate Plan 2015-2018 14 PERFORMANCE REVIEW : Public Service Mandate – FM Radio Coverage expansion
Incremental Expansion of Public FM Radio Incremental Expansion of Commercial FM Radio Coverage: 2010-2014 Coverage: 2010-2014
Population Geographic (km²) Population Geographic (km²)
1,400,000 70,000 20,000,000 120,000
18,000,000 1,200,000 60,000 100,000 16,000,000
1,000,000 50,000 14,000,000 (km sq) (km 80,000 12,000,000 800,000 40,000 10,000,000 60,000 600,000 30,000 8,000,000 40,000
400,000 20,000 6,000,000
Population Coverage Population Coverage Population
4,000,000 Gepgraphic Coverage (km sq) (km Coverage Gepgraphic 200,000 10,000 Coverage Geographic 20,000 2,000,000
0 0 0 0 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2010/20112011/20122012/20132013/20142014/2015
SENTECH has been instrumental in expanding the Public and Commercial FM radio stations services over the last 4 years. Between the end of 2010/2011 and the 3rd quarter of 2014/2015: • For Public FM, the population coverage had increased by 1 329 490 and geographical coverage by 57 632 square km. • For Commercial FM, the population coverage had increased by 15 617 383 and geographical coverage by 100 055 square km.
15 SENTECH SOC LTD Corporate Plan 2015-2018 PERFORMANCE REVIEW : Public Service Mandate – Community FM Radio Expansion
Incremental Expansion of Community FM Radio Coverage: 2010-2014
Population Geographic (km²) 5,000,000 140,000
4,500,000 120,000 4,000,000
3,500,000 100,000
3,000,000 80,000 2,500,000 60,000 2,000,000
1,500,000 sq) (Km Coverage Geographic
Population Coverage Population 40,000 1,000,000 20,000 500,000
0 0 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015
Between the end of 2010/2011 to 3rd quarter of 2014/2015 the population coverage had increased by 4 692 254 and geographical coverage by 129 369 square km.
16 SENTECH SOC LTD Corporate Plan 2015-2018 PERFORMANCE REVIEW : Public Service Mandate – DTT Network Implementation
DTT Network Implementation 2011-2015
Number of Sites Population Coverage Geographic Coverage
200 90%
180 80%
160 70% 140 60% 120 50% 100 40% 80
Number of of Sites Number 30% 60
40 20% Population and Geographic Coverage Geographic and Population 20 10%
0 0% 2011-2012 2012-2013 2013-2014 2014-2015
SENTECH has now completed all 178 migration sites which provide population coverage of 84.23% and a geographical coverage of 57.99%. The 15.77% of the population that will not be covered by DTT will be covered by the DTH satellite gap filler solution which is complete.
17 SENTECH SOC LTD Corporate Plan 2015-2018 PERFORMANCE REVIEW : Public Service Mandate – DTT Network Implementation
Number of Completed Province Migration Sites
Free State 13
Gauteng 12
Kwazulu Natal 29
Limpopo 10
Mpumalanga 13
North West 16
Eastern Cape 33
Northern Cape 17
Western Cape 35
TOTAL 178
The table above shows the site rollout per province and the map above the national coverage population and geographical coverage after completion of the migration sites.
18 SENTECH SOC LTD Corporate Plan 2015-2018 PERFORMANCE REVIEW : Operations – OC Coverage
.
SENTECH operates approximately 330 terrestrial distribution sites and a satellite platform where the networks are operated on a 24 hour 7days a week basis. The networks are continually maintained to sustain reliability, as well as to ensure the availability of services and long-term operations continuity.
19 SENTECH SOC LTD Corporate Plan 2015-2018 PERFORMANCE REVIEW: Operations – Network Availability
Network Availability Per Service
100.2
100
99.8
99.6 Television 99.4 FM Radio
99.2 MW Radio SW Radio
Availability 99 Satellite DTH 98.8 VSAT
98.6
98.4
98.2 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
• There was a downward trend between 2011/2012 to 2013/2014, during the financial year 2014/2015,
the downward trend was reversed for all services other than VSAT and Shortwave Radio.
Improvement in network availability was due to replacement of unreliable network solutions and
concerted effort in preventative maintenance.
20 SENTECH SOC LTD Corporate Plan 2015-2018 PERFORMANCE REVIEW: Financial Performance
Financial Performance
Revenue Equity
950000 1400000
1200000 900000 1000000
850000
800000 Equity
Revenue 600000 800000
400000 750000 200000
700000 0 2010-2011 2011-2012 2012-2013 2013-2014
• The Company’s revenues increased by 16% from R 794m in 2010/2011 financial year to R925m in 2013/2014 resulting, after considerations of costs and other items, in an increase of 48% in Shareholder equity from R745m to R1.1bn for the same period.
21 SENTECH SOC LTD Corporate Plan 2015-2018 PERFORMANCE REVIEW: Corporate Governance
Irregular Expenditure & Audit Findings Trend 2010-2014
Irregular Expenditure Number of AR Findings
70,000 16
60,000 14 12 50,000 10 40,000 8 30,000 6 20,000
4 Findings of AR Number Irregular Expenditure (R'000) Expenditure Irregular 10,000 2
- 0 2010/2011 2011/2012 2012/2013 2013/2014
• Since 2010/2011 SENTECH has seen a definite improvement in corporate governance, with significant decrease in irregular expenditure and material audit findings.
22 SENTECH SOC LTD Corporate Plan 2015-2018 PERFORMANCE REVIEW: Human Capital
• During 2012, SENTECH embarked on a journey of going back to basics through implementation of people-centered systems and processes aimed at embedding operational excellence and performance. Project Sakhumtu has helped transform human capital from being administratively focused to being a strategic partner to business. To date we have implemented the following key people programs:
o Talent Management - to create an aspirational employee value proposition linked to performance management, development and succession management
o Human Capital Policies - Review and development of all Human capital policies
o Competency Framework - Development of leadership and organizational competency framework
o Evaluation of Jobs - Competency based job profiles and grading of jobs to enable internal and external equity
o Leadership Development Program - to build leadership capability and effectiveness for our leaders
o Skills Audit - to identify and address current development gaps
o Performance and development Management system - to entrench a culture of high performance and development
o Reward and Recognition Strategy - to implement comprehensive performance based reward system to attract and retain best talent.
o Employee Engagement Strategy- to foster sound employee relations
SENTECH SOC LTD Corporate Plan 2015-2018 23 CORPORATE PLAN
1 FOREWORD
2 COMPANY PURPOSE
3 ALIGNMENT TO SHAREHOLDER PRIORITIES
4 PERFORMANCE REVIEW
5 MARKET OUTLOOK
6 BUSINESS STRATEGY: MTEF 2015 - 2015 7 STRATEGIC PROGRAMS AND PROJECTS
8 FINANCIAL PLAN
9 KEY PERFORMANCE INDICATORS
SENTECH SOC LTD Corporate Plan 2015- 24 2018 MARKET OUTLOOK: Introduction
• Over the past decade, numerous studies have highlighted the inherent potential for countries in developing economies to leapfrog some of the 1st world economy countries through the adoption and implementation of digital technologies focused on the specific needs of each country.
• We believe that the 2013 BDM and Broadband Policy amendments provide the strategic foundation for the South African ICT industry to begin its roadmap towards digital inclusiveness for all citizens.
• In the short-to-medium term, SENTECH has to contend with and respond to a challenging external market environment informed by the following:
o Policy Environment,
o Regulatory Environment and
o Entertainment & Media Market Outlook.
SENTECH SOC LTD Corporate Plan 2015-2018 25 MARKET OUTLOOK: Regulatory Environment: Radio Broadcasting
• In the 2014 calendar year, the Regulator continued to make significant progress in enabling diversity of voice and programming in the Radio market, largely through the licensing of new Commercial Radio Services for FM and MW.
o New FM Commercial Sound Broadcasting Licences in the Secondary Markets
• In February 2014, ICASA announced that the regulator will grant individual licences to the following entities; Histotrim (Pty) Ltd in the Free State Province and Histoprox (Pty) Ltd in the Eastern Cape Province.
o New MW Commercial Sound Broadcasting Licences in the Primary Markets
• In April 2014, ICASA announced that the regulator will grant individual licenses to the following entities; Mainstreet 1035 (Pty) Ltd (“TalkSport Radio”) and Extriserve (Pty) Ltd (“LM Radio”) in Gauteng Province, as well as Altius Trading 460 (Pty) Ltd (“Magic 828”) in Cape Town
• Despite these achievements, a number of Regulatory challenges for the Radio market remains as the radio broadcasting industry seeks to drive public discourse on digital radio, particularly DAB+ and DRM.
SENTECH SOC LTD Corporate Plan 2015-2018 26 MARKET OUTLOOK: Regulatory Environment – Television Broadcasting
• The Television market regulatory regime remains a challenge for all industry players, including SENTECH as uncertainty on the commercial launch of DTT services persist. Despite the ongoing Policy vacuum on the DTT STB Control System, there has been movement in the Regulatory Framework in 2014.
• On 22 August 2014 ICASA gazetted the Promotion of Diversity and Competition on Digital Terrestrial Television Regulations. New community broadcasters will be licensed on the allocated DTT multiplex 1 capacity and commercial FTA and subscription broadcasters will be licensed on DTT multiplex 3 (previously mobile multiplex 2).
• Despite the publication of the Promotion of Diversity and Competition on Digital Terrestrial Television Regulations, ICASA is still not clear whether the moratorium on licensing of new community broadcasters has indeed been lifted.
• On 29 August 2014 ICASA gazetted an ITA for commercial FTA terrestrial services requesting interested parties to apply. The ITA is in line with the Promotion of Diversity and Competition on Digital Terrestrial Television Regulations.
SENTECH SOC LTD Corporate Plan 2015-2018 27 MARKET OUTLOOK: Regulatory Environment – Spectrum
• On 14 November 2014, ICASA published the second draft of the IMT Roadmap document for further public consultation, with the submission date for January 2015. The first draft was published on 27 August 2014, with public hearings held two days after the closing of the submission date, 9 October 2014.
• On 14 November 2014, ICASA also published draft spectrum assignment plans for IMT services in the band 694 – 862 MHz These draft assignments will impact on the studio-to-transmitter links (STLs) operated by SENTECH. ICASA has proposed the 2.2 GHz band as the designated band for STLs, it is not clear what factors were considered by the Authority particularly since SENTECH proposed the L-band and provided justification for its choice.
SENTECH SOC LTD Corporate Plan 2015-2018 28 MARKET OUTLOOK: Entertainment & Media Industry Ecosystem
• The South African Entertainment and Media (“E&M”) Market is buoyant, and continues to offer significant potential for ICT operators geared for this latent market opportunity despite the prevailing Policy and Regulatory challenges.
• In developing the strategy roadmap for the MTEF 2014 – 2017 period, SENTECH considered the E&M market outlook and its implications on the future sustainability of the Company.
• On current trends, Radio and Television will remain the most ubiquitous media and entertainment mediums for the majority of South Africans for the foreseeable future. However, the concentration of fixed broadband penetration in the middle-to-upper income households means that the digital divide amongst citizens is likely to widen without a universal access plan for basic broadband services to all households.
• During the MTEF it is projected that there will be a shift from the current E&M revenues by share of market away from the traditional segments to the Internet which will have an overall share of the market of 37% in 2018 from a base of 21.6% in 2013. For the same period, the market share of television and radio are expected to shrink respectively from 26.3% and 3.4% to 20.5% and 3.1%
SENTECH SOC LTD Corporate Plan 2015-2018 29 MARKET OUTLOOK: Entertainment & Media Industry Ecosystem
• On current trends, Radio and Television will remain the most ubiquitous media and entertainment mediums for the majority of South Africans for the foreseeable future. However, the concentration of fixed broadband penetration in the middle-to-upper income households means that the digital divide amongst citizens is likely to widen without a universal access plan for basic broadband services to all households.
• Within this context, SENTECH hopes that the ICT Policy Review will provide the framework for sustainable funding of Public and Community Radio services that is less dependent on Advertising Revenue.
• South Africa needs to develop a competitive policy framework to regulate the Advertising Revenue market and to encourage the entry of new Subscription Operators. Simultaneously, FTA broadcasters need to accelerate their digital multichannel television strategies in order to contain the increasing Advertising Revenue share growth of Subscription Television operators.
• South Africa, as most territories in the world, is experiencing an unprecedented surge in the OnDemand and Over-The-Top (“OTT”) Content distribution and consumption segments.
SENTECH SOC LTD Corporate Plan 2015-2018 30 CORPORATE PLAN
1 FOREWORD
2 COMPANY PURPOSE
3 ALIGNMENT TO SHAREHOLDER PRIORITIES
4 PERFORMANCE REVIEW
5 MARKET OUTLOOK
6 BUSINESS STRATEGY: MTEF 2015 - 2015 7 STRATEGIC PROGRAMS AND PROJECTS
8 FINANCIAL PLAN
9 KEY PERFORMANCE INDICATORS
SENTECH SOC LTD Corporate Plan 2015- 31 2018 BUSINESS STRATEGY: Business Unit Model
SENTECH SOC LTD Corporate Plan 2015-2018 32 BUSINESS STRATEGY: Broadcasting Signal Distribution Services
• Broadcasting Signal Distribution Services will remain central to the operational activities of SENTECH in the 2016 financial year, and it is projected that this area will contribute 70.2% to the Company’s total revenues of R847m in the 2015 financial year.
• Broadcasting Signal Distribution Services is made up of the following products:
o Analogue Services,
o Terrestrial television
o FM
o MW
o SW
o Digital Services, including activities related to DTT rollout, Digital-to-Digital Migration, Roll out of future multiplexers and Digital radio trials
SENTECH SOC LTD Corporate Plan 2015-2018 33 BUSINESS STRATEGY: Broadcasting Signal Distribution Services
Terrestrial Television Terrestrial television has over the last number of years been the major revenue contributor to the business and will continue to be so over the MTEF 2015-2018. The analogue television (ATV) revenue projection will remain linked to inflation tariff increase until the implementation of DTT. The major activities that will be undertaking in respect of terrestrial television are discussed in detail in the next sub-sections.
Analogue Switch-Off
The Company has completed a phased ASO plan that considers and prioritizes the requirements of the SKA area in the Northern Cape and the geographies that may be affected if neighboring countries were to start phasing out their analogue services and operating their DTT services under ITU protections. Thereafter, the plan assumes that the switch off of the rest of the network will be phased and based on provinces. In order to assist broadcasters with their migration requirements, the Company will implement an ASO tariff model that will have components of both analogue and digital tariffs based on the extent of the phased ASO.
SENTECH SOC LTD Corporate Plan 2015-2018 34 BUSINESS STRATEGY: Broadcasting Signal Distribution Services
Analogue Network Maintenance
• SENTECH currently operates a total of 620 transmitter network sites to provide SABC, e.tv, M-net and community Broadcasters television broadcasting services. During the past three years SENTECH has focused on maintaining the Analogue network in order that it is able to meet the Service Level Agreement terrestrial television platform performance targets of 99.7% availability across the network SENTECH continued to replace analogue end of life solutions in the previous MTEF to ensure compliance with SLA’s
Digital Terrestrial Television
• Since 2008 SENTECH has been involved in a journey to take South Africa from the Analogue to the Digital environment. SENTECH has completed the migration of all the 178 analogue sites by 6 March 2015. Within the first year of the MTEF itself, the Company will add an additional four (4) greenfield digital sites.
SENTECH SOC LTD Corporate Plan 2015-2018 35 BUSINESS STRATEGY: Broadcasting Signal Distribution Services: DTT
Digital Multiplex 3 • The Company anticipates that the regulatory processes to enable the licensing of broadcasters on the third multiplexor will be initiated and even completed within the financial year 2015/2016. As a result, the Company plans to begin discussions with potential users of this multiplexor within the same financial year in order to enable the build program to be completed within the financial year 2016/2017 and commercial operations to start no later than the beginning of the last year of the MTEF. Based on the current legislation the coverage will be as indicated in the diagram below.
SENTECH SOC LTD Corporate Plan 2015-2018 36 BUSINESS STRATEGY: Broadcasting Signal Distribution Services: FM
FM Radio
• FM radio is the second largest contributor to the Revenue of the company. SENTECH Operates a total of 823 transmitter network sites to provide FM radio signal distribution services to the public, commercial and community broadcasters using radio frequency spectrum between 88Mhz and 108Mhz.
• This transmitter network supports 18 Public Radio Services, 18 Commercial Radio Services and 89 Community Radio Services.
SENTECH SOC LTD Corporate Plan 2015-2018 37 BUSINESS STRATEGY: Broadcasting Signal Distribution Services: FM
Community Broadcasters
• For the MTEF period 2015-2018, the Company will intensify its interventions in the community radio broadcasting industry, encouraging additional self-providing broadcasters into its network, enabling new broadcasters to enter the market as quickly as possible, enabling network expansions in line with the regulatory framework, and introducing value-added services that will enable the sector to be financially self-reliant.
SENTECH SOC LTD Corporate Plan 2015-2018 38 BUSINESS STRATEGY: Broadcasting Signal Distribution Services: FM
Public Broadcaster
For the Public Broadcaster, the Company completed the plans for the FM expansion project whose main intention is to normalize the coverage of all of SABC’s radio services. For the MTEF period, SENTECH will not only make all the necessary efforts to implement the expansion project as shown below, but the Company will also prepare and offer network access redundancy options to the Public Broadcaster.
SENTECH SOC LTD Corporate Plan 2015-2018 39 BUSINESS STRATEGY: Broadcasting Signal Distribution Services: FM
Commercial Broadcasters
• For commercial broadcasters, the Company has been proactive in highlighting potential areas for expansion based on the underlying business drivers and also availability of spectrum. For the MTEF period 2015-2018, SENTECH will continue to work with the commercial broadcasters and the Regulator to assess further opportunities for coverage expansion. Furthermore, the Company will introduce an initiative to provide redundancy options in network access services and standby power. This will allow the broadcasters to determine appropriate differentiated service levels in line with their business objectives.
SENTECH SOC LTD Corporate Plan 2015-2018 40 BUSINESS STRATEGY: Broadcasting Signal Distribution Services: FM VAS
• Value added services such as distributed Dynamic RDS and Internet audio streaming platform services will be developed over the MTEF period. Digital technology DAB+, once commercially available (after ASO), will offer further opportunities for growth.
SENTECH SOC LTD Corporate Plan 2015-2018 41 BUSINESS STRATEGY: Broadcasting Signal Distribution Services: MW
• SENTECH provides medium wave radio broadcasting signal distribution services over 8 transmitter sites using radio frequency spectrum between 535.5 kHz and 1606.5 kHz. This transmitter network supports 2 Public Broadcaster Radio Services, 1 Commercial Radio Service and 5 Community Radio Services. The MAP below shows the current MW radio coverage.
SENTECH SOC LTD Corporate Plan 2015-2018 42 BUSINESS STRATEGY: Broadcasting Signal Distribution Services: MW
• Growth projections for MW are informed by the 2 commercial and 2 community MW licenses issued by ICASA in the previous years. Further growth is dependent on additional MW licenses issued and the evolution of MW from analogue to digital standard DRM MW. Radio Digital broadcasting will serve as spectrum efficient high quality option for broadcasting and SENTECH has completed a DRM MW trial for Radio Pulpit that showcases the technology with the intention of commercially providing this service once the licensing framework has been established. No previous trials on DRM have been conducted in South Africa. SENTECH will engage industry further in a drive to rollout affordable digital receivers for this market
SENTECH SOC LTD Corporate Plan 2015-2018 43 BUSINESS STRATEGY: Broadcasting Signal Distribution Services: SW
• Shortwave radio broadcasting offers the opportunity to target remote areas with the use of very high power transmitters and high gain antenna systems. The SW transmitter product is offered on 3 different transmitter power configurations. Customers broadcast for designated hours and tariffs are payable per hour.
• SENTECH is the only provider of SW services in South Africa. It has not been possible to operate the SW business profitably over the past years due to the shrinking market and rapidly rising operating costs. The 4-year business turn-around plan that started in April 2013 is showing encouraging signs with a 60% improvement in profitability to budget by end October 2014. Should the SW product not become profitable by end March 2016, the current services will be further rationalized to only cater for the current public services (Channel Africa and RSG). Currently SENTECH provides Broadcasting Services to 2 Public Radio Stations and 6 internationally-based Radio Stations
SENTECH SOC LTD Corporate Plan 2015-2018 44 BUSINESS STRATEGY: Broadcasting Signal Distribution Services: Digital Radio
DAB+
• SENTECH, in conjunction with the National Association of Broadcasters (“NAB”) and the Southern African Digital Broadcasting Association (“SADIBA”), has launched the DAB+ Digital Radio Trial Transmission in Gauteng in November 2014. The trial will continue into the third quarter of the 2015/16 financial year, with SENTECH funding the CAPEX for the broadcast infrastructure.
• SENTECH, together with the radio industry, will be actively engaging the policy makers and the regulator on the finalization of the policy and regulatory framework for digital radio services.
• SENTECH believes DAB+ to be a key growth area for the Radio business as it unlocks numerous opportunities for new and existing broadcasters. It is envisaged that DAB+ will exist alongside analogue FM radio for the next 10 to 15 years.
DRM
• SENTECH will also work closely with industry partners to review other emerging technologies such as DRM+, to be evaluated in terms of feasibility to deliver digital services within the existing FM spectrum capacity
SENTECH SOC LTD Corporate Plan 2015-2018 45 BUSINESS STRATEGY: Digital Media Services
• The Digital Media Services solution portfolio is a new portfolio and will include a set of digital platform services that enable linear and non-linear content to be stored, processed and prepared for distribution across any number of content distribution platforms and in support of complex solution requirements and business models.
• SENTECH has started on the roadmap to adapt from a traditional signal distribution service provider towards offering an integrated platform supporting open access provision of content across all digital media platforms (Terrestrial, Satellite and IP content distribution). This mixed platform, incorporating wholesale open-access content management systems, will culminate in the launch of a wide range of value-added and innovative services to meet the evolving needs of Broadcasters and Content Providers.
• For the MTEF period 2015-2016, SENTECH will focus on providing its customers with the following services within this portfolio:
– Wholesale DTH-S platform and auxiliary services;
– Hybrid broadcasting distribution and content management platform services;
– Over the Top (OTT) solutions.
SENTECH SOC LTD Corporate Plan 2015-2018 46 BUSINESS STRATEGY: Digital Media Services: Wholesale DTH-S
• The Company’s DTH strategy recognizes that future growth in the DTH market is likely to be driven by customers that operate multi-channel bouquets as opposed to individual channels. These types of customers have traditionally been categorized as Content Aggregators as they require bulk capacity to carry the individual channels they aggregate under a common consumer offering. The Content Aggregators differ in their nature and type of business model.
• This new approach is to focus on the Super Program Aggregators on a common ‘open access and ‘interoperable’ DTH Platform. This approach incorporates the business models of Content Aggregators and extends this business model to allow for one or more Content Aggregators to operate under one consumer brand and one logistics operation in respect of the distribution and management of consumer devices. To date SENTECH has successfully concluded DTH Super Program Aggregator distribution agreements with OpenViewHD and Multichoice and is in discussion with other new potential operators to carry their service offerings.
SENTECH SOC LTD Corporate Plan 2015-2018 47 BUSINESS STRATEGY: Digital Media Services: OTT
• SENTECH’s traditional customer market is also undergoing changes. For more than seven decades, traditional television has been dominated by network broadcasters. In recent years, however, a range of new market participants, such as web players and telecom operators, have entered the landscape with ground-breaking platforms and innovative formats that utilize evolving technologies, and are impacting viewer consumption behavior.
• Consequently, both the overall TV value chain and existing revenue models are being destabilized. The huge growth in the internet markets has afforded the consumer much more freedom in how they access their entertainment. The old model of push television channels deciding what the consumer should watch is no longer valid. The consumer is free to choose what they want, when they want.
• This freedom also leads to a point of entertainment overload for the consumer. What the media world is settling on is a model with a reasonable mix of both push and pull television. Channel providers will aggregate content onto the push medium and the consumer will use the pull medium to get time flexibility and to get more of a specific content. This is the new pull television model.
SENTECH SOC LTD Corporate Plan 2015-2018 48 BUSINESS STRATEGY: Digital Media Services – Business Radio and Television
• SENTECH’s Business Television and Radio services currently operate in a linear environment. The evolution of the product will be to create a multi-platform environment, where Business communications services at a store level are available on multiple devices for consumers to interact with their retailer of choice. Services on offer will be traditional satellite broadcasting, push VOD, live streaming and IPTV.
• Preparatory development will be conducted during the financial year 2015/2016 with services and solutions deployed to customers in subsequent financial years.
SENTECH SOC LTD Corporate Plan 2015-2018 49 BUSINESS STRATEGY: Connectivity Services
• Connectivity Services remains a strategic opportunity for SENTECH to leverage the public investment in the Company’s communications network infrastructure.
• In the short-to-medium term, SENTECH’s Connectivity Services Solutions Portfolio offering will retain its focus on connectivity solutions using a variety of applicable technologies and targeted at a broader segment of the communications industry and public sector applications.
• Solutions will include
– Data Connectivity
– Internet-of-things
– Third party managed networks
– Facilities Property rental
– Facilities Leasing
SENTECH SOC LTD Corporate Plan 2015-2018 50 BUSINESS STRATEGY: Connectivity Services – Data Connectivity
• At a specific product level, the turnaround strategy for VSAT entails repackaging the platform to allow a hybrid of technologies to deliver connectivity services.
• Transactional solutions using the Ku-band platform were launched during financial year 2014/2015. These solutions will be presented to the market through electronic communications services providers. In addition to Ku-band platform services, SENTECH has piloted the Ka-band services which enable the Company to provide current and prospective customers with improved broadband services.
• From a point of view of applications, during the MTEF period SENTECH will focus on creating solutions that combine VSAT Ka-band services and the components of service units from the digital media service portfolio. The company will provide these service through mandated service providers such SITA. On a trial basis, SENTECH is currently connecting one FET and selected schools and is expecting to grow the number of learning institutions using the SENTECH connectivity solution during this MTEF.
SENTECH SOC LTD Corporate Plan 2015-2018 51 BUSINESS STRATEGY: Connectivity Services - IOT
• During the MTEF period SENTECH will exploit its existing signal distribution facilities to develop capabilities to build and operate low power long range narrowband machine-to-machine network platform services that will enable a number of exciting services for both the public and private sector such as Smart Metering, Smart Traffic Management and Smart Energy Management. The actual machine-to-machine applications and services will be provided by independent application and electronic communications service providers who will in turn be wholesale customers of SENTECH.
SENTECH SOC LTD Corporate Plan 2015-2018 52 BUSINESS STRATEGY: Connectivity Services – Third Party Managed Network Services
• With its vast experience in managing a plurality of different types of networks from broadcasting to telecommunications, SENTECH has built up a strong capability in network design, deployment, operation and maintenance. These skills and technical capabilities are the ideal foundation to offer managed network services to other owners of similar networks. Within South Africa there are many organizations that own and utilize communications networks for their communications needs
• These range from Municipalities that operate Two Way Radio networks, telecoms companies that operate fixed and mobile networks to Emergency Services Operators that operate Tetra networks. SENTECH aims to productize its skills, resources and services into a Managed Network Services offering. Customers will be able to contract SENTECH to manage their networks depending on their own resources and communications support needs. This will allow the customer to focus on their core business whilst they rely on a world class network operator to manage their communications needs.
• The Managed Network Services will include various capabilities such as a 24/7 Service Desk, network monitoring and fault reporting, network performance reporting, maintenance support, preventative inspections and diagnostics and repair services to ensure the best levels of network availability.
SENTECH SOC LTD Corporate Plan 2015-2018 53 BUSINESS STRATEGY: Connectivity Services – Facilities Property Management
• Facilities Property Management is a new SENTECH service which comprises comprehensive Site Management and Maintenance services. As part of the Facilities Management network growth and diversification strategy, SENTECH will develop a Business Case for a Facilities Management and Maintenance Product for national strategic terrestrial infrastructure sites owned and operated by other tiers of Government, with specific focus on Municipal- and Metro owned infrastructure.
• Significant progress has been made in reaching agreement with operators of Broadcasting Self-Help Sites with regards to providing end-to-end Site Management and Maintenance services. This model may now be expanded into other strategic Communications Network Infrastructure Sites, in particular those that are owned by the different tiers of Government – especially where these are strategically aligned to SENTECH’s Public Service Mandate and Business Model.
SENTECH SOC LTD Corporate Plan 2015-2018 54 BUSINESS STRATEGY: Connectivity Services – Facilities Leasing
• The Facilities Leasing service is the business in which SENTECH provides site-sharing facilities to public and private companies on more than 220 of its transmitter high sites for various communication services. Historically there has always been a strong demand for use of SENTECH’s high sites, due to their ideal location and coverage reach, however, there was a lengthy timeframe for processing site-sharing requests. In the 2013/2014 year was a concerted effort to streamline these policies which resulted in an increase in revenue and utilization.
• A market study was conducted on the product nature and pricing structures in the market and a new rate card had been adopted for Facility Leasing. The new rates will provide current customers with the option to keep their equipment on the SENTECH sites. During the MTEF period a web portal will be developed and implemented which will significantly shorten the application process for Facilities Leasing customers.
• Site audits will be conducted to determine the condition of our towers and additional capacity that can be loaded. A panel of service providers will be appointed by end of Q2 FY2016 to conduct the site audits. It is anticipated that the audits will be completed by Q2 FY2017.
SENTECH SOC LTD Corporate Plan 2015-2018 55 BUSINESS STRATEGY: Public Safety Services
• This new portfolio will comprise of managed network services to improve the efficiency of public safety services and also specific network platform services and solutions for targeted public sector applications.
• SENTECH has been conducting benchmarking of similar operators internationally such as Arqiva in the UK and Abertis Telecom in Spain. The benchmarking has helped the Company identify new areas of diversifying its services portfolio that leverage the core skills, resources and infrastructure that the Company currently has. The Public Safety portfolio is a new strategic area that leverages the Company’s Digital Network and core Engineering Skills to provide solutions to the Public Sector for more effective, secure communications platforms. This includes solutions specifically designed for Emergency Services, Maritime Safety, Policing, Defence and other Security related arms of Government
• SENTECH currently has skilled human resources that are distributed across the country to manage the traditional broadcasting signal distribution networks and that typically, the skills and experience required to build and operate the network components of public safety services are indeed, the skills that are required to build and operate the broadcasting signal distribution network. SENTECH believes that by creating this portfolio and offering the related services to the public sector across the country, the Company will contribute significantly in improving the quality of certain critical public services
SENTECH SOC LTD Corporate Plan 2015-2018 56 CORPORATE PLAN
1 FOREWORD
2 COMPANY PURPOSE
3 ALIGNMENT TO SHAREHOLDER PRIORITIES
4 PERFORMANCE REVIEW
5 MARKET OUTLOOK
6 BUSINESS STRATEGY: MTEF 2014 - 2017 7 STRATEGIC PROGRAMS AND PROJECTS
8 FINANCIAL PLAN
9 KEY PERFORMANCE INDICATORS
SENTECH SOC LTD Corporate Plan 2015- 57 2018 STRATEGIC PROGRAMS AND PROJECTS
The following are the strategic programs and projects for the MTEF period:
• Organisational efficiency and effectiveness
– The Board of SENTECH has approved a new operating structure with 4 operating business units. SENTECH will combine various strategic initiatives into a strategic program which deals specifically with the transforming of the SENTECH of today to a SENTECH ready for the digital tomorrow. • Human capital strategy implementation
– As the Company moves towards building the new organization, the next phase of Project Sakhumtu will focus on implementing programs that are aimed at embedding a culture of excellence, innovation and customer centricity. The detailed themes are included in the foreword • Enterprise and Supplier development
– SENTECH is of the belief that in order to advance supplier and customer development and inclusion in the ICT sector there is need for interventions. To this end SENTECH has identified certain interventions as part of this strategy to achieve this. These interventions are included in detail in the Corporate Plan
SENTECH SOC LTD Corporate Plan 2015-2018 58 STRATEGIC PROGRAMS AND PROJECTS
• SENTECH Foundation
– SENTECH being the industry leader – and equally of importance, an SOC– recognises that ours is a highly specialised sector which has traditionally not been accessible to most South Africans. Regrettably not a great deal has changed over the years – industry-wide. This status quo is by no means ideal considering that the sector’s core purpose is to drive the social agenda thereby impacting on society and culture at large. In order to address these matters SENTECH has decided to set up the SENTECH Foundation. As this is such a critical requirement this has been earmarked a strategic project.
SENTECH SOC LTD Corporate Plan 2015-2018 59 CORPORATE PLAN
1 FOREWORD
2 COMPANY PURPOSE
3 ALIGNMENT TO SHAREHOLDER PRIORITIES
4 PERFORMANCE REVIEW
5 MARKET OUTLOOK
6 BUSINESS STRATEGY: MTEF 2015 - 2018 7 STRATEGIC PROGRAMS AND PROJECTS
8 FINANCIAL PLAN
9 KEY PERFORMANCE INDICATORS
SENTECH SOC LTD Corporate Plan 2015- 60 2018 FINANCIAL PLAN: COMPREHENSIVE INCOME STATEMENT
FY2015 FY2015 FY2016 FY2017 FY2018 FY2014 Actual FY2015 vs FY2016 Budget Forecast Budget Budget Budget • Overall, SENTECH is projecting R'000 R'000 R'000 R'000 R'000 R'000 R'000 % Revenue an EBIT of R195.7million and Terrestrial Broadcasting Services 750,088 782,905 807,602 846,945 897,761 951,627 39,343 5% Digital Media Services 71,420 127,970 94,290 187,628 198,886 210,819 93,338 99% Connectivity Services 59,672 85,304 63,834 76,161 80,730 85,574 12,327 19% Earnings after Tax of R155.9 Other Extra-ordinary - 16,363 - - - (16,363) (100%) million for the 2016 financial year, Dual Illumination 89,349 30,000 104,702 95,614 - - (9,088) (9%) Other Revenue 46,168 4,150 - - - - - an earnings decrease of 5% and Revenue 1,016,697 1,030,329 1,086,791 1,206,348 1,177,377 1,248,020 119,556 11%
Less : expenditure (815,279) (926,173) (879,717) (1,010,618) (1,071,255) (1,135,530) (130,901) (15%) 7% respectively, compared to the COS (23,549) (3,783) (9,207) (13,385) (14,188) (15,040) (4,178) (45%) year-end forecast for 2015 Line Rental (9,732) (8,548) (8,434) (13,621) (14,438) (15,304) (5,187) (62%) Satellite Rental (161,531) (205,375) (206,696) (240,379) (254,802) (270,090) (33,683) (16%) Energy Costs (90,020) (99,323) (93,772) (113,966) (120,804) (128,053) (20,195) (22%) financial year Preventative Maintainance (5,153) (20,710) (15,288) (35,732) (37,876) (40,148) (20,444) (134%) Corrective Maintainance (34,359) (29,043) (17,706) (18,652) (19,771) (20,957) (946) (5%) • The projected FY2016 Revenues Personnel Remuneration (311,371) (350,188) (355,554) (374,707) (397,190) (421,021) (19,153) (5%) Depreciation (48,374) (58,763) (53,586) (60,576) (64,210) (68,063) (6,990) (13%) Cost of Sales (684,088) (775,733) (760,242) (871,018) (923,279) (978,675) (110,775) (15%) are based on the analysis of the
Services and Levies (1,121) (1,914) (1,183) (1,739) (1,844) (1,954) (556) (47%) market environment and estimated Licences (4,838) (4,836) (7,954) (6,970) (7,389) (7,832) 984 12% Insurance & Security costs (5,866) (11,571) (10,495) (10,608) (11,245) (11,920) (113) (1%) Stationery & Printing (921) (1,052) (800) (925) (981) (1,039) (125) (16%) earnings to be derived from new Communication Costs (7,537) (8,064) (7,795) (7,872) (8,344) (8,845) (77) (1%) Other Office costs (814) (972) (390) (368) (390) (413) 22 6% licensees. Estimates for FY2016 Financial & Write-off Charges (15,111) (2,713) (3,072) (1,308) (1,387) (1,470) 1,764 57% Computer Services (7,339) (13,700) (8,914) (13,495) (14,305) (15,163) (4,581) (51%) and FY2017 are based on Administrative expenses (43,548) (44,823) (40,603) (43,286) (45,884) (48,637) (2,683) (7%)
Hiring Charges (12,988) (14,585) (12,664) (15,173) (16,083) (17,048) (2,508) (20%) projected FY2015 figures Transport Costs (21,585) (17,508) (20,528) (17,298) (18,336) (19,436) 3,230 16% Travel & Subsistence (20,415) (22,574) (20,974) (21,073) (22,338) (23,678) (99) (0%) increased by the October 2014 Audit fees (3,605) (4,300) (3,800) (5,500) (5,830) (6,180) (1,700) (45%) Board fees (2,042) (3,649) (2,114) (3,241) (3,435) (3,641) (1,126) (53%) Professional & Consulting Charges (9,180) (17,911) (6,859) (21,314) (22,593) (23,948) (14,455) (211%) CPI of 5.9%. Legal fees (3,111) (3,800) (1,084) (2,500) (2,650) (2,809) (1,416) (131%) Marketing Costs (14,718) (21,291) (10,847) (10,215) (10,828) (11,478) 632 6% • Dual illumination is only funded for Operating expenses (87,644) (105,617) (78,871) (96,314) (102,092) (108,218) (17,442) (22%)
Operating Profit 201,418 104,156 207,074 195,730 106,123 112,490 (11,344) (5%) FY2016.
Less : Net Finance Cost 23,100 24,347 46,149 20,840 8,168 22,922 (25,309) (55%) Interest Received 46,202 24,447 48,049 21,340 8,168 22,922 (26,709) (56%) Interest Paid (23,102) (100) (1,899) (500) - - 1,399 74%
Profit / (loss) before taxation 224,517 128,503 253,223 216,570 114,291 135,412 (36,653) (14%)
Income Tax Expense (11,511) (54,257) (85,907) (60,640) (32,001) (37,915) 25,267 29%
Profit / (loss) after taxation 213,006 74,246 167,317 155,930 82,289 97,497 (11,386) (7%)
SENTECH SOC LTD Corporate Plan 2015-2018 61 FINANCIAL PLAN: STATEMENT OF FINANCIAL POSITION
Forecast MTEF FY2014 FY2015 FY2016 FY2017 FY2018 R'000 R'000 R'000 R'000 R'000 Assets Non-current assets 602,409 693,253 931,369 1,165,772 1,246,240 Property, plant and equipment 602,409 693,253 931,369 1,165,772 1,246,240
Current assets 1,239,329 971,545 739,828 579,006 591,550 Inventory 71,666 83,169 83,169 83,169 83,169 Tax Receivable 50,401 50,401 - - - Trade & other receivables 39,832 62,727 66,491 70,480 74,709 Cash and cash equivalents 1,077,430 775,249 590,169 425,357 433,672
Total assets 1,841,738 1,664,798 1,671,197 1,744,778 1,837,790
Equity and Liabilities
Capital and reserves 1,166,201 1,384,064 1,539,995 1,622,777 1,722,145 Share capital and premium 586,655 586,655 586,655 586,655 586,655
Retained earnings 579,546 797,409 953,339 1,036,122 1,135,490
Non-current liabilities 138,540 38,207 38,207 38,207 38,207 Retirement benefit obligations 100,333 - - - - Deferred taxation 38,207 38,207 38,207 38,207 38,207
Current liabilities 536,998 242,528 92,996 83,795 77,438 Trade & other payables 155,162 132,770 68,821 62,426 57,426 Government grant 366,020 80,822 - - - Short term portion of LTL 15,816 - - - - Tax liability - 28,936 24,175 21,368 20,012
Total liabilities 675,537 280,734 131,203 122,001 115,644
Total equity and liabilities 1,841,738 1,664,799 1,671,197 1,744,778 1,837,790
SENTECH SOC LTD Corporate Plan 2015-2018 62 FINANCIAL PLAN CASH FLOW STATEMENT
FORECAST MTEF FY2014 FY2015 FY2016 FY2017 FY2018 R'000 R'000 R'000 R'000 R'000 Note CASH FLOW FROM OPERATING ACTIVITIES 47,609 187,377 195,742 135,188 158,316 Cash generated from Operations 1 39,378 199,900 189,902 161,336 172,794 Finance income received 38,720 47,900 21,340 8,853 25,521 Dividends paid 7,482 - Finance costs (4,582) (2,032) (500) - - Taxation paid (33,389) (58,391) (15,000) (35,000) (40,000)
CASH FLOW FROM INVESTING ACTIVITIES (290,493) (362,057) (300,000) (300,000) (150,000) Property, Plant and Equipment acquired (290,493) (362,057) (300,000) (300,000) (150,000)
CASH FLOW FROM FINANCING ACTIVITIES (239,824) (127,494) (80,822) - - Government Grant received 469,565 66,143 95,614 - - Repayment of financial liabilities (38,530) (10,943) - - - Treasury -Broadband funds paid (622,441) - - - - Interest earned on government grants payable 15,625 - - - - Interest on government grant 15,541 5,313 - - - Government grant utilisation (5,140) (69,674) (176,436) - - Settlement of post retirement pension benefit (74,443) (118,333) - - -
NET INCREASE/(DECREASE) IN CASH (482,708) (302,175) (185,080) (164,812) 8,316 Cash and cash equivalents at beginning of period 1,560,131 1,077,424 775,249 590,169 425,357 Cash and cash equivalents at end of period 1,077,424 775,249 590,169 425,357 433,672 - - 0 - - NOTES TO THE CASH FLOW STATEMENT
1. CASH GENERATED FROM OPERATIONS
Profit per the income statement 201,385 259,367 195,730 106,123 112,490 Adjustments for non-cash flow items : Depreciation and Amortisation 48,373 52,516 60,576 64,210 68,063 Impairment of assets 5,901 1,398 1,308 1,387 1,470 Transfer to Post Retirement Medical Fund (41,410) - - - - DTT Dual illumination (89,349) (69,674) - - - Movement in retirement benefit assets and liabilities (558) 18,000 - - - Decrease in provisions (198) - - - - DBSA interest (1,166) - - - - Changes in working capital : (Increase) / Decrease in Inventory (7,371) (11,503) - - - (Increase) / Decrease in Trade and Other Receivables 20,663 (22,895) (3,764) (3,989) (4,229) Increase / (Decrease) in Accounts Payable (96,892) (27,309) (63,949) (6,395) (5,000) Cash Generated from Operations 39,378 199,900 189,902 161,336 172,794
SENTECH SOC LTD Corporate Plan 2015-2018 63 CORPORATE PLAN
1 FOREWORD
2 COMPANY PURPOSE
3 ALIGNMENT TO SHAREHOLDER PRIORITIES
4 PERFORMANCE REVIEW
5 MARKET OUTLOOK
6 BUSINESS STRATEGY: MTEF 2015 - 2018 7 STRATEGIC PROGRAMS AND PROJECTS
8 FINANCIAL PLAN
9 KEY PERFORMANCE INDICATORS
SENTECH SOC LTD Corporate Plan 2015- 64 2018 KEY PERFORMANCE INDICATORS: MTEF 2015-2018
KEY PERFORMANCE INDICATOR PERFORMANCE TARGETS STRATEGIC GOAL STRATEGIC OBJECTIVES (How We Will Measure (What We Want To Achieve) (How We Will Achieve It) Performance) FY15/16 FY16/17 FY17/18
Number of data connectivity 300 300 300 Ensure universal access to connectivity terminals installed network services Number of Smart City Solutions 1 2 5 Implemented Approved Build and Disaster Recovery (DR) and Ensure secure and reliable internal ICT Business Commission all Deployment of the BCP to Business Continuity (BC) Centre infrastructure and services Continuity Plan Disaster Recovery all Business Units established capability sites Number of Digital Terrestrial 4 Greenfield sites 0 0 Television sites completed completed SG 1: Ensure that ICT infrastructure is accessible, 33 community 33 community robust, reliable, affordable and Ensure universal access to digital 33 community radio radio broadcasters radio broadcasters secure to meet the needs of the broadcasting signal distribution network broadcasters connected connected connected country and its people. services FM services implemented
31 transmitters for 31 transmitters for SABC Expansion SABC Expansion 0 connected connected
1 new customer on 2 new customer on the Hybrid the Hybrid 4 new customer on the Ensure universal access to digital Digital Media solutions implemented Broadcasting Broadcasting Hybrid Broadcasting multimedia services Platform Platform Platform connected connected connected
65 SENTECH SOC LTD Corporate Plan 2015-2018 KEY PERFORMANCE INDICATORS: MTEF 2015-2018
KEY PERFORMANCE INDICATOR PERFORMANCE TARGETS STRATEGIC GOAL STRATEGIC OBJECTIVES (How We Will Measure (What We Want To Achieve) (How We Will Achieve It) FY15/16 FY16/17 FY17/18 Performance)
Weighted average Weighted average Weighted average Ensure Network Availability meets Weighted average availability based availability based availability based availability based on SG 2: Ensure high levels of Customer SLA requirements across all platforms on product revenues achieved on product on product product revenues of and Stakeholder satisfaction by revenues of 99.80% revenues of 99.80% 99.80% meeting their needs all the time. Improve Customer and Stakeholder Customer and Stakeholder service 69% Baseline +15% Baseline +18% satisfaction index rating achieved Non-Bargaining Unit 100% of performance contracts signed Average employee Average employee and reviewed. Performance ratings achieved performance score performance score of Bargaining Unit - of 3.2 3.5 Effective Management of Talent 90% of performance contracts signed SG 3: Drive organizational and reviewed. performance in order to improve 25% cover ratio for 50% cover ratio for organizational effectiveness. 90% cover ratio for Cover Ratio for Succession achieved Critical and Core Critical and Core Critical and Core Skills Skills Skills Implement new Implement new organizational Redesigning and alignment of Implementation of new Approved organizational design and Organizational structure for Middle organizational structure to the new organizational implementation of macro and structure for the Management and operating model in order to develop structure for functional structures Top three finalization of organizational capacity and capability. bargaining levels management layers functional structure design.
66 SENTECH SOC LTD Corporate Plan 2015-2018 KEY PERFORMANCE INDICATORS: MTEF 2015-2018
KEY PERFORMANCE INDICATOR PERFORMANCE TARGETS STRATEGIC GOAL STRATEGIC OBJECTIVES (How We Will Measure (What We Want To Achieve) (How We Will Achieve It) Performance) FY15/16 FY16/17 FY17/18
Funds set aside for the Implement SENTECH Foundation implementation of the SENTECH 2% of NPAT 2.5% of NPAT 3% of NPAT Foundation
Funds invested in the implementation Develop and implement Supplier of the Enterprise and Supplier 3% of NPAT 3.2% of NPAT 3.5% of NPAT Development Strategy Development Strategy
Maintain sustainable Return on Net Return on Net Assets from continuing 8% 6.0% 6.0% SG 4: Ensure that the Company Assets (RONA) operations is financially sustainable.
Maintain a healthy Earnings before Earnings before Interest and Tax R195.7m R106.1m R112.4m Interest and Tax (EBIT) achieved
Implement effective internal control system and compliance with Clean audit achieved Clean Audit Clean Audit Clean Audit applicable legislation
SENTECH SOC LTD Corporate Plan 2015-2018 67