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Sentech Annual Report & Sustainability Report 2008

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Sentech Annual Report & Sustainability Report 2008 v d @ v a A g @ @ a Ω Annual and Sustainability Report 2008 Contents Our vision, purpose and values 5 Board of Directors 6-7 Chairperson’s Report 8-13 Chief Executive Officer’s Report 14-3 Sustainability Report 4-90 Financial Review 9-101 Corporate Governance 10-111 and Risk Management v Annual Financial Statements 11-18 d @ Acronyms 183 v a A g @ @ a Ω Sentech Annual and Sustainability Report 2008 v d @ v a A g Sentech has transformed from the technical and broadcast arm of the SABC into @ @ ‘ a leader in converging communications technologies a Ω ’ About Sentech Sentech is a State-owned, fully Sentech connects its stakeholders to their integrated digital internet protocol (IP) commercial enterprise. Sentech was world and connects the world to them network. awarded Multimedia and Carrier of through a wide range of communication Carrier licences in 2002. solutions. It provides the sounds of radio Sentech’s long-term growth is dependent and the pictures of television, and offers on its success in markets traditionally During the past few years, Sentech internet connectivity from anywhere, served by telecommunications has reinvented itself, transforming from connecting customers to those overseas companies. Whilst its core business the technical and broadcast arm of the and providing virtual private networks remains broadcasting signal networks, South African Broadcasting Corporation for businesses. The Company’s plan is the broadband business is envisaged (SABC) into a leader in converging to provide communications solutions as a major element of the product mix in communication technologies. such as voice, data and video on one, future. @ 4 Sentech Annual and Sustainability Report 2008 Vision Sentech will be a leader in providing broadband communications. Purpose Sentech is a broadband network business accommodating narrowband functionality on a common platform, supplying communication solutions and services to wholesale customers in chosen markets in South Africa and on the rest of the continent. Values • Integrity, honesty and fairness in dealings with all stakeholders; • Quality customer service is the cornerstone of the Company’s success and every customer; contact should be a pleasant experience; and • Opportunities for Sentech people to develop to their fullest potential by ensuring quality leadership, rewarding excellent performance and encouraging innovation. Sentech Annual and Sustainability Report 2008 5 Board of Directors Colin Hickling Dr Sebiletso Dr Len Konar Mokone- Chairperson Matabane Non-Executive Director Dr Konar is a chartered Mr Hickling is the Chief Executive accountant with a BCom Chairperson of the Officer Public Trustees and and postgraduate diploma in accounting from the Trust Corporation. He Dr Mokone-Matabane University of Durban- is a former deputy holds a PhD in educational administration Westville, a master of accounting sciences degree chairperson of SABC. and degrees in television, radio and (Illinois, USA), and a certificate in tax law and a political science. doctorate in commerce (accounting) from Unisa. Mohammed Beverley Thabo Leeuw Siddique Cassim Ngwenya Non-Executive Chief Financial Chief Operations Director Officer Officer Mr Leeuw holds an Mr Cassim is a Mrs Ngwenya holds honours bachelor of chartered accountant, a BSc in electrical accounting sciences with an electricity engineering from the degree from Unisa pricing certificate from the University of University of Cape Town. Has extensive and a management Stellenbosch and a certificate in regulation experience in the telecommunications advancement qualification from the and strategy of utilities from the University of sector gained with South Africa’s leading University of Witwatersrand. Florida, USA. ICT companies. Adv Mlamli Booi Nandi Sihlali Nonkumbulo Tshombe Non-Executive Non-Executive Director Director (Resigned 25 July Non-Executive 2007) Ms Sihlali holds a Director BSc in electrical Mr Booi holds a BSc engineering (light Adv. Tshombe is an degree and MSc current) and is a admitted advocate of Electronic (UCT), member of the South the High Court of South Africa, with an LLB Graduate diploma in Project Management African Institute of Electrical Engineers. degree and a higher diploma in taxation. (Damelin). Mr Booi is a registered professional engineer with exprience in Telecommunications and Broadcasting. 6 Sentech Annual and Sustainability Report 2008 Sentech Annual and Sustainability Report 2008 7 Chairperson’s Report @ Sentech is … a key pillar in the Government’s desire to deliver an ‘ information society ’ Colin Hickling Chairperson 8 Sentech Annual and Sustainability Report 2008 By any measurement standard, the year under rollout of the wireless broadband infrastructure. review was extremely challenging for the Board, This wireless broadband infrastructure is management, employees and stakeholders of essential for improving broadband capability Sentech largely because of funding. and access, particularly for rural communities and public facilities such as schools, clinics, The broadcasting signal distribution business courts, Thusong Service Centres and other continues to perform exceptionally well and government offices”. further details are included in the CEO’s and Sustainability Report. A turnaround strategy Our optimism was strengthened by a letter for the telecommunication business has been from the Minister of Communications, Dr Ivy formulated to enable Sentech to meet the Matsepe Casaburri, on 26 June 2008, in which objectives of sustained profitability, improved she advised that “Cabinet yesterday once again cash flows and essential business expansion. confirmed that Sentech is a strategic asset and It is expected that this will not only reverse must be appropriately funded”. the loss situation, but transform the company into a strong and vibrant institution capable of At the time of writing, we await confirmation withstanding external shocks and aggressively that the necessary funding has been allocated. tackling new growth possibilities. In the meantime, the Board is mindful of its fiduciary responsibilities and has put a stop to The success of this strategy is, however, any further expenditure on key projects where dependent on the shareholder providing binding and irrevocable funding commitments unwavering financial and policy support, as remain outstanding. Sentech is repositioned as a key pillar in the Government’s desire to deliver an “information In February 2008, the Board was subjected society”. to negative media attacks. In essence the questions were raised about Sentech’s We were therefore heartened by the continued presence in the retail broadband market and financial support for the migration from Government reluctance to invest more public analogue to Digital Terrestrial Television (DTT); funds in Sentech. to successfully fulfil our role for the FIFA 2010 World Cup; and recent statement issued after The Board had already agreed at a strategic the meeting of the South African Cabinet on planning session in December 2007 to 25 June 2008: “Cabinet noted and discussed “migrate MyWireless and BizNet from the Sentech’s funding requirements and resolved retail to the wholesale market; strengthen the that the Presidency, National Treasury and DoC Carrier of Carriers (CoC) and V-Sat offerings would meet urgently to consider the funding to ensure profitability, consider the impacts requirements with a view to expediting the of the recent Electronic Communications Transmitter Site, Durban Regional Office Sentech Annual and Sustainability Report 2008 9 Chairperson’s Report d Act 36 of 2005 (ECA); and further review Sentech’s journey started in 1992 when the the private and public sectors. product opportunities and tariffs in the digital signal distribution division of the SABC was environment”. placed in a wholly-owned subsidiary. In After a profitable period in the late 1990s 1996, the company became a State Owned and early 2000s, Sentech’s financial position Early in 2008 the Department of Enterprise (SOE) reporting to the Minister of deteriorated significantly. Notwithstanding Communications (DoC) clarified that Sentech’s Communications. In terms of the Sentech Act the Government’s initial support for Sentech’s revised mandate is to construct and make of 1996, the company is to act as a “common rollout plans for a national broadband wireless wireless broadband infrastructure available carrier” for all broadcasters in South Africa. infrastructure, the anticipated funding did on open access principles on behalf of the not materialise, which resulted in a decline State, with the primary objective of bridging In 1999, the DoC commissioned international in revenues from products under the the digital divide, enabling development in consultants AD Little and Associates to telecommunications licences. This contributed the Information Communications Technology report on the future and repositioning of to the company reporting losses (with a (ICT) sector and reducing the cost of Sentech. Their finding was that due to positive trend in the past three years) of: communications. Sentech will therefore convergence of technologies, there was no • R73,3 million in 2004; concentrate on increasing service delivery to long term future for Sentech operating purely • R93,2 million in 2005; schools, health centres, Government offices as a broadcasting signal distributor. They • R85,3 million in 2006; and and the Thusong Post Offices. recommended the company’s entry into the • R17,6 million in 2007. broadband telecommunications
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