Slide 1

17 October 2012

Presentation to Select Committee on Labour

and Public Enterprises

Slide 2

Agenda

Mandate

Broadband Infraco’s legislative mandate is set out in the Broadband Infraco Act No. 33 of 2007 (the “Act”).

Slide 3

The main objectives as set out in the Act are to expand the availability and affordability of access to electronic communications;Including but not limited to underdeveloped and under serviced areas;In support of projects of National Interests; In accordance with the Electronic Communications Act and commensurate with international best practice and pricing;Through the provision of electronic communications network services and electronic communications services.

Slide 4

2.2 Broadband Infraco proposition re-stated

Unique Strengths

Exclusive servitude access: Eskom & Transnet

Latent strengths

Shareholding

Maintenance teams in the field

Network Operating CentreRelative Strengths

Very High service level records (managed fibre)

Stable network functionality

Above-average Mean Time To Respond standards.

Expanded national footprint: 110 Customer termination sites, 151 long distance sites and over 12 700km fibre optic

Solid Shareholder

WACS shareholding

Service provider to a Second Network Operator

Strengths

Regional connectivity National connectivity

International connectivity Interlinking East & West Coast international cables

Slide 5

3.2. Provincial Broadband Segmentation

Broadband Infraco will pursue these provinces purely commercially; redundancy/diversity; Higher SLA’s; Private sector will also target them; Wider Pop Access

Provinces with immense commercial imperative

[to a lesser extent]

Gauteng Western Cape

KwaZulu Natal

Free State

Commercial powerhouse of Southern Africa; 33, 9% of the National Economy and 10% of the total GDP of the African Continent;high infrastructure; some rural underserviced areas; 45/7% traffic

Up to 16,8% traffic origination; second most important province in terms of economic activity; some underserviced townships

10.8% traffic origination; high infrastructure in urban areas with gaps in rural areas

4.7% traffic origination; a most strategic province by virtue of centrality and strategic location

• Neotel-Vodacom-MTN (and SANRAL) Fibre Co-Build initiative: Johannesburg-Durban and Johannesburg-Bloemfontein are both just over 90% complete and should be by early 2013.. Bloemfontein-Cape Town is more than 50% finished, and is expected to be complete in mid 2013.

• FibreCo build from Bloemfontein to Cape Town • Where large metropolitan municipalities are initiating own fibre

roll-outs (City of Johannesburg; City of Cape Town; City of Tshwane; Ekurhuleni Metropolitan Municipality; eThekwini

Free State footprint

Gauteng footprintWestern Cape footprint

KZN footprint

Slide 6

3.3. Provincial Broadband Segmentation

Provinces for case-based engagement

Eastern Cape Mpumalanga Limpopo

3.8% traffic origination; high economic growth hubs

6.2% traffic origination; significant potential

4.1% traffic origination; vibrant broadband policy deliverables

These provinces represent great opportunity; and will be pursued as a matter of first priority (backhaul; metro access and last mile) partnerships with the private and public sector.

The private sector has very low appetite for these provinces because of the lower economic activities

The roll out of broadband in these provinces needs to be driven by a socio economic benefit

Broadband Infraco Eastern Cape footprint

Broadband Infraco Mpumalanga footprint

Broadband Infraco Limpopo footprint

Slide 7

3.4 Provincial Broadband Segmentation

Provinces with Socio-Economic imperative

North West Northern Cape

5.9% traffic origination; poor infrastructure spread.

2.1% traffic origination; sparsely populated (less than a million) with very poor infrastructure;

These provinces do not represent a viable commercial business case. Purely universal access roll-out. Shareholder or provincial/customer funding required. Partnerships are an imperativeWith the low population densities as well as the low GDP alternate technologies that require spectrum have to be explored

Broadband Infraco Northern Cape footprint Broadband Infraco North West footprint

Investment programme

Capital expenditure roll out plan

Slide 9

Outcomes

BBI Investment Program (IP) fully adopted Strategic Infrastructure Programme (SIP)

BBI directly contribute to the Presidential Infrastructure Coordinating Commission:

Directly impacting SIP 15, 16 and 17

Supporting SIP 12,13 ,14 and 6

Directly benefiting from SIP 10

This IP, covering the period 2012/2013 to 2016/2017 brings together the projects costing to R4 039

These is to ensure that BBI delivers on its mandate and government outcomes

Expansion projects

BBI Investment Program fully adopted Strategic Infrastructure Programme (SIP)

BBI directly contribute to the National Government Outcome 6, SIP 14,15 and 16 as highlighted in the next slide

This Investment Programme, covering the period 2012/2013 to 2016/2017 brings together the projects costing to R4 039

These is to ensure that BBI delivers on its mandate and government outcomes

Eastern Cape Inland connectivityPhase 1

Requirement: Access network connecting 37 out of 38 municipalities with access to broadband connectivity. Enabler:Deploy 487km fibre and wireless backhaul to enable provincial connectivity.  Benefit:

Expand access to areas that are not addressed by the market and the likelihood of market investment is very low due to poor economic activity

97% coverage in the province.

Estimated Cost: R244.2mmillion.

Slide 12

2nd Northern RingProgramme: LP and MP

Requirement:

Access network connecting 19 of the 25 municipalities with access to broadband connectivity.

 Enabler:

Deploy backhaul connectivity of 554km redundancy and Network expansion, connecting Limpopo and Mpumalanga.

  Benefit:

Alternative route to Zimbabwe (international gateway); Botswana .

76% coverage in the province

SIP 17: Enable regional integration

Estimated Cost: R401.4 million

Slide 13

Access Network Connection Phase 1 covering(GP, WC,FS and KZN) 

Requirements 73km of access network to reach the sites of the operators/customers or last mile licence holders.

Create 16 open access points as Telkom and Neotel’s PoP have restrictions in Gauteng.

115km of access network in Western Cape

An Operator neutral like Terraco do not have sufficient footprint to terminate operators

 OutcomeOpen Access in the Gauteng will increase to 16

Additional 29 Open Access and coverage of 58% in KZN

89% coverage in Free State and Connecting 17 municipalities in the Free State

Estimated Cost: R833.8 million

Slide 14

Northern Cape Connection Phase 1

Requirements

Access network as there is no national backhaul.

This is to address access network, connecting 21 of the 27 municipalities.

Enabler:

need to deploy 894km of national backhaul

Estimated Cost:

R364.3 million

Slide 15

North West ConnectionPhase 1

Requirements

Base coverage in 17 municipalities

Enabler:

Need to deploy 691 km

Estimated Cost:

R125.2 million

Slide 16

Technology Life cycle management (Replacement or Upgrade)

Adlash replacement projects

Single Point of Failure

Microwave replacement project

625 Critical faulty network

Transmission equipment enhancement project

Battery replacement project

IP Core

Customer requests

Slide 17

Investment Programme

Project Name Province 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 Total

Eastern Cape Inland connectivity EC 244 166         244 166

2nd Northern Ring : Phase1 LP and MP 220 202 181 217       401 419

Access Network Connection covering GP, WC , KZN & FS   426 556 285 091   122 154 833 801

Northern Cape Connection* NC       364 344   364 344

North West Connection NW         125 177 125 177

Total expansion 464 368 607 773 285 091 364 344 247 331 1 968 907

Customer expansion

All provinces

          741 000

Total replacement/Upgrade 440 516 173 924 200 985 197 988

315 368 1 328 781

 Total capital expenditure 904 884 781 697 486 076 562 332 562 699 4 038 688

3169 km’s of Adlash replacement program

Slide 19

Year Down Time Hr Number of severe defects KM Amount

2013 1 206 53 1028 164 400

2014 231 43 744 119 053

2015 26 23 750 119 931

2016 186 44 648 103 677

1 649 163 3 170 507 061

Stakeholder engagements

Slide 20

StakeholdersEnablers: Current

Eskom: Expansion programme

Transnet: Expansion programme

Enablers: Future

Sanral

Prasa

Possible partnerships

Telecommunication operators

Incumbents across the boarder

Investors

Commercial institutions

Developmental institutions

Universal Services Fund

Shareholders

Slide 21

SuppliersEskom

Transnet

Transmission equipment manufacturers and suppliers

Conclusion

Slide 22

Connect. Growth, UNLOCKED.