PRESENTATION BY SENTECH LIMITED TO THE PORTFOLIO COMMITTEE

PRESENTATION BY SENTECH LIMITED TO THE PORTFOLIO COMMITTEE ON COMMUNICATIONS, REGARDING THE TELECOMMUNICATIONS AMENDMENT BILL 2003 DD/gk/Telecoms Bill 2003 1

SENTECH TEAM • Gladwin Marumo (Chief Operating Officer) • Johan Raath (Group Executive Business Development) • Dingane Dube (Senior Manager: Government & Regulatory Affairs • Matime Nchabeleng (Manager: Government Relations) DD/gk/Telecoms Bill 2003 2

INTRODUCTION DESIRED OUTCOME OF THIS PROCESS, INTER ALIA : - • Declaring Sentech a Public Operator for its Carrier of Carriers and Multimedia Services Licences – Benefit to the End User – Obtain facilities from Telkom at Wholesale Rates • Acknowledgement that Sentech carries traffic of the End Users • Limitations placed on Sentech need to be re-examined • Commitment to introduce competition in the Communications Sector • Enabling Sentech to fulfil its statutory mandate as contained in the Sentech Act and Telecommunications Act DD/gk/Telecoms Bill 2003 3

HISTORICAL OVERVIEW: 1. The first draft supplementary Facilities leasing guidelines (Government Gazette, Notice Number 358 of 15 March 2002) declared Sentech a Public Operator. 1. These guidelines read as follows: “ 2. 1 These guidelines apply to the persons identified in section 2. 2 and set out additional rights and obligations applicable to such persons when entering into a Facilities Leasing Agreement pursuant to General Notice 1260 of 2000…. 2. 2 These guidelines shall apply to the following: a. PSTS licensees contemplated in Section 36 of the Telecommunications Act as amended and does not apply to licensees as contemplated in section 40 A of the Telecommunications Act as amended. b. Sentech, only in relation to the provision by Sentech of carriers services. ” DD/gk/Telecoms Bill 2003 4

2. 3 For purposes of these guidelines and the matters addressed herein, Telkom SA Limited is declared a major operator and its facilities leased in accordance with these guidelines shall be considered essential facilities. 2. 4 For purposes of these guidelines and the matters addressed herein, persons listed in section 2. 2 are public operators”. 2. Draft Interconnection Guidelines, published under Notice 784 of 2002 in Government Gazette No. 23458 on 24 May 2002 “Public Operator’ means a provider of a public switched telecommunications service or a public mobile telecommunications service, or an under-serviced area licensee or Sentech for the purposes of its provision of multimedia services or carrier of carriers service. ” (Sentech’s emphasis) DD/gk/Telecoms Bill 2003 5

Public Operator status for purposes of interconnection and facilities leasing • To provide the services at affordable prices, Sentech must be able to obtain facilities at competitive prices (wholesale prices) • Real benefit to economy if duplication of facilities is limited. DD/gk/Telecoms Bill 2003 6

Overseas customer calls SA Mobile customer via either Sentech or Telkom. Direction of call Overseas operator pays Sentech termination rate = TS = TM + costs + margin Sentech pays Telkom retail rates for SAT 3 half- circuits Customer pays retail rate TR = TT or TS + costs + margin Sentech and Telkom pay Mobile termination rate = TM SAT 3 Cable Customer makes call to SA mobile customer Overseas Operator Sentech Note: Competition between Sentech and Telkom for traffic SAT 3 Cable Telkom uses SAT 3 half- circuits at cost SA Mobile customer Sentech pays Telkom retail-based rates for national transmission Telkom Overseas Operator pays Telkom termination rate = TT = TM + costs + margin DD/gk/Telecoms Bill 2003 SA Mobile Operator Telkom uses national transmission at cost 7

Overseas customer calls Telkom customer via either Sentech or Telkom. Direction of call Overseas operator pays Sentech termination rate = TS = TT + costs + margin Sentech pays Telkom retail rates for SAT 3 half- circuits Customer pays retail rate TR = TT or TS + costs + margin Sentech pays Telkom termination rate = TT SAT 3 Cable Customer makes call to Telkom SA customer Overseas Operator Telkom customer Sentech pays Telkom retail-based rates for national transmission Sentech Note: Competition between Sentech and Telkom for traffic Telkom SAT 3 Cable Telkom uses SAT 3 half- circuits at cost Overseas Operator pays Telkom termination rate = TT DD/gk/Telecoms Bill 2003 Telkom uses national transmission at cost 8

Sentech and Telkom competing for Multimedia customer with Telkom charging retail-based rates for facilities. Telkom optic fibre charged to Sentech at retail-based rates. Customer Branch A Telkom optic fibre at cost to Telkom Sentech and Telkom competing for provision of video conferencing service to a customer. Sentech using Telkom links to customer A at uncompetitive prices Sentech radio link at cost to Sentech Customer Branch B DD/gk/Telecoms Bill 2003 Telkom optic fibre at cost to Telkom 9

AMEND - S 40 (2) At this time, VANS can utilise Sentech’s network up to the point of interconnection with the VAN, but must use Telkom network to provide Sentech services to their customers. – Only Telkom benefits !!! Why Sentech should be included in S 40(2): – Costs • increased competition • Affordable prices to end-customers – Services • VANS able to offer Multimedia Services to their customers • VANS able to utilise Sentech’s Multimedia network DD/gk/Telecoms Bill 2003 10

DD/gk/Telecoms Bill 2003 11