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Presentation to Parliamentary Portfolio Committee on Telecommunications & Postal Services 14 November 2014 The Purpose of Broadband Infraco NDP DTPS Vision 2020 SA Connect Broadband 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. 100% of South Africans will have access to broadband services at 2.5% less of the populations average monthly income Broadband 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 Digital Development Digital Future Digital Opportunity 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 Broadband roll out is aligned to national government programmes. Aggregation of public sector demand (SITA 10 year contract • Enterprise development and localisation Long term collaboration of existing infrastructure providers: Eskom Transnet Freight and Rail PRASA Provincial government WACS – consortium DFA Skills and institutional capability Internship Programme (10 interns) Broadband Infraco Staff: Average age of 34 years Slide 2 Broadband policies and regulations Broadband Infraco Act 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 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 USAASA USAASA has finalised its National Strategy and the Funding Manual Broadband Infraco supported the USAASA MTEF application ICT Policy Review Panel Infrastructure & Services Sub-Committee Broadband Infraco is actively participating in the Infrastructure and Services Committee of the Panel Slide 3 Broadband Infraco Implementation as at 2012 Shareholder Capitalisation WACS R440 534 000 SELF BUILD ESKOM (assets) R779 011 000 12 681km of fibre 144 PoP Resultant Network R1, 8 billion R377 300 000 TRANSNET (assets) OFFICE & COMPUTER EQUIPMENT R34 163 000 R13 955 000 WACS CONNECTIVITY SADC CONNECTIVITY EXPANDING ACCESS ENABLING GOVERNMENT • Broadband Infraco is a significant investor in the 5.1Tbits/s West Africa Cable System (WACS) Project. • Swaziland: Created new route that goes through Pietretief then Mahamba • 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 • Connected Government through SITA. • 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. • Namibia: Created new route Aries, Schuibsdrift then Onseepkans • Mozambique: Kamedien to Komatipoort on the TFR fibre • Zimbabwe: Soekmekaar to Beitbridge • This was to have the South Ring between Gauteng, Kwa-Zulu Natal Western Cape. • Testing Equipment • Monitoring system • Transmission equipment Slide 4 Consolidated Customers, Revenues & Cost of Sales Customers, Revenue and Cost of Sales What does each axis represent? Customers A significant growth of our customers from 1 to 14, including signing SITA as an anchor client Revenue Decline in 2013 due to the end of Rights of Use (ROU) with Neotel. More customers acquired and a positive trend is expected. Cost of Sales Efficient management of Cost of Sales. Slide 5 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. Security around 54 Mesh None One (1) site secured (Athene site). IP Update to date IP/MPLS on Golden Triangle No expansion - currently using Ethernet over SDH as workaround. Implemented Phase 1 of the ERP system. User requirements specifications for Phase 2 in progress Thirteen (13) sites planned for this next financial year. Expansion to 3 priority provinces planned for this year (Limpopo, Mpumalanga and Eastern Cape) Slide 6 Broadband Infraco alignment to Broadband Policy Targets • • • • • Broadband Policy Target Broadband access in Mbps User Experience 50% at 5 Mbps 2016 8 895 kms of fibre 158 PoPs nationally R50 billion What has Broadband Infraco done Initiatives Areas Outcome 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 Capacity 155 Mbps – 40 Gigs • Renewed 40% of obsolete transmission equipment Slide 7 Transformation and Enterprise Development Young women in ICT/Engineering Enterprise & Supplier Development Broadband Infraco runs a graduate internship programme that targets the development of scares Network Engineering skill-pool in 2010, with three successful follow Of these, 6 interns have been absorbed into permanent employment. There are currently 10 interns recruited in 2013, to complete the R1.2 mil YTD 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 up groups to date. R11.4 mil YTD Indirect jobs Africa to meet current and future The first intake was in January Spend on BYO 2014 South industry needs. Spend on BWO 06th Jun 2013 13 Jun 2013 27th Sep 2013 Indaba Hotel Nafcoc offices, Polokwane Royal KZN Hotel roadshow Venue of Roadshow No. of delegates 153 47 111 + 400 13 15 who attended No. of women registered programme in December 2014. Slide 8 Shareholder Compact 2014/15 Strategic Objective Ensure Business Sustainability & Network Saleability KPI Target Network performance rebates paid as percentage of gross revenue ≤3% Cash at the end of the year ≥R100 mil Measure EBIDTA based on budget ≥(116.6) mil (60%) Company Sustainability Overall increase in capacity sold at STM-1 10% increase equivalent in the Golden Triangle, Northern Ring (113 STM-1) and other routes Extend the network and enable the connection of 75 services by 1 Jan 2015 the 2nd anchor customer (Cell C Network Improvement (20%) Establish new open access PoPs Establish premises a laboratory at Broadband 5 PoPs by 31 December 2014 Mandate Delivery Infraco Fully functional Lab by 31 March 2015 Training spend as percentage of payroll 3 Increase in number of engineers in training per 10 annum Increase in number of direct jobs created baseline+2% (3 employees) Economic Transformation (20%) 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 Socio-economic transformation Amount spend on People with disabilities owned 300000 entities CSI projects completed Interactive whiteboards and internet facilities and Maths equipment Slide 9 Significant projects: SITA and Cell C 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 SITA Cell-C • 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. • 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 Province Fibre (KM) PoP Northern Cape 9.08 KM - Northern Cape 1.5 KM - Western Cape 23.84 KM 1 Western Cape 190 KM - Eastern Cape 64.68 KM - Eastern Cape 87 KM 1 Free State 9.69 KM 1 Free State 43 KM - North West 14.47 KM - North West 100 KM - KZN 32.9 KM - KZN 114 KM - Gauteng 73.7 KM - Gauteng 174 KM 1 Limpopo 13.09 KM - Limpopo 6 KM - Mpumalanga 10.55 KM - Mpumalanga 65 KM Slide 10 Challenges and Mitigation Challenges 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 Mitigations 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 Slide 11 Thank You Slide 12