Telecommunications Policy

1. Telecommunications Policy Eskom Parliamentary Portfolio Committee Presentation Date: 3 April 2001

2. INTRODUCTION • Eskom welcomes the Minister’s policy directions • We look forward to participating in the SNO and ICT sector in a manner which enhances the value of our assets for the benefit of all South Africans

3. Key Policy Matters • “Managed liberalisation” - a prudent approach to telecommunications development in SA whilst preserving sector value • Complete PSTS licence including a full mobile component • Separate inclusion of ESI~TEL and Transtel • Provision for BEE and participation of HDGs

4. Key Policy Matters (continued) • Commitment to an aggressive timeframe for liberalisation • Unbundled local loop aspect of infrastructure sharing is positive • Access to 1800MHz and 3G • Number portability, universal access, emergency communications, ICT Institute

5. Eskom Position • Eskom previously put forward its position • ESI~TEL and Transtel assets overlap • Therefore two new full public licences would be required to optimally leverage existing State assets • To avoid ‘sterilising’ either ESI~TEL or Transtel within a single SNO • To enable formation of a competitive third operator • Thereby to maximise the value to the State of its existing assets • All scenarios must avoid destruction of State asset value

6. “Value Enhancement” Principle • Inappropriate equity “set-aside” could result in value destruction of State assets • 21% equity could result in a realisation of only ¼ to ½ of the true value of these assets • Inclusion of both parastatals in the SNO could exacerbate possible “value dilution” • The 21% would be split, and indeed, over duplicative assets • A number of alternative mechanisms can be applied within the announced policy directions

7. The SNO Process • The detailed steps in the SNO formation must be clarified early in the process • SEPs • Eskom • Transnet • BEEs • The percentage set-aside for ESI~TEL and Transtel must be informed by the underlying value of the assets

8. The SNO Process (continued) • The tight timeframes exacerbate any lack of clarity in the process • Mechanisms for identifying and funding BEE participation should be outlined • Maximum Regulatory clarity should be achieved before the ITA is issued

9. Eskom Telecommunications • Eskom represents the superior basis for a second public telecommunications operator in SA • Lowest-cost fibre optic network option • Fastest roll-out speed to enable completion by May 2002 (the 14000km project commenced Feb 2001) • Superior financial capacity • Best customer ownership (4m) from largest corporates to individual consumers • Existing assets include a national digital microwave network (155MB 1+1 – 16 960km --11.3 million Ch km)

10. Eskom Telecommunications (continued) • Optimal skills and staffing base with experience both in large engineering projects (eg Power Stations) and Electrification • Africa presence (eg Lesotho, Kenya) and opportunities through power/telecommunications expansion strategy

11. Concluding Matters for Clarification • SNO formation and licence bidding process • BEE participation • SEP requirements • Percentage set-aside for ESI~TEL and Transtel • Precise meaning of “fixed-mobile services” • Extent of regulatory clarity expected by the time of the issue of the ITA

12. Conclusion • Eskom is fully committed to the Minister’s policy directives We look forward to participating in the SNO in a manner which enhances the value and use of our assets and skills.