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Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.

INTER SYSTEMS IT

INTER SYSTEMS IT
LIMPOPO LTE PROJECT: BUSINESS CASE

Purpose This document provides the base information regarding the project business case, covering the fundamental questions of: o Reasons for the Project o Expected Benefits o Risk Analysis o Cost o Time Scales o Investment Appraisal This document should be read by all members of the project in order to ensure a common understanding. Copyright 2007 INTER SYSTEMS IT. This material, including documentation and any related computer programs, is protected by copyright controlled by INTER SYSTEMS IT. All rights are reserved. Copying, including reproducing, storing, adapting or translating, any or all of this material requires the prior written consent of INTER SYSTEMS IT. This material also contains confidential information, which may not be disclosed to others without the prior written consent of INTER SYSTEMS IT. Copyright 2007 INTER SYSTEMS IT. All rights reserved. INTER SYSTEMS IT St John's House 54 St John's Square London EC1V 4JL United Kingdom

Project Name Document Number Version Number

LIMPOPO SYS032012BC 3.1 1

INTER SYSTEMS IT UK Limited, 2011 Classification:

Issue Date: 01/11/11 Status: Draft

Page 1 of 46 Author: Project Director

Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.0

INTER SYSTEMS IT

Document Control
Document Approval
Approved By Tim Sameke Steering Committee Organisation INTER SYSTEMS IT LIMPOPO LTE PROJECT Role MD EXE Date 16/11/11

Document History
Author AWNIT AWNIT AWNIT AWNIT KUMAR KUMAR KUMAR KUMAR Version No 1.0 1.1 2.1 3.1 Status Draft Draft Draft Draft Reason for Change New document Document Review Document Review Document Review Issue Date 01/11/11 29/10/12 12/03/13 01/04/13

Distribution
Name Steering Committee INTER SYSTEMS IT Organisation LIMPOPO LTE PROJECT INTER SYSTEMS IT Email Address limpopo.project@intersysit.com project.solutions@intersysit.com

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INTER SYSTEMS IT UK Limited, 2011 Classification: Issue Date: 01/11/11 Status: Draft Page 2 of 46 Author: Project Director

Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.0

INTER SYSTEMS IT

Document Control ........................................................................................................................ 2


Document Approval ................................................................................................................................................2 Document History ...................................................................................................................................................2 Distribution .............................................................................................................................................................. 2 Table of Contents ....................................................................................................................................................3 Executive Summary .............................................................................................................................................4 About Us .................................................................................................................................................................4 Project Background .............................................................................................................................................5 Market Research ...................................................................................................................................................6 Demographics/ Service Penetration ................................................................................................................6 Products ................................................................................................................................................................ 16 Financial Analysis .............................................................................................................................................. 25 Options Analysis ................................................................................................................................................. 28 Expected Benefits............................................................................................................................................... 28 Risks Analysis ..................................................................................................................................................... 28 Financial Cost Analysis .................................................................................................................................... 43 Project Timescales ............................................................................................................................................. 45 Investment Appraisal ......................................................................................................................................... 45

Table of Contents

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INTER SYSTEMS IT UK Limited, 2011 Classification: Issue Date: 01/11/11 Status: Draft Page 3 of 46 Author: Project Director

Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.0

INTER SYSTEMS IT

Business Case Executive Summary About Us


INTER SYSTEMS IT LTD, is a Telecommunication Services company focused on the deployment and management of high CAPEX infrastructure projects. Our Managed Services portfolio is dedicated on delivering value, reduced CAPEX/OPEX costs for both fixed line and network operators worldwide. INTER SYSTEMS IT has tailored solutions which make it possible to carry out time critical upgrades and deployments of Core Network and Radio Access Network projects. We are an independent Managed Services company, not aligned to any infrastructure vendors giving us a unique selling point of giving clients cost effective network solutions. INTER SYSTEMS IT great industry edge of delivering great value open solutions ensures best in class technology solutions for communication network roll outs. To deliver a high standard service, INTER SYSTEMS IT works with several Telecommunication Equipment Vendors who provide a broad selection of technologies hence enabling us to meet a wide criterion of our client needs. Our in depth knowledge and particularly the in-house expertise and experience in the GSM/WCDMA/LTE mobile and fixed network solutions, gives us a distinct competitive advantage and enables us to provide an exceptional level of service. Not only are we technology experts but integrated in our business operation is a team of experienced Project Managers with extensive know-how in the deployment of network infrastructure. Essentially INTER SYSTEMS IT Ltd understands exactly what is required to design, build, maintain and finance modern telecommunications and IT infrastructure.

INTER SYSTEMS IT Ltd aims to provide products and services that give network operators these fundamental benefits: Reductions in CAPEX and or OPEX. Increased operational efficiency: Deliver operational and financial efficiencies through streamlined outsourced operations. Fixed and low costs for OPEX and CAPEX during new network roll out phase.
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INTER SYSTEMS IT UK Limited, 2011 Classification: Issue Date: 01/11/11 Status: Draft Page 4 of 46 Author: Project Director

Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.0

INTER SYSTEMS IT

Shared risk between Network operators and Managed Service provider for new technology roll out. Faster Time-to-Market for new services requiring infrastructure upgrades. Reduced network overlays and lower operation costs. Predictable network quality though service level Agreements (SLA). Focus on core business: Transform networks and processes for long-term growth by shifting the operational focus to the end-user experience and migrating to service-centric models.

Project Background
INTER SYSTEMS IT acquired a seventy five percent shareholding in COMPANY XYZ PRIVATE LIMITED a licensed telecommunications company currently planning on rolling out voice and data services in Zimbabwe. COMPANY XYZ PRIVATE LIMITED a subsidiary of INTER SYSTEMS IT has an IAP CLASS A license from Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) which allows this private limited company to build a digital telecommunications network with a capacity to: Provide nationwide fixed voice and data telecommunications services. Provide nationwide mobile voice and data telecommunications services. Provide an Optical Fibre backbone with two international gateway connections to West African Cable Systems (WACS) via Botswana and SEACOM/ EASSy through Mozambique. Provide nationwide telecommunications services using Long Term Evolution (LTE) 4G technology. Provide over the top digital media services such as Video-On-Demand (VOD), IPTV, eBanking and Hosting Solutions. Provide affordable universal access to mobile voice and data services using 3GPP WCDMA technology.

Project Objective
LIMPOPO LTE PROJECT has been established by INTER SYTEMS IT Ltd UK to invest (built and operate) in the infrastructure required to roll out nationwide wireless based services including an optical fibre backbone in Zimbabwe. The project aims to provide new broadband services such as Triple play (VOIP, broadband internet and IPTV) including value added services to a large consumer base currently without access to these products. INTER SYSTEMS IT through its subsidiary COMPANY XYZ PRIVATE LIMITED also aims to be the key supplier of wholesale internet bandwidth to internet service providers, mobile and fixed telecommunication companies.

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INTER SYSTEMS IT UK Limited, 2011 Classification: Issue Date: 01/11/11 Status: Draft Page 5 of 46 Author: Project Director

Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.0

INTER SYSTEMS IT

Project Justification
INTER SYSTEMS IT, has made the decision to undertake the LIMPOPO LTE PROJECT because it presents a viable opportunity to build a commercially successful wireless network. Subsequently this has a substantially positive financial and strategic impact on the companys business plans in this region. The LIMPOPO LTE PROJECT is immensely essential to the companys growth strategy as it will make it possible for future penetration of Managed Services in this geographical region. The new planned network will be promoted as the flag ship of our technical and management capability. In addition a successfully financially viable network will not only positively contribute to INTER SYSTEMS IT UK LIMITED balance sheet but will correspondingly highlight the companys strength in end-to-end Project Management and delivery. The expected project outcomes as set out in the justification of the project are: 1. The LIMPOPO LTE PROJECT is aligned to the INTER SYSTEMS IT internal business plans. 2. The LIMPOPO LTE PROJECT will contribute positively to INTER SYSTEMS IT UK LIMITED balance sheet. 3. The LIMPOPO LTE PROJECT will deliver a flagship network to show case INTER SYSTEMS IT technical, management consultancy and end-to-end project management capabilities. 4. The LIMPOPO LTE PROJECT will provide continued professional experience for our consultants on emerging technologies. 5. The LIMPOPO LTE PROJECT presents an opportunity for INTER SYSTEMS IT to break into the SubSahara Africa telecoms market.

Market Research Demographics/ Service Penetration


INTER SYSTEMS IT has conducted a thorough market research in all areas that would affect mostly the LIMPOPO LTE PROJECT viability and continued implementation. The LIMPOPO LTE PROJECT is planned to deliver a modern fixed and wireless telecommunications network in Zimbabwe, Africa. This country located in Southern Africa and shares borders with South Africa, Botswana, Mozambique, Namibia and Zambia. Zimbabwe is a land locked country with a total area of 390,757 sq km with 386,847 sq km land and 3,910 sq km covered with water. The country has a total estimated population of 12.5 million with 90.7% literacy. Annual inflation declined from 4.3% in January 2012 to 2.5 % in January 2013. The countrys GDP for 2013 is estimated to be $11 bn (Source: National Budget) the 2013 National Budget projects overall GDP growth of 5% in 2013 and levels of above 06% in 2014 and 2015, mainly driven by mining, agriculture, manufacturing, tourism and construction.

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INTER SYSTEMS IT UK Limited, 2011 Classification: Issue Date: 01/11/11 Status: Draft Page 6 of 46 Author: Project Director

Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.0

INTER SYSTEMS IT

Zimbabwes tele-density currently stands at 90.5% with a significant proportion of services provided by three GSM mobile network operators.

Mobile Penetration: 87% Fixed Line Penetration: 3% Internet Penetration: 12% Based on the most recent tele-density data it is quite clear that Zimbabwes mobile phone penetration would reach 100% by 2013. INTER SYSTEMS IT therefore has a clear strategy and plans to concentrate its effort in: Providing value added mobile voice services to gain market share from the incumbent network operators. The qualitative data for existing services provided by the current Operators and the Telecommunications Regulator highlights substantially poor quality of services across the industry. Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) the local regulator has highlighted in its periodic publications significant issues with: An extremely high number of call drops. Poor call quality due to network congestion.
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INTER SYSTEMS IT UK Limited, 2011 Classification: Issue Date: 01/11/11 Status: Draft Page 7 of 46 Author: Project Director

Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.0

INTER SYSTEMS IT

The lowest voice quality codec (GSM Half Rate) being consistently used by all network operators. Limited or no services for voice or data due to power supply outages. Limited or no services for voice or data due to network failures. Slow data speeds resulting in poor user experience. High volumes of reported billing errors. High cost of voice and data services. Poor Quality of Service (QOS) Poor Customer Services. Constant breaches of customers Service Level Agreements (SLA). All of the above will be areas where INTER SYSTEMS IT aims to compete by introducing disruptive telecommunication technologies, professionalism and management skills that would provide good quality, value for money services. Critical to our business case is the provision of good customer support and service delivery which will be important to gaining market share. Our entrance to the market will also bring much needed competition not seen in this sector and differentiate between the low cost low quality providers and the competitively priced value added service INTER SYSTEMS IT would bring. Fixed line and Internet services are two growth market segments where the penetration rates are still significantly low. This raises opportunities for INTER SYSTEMS IT to provide new service products such as video-on-demand, home broadband and fixed telephone known as triple play. Integrated with mobile voice and data our product portfolio becomes a very attractive Quad-play converged service highly demanded by business and the socially active online consumer groups.

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INTER SYSTEMS IT UK Limited, 2011 Classification: Issue Date: 01/11/11 Status: Draft Page 8 of 46 Author: Project Director

Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.0

INTER SYSTEMS IT

LIMPOPO PROJECT: Market Assessment

LTE Subscriber Segments

Target LTE Subs: 2.5M in 2015

Smartphone user
Mainly voice + moderate data

Dongle user
Datacard userbase Substantial Data generation

Wireless DSL
Address DSL Customers & corporates

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INTER SYSTEMS IT UK Limited, 2011 Classification: Issue Date: 01/11/11 Status: Draft Page 9 of 46 Author: Project Director

Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.0

INTER SYSTEMS IT

INTER SYSTEMS IT concludes that the telecommunication market in Zimbabwe has space for another Network Operator to provide consumers with internet based broadband services for Smart Phones, Tablets and DSL Modem Routers as shown above. The current trends in Zimbabwe for mobile internet broadband has increased due to the proliferation of over the top applications/content such as games consoles, online gaming, Facebook, Whatsapp, Skype, IP-PBX, VoIP solutions, SKY NEWS, BBC NEWS, Video-on-Demand, SoundCloud and YouTube just to mention a few. None of the current wireless networks are optimised for high data services and Rich Communication Services (RCS) hence this provides a great business opportunity. LTE as a significant disruptive technology is primarily designed as a packet data only system with a heavy bias towards fast and high data centric networks. With Zimbabwe having a combination of high data demand and none of the present networks designed for such an evolution in customer usage trends the planned network would adequately address this requirement. It has been identified that there will be three main devices which will load the network based on projected customer usage. Smart Phones (including Tablets) USB Mobile Internet Dongles Wireless DSL modems The estimated total number of subscribers using the devices above will be 2.5million by 2015 delivering huge attrition for the existing Network Operators.

Competitor Analysis
Zimbabwe has an unconventional licensing structure which constitutes of five types of licenses issued for the provision of mobile and or fixed voice and data services. The regulator Post and Telecommunication Regulations Authority of Zimbabwe (POTRAZ) is the sole authority responsible for issuing the following licenses to the existing fixed/wireless network operators: 1. GSM License (Circuit switched mobile voice services) 2. Fixed Telecommunication License (Fixed Voice and Data Services Only) 3. Internet Access Provider Class A (Data + Voice over IP) 4. Internet Access Provider Class A Class B (Data only) 5. Converged License Three GSM licenses have been issued to network operators, Econet Wireless, Telecel and NetOne. Some of these companies also have Internet Access Provider (IAP) Class A licenses to provide both fixed/wireless VOIP data. The Internet Access Provider Class A license has been issued to twelve companies all competing to provide internet broadband and Voice over IP services. Another Internet Access Provider license, Class B has only been issued to one company and this allows a licensee to provide just simply data services. In addition the is also a license for fixed voice and data services provided to only one company that is solely owed by the Zimbabwean Government. Zimbabwes telecommunications regulator POTRAZ has stopped issuing out licenses and this will continue to be the case for the foreseeable future. Although at the end of the first quarter of 2013 a new Converged license was announced. The purpose of this new license was to correct a blunder in licensing structure that caused confusing on the provision of services allowed based on technology. Therefore all Network Operators regardless of their current licenses can upgrade to the new Converged License and offer a wider range of telecommunication services irrespective of the technology. The technology agnostic Converged License would allow for the setup of an ubiquitous networks in step with global trends. No
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INTER SYSTEMS IT UK Limited, 2011 Classification: Issue Date: 01/11/11 Status: Draft Page 10 of 46 Author: Project Director

Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.0

INTER SYSTEMS IT

Network Operator has been issued this license as yet due to the legal and legislative processes that need completion. The five different licenses issued by the local Regulator are not restricted to any frequency and spectrum is allocated on a case by case basis, usually first come first serve. Although there are clear differences in the provision of services provide by the GSM and IAP Class A licensees with new advances in technology these differences are blurred giving IAP Class A licensees an advantage when using disruptive technologies such as LTE. The introduction of 3GPP Long Term Evolution (4G LTE) for one, enables mobile voice to be transmitted over data networks such as the Internet. Therefore data networks can now provide commercial voice services which were only available to GSM license holders. INTER SYSTEMS IT through its local subsidiary COMPANY XYZ PRIVATE LIMITED with the IAP Class A license is in a position to provide a competing mobile voice network among other services. Additionally COMPANY XYZ PRIVATE LIMITED will leverage its lack of legacy GSM equipment to invest in LTE a disruptive technology which brings greater value addition and service differentiation to the existing telecommunication market. To quickly gain significant market share our strategy will be to induce customer churn from the incumbent GSM mobile operators, TelOne and IAPs with particular focus on: 1. Fixed residential & commercial voice services 2. Fixed residential & commercial internet broadband services 3. Mobile broadband services 4. Mobile voice services 5. IPTV or Video on Demand services 6. Data bandwidth With clear evidence of poor service provision by existing network operators our aim would be to simply provide a better quality of service and proactive customer support. Moreover we intend to have in place a highly competitive pricing structure based on a long term investment payback period. This will make our product offering exceedingly attractive to a wide customer base and also hedge our pricing strategy from a price war. Econet Wireless Zimbabwe Limited This locally established company is the current market leader in provision of both mobile voice and data telecommunication services. Although Econet Wireless Zimbabwe Limited (EWZ) was the last company amongst the three GSM license holders to be granted permission to start operating a cellular network. In the last 12 years the company has delivered a fairly maintained a reliable mobile network in comparison to the other Operators. This has generated a positive consumer response due to the poor service delivery by the other two licensees hence effectively giving EWZ a monopoly. Econet Wireless Zimbabwe Limited is also one of the largest quoted publically listed companies in terms of market capitalisation and the only telecommunications company listed on the Zimbabwe Stock Exchange. Their status as the market leader in terms of subscriber share and revenue has translated into significant profits for the company. High net profit margins of 31.2% have made Econet Wireless Zimbabwe Limited an attractive investment target on the Zimbabwe Stock Exchange (ZSE), where the stock has been highly traded and valued. The company has to date invested in GSM/GPRS (2G) and WCDMA (3G) technology to provide mobile voice and data services. Econet Wireless Zimbabwe Limited has GSM nationwide coverage of 80% and this is mainly used for mobile voice and SMS services. Data services are provided mainly via GPRS base stations with a few WCDMA 3G locations for high data usage. Econet Wireless Zimbabwe has 6.4 million subscribers which constitutes 57% of market share and is the biggest telecommunications operator in
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INTER SYSTEMS IT UK Limited, 2011 Classification: Issue Date: 01/11/11 Status: Draft Page 11 of 46 Author: Project Director

Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.0

INTER SYSTEMS IT

both voice and data services. They have a strong cash flow and going forwards will continue being a dominate player in Zimbabwes telecommunication industry. Telecel Zimbabwe This company was the first private business to be awarded a telecommunications license by the Regulator. Telecel Zimbabwe is jointly owned by Orascom and the Empowerment Corporation a group of small local investors. Orascom is a subsidiary of VimpelCom, a major international telecommunications company with interests in Europe, Africa, Asia, the Middle East and North America. The Empowerment Corporation is a Zimbabwean consortium made up of a number of Zimbabwean companies from varying backgrounds. The current shareholding structure of Telecel Zimbabwe is not in accordance with Zimbabwean Telecommunication regulations where foreign owned companies are required to have a maximum 49% equity stake. Telecel Global has 60% and the remaining 40% with the Empowerment Corporation. The company has plans to reduce the foreign owned equity in line with local regulation by listing on the Zimbabwean Stock Exchange. Internal but public boardroom disagreements between the main shareholders is delaying the divesture of Orascom. After recent network upgrades the company has grown to become the second largest mobile operator in the space of just two years. Telecel have managed to achieve this by investing wisely money generated by the business on infrastructure and value added services. The company has 2 million subscribers constituting 18% of market share. The internal tug of war between the two rival investors if not resolved will continue being a barrier for the company realising its full potential therefore holding on to its market position is not a certainty. NetOne This solely owned Government Company was the first to get a telecommunications license to operate the first mobile phone network in Zimbabwe. NetOne traditionally had the advantage of providing the best coverage due to the land and tower asserts they shared with a sister company TelOne. They fell short spectacularly when it came to delivering quality of service due to the high numbers of failed connections, billing errors, network congestion and poor customer support. NetOne has also in recent years failed to get loans to upgrade its network infrastructure due to defaults on previous loans. The company requires urgent restructuring and a professional management team to take it forward. Government privatisation plans have not been implemented and so far only two companies (MTN South Africa & TelKon South African) have registered interested. After completing due diligence both companies have not made any investments in the struggling business. NetOne has currently clawed back market share from Telecel Zimbabwe but are still the third largest telecommunications company. The company has a 2.5 million subscriber base constituting 22% of market share, although this could change very quickly. Technologically, NetOne will continue to lag behind the other operators and will struggle to provide value added services. Their poor financial position and management problems will only be resolved once the entity has been privatised, which does not look likely. TelOne The sister company of NetOne is also solely owned by the Government of Zimbabwe and is the only provider of fixed line services. The company has the advantage of being the biggest provider of fixed voice and data services including an optical fibre backbone connecting to the undersea cables via Mozambique. In the last 12 months TelOne has started to gain market share in the fixed broadband market with its ADSL offering which is substantially cheaper and faster that the current wireless
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INTER SYSTEMS IT UK Limited, 2011 Classification: Issue Date: 01/11/11 Status: Draft Page 12 of 46 Author: Project Director

Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.0

INTER SYSTEMS IT

broadband solutions. The broadband service offering is notably very new hence it is still to be seen if the quality of service is maintained as the customer base increases. Demand for fixed voice in Zimbabwe remains very high as TelOne has failed to provide telephone connections to customers across the country. Going forward the company has an opportunity to grow and proved much needed services to underserved population but the company seems to suffer from the same problems as NetOne. A poor financial position compounded by an unprofessional management team which continues to hamper the success of TelOne unless privatised. Just like NetOne in the short term privatisation looks very unlikely due to the low equity on offer to any potential investors, dilapidated over valued assets and the unsustainable blotted wage bill. Internet Service Providers: Class A In 2010 the regulator issued a new type of license meant to stimulate growth in the internet broadband fixed line and mobile services. In total twelve companies were issued with Internet Service Provider Class A (IAP) licenses to provide broadband and voice over IP services. COMPANY XYZ PRIVATE LIMITED was one of the successful companies to have been granted a ten year license. A small number of these operators have started providing voice over IP (VOIP) services in the major towns and cities directly competing with TelOne. Mostly using low CAPEX technologies such as CDMA and WiMax as this small handful of Network Operators has managed to introduce affordable fixed line service and this has helped increase the use of broadband in the last 2 years. The service offering has been the same among the top tier of CLASS A Internet Service Providers, issues of quality have been problematic due to lack of network capacity and erratic availability of services. The key problem affecting all Internet Service Provider Class A providers primarily being poor network planning, lack of technical competence on radio frequency systems and shortage of capital. This shortage of capital from local banks has meant the inadequate investment on infrastructure deployment. Inevitably these Internet Access Provider Class A licensee companies will require foreign direct investment to compete with the GSM licensees providing similar services. In the long term they are likely to be many casualties with most the IAP operators going out of business. Market consolidation through mergers and acquisitions is also expected as there are too many companies competing for a limited market.

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INTER SYSTEMS IT UK Limited, 2011 Classification: Issue Date: 01/11/11 Status: Draft Page 13 of 46 Author: Project Director

Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.0

INTER SYSTEMS IT

IAP CLASS A Licensees PowerTel Communications (Pvt) Ltd

Financial Position GOOD

Network Assets > US$ 30 million

Customer Base < 50 000

Unique Selling Point CDMA broadband and VOIP solution in two towns and 3 cities. High speed optical fibre solution available in most cities.

Additional Notes Government owned company which is a subsidiary of the Zimbabwe Electricity Supply Authority. Company seems to be well run and has collaborated with private companies to build an Optical Fibre backhaul with an international gateway. A going concern with very low cash flow.

AFRICOM (Pvt) Ltd. Ecoweb (Pvt) Ltd

FAIR

< US$ 10 million

< 50 000

VERY GOOD

> US$ 20 million

> 200 000

CDMA broadband and VOIP solution in four cities. Metro fibre solution provider. National Coverage of WiMax broadband and VOIP with high speed optical fibre solution available across most towns and cities. Good QOS WiMax and VOIP Solution only available in the capital city. WiMax and VOIP Solution available in all cities and a few towns. Metro fibre solution provider. WiMax and VOIP Solution available in all cities and a few towns. VSAT solution provider. Fixed line broadband using ADSL. High speed broadband with VPN and metro fibre. 14

Subsidiary of Econet Wireless Zimbabwe.

Dandemutande (Pvt) Ltd Aquiva Wireless (Pvt) Ltd

FAIR

< US $20 million

< 100 000

BAD

< US $5 million

< 20 000

Good privately run company with a wellmanaged network that is only available in Harare. A going concern with low cash flow.

Aptics Trading (Pvt) Ltd Telecontract (Pvt) Ltd (t/a Telco) TelOne (Pvt) (t/a ComOne)

BAD

< US $5 million

< 20 000

A going concern with low cash flow.

VERY BAD FAIR

< US $ 100 000 < US$ 10 million

< 10 000 < 100 000

No data or voice network deployed. Currently Government owned company which is a subsidiary of TelOne. Has sufficient bandwidth capacity over an Optical Fibre backhaul with an international gateway.

INTER SYSTEMS IT UK Limited, 2011 Classification:

Issue Date: 01/11/11 Status: Draft

Page 14 of 46 Author: Project Director

Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.0 Transmedia Corporation BAD N/A N/A

INTER SYSTEMS IT

VSAT and Microwave data backhaul solution provider.

Valley Technologies (Pvt) Ltd BlueSat Access PECUS ENTERPRISES PRIVATE LIMITED

VERY BAD

< US $20 million

< 5 000

CDMA broadband and VOIP solution provider.

VERY BAD GOOD

< US $ 100 000 < US $20 million

< 5 000 None

VSAT solution provider. Metro fibre solution provider.

Government owned company which is a subsidiary of the Zimbabwe broadcasting Corporation. No data or voice network deployed. Company is no longer a going concern as money owed to local banks has not been paid back due to poor network and bad management. No data or voice network deployed. The last Company to be issued with an IAP CLASS A license.

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Products
INTER SYSTEMS IT through its local Zimbabwean subsidiary COMPANY XYZ PRIVATE LIMITED plans to make available a diverse product portfolio that will cater for a wide and diverse local market. Each product is designed to ensure differentiation from existing competitors and present a unique selling point. Where new products/services have been introduced INTER SYSTEMS IT has focused on making sure that there is a good value proposition and strong customer demand. Based on our core business strategy centred on providing a better customer experience all products will be converged with value added services. There will be a mix of voice and data services in all products taking advantage of the homogenous design of LTE networks at our disposal. Voice Products Product Residential VoIP-Basic Residential VoIP-Weekends Residential VoIP-Evening & Weekends VoIP-SME VoIP - Corporate VoIP - Enterprise Mobile VoIP - LITE Pay as you go Mobile VoIP- Basic Pay as you go Mobile VoIP-Life Style Pay as you go Mobile VoIP ContractFreedom Description 100 free minutes any network in Zimbabwe every month. Free weekend calls on LTE network. 200 free minutes to any network in Zimbabwe every month. Free weekend calls on LTE network. 300 free minutes to any network in Zimbabwe every month. Free evening & weekend calls on LTE network. Small office up to 10 phone lines. Discounted local and international call rates. 10+ phone lines, remote VoIP server. Discounted local and international call rates. 50+ phone lines, Dedicated local VoIP server, Branch interconnections. Mobile voice service which comes data bundle. Top up vouchers in $1, $5, $10, $50 Mobile voice service which comes 1GB data bundle. 100 free minutes any network in Zimbabwe every month. Free weekend calls on LTE network. Mobile voice service which comes 2GB data bundle. 200 free minutes any network in Zimbabwe every month. Free weekend calls on LTE network. Mobile voice service which comes 5GB data bundle. 400 free minutes any network in Zimbabwe every month. Free evening and weekend calls on LTE network.
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INTER SYSTEMS IT UK Limited, 2011 Classification: Issue Date: 01/11/11 Status: Draft Page 16 of 46 Author: Project Director

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INTER SYSTEMS IT

Broadband Internet Products Product Internet -SME Internet - Business Internet - Enterprise Home Internet - Basic Home Internet - 5GB Home Internet Unlimited Mobile Broadband (Life Style) Mobile Broadband (Business) Description 1Mbps, 50GB download per month. 1Mbps, Unlimited download. > 2Mbps, Unlimited download including VPN. 512kbps, 2GB download per month. 1Mbps, 5GB download per month. 1Mbps, Unlimited download. LTE mobile broadband for Smart phones, Tablets and USB Dongles. Data rate 512kbps, 2GB download per month. LTE mobile broadband for Smart phones, Tablets and USB Dongles. Data rate 1Mbps, 5GB download per month. Optical Fibre Backbone White Label bandwidth leasing for Fixed and Mobile Telecommunications Operators. Optical Fibre Backbone White Label bandwidth leasing for Corporates, ISP and Data Centres.

Wholesale Broadband - Tier1 Wholesale Broadband - Tier2 IPTV Products Product IPTV - Basic IPTV - Basic + Movies IPTV - Unlimited

Description Free view satellite channels + Radio & regional programmes. Basic package + Choice of movies, documentaries, Sport, Children & Teen Channels, Music, News, Life Style. The full TV and Radio offering with HD TV. Commercial adverts on IPTV platform. One advert aired once on off peak times. Commercial adverts on IPTV platform. One advert aired once on off peak times. Commercial adverts on IPTV platform. One advert aired once on off peak times. Commercial adverts on IPTV platform. One
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Issue Date: 01/11/11 Status: Draft Page 17 of 46 Author: Project Director

15sec Advertising on IPTV 20sec Advertising on IPTV 25sec Advertising on IPTV 30sec Advertising on IPTV
INTER SYSTEMS IT UK Limited, 2011 Classification:

Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.0

INTER SYSTEMS IT

45sec Advertising on IPTV

advert aired once on off peak times. Commercial adverts on IPTV platform.

Converged Products Product Quad Play - Lite Quad Play - Budget Description Residential VoIP-Basic, Home Internet-Basic, Mobile VoIP - LITE and IPTV-Basic. Residential VoIP-Free Weekends calls on LTE, Home Internet-5GB, Mobile VoIP- Basic and IPTV-Basic +Choice. Residential VoIP-Free Evenings & Weekends calls on LTE network, Home Internet-Unlimited, Mobile VoIP-Life Style and IPTV-Unlimited.

Quad Play - Ultimate

Price
The communications regulator in Zimbabwe POTRAZ stipulates the call interconnection charges between all licensed operators. Any other pricing for voice calls, IPTV, advertising and broadband internet access are the prerogative of the network operator. Voice Products Product Residential VoIP-Basic Residential VoIP-Weekends Residential VoIP-Evening & Weekends Price US $ (Monthly) $5 $10 $15 Price US $ (Yearly) $60 $120 $180 $1620 + (US$ 350 Activation fees) $4200 + (US$ 600 Activation fees) $9000 + (US$ 950 Activation fees)

VoIP-SME VoIP - Corporate VoIP - Enterprise

$135 $350 $750

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INTER SYSTEMS IT UK Limited, 2011 Classification: Issue Date: 01/11/11 Status: Draft Page 18 of 46 Author: Project Director

Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.0

INTER SYSTEMS IT

Mobile VOIP Pay as you go - LITE Mobile VOIP Pay as you go - Basic

$5 $10

$60 $120

Mobile VOIP-Contract - Life Style

$20

$240

Mobile VOIP Contract-Freedom

$35

$420

Broadband Internet Products Product Internet -SME Internet - Business Internet - Enterprise Home Internet - Basic Home Internet - 5GB Home Internet - Unlimited Mobile Broadband (Life Style) Mobile Broadband (Business) Price US $ (Monthly) 150 375 885 $5 $10 $25 $35 $65 Price US $ (Yearly) 1800 + (US$ 350 Activation fees) 4500 + (US$ 550 Activation fees) 10620 + (US$ 1600 Activation fees) $60 $120 $300 $420 $780

Wholesale Broadband - Tier1

$5750

$69000 + (US$ 2300 Activation fees) $35400 + (US$ 1600 Activation fees)

Wholesale Broadband - Tier2

$2950

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IPTV Products Product IPTV - Basic IPTV - Basic + Movies IPTV - Unlimited 15sec Advertising on IPTV 20sec Advertising on IPTV 25sec Advertising on IPTV 30sec Advertising on IPTV 45sec Advertising on IPTV Price US $ (Monthly) $15 $35 $50 $750 $1000 $1200 $1400 $1900 Price US $ (Yearly) $180 $420 $600 $9000 $12000 $14400 $16800 $22800

Converged Products Product Quad Play - Lite Quad Play - Budget Quad Play - Ultimate Price US $ (Monthly) $100 $150 $200 Price US $ (Yearly) $1200 $1800 $2400

Competitor Prices
Prices published by competitors in the telecommunications market

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Sales Volumes

Services Subscribers

Products / Services

Year1

Year2

Year3

Year4

Year5

Year6

Residential VOIP-Basic Residential VOIP- Weekends Residential VOIP-Evening & Weekends Residential, VoIP VOIP-SME VOIP - Corporate VOIP - Enterprise Business VoIP

25,000 31,250 18,750 75,000 850 225 100 1,175

32500 40625 24375 97,500 1105 293 130 1,528

42500 53125 31875 127,500 1403 371 165 1,939

52500 65625 39375 157,500 1700 450 200 2,350

60000 75000 45000 180,000 1955 518 230 2,703

67500 84375 50625 202,500 2125 563 250 2,938

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Services Subscribers

Products / Services

Year1 350000 250000 200000 3000 803,000

Year2 630000 450000 360000 5400 1,445,400

Year3 1008000 720000 576000 8640 2,312,640

Year4 1260000 900000 720000 10800 2,890,800

Year5 1512000 1080000 864000 12960 3,468,960

Year6 1764000 1260000 1008000 15120 4,047,120

Mobile VOIP - LITE Pay as you go Mobile VOIP- Basic Pay as you go Mobile VOIP-Life Style Pay as you go Mobile VOIP Contract- Freedom

Mobile VoIP

Services Subscribers

Products / Services

Year1 3000 1200 900 5,100 1050 550 100 1,700

Year2 3300 1320 990 5,610 1365 715 130 2,210

Year3 3750 1500 1125 6,375 1733 908 165 2,805

Year4 4200 1680 1260 7,140 2100 1100 200 3,400

Year5 4500 1800 1350 7,650 2415 1265 230 3,910

Year6 4800 1920 1440 8,160 2625 1375 250 4,250

Home Internet - Basic Home Internet - 5GB Home Internet -Unlimited Home LTE Internet Internet -SME Internet - Business Internet - Enterprise Business LTE Internet

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Services Subscribers

Products / Services

Year1 2000 1500 500 4,000 7000 4000 1500 12,500 4500 2500 7,000

Year2 2600 1950 650 5,200 9100 5200 1950 16,250 5850 3250 9,100

Year3 3200 2400 800 6,400 11900 6800 2550 21,250 7650 4125 11,775

Year4 3700 2775 925 7,400 14700 8400 3150 26,250 9450 5000 14,450

Year5 4100 3075 1025 8,200 16800 9600 3600 30,000 10800 5750 16,550

Year6 4500 3375 1125 9,000 18900 10800 4050 33,750 12150 6250 18,400

IPTV - Basic IPTV - Basic + Movies IPTV - Unlimited IPTV Quad play - Lite Quad Play - Budget Quad Play - Ultimate Triple Play Home Mobile Broadband (Life Style) Mobile Broadband (Business) Mobile Broadband Tablets & Dongles

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Services Subscribers

Products / Services

Year1

Year2

Year3

Year4

Year5

Year6

Wholesale Broadband (Tier 1) Wholesale Broadband (Tier 2) Wholesale Broadband 15sec Advertising on IPTV 20sec Advertising on IPTV 25sec Advertising on IPTV 30sec Advertising on IPTV 45sec Advertising on IPTV IPTV Advertising

1 3 4 300 300 300 300 100 1,304

1 3 4 360 360 360 360 120 1,569

1 3 5 450 450 450 450 150 1,959

1 4 5 570 570 570 570 190 2,480

1 4 5 660 660 660 660 220 2,870

1 4 5 750 750 750 750 250 3,260

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INTER SYSTEMS IT UK Limited, 2011 Classification: Issue Date: 01/11/11 Status: Draft Page 24 of 46 Author: Project Director

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Financial Analysis

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Projected Revenues

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Opportunity Cost

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Options Analysis
To be added!

[Brief description of the different options considered for the project] - DO NOTHING - ACQUISITION OF OTHER EXISTING NETWORKS - ACQUIRE A LICENSE FROM REGULATOR - LIMPOPO LTE Project (Big Bang Approach) - LIMPOPO LTE Project (Phased Approach) - LIMPOPO HSPA+ Project - LIMPOPO WiMax Project

Expected Benefits
To be added!

[Expressed in measurable terms against todays situation] Financial Analysis: NPV Financial Analysis: ROI

Risks Analysis
To be added!

[Summary of the key risks of the project]

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SWOT Analysis
INTER SYSTEMS IT has carried out an in depth Strength, Weakness, Opportunities and Threats (SWOT) analysis to fully understand the business case potential and risk. Identifying and understanding the business environment is essential for COMPANY XYZ PRIVATE LIMITED to provide the right products and services based on an accurate risk analysis. Strength 1. Affordable Products and services. 2. Pricing based on Lifestyle. 3. Providing value added services which are not currently available in market. 4. Value added revenue streams from IPTV (Video on Demand) and advertising. 5. Deployment of the disruptive telecom technology in LTE. 6. Technology agnostic, covering both voice and data. 7. Experienced and commercially aware human resources. 8. Product and technology leadership expertise. 9. Acquisition of Green Field Operator in Zimbabwe. 10. Extensive network coverage 11. Low energynetwork hardware elements Weakness 1. INTER SYSTEMS IT first nationwide rollout of telecom services. 2. INTER SYSTEMS IT will be a late entrant in the Zimbabwe Telecom market. 3. Project is leveraged on affordable finance. 4. Limited management experience in telecom network operations.

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Opportunities 1. Growing voice and internet data market in Zimbabwe. 2. Huge market opportunity for Mobile data 3. Increased consumer demand driving growth in market. 4. Opportunities for new services in market. 5. Poor network coverage for both data and voice still exists. 6. Huge potential for value added service with prepaid products and lock in period to maintain ARPU level. 7. Stable currency in Zimbabwe, currently using US$. 8. Robust cash flow based on strong demand. 9. Growing Economy with huge Gold, Diamond, Platinum, Steel and Natural Gas mining resources.

Threats 1. Weak Regulation may constraint long term growth. 2. Competition from two well established Telecom players. 3. Low disposal Income. 4. Availability of affordable LTE handset. 5. Political instability. 6. Skilled Telecom professionals. 7. Inconsistent power supply. 8. Delay in project roll out 9. Poor Governance and Economic policies. 10. Breach of contractual agreements with local companies.

Strength 1. Affordable Products and Services Currently the Zimbabwean telecommunications market is categorised as highly pricesensitive and this will increase in near future as competitive intensity increases. INTER SYSTEMS IT planned deployment of LTE will give our product services a competitive advantage. LTE will provide both basic and value added services that will differentiate our network from the Incumbents operators. Product pricing will therefore be intrinsically linked to the cost of project finance and will effectively determine the depth of discounting. Gaining substantial market access is a key requirement for a profitable business with an affordable product and service based on intelligent pricing as leverage.
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This project has a number of price plans in macro segment products at very competitive rates for all, calculated to encourage competitor churn, customer retention and long term profitability within all market segments targeted. Some of the introduced product services will be new in the market based on advanced technology (LTE) hence opening up new untapped revenue streams. Detail of pricing and services is shown in the Product and Price section of this document. 2. Product based on lifestyle The Limpopo project will plan its consumer products and services around customer profile demographic information to effectively target infrastructure investment. These product will target certain category of market and specifically product designed to suite there requirement and purpose. Tariff plan has also been aligned accordingly. 3. New value added services introduced Project has created new value added services like IPTV, Office VoIP, Telephone customer support centres (Call Centres) , HD voice calls, telephone conference solutions, and video call just to mention a few. These services are currently not available in Zimbabwe. Based on projected demand these new value added services will generate significant revenues in the five year horizon due to there being no competitors with similar products. There are indeed tremendous possibilities to gain significant market share especially in niche segment service sectors. These services are only possible with LTE technology hence giving COMPANY XYZ Private Limited an advantage. 4. Generation of extra revenue from advertisement Advertising will be another new revenue stream created on top of the IPTV (Video-on-Demand) service. Pricing plans will be based on the time slot, programme schedule and the advert length. Proliferation of subscription based television is currently provided through satellite technology. The introduction of IPTV to the market will provide a local and cheaper service. In addition localised advertising as an additional business service will be very attractive to companies and will bring in additional revenues. 5. Latest telecom technology LTE At the heart of the business and its projected revenue will be premised on rolling out the latest technology in Mobile communication. LTE technology will provide a new user experience and services which are currently not available using existing network infrastructure. Fixed line as well as mobile voice and data services will all use LTE as this provides the most cost efficient method to deliver a better QOS than existing technologies. The following advantages of LTE over older technologies are highlighted below. a. LTE provides decrease in latency and improved user experience. Latency is approximately 10ms, which will be much more desirable for users on mobile network using real time interactive networks
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b. Lower cost of service Due to better energy efficiency and reduced number of network elements. c. Higher network capacity - Making possible for higher data rate services at a lower cost d. Wider channel bandwidth A proportional higher amount of data can be sent over these frequencies, spectrum can be used more efficiently, achieving higher data rates e. Higher Average Revenue per User- Lower cost bit, boost ARPU as shift from voice centric revenue to data centric revenue. f. Increased peak data rates and spectral efficiency- Peak rates reach up to 50 Mbps on the uplink and 100 Mbps on the downlink for 20 MHz of spectrum. This reduces the cost of spectrum fees.

6. Technology covers both voice and data Limpopo project will rollout both voice and data version of LTE (VoLTE) which will be one of the first networks in Africa. This technology will provide a real competitive edge over the other telecom provider in Zimbabwe. Not only will this technology give COMPANY XYZ Private Limited an unrivalled competitive edge in data services but will also cover voice which is still in high demand and considerable mass market service product. 7. Experienced Manpower INTER SYSTEMS IT is a company driven by professionals who are highly experienced in telecom industry with an average experience of 12 years. COMPANY XYZ Private Limited currently employs experienced and qualified staff with both technical and management skills to take on this project. 8. Product and technology leadership This project will offer products that are not available in current market at very competitive price but new converged services. 9. Extensive Network coverage The planned network rollout will cover 70% of the population with 90% of all towns and cities receiving both voice and data services. This deployment approach will give customers confidence in the service delivery of the network and encourage more users to join. 10. Low energy network elements LTE networks are designed with energy efficiency and intelligent power saving features that can turn transmitters and receivers on or off depending on the load and go into an idle state. During quite
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periods (night time) when the number of users on the network is low the eNB systems can also go into power saving mode.

PESTEL Analysis
INTER SYSTEMS IT has carried out an in-depth analysis of the Political, Economic, Social, Technological, Environmental and Legal (PESTEL) analysis to fully understand the business case potential and risk. Political The political history of Zimbabwe in the last decade has been turbulent and simply not presented confidence to investors due to poor government policy making, inadequate protection of property rights, weak government institutions such as the judiciary and ineffective policing of current laws. This coupled with disputed elections and a shaky collision government saw the countrys economy suffer negative growth from 2000 to 2008. However since the African Union (AU) and Southern African Development Community (SADC) sponsored Government of National Unity (GNU) was signed the political atmosphere has been considerably stable. This has immensely contributed to GDP growth which had contracted by 45% during the period of 2000-2008. Improved macroeconomic stability, associated with full dollarisation, liberalisation of grains, minerals marketing and high price of commodities have fostered a turnaround of the Zimbabwean economy in 2009-2011. There has been continued disagreement thus far between the coalition parties about indigenisation laws which have been approved but suspended to new investors and banking institutions operating in Zimbabwe. The life of the constitutional parliament ends in June 2013 and new elections will soon take place under a new constitution. The conduct of these elections will be key barometer on future political stability going forward. Economic According to the World Bank, Zimbabwes economy is recovering from a decade-long crisis that saw economic output decline every single year during the period Key facts: 1999 to 2008, with a cumulative decline of more than 45 percent. However, supported by a strong recovery of GDP - USD $11 bn domestic demand and government consumption, overall, GDP per capita USD $698 real GDP grew by 20.1 percent between 2009 and 2011. Despite the government operating on a cash budget principle, the budget balance for 2011 (-3.2 per cent of GDP, is an improvement on the level of -4.3% recorded in 2010. Projections for 2012 and 2013 are similar at -2.8% and -3.0% respectively.

FDI USD $125m Budget deficit 2.8% Inflation 2.5% Currency Multiple Currencies (USD, EURO, GBP, PULA and RAND)

Annual inflation declined from 4.3 percent in January 2012 to 2.5 percent in January 2013. In January 2013, annual food and non-food inflation stood at 3.7 percent and 1.9 percent respectively. Key drivers of annual inflation
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in January 2013 included education (13.0 percent); housing, water, electricity, gas and other fuels (10.7 percent) and transport (6.4 percent). The main factors that contributed to the decline in annual inflation in January 2013 included wines (-8.7 percent) and clothing material (-5.8 percent). Month-on-month inflation for January 2013 declined to 0.07 percent from 0.13 percent in December 2012. Month-onmonth food and non-food inflation stood at 0.32 percent and -0.06 percent respectively. Thus, non-food items were the main factor underpinning the decline in month-on-month inflation in January 2013. In general, food items have been the main driver of both annual and month-on-month inflation. Policy measures targeted at increasing the supply of food and the reduction of food prices were expected to lead to lower inflation levels. Inflationary developments in the short to medium term will continue to be influenced by the US dollar/rand exchange rate, inflation developments in South Africa, international oil prices and local utility charges.

Source: ZIMSTAT Nominal GDP as of end 2012 is estimated at US$11 billion, with GDP per capita at US$698. GDP was led by strong growth in: Mining (107%), Agriculture (35 %) Services (51 %) Manufacturing sector (22 %) Mineral exports increased by 230 percent over the 2009-2011 period, while value of agricultural exports increased by 101 percent over the same period Strong external demand for primary commodities (platinum, gold, cotton and tobacco) has supported higher production levels, which have recovered pre-2000 levels in terms of values. Foreign direct

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investment (FDI) inflows into the country were projected at USD 125 million in 2011, a marginal increase from USD 123 million in 2010. The Current Account has now been fully liberalised, allowing authorised dealers to process all transactions for imports without seeking prior exchange control approval. In 2011, imports amounted to USD 6.28 billion, an increase of 148% over the USD 2.53 billion recorded in 2010. The increase in foreign payments is attributed to the countrys continued dependence on imported goods and services due to subdued domestic production due to political and economic turbulence. Exports amounted to USD 3.67 billion in 2011, 65% above the USD 2.22 billion in 2010. The financial sector in Zimbabwe is regulated by the Ministry of Finance through the Reserve Bank of Zimbabwe (RBZ). On the 6th of April 2010, government signed a new RBZ Bill which outlines the activities and mandates of the RBZ. The new Act also resulted in the establishment of the RBZ Board chaired by the RBZ governor, and a Monetary Policy Committee. The RBZ is also in charge of the Exchange Control Act of 1964 as amended. Other interested ministries are the Ministries of Economic Planning and Development and the Ministry of Industry and International Trade. The countrys financial sector is relatively more developed than other countries in the region although is hindered by significant structural issues presently. These are being addressed by amending corporate governance guidelines and direct intervention of RBZ. The banking sector is generally highly competitive, and institutional investors are active players in public securities markets. The deposit base grew from US$3.1 billion in January to US$3.73 billion in September 2012. Zimbabwes securities markets are served by a depth of service providers. (Source: http://www.zimbabwe-stock-exchange.com) Socio cultural The excessive macro-economic imbalances experienced between 2000 and 2008 had extreme consequences for development and poverty situation in Zimbabwe. The collapse of the economy by 2008 resulted in a collapse of social services, especially in the areas of health, education, and access to water and sanitation and also increased the levels of unemployment and poverty.
Key facts: US $618.3 in aid assistance HIV infection rate reduced from 29% in 2007 to 14% in 2010 Literacy rates increase from 85% to 91% due to more Government investment into Education. Improved Mortality due to better health service provision.

With the support of donors, the Government has through targeted financing, improved services in education and health as well as enhanced food security (African development Bank). According to USAID, in 2011 development partners pledged USD 618.3 million focusing on humanitarian assistance, targeting health, education and social protection programmes, as well as agriculture, energy, water and sanitation and governance. However, the support is off budget. Though not part of the
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budget and government control, per se, the basket funded multi-development partners investments in social sectors in Zimbabwe such as under UNICEFs Education and Health Transition Funds have promoted joint programming, implementation, monitoring and evaluation. The following funds are operational under the management of UNICEF: the National Action Plan for Orphans and Vulnerable Children Phase II (2011/15), implemented with the support of the Child Protection Fund; the Education Transition Fund II; and the Health Transition Fund. The budget allocation towards education increased from 12.3% of the budget in 2010 to 22.8% in 2011 and 25.1% in 2012. The result of this sustained increase in budget support for education has seen literacy rates increase from 85% to 91% of the population. Similarly, the allocation for health care budget increased from 7% in 2010 to 9.3% in 2011 and 8.6% in 2012 hence contributing to a marked improvement in mortality. Allocations to the water sector improved from 0.1% in 2010 to 1.4% in 2011 and 1.8% in 2012. This funding has also helped in the prevention and treatment of HIV/AIDS, tuberculosis and malaria. Furthermore, schools and hospitals that had closed and scaled down operations have re-opened and scaled up their operations. The focus of donor support on humanitarian assistance has largely facilitated this recovery of the social sectors. Technological The Postal and Telecommunications Regulatory Key facts: Authority of Zimbabwe (POTRAZ) is a body corporate established in terms of the Postal and Access to Seacom undersea data cables. Telecommunications Act [Chapter 12:05]. POTRAZ is Access to WACS undersea data mandated by law to issue licenses in the postal and cables. telecommunications sector, and to set the terms and 3 mobile network providers Increase mobile penetration rate to conditions for activities in the sector. According to 87% POTRAZ there are currently 12 licensed Internet Access Strong demand for data services Providers in Zimbabwe (TelOne, Africom, Dandemutande, Aquiva, Ecoweb, PowerTel, Telecontract, Aptics Trading, Valley Technologies, Transmedia Corporation, Pecus Enterprises and Blue Sat Access ). CommIT and NetOne are the only companies with a Class B IAP license whilst the rest have CLASS A licensees. The difference being that CLASS A licensees are allowed to operate VoIP services in addition to the public data and internet networks that class B licensees do. SEACOM, which is a company running a high-speed Internet cable along Africa's east coast, announced that it reached a deal with Mozambique to provide a new link to landlocked Zimbabwe. Under the agreement, the state owned company Telecomunicacoes de Mocambique (TDM) will allow its fibreoptic network to be used to link Zimbabweans to the 13 700-kilometre cable running along the coast. As of February 2012, state owned fixed telephone network operator, Tel One, has invested US$ 7.7 million into the optical fibre project which will link the capital city Harare to Beira in Mozambique via the eastern border city of Mutare. Econet Wireless has spent in the region of US $66m connecting through Durban. An estimated 70% of the population did not have access to banking services, however, to
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enhance inclusive banking, banks have introduced mobile banking products in conjunction with mobile phone service providers. According to statistics released by POTRAZ 2012, the countrys mobile penetration has jumped from 63.9% to 87%. Other released Key performance indicators showed a moderate rise in internet broadband and fixed line telephone services. Environmental Floods, Drought or other natural disasters... Legal Despite the mixed signals, the authorities are taking steps to improve the business climate. Zimbabwe has eased business start-up by reducing registration fees and initiated a process to speed up the name search process and company and tax registration. In addition, the corporate income tax rate was reduced from 30% to 25%, the capital gains tax was lowered from 20% to 5%, and the payment of corporate income tax was simplified by allowing quarterly payment through commercial banks. This has resulted in Zimbabwe moving up in its ranking according to The World Banks Doing Business Report 2012. The main taxes in Zimbabwe are enacted by the following acts The Income Tax Act (covers income taxes of individuals and companies and withholding taxes). The Finance Act (specifies periodic changes to the tax acts such as rate changes) The Capital Gains Tax Act (covers capital gains taxation and capital gains withholding taxes) The Value Added Tax Act (covers value added taxes) The Customs and Excise Act (covers customs and excise duties but should be read in conjunction with the statutory instruments on rates of duties) The Stamp Duties Act (covers stamp duties on certain instruments and immovable properties)
Key facts: Reduced time to register a business Reduction in corporate tax Reduction in capital gains tax

General regulations are available in support of some of the Acts. In addition, Zimbabwe has also recently concluded Bilateral Investment Promotion and Protection Agreements (BIPPAs) with the Governments of South Africa and Botswana respectively. These BIPPAs are aimed at providing reciprocal security of tenure to South African and Botswana investments in Zimbabwe but which expressly protects only new investments. BIPPAs are being discussed with other countries including Namibia, Brazil, Tanzania, India and South Korea. A law was enacted by the Government of Zimbabwe in 2007 (prior to the formation of the Government of National Unity) that set as an objective that all businesses in Zimbabwe should have a majority shareholding by indigenous Zimbabweans. This law empowered the Minister responsible for its
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implementation to issue regulations aimed at achieving this objective. These regulations have been issued in 2010 and 2011. The basis requirements of the law and regulations are as follows: All existing businesses with a net asset value of US$ 500 000 or more must achieve a majority shareholding by indigenous Zimbabweans within five years. Businesses affected by the legislation are required to submit plans to the Minister as to how they intend to achieve the required level of indigenous shareholding in the required time period. All new investment, both domestic and foreign, must have a majority shareholding by indigenous Zimbabweans.

More stringent requirements have been made for the mining sector. However, there are certain important points to note: There is no provision in the legislation for the Government of Zimbabwe to forcibly take over or nationalise any business. There is no provision in the legislation for any Minister to withdraw the operating licence of a business simply because its indigenisation plan is not deemed to be satisfactory. There is provision in the legislation for a lesser share of indigenisation than 51%, or a longer time period, in order to achieve other socially or economically desirable objectives. Corporate social responsibility, or social credits, may be taken into account in the indigenisation process. The Minister responsible has the power to authorize a lesser level of indigenisation in the case of new investments. It must be seen as significant that the recent investment in 2010 by an Indian company, Essar, in a steel manufacturing company in Zimbabwe, valued at US$ 750 million, has given the foreign investor a 54% shareholding in the local company.

Analysis
The table below represents the probability impact grid for the weakness and threats identified in the SWOT analysis. The vertical axis of the grid represents the probability range with 0.1 being most unlikely chance of a threat or weakness occurring and 0.9 being the higher likely an event taking place. The probability of a threat or weakness occurring is plotted against the Impact hence giving INTER SYSTEMS IT a good understanding on how to prioritise risk mitigation.

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Very High W1, W4 0.9 High W2 0.7 Medium T4, T6,T7 0.5 Low W3 0.3 Very Low T10 0.1 Very Low 0.1 Low 0.3 Medium 0.5 High 0.7 Very High 0.9 T3, T5 T1, T8, T9 W5, T2

Impact

Risk Probability Impact Assessment


Very High 0.9 High
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0.7 Medium 0.5 Low 0.3 Very Low 0.1 Very Low 0.1 Low 0.3 Medium 0.5 High 0.7 Very High 0.9

HIGH MEDIUM LOW

Risk mitigation plan required and regular monitoring. Risk mitigation plan required and periodic monitoring. Risk mitigation required and periodic monitoring.

Risk Mitigation

Risk Id

Risk Probability

Risk Detail

Mitigation

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Impact INTER SYSTEMS IT will be carrying out a nationwide rollout of telecom service for the first time. INTER SYSTEMS IT will be a late entrant in the Zimbabwe Telecom market. Project is leveraged on finance W3 LOW The RF planning, network design, deployment and project management of the network rollout will be outsourced to specialist companies or network vendors with the required experience. 1. Introduce competitive product pricing 2. Offer innovative products. 1. Fixed long term interest rate will be opted 2. Financial prudence throughout the project life cycle. 3. Debt reduction by listing on the local stock market. Recruit foreign professionals to key management positions. Seek constant legal advice and frequent consultation with the Regulator during the project life cycle 1. New services will be introduced in the market 2. Advance disruptive technology and equipment Marketing innovation to reduce costs 3. Intelligent and efficient top-up sales distribution and supply process Tariff plans based on lifestyle and income groups: 1. Low cost tariff solutions 2. Discounts and Promotions Approach Chinese and Taiwanese OEM handset manufacturers for low cost handsets. Insurance against country specific political risk 1. Recruitment from other regional countries. 2. Use of foreign consultants. 3. Setup an internal training program to improve employee skills.

W1

HIGH

W2

LOW

W4 T1

HIGH HIGH

Limited management experience in telecom operations Weak Regulation constraint long term growth Competition with well establish Telecom player

T2

MEDIUM

T3

MEDIUM

High level of Poverty and Low disposal Income

Availability of affordable LTE handsets. T4 LOW

T5

MEDIUM

Political instability Skilled Telecom professionals.

T6

LOW

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INTER SYSTEMS IT UK Limited, 2011 Classification: Issue Date: 01/11/11 Status: Draft Page 41 of 46 Author: Project Director

Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.0

INTER SYSTEMS IT

Inconsistent power supply. T7 LOW Delay in project roll out T8 HIGH

Use of diesel generators and backup batteries. 4. Provision for penalty clauses on services provided by third parties and subcontractors. 5. Project managed internally (INTER SYSTEMS IT) with clear project deliverables and timelines. Long term planning with focus on country specific economic data.

T9

HIGH

Poor Governance and Economic policies.

T10

LOW

Breach of contractual agreements with local companies.

Employ legal consul to give advice on ongoing contractual agreements.

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INTER SYSTEMS IT UK Limited, 2011 Classification: Issue Date: 01/11/11 Status: Draft Page 42 of 46 Author: Project Director

Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.0

INTER SYSTEMS IT

Financial Cost Analysis

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INTER SYSTEMS IT UK Limited, 2011 Classification: Issue Date: 01/11/11 Status: Draft Page 43 of 46 Author: Project Director

Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.0

INTER SYSTEMS IT

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INTER SYSTEMS IT UK Limited, 2011 Classification: Issue Date: 01/11/11 Status: Draft Page 44 of 46 Author: Project Director

Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.0

INTER SYSTEMS IT

Project Timescales
[Summary of the Project Plan]

Investment Appraisal
[Illustrates the balance between the development, operational, maintenance and support costs against the financial value of the benefits over a period of time] Financial Analysis: ROI Financial Analysis: IRR Financial Analysis: NPV

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INTER SYSTEMS IT UK Limited, 2011 Classification: Issue Date: 01/11/11 Status: Draft Page 45 of 46 Author: Project Director

Customer: INTER SYSTEMS IT EXE Project Name: LIMPOPO LTE PROJECT Document Number: SYS032012BC Version Number: 2.0

INTER SYSTEMS IT

STEERING COMMITTEE
Approved by the Steering Committee:
INTER SYSTEMS IT LTD

Signature Name Title Date

: : : :

COMPANY XYZ PRIVATE LIMITED Signature :

Name

Title

Date

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INTER SYSTEMS IT UK Limited, 2011 Classification: Issue Date: 01/11/11 Status: Draft Page 46 of 46 Author: Project Director