Document of The World Bank FOR OFFICIAL USE ONLY Rqpt No. 8882 PROJECT COMPLETION REPORT MALI SECOND TELECOMMUNICATIONS PROJECT CREDIT 1200-ML1 JUNE 29, 1990 Industry and Energy Operati.-ns Division Sahelian Department Africa Regional Office This docunent has a resticed dlsbuton and may be uod by recpients only In the pefonnmne of thei ofcia duoti Its contenSt may not ohrwise be dbilod w_t World Bank authozation. ABBREVIATIONS AND ACRONYMS USED AfDB * African Development Bank (Abidjan, Cote d'Ivoire) CCCE I Caisse Centrale de Cooperation Economique (Paris, France) CIDA I Canadian International Development Agency DEL s Direct exchange line (connected, telephone) Expressed Demand a Sum of working connections and vaiting list FAC s Fonds d'Aide et de Cooperation (Paris, France) ITU s International Telecomunmication Union Km s Kilometer (I kilometer - 0.62 miles) LD * Long distance transmission, channel or circuit Microwave * Radio system working at frequencies above 1,000 Megahertz (normally used as long distance transmission carrier for telephone and television circuits) MIT a Minist&re de l'Information et des Telecovaunications, In ch.srge of sector policy and supervision of OPT OPT s Office des Postes et Telecomuunications du Mali, the operating entlty for domestic telecommications in Mali PE s Public hnterprise Sector Reform Program SE? a Super High Frequencies STD s Subscriber Trunk Dialling in automatic Interurban/international services Telex s Switched teleprinter service TIM s Compagnie des T6l6communications Internationales du Mali Trunk s Long distance, for interurban service UAPT a Union Africaine des Postes et Telecoanunications UHF s Ultra High Frequencies UNDP s United Nations Development Programme VHF a Very High Frequencies THE WORLD BANK FOR OMFCIAL USE ONLY TH WORLD S3ANK t° Weshton. DC *33 U.S A 0are di D.tw..,ea MOw o June 29, 1990 IENORMDNgU TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Mali §econd Telecommunicatio Proiect (Credit 1200-tLI) Attached, for information, is a copy of a report entitled "Project Completion Report on Mali - Second Telecommunications Project (Credit 1200- ELI)" prepared by the Asia Regional Office with Part II of the report contributed by the Borrower. No audit of this project has been made by the Operations Evaluation Department at this time. Attachment Thidocurnenmt has a ested djsibution nd may be used by recipents only in the perfrance of eio fkcW duts. ILts contents resy not otherwise be duwlsed without World Bank authoizaton. FOR OFFICIUL USE ONLY MALI SECOND TELECOMNUNICATIONS PROJECT CREDIT 1200-NLIL PROJECT COMPLETION REPORT Table of Contents Page No. PREFACE ..**.*.............*****.....*... ******** i EVALUATION SUMMARY..... ...... .******.... ii PART I 1. PROJECT IDENTITY ..... ............. ................ 1 2. BACKGROUND ... #..........***t***. *............**.. 1 3. PROJECT OBJECTI ES AND DESCRIPTION ................... 1 - Project Objectives ................................. 2 - Project Description .....*.......................... 2 4. PROJECT DESIGN AND ORGANIZATION ....................... 2 5 * PROJECT IWLEMENTATION . . . * ..**** * . ... . * . * * 3 - Credit Effectiveness and Project Start Up ......... 3 - Procurement t......... too .... ******.... 3 - Implementation Schedule ........................... 3 - Project Cost and Revision ......................... 4 - Allocation of Credit Proceeds ..................... 4 6. PROJECT RESULTS .....................**..* ........*.. 5 - Physical and Operational Results .................. 5 - Financial Performance .. ......... ** ..... .... * .. 5 - Rate of Return ...... ..................................... 6 - Receivables .... .. .. * . * * ** * *.............. ** ....... * ......* 6 7. PROJECT SUSTAINABILITY .. .................. ......*. 6 - Project Benefits ................... ............... 6 - Institutional Impact ..... *..............* *** .. **...... . 7 - Economic Impact ... ............................ .... 7 8. BANK PERFORMANCE *............................. . 7 This document has a restricted distribution and may be used by recipients only in fth performance of their official duties. Its contents may not otherwise be disckosed without World Bank authotizAtion. TABLE OF COI1TENTS (Cont.j Page No. 9. BORROWER PERFOR1MANCE .......................... .*... 7 10. PROJECT RELATIONSHIP ............ ......7 11. CONSULTING SERVICES ...................a8 _ Technical ... ............. ....................... 8 - Financial Management and Audit .................... 8 -Studies ..............8 12. PROJECT DOCUMENTATION AND REPORTING .................. 9 13. CONCLUSIONS AND RECOMENDATIONS....................... 10 PART II Comments received from the Borrower on Parts I and II 11 PART III Tables 3.1 Related Bank Loans or Credits . ..... ........... 14 3.2 Project Timetable . ................................... 14 3.3 Credit Allocation and Disbursements ................ . 15 A. Allocation of Credit Proceeds (original, revised and as disbursed) .................................. 15 B. Cumulative Estimated and Actual Disbursements ... 15 3.4 Project Implementation ............. ................. . 16 A. Additional Facilities, Estimated and Actual ..... 16 B. Completion Dates, Estimated and Actual .......... 17 3.5 Project Cost and Financing ...... ..................... 18 A. Project Costs ................. . ... 6.0.. .......... 18 B. Project Financing ................................ 19 C. Country Exchange Rates ................. .......... 20 3.6 Project Results .... ........ ................................ 20 A. Direct Benefits ...... ............................ 20 B. Economic Rate of Return ..... ................. 21 C. Financial and Fiscal Impact ......... .22 D. Studies ......................23 TABLE OF CONTENTS (Cont.) Page No. 3.7 Status of Covenants *....... ......*q**. 24 3.8 Missions Data ..........*..................4 ...... 27 Annexes Annex 1 Growth of Facilities and Operational Performance 30 Annex 2 Financial Statements ....................... *.... 31 A. Income Statements ........................... 31 S. Consolidated Balance Sheets ........,........... 32 NAL SECOND TELECOMMUNICATIONS PROJECT CMEDIT 1200-M;; PRJECT COMPLETION REPORT PREFACE 1. This is the Project Completion Report (PCR) for the Second Telecommunications Project in Mali, for which Crsdit 1200-MLI in the amount of SDR 11.8 million to the Republic of Mali was signed on April 30, 1982, became effective on November 24, 1982 and was closed on June 30, 1988, the original closing date. 2. The PCR was jointly prepared by the Industry and Energy Operations Division of the Africa Regional Office (Preface, Evaluation Summary, Parts I and III) and the Borrower (Part II). 3. Preparation of this PCR was started during the Bank's final suparvision mission in April 1988, and is based, inter alia, on the Staff Appraisal Report; the Credit, Guarantee, and Project Agreements; supervision reports; correspondence between the Bank and the Borrower; and internal Bank memoranda. - ii - SECONf TELECOMMUNIgATIONS PROJECT (CREDIT 1200-MLI). PROJECT COMPLETION REPORT EVALUATION SUWMARY Project Objectives 1. The main objectives of the project were to (i) improve OPTM's organization, management and operations; (ii) provide reliable telecommunications between the country's main economic centers, with rural areas and with neighboring countries; and (iii) modernize and expand local network facilities (paras. 3.02 and 4.01). 2. The project includeds (i) the expansion and construction of local telephone facilities; (ii) expansion of the long distance transmission network; (iii) support facilities for operation, maintenance and construction of the networks; and tiv) technical assistance and training in management, accounting, development planning and operation (paras. 3.03 and 4.01). Ezperience and Results 3. Implementation did not raise difficulties with regard to procurement, supply and construction. Completion was delayed by about two years due to late tendering and revision of network design at several locations. To cope with growing demand, the project component co-financed by CCCE was redesigned in 1985, increasing capacities and adding exchanges at new locations. The design of the network component financed by IDA as well as the credit allocation also had to be revised accordingly (paras. 5.01 to 5.03, and 6.01). 4. The estimated project cost was CPAP 6.35 billion ($25.3 million), with a foreign exchange component of about 72?. The actual cost is CFAF 8.43 billion ($23.0 million) also with 722 foreign exchange. The decrease in US dollar equivalent is due to dollar appreciation. A higher percentage of the local costs has been financed from IDA credit and the remaining 102 increase in OPTM's share of project costs was met by self- generated funds (paras. 5.04 to 5.06). 5. The physical part of the project went slightly beyond target, (4,500 additional telephone lines, cumpared with 4,000 at appraisal). At project completion, 842 of all 9,200 main working lines had access to nationwide subscriber dialing service and most of them also had access to international subscriber dialing. Overall demand and usage of service grew in line with appraisal estimates (para. 6.01). - iii - 6. In the financial area, the results were well below what was anticipated at the time of appraisal. The accounting system remained insufficient and unreliable. Billing was still slow and Government agencies accumulated further arrears. The target rate of return was not reached (paras 6.02, 6.03 and 11.02). 7. The implementation of the institutional component was also unsatisfactory at the beginning of the project, and to speed up progress in this area, a sector study was carried out in the context of the Public Enterprise (PE) Sector Reform Program (credit 1937 and 1938-14LI) in coordination with the technical assistance under the project. Based on the study's recommendations, Government is implementing a comprehensive sector reform, which began in 1988 (paras. 10.01, 11.03 and 11.04). Findings and Lessons to be Learned 8. The main findings and lessons to be learned are thats (a) delay in procurement could have been avoided by financing preparation of bid documents through PPF (para. 5.02); (b) a more thorough evaluation of the impact of OPTM's outpayments to the company providing international carrier facilities should have been made during appraisal (para. 6.02(e)); (c) IDA should have further insisted on borrower's compliance with: (i) the settlement of Government arrears; (ii) the impact of the 1985 tariff studv and the requirement to consult with IDA before implementing new tariffs (paras. 6.02, 9.01, 10.01 and 11.03); and *d) one very positive step was taken when a sector reform program and action plan was undertaken in the context of the Mali PE project and in coordination with other donors/lenders (paras. 11.04 and 12.01). Conclusion 9. The follow-up of two telecommunications projects has shown that institutional building and restructuring in Hali is a difficult, complex and slow process. Appropriate coordination and complementary outside assistance are required for a long period of time in addition to further investments in telecommunications, which are necessary to meet the country's future communications needs. This strongly advocates continued IDA involvement in Mali's Telecommunications sector, in close cooperation with other donors. MALI SECOND TELECOMKUNICATIONS PROJECT (CREDIT 1200-MLI) PROJECT COMPLETION REPORT PART I 1. Project Identity Title : Spond Telecommunications Project Credit No.: Credit 1200-MLI RVP Unit : Africa Region Country : Mali Sector : APSIE - Industry Energy Sector Subsector s Telecommunications 2. Background 2.01 Telecommunications in Mali are under the supervision of the Ministry of Information and Telecommunications. During the project implementation period, operation and development of domestic telecommunications services were the responsibility of the "Office des Postes et Telecommunications" (OPT), a public enterprise established in 1960, which also operated the postal services and provided various public financial services - money orders, postal checking -counts and savings accounts. A mixed company, "T4lcommunications Int.- ationales du Mali" (TIM), jointly owned by the Government (65Z) and a French Company, 'France Cable et Radio," (352) operated common carrier facilities for international services. 2.02 IDA has been associated with the telecommunications sector in Mali since 1972 through two credits. The first credit (Credit 321-MLI) of $3.6 million, declared effective on April 4, 1973, was closed on June 30, 1979. It supported construction of a microwave link Bamako-Segou, supply of switching equipment in three main cities and cable work in Bamako. Implementation suffered considerable delays and cost overrun due to poor performance of the consultants and to institutional weakness of OPT. A Project Completion Report was issued on September 30, 1981 and a Projekt Performance Audit Report on June 6, 1983. The Credit 1200-MLI, of SDR 11.8 million for the second telecommunications project, for which this is the completion report, was signed on April 30, 1982 and closed on June 30, 1988. The Public Enterprise Institutional Development project (Cr. 1938 MLI), signed on June 24, 1988, includes a post and telecommunications component for restructuring the sector with the creation of two new entities--one responsible for postal services and the other for all public telecommunications services, including international ones. A decision has also been reached to create, out of OPT's financial services arm, an independent financial institution subject to banking regulations. 3. Project Oblectives and Description 3.01 In March 1978, the Government of Mali requested IDA's assistance in financing the second telecommunications project, which was part of its - 2 - 1981-85 telecommunications investment program. The project was prepared by OPT with the assistance of consultants financed through a PPF. The project was appraised in January!February 1981 and negotiations were held in November 1981. The credit of SDR 11.8 million was approved by IDA's Board ou January 7, 1982 and the credit agreement with the Government of Mali was signed on April 30, 1982 (para. 2.02). A project agreement between IDA and OPT was also signed on the same date. Proiect Objectives 3.02 The objectives of the project were tot (a) provide reliable telecommunications between all the main economic centers of the country; (b) improve and expand local telephone services in Bamako, in provincial towns, important district centers, and rural and remote areas; (c) improve international facilities and introduce subscriber trunk dialing (STD) and links to neighboring countrips; (d) improve and expand domestic r.nd international telex service; and Ce) improve OPT's management and operations. Project Description 3.03 The project components are: (a) construction of a new 200-line automatic telephone exchange in San and extension of trunk switching facilities in Segou; (b) expansion of the local cahle network in Bamako to a capacity of about 13,000 pairs, construction of new networks, with a total capacity of about 5,000 pairs, in eight provincial towns and the connection of about 4,000 additional DELs; (c) construction of a microwave radio link on the route Segou-Sevare, and of a number of secondary and rural radio links; (d) installation of a telex exchange, with 400 lines initial capacity in Bamako and the addition of 150 telex subscribers; (e) provision of teaching aids, tools, instruments, equipment and vehicles for construction, maintenance, and operation; and (f) consultancy services for strengthening OPT's administration, financial management, operations and maintenance, and training and fellowships. 4. Project Design and Organization 4.01 The project was designed to support sector objectives described in paragraph 3.02 and to complete the investments initially planned under the First IDA-financed Telecommunications Project. Implementation problems and cost overruns under the first project had resulted in substantial delays and subsequent project revisions, including reduction of project scope. About one half of the second project is made up of components of the first project which had to be deferred, such as local networks in provincial towns and long distance transmission links. The other half included essential elements of the second phase of OPT's 1981-85 investment program - further extension of local cable networks, new telex facilities, secondary radio links, rural coverage and support facilities for construction and maintenance. The project was designed to enable OPT to meet growth of demand, improve domestic and international services and increase service penetration into rural areas. The project also aimed at institutional development and strengthening of OPT's management, in particular its tclecomunications branch - planning and preparing, financial management, operation and maintenance, management information and statistics. Project design and project management organization remained unchanged throughout implementation in spite of some revisions (para. 5.05). 5. Proiect Implementation 5.01 Credit Effectiveness and Proiect Start-up: The Credit Agreement signed in April 1982 specified July 30, 1982 for credit effectiveness, but it was only declared on November 24, 1982. This postponement came from: Mi) difficulties encountered in obtaining the subsidiary loan agreement between GOM and OPT and the legal opinion on the Credit and Project Agreements, duly ratified by all necessary authorities; and (ii) delays in fulfilling conditions of effectiveness of the parallel financing agreement with CCCE. Improvements could be achieved in this area by better informing the various parties invol7ed in the document approval cycle. For instance, these documents and the ratifying procedure could be discussed and explained at negotiations. 5.02 Procurement: The first disbursement took place at the end of 1984, two years after effectiveness. This delay could have been avoided by financing preparation of bid documents through PPF. However, the procurement process went well with assistance of consultants. Performance of the suppliers and consultants was satisfactory. 5.03 Proiect Implementation Schedule: Physical project components originally scheduled to be completed in December 1986, were completed about two years behind schedule. Table 3.4 in part III gives details of the completion dates, estimated and actual, for the main project components. However, telephone and telex exchanges, microwave links, subscriber equipment and network construction equipment and tools were delivered as early as December 1987. Local networks construction was delayed because of design and procedural changes which also caused cost increases (para. 5.05). Final orders for cables had to be adjusted and cable laying was rescheduled accordingly. The closing date was not extended because funds had been fully committed by June 30, 1988 ar.d final delivery and payments were completed by December 31, 1988. Only about 500 of the 4,000 new subscribers under the project were left to be connected during the first semester of 1989. In the financial area, audits were late but the delay was reduced to eight months for the last audit (1986 accounts), and audits - 4 - of the 1987 to 1989 accounts are underway as part of OPT's ongoing restructuring program under Cr. 1938-MLI. Project Cost and Revision 5.04 The .ost of the project was estimated at Malian F. 12.70 billion or, following ;eintegration of Mali into the West African Monetary Union in 1986, ClAP 6.35 billion (US$25.30 million equivalent) with a foreign exchange component representing 722 of total cost. The final cost is about US$23.05 million of which 722 is foreign exchange. Appraisal estimate and final costs in CFAF were 6.35 and 8.43 billion CFAP respectively. A 33Z increase in the total project cost expressed in CFAF compares with an 8O decrease in US dollars, due to dollar appreciation. Consequently, foreign financing was sufficient, but OPT's share which represented about 102 of total cost did increase and was barely met by self generated funds. A comparison of the project costs, as estimated at appraisal and actual as of December 31, 1988, is shown in Table 3.5.A. of Part III. Project financing is detailed in Table 3.5.B. Table 3.5.C. indicates the country exchange rate variations during the project period. 1/ 5.05 The cost difference between appraisal and implementation stems from three main factors: (a) the revision of the project component financed by CCCE, which increased line capacities and added a number of exchanges within OPT's program, increasing the project cost by about 352 (Table 3.5.b.) and the overall program cost by over 2002; (b) the use of contractors for civil works and installation of large local networks contributed to nearly half the increase of 34Z in local costs; and (c) a major portion of civil works had to be done twice because of an unexpected change in highway construction. The additional cost incurred under (b) was more than compensated by the incremental revenue generated by the faster connection rate of new subscribers. Concerning item (c), better coordination between OPT and the Ministry of Transport responsible for road construction could have avoided a cost overrun of 1312, i.e., 700 MCPAF. 5.06 Allocation of Credit Proceeds: The original and revised allocation of proceeds and final disbursement for the credit in SDR, is given in Part III, Table 3.3.A. The revised allocation was agreed in July 1986 to reflect project revision, which was based on actual costs. It also reflected the dollar depreciation for the late orders for cables and 11 The exchange rate for the Mali Franc at appraisal was US$1 - MF500 - equivalent CFAF 250. The annual exchange rate variations were taken into account in determining the actual cost in US$. This results in an average rate of US$ = CPAF 366 during the project period. -5- outside plant. Cumulative estimated and actual disbursements, in US$ million for each Bank fiscal year, are shown in Table 3.3.B. of Part III. 6. Proiect Results 6.01 Physical and Operational Results. The physical targets of the project as planned and achieved are shown in Tables 3.4.A. and 3.6.A of Part III. Growth of DEL's as forecasted at appraisal was revised and increased, by about 12.52 from 4,000 to 4,500, DEL's to be connected under the project. It was also anticipated that construction of local networks in Bamako and the provinces would require about two more years than initially planned, and full development and usage of the new facilities would only occur by December 1989. OPT's main operational results and performance on major indicators is given in Annex 1, on a yearly basis as estimated during appraisal and actual from 1983 to 1987. During the project period, actual yearly growth of new telephone connections averaged about 9Z, compared to appraisal estimates of 12X. At the end of 1987, the total expressed demand of 3,800 applicants and 8,300 DEL's reached 12,100 lines, which was slightly above the demand of 12,000 lines forecasted at appraisal. At project completion, 842 of all working DELs had access to nationwide STD service and most of them had also access to international subscriber dialing (ISD). 6.02 Financial Performance: OPT's financial performance has been well below what was anticipated at the time of appraisal. (a) Accounts were audited from 1980 to 1986, with a time lag, which was progressively reduced, since the 1986 audited accounts were available in December 1987; (b) The status of the accounting system, as described in the last auditora' report on the 1986 accounts (February 1988), reads like a calamity list: (i) all entries are manually made, which causes delays; (ii) receivables cannot be properly monitored because there is no updated register of individual subscribers, which is one explanation for arrears; (Mii) there is no register of fixed assets (although one was established under the first IDA project), the amounts of annual construction expenditure cannot thus be correctly assessed and there is no possibility of revaluation; (iv) there is no physical inventory of stocks; (v) there is no cash management; (vi) outstanding amounts, due to TIM which is the largest supplier of services, are not checked with it. In summary, the accounting system is wholly unreliable. (c) Billing was still slow (six to seven weeks), collection improved in 1987 for private consumers due to enforcement of strict procedures, but there was no trace of it in the 1986 audited accounts. And Government agencies have not ,aid for their consumption during the whole period of the project; -6 there was compensation in 1984, but bills were never formally paid. Arrears are a very thorny question. They are caused by insufficient monitoring of accounts, though it has improved over the years, unwillingness to cut off delinquent customers and opposition of Government to discuss ways of settling its agencies' accounts, which tend to consume freely above their budgets. (d) The tariff study was completed with delay, its conclusions were not applied and the purpose of achieving the required rate of return was not taken into account. (e) The objective rate of return of 122 on revalued net assets was overstated as outpaymants to TIM were omitted in the appraisal report from 1980 onwards. The rate reached 7? in 1985 and 1986 on book values, when sharing with TIM was more favorable to OPT, and after being negative from 1980 to 1982 and low in 1983 and 1984. Apart from the overvaluation of the comparator, the rate of return did not go higher because of slow increase in revenues due to the relatively slow commissioning of DEL's. There often is a noticeable difference in the degree of success between implementing the physical components and implementing the institutional ones, as there is generally in the country a greater purpose and more available competence to achieve physical investment. The problem is how to motivate managemet improvements as all aspects of it, quality of accounting, tariffs, receivables, rate of return, cosc analysis, are constrained by the country's envirorment and then equally poor. In spite of adequate supervision and insistence on the weak aspects of project implementation, the Bank is not, in fact, in a position to enforce institutional covenants, which are often difficult to meet by lack of competent or motivated people, not perceived as essential by the borrower, and not crucial enough to justify a credit suspension. 6.03 Rate of Return. The internal economic rate of return of the project is estimated, on the basis of the last available documents - the 1986 audited accounts and 1988 supervision report - at 162. This falls short of the 252 calculated at appraisal, which was overvalued (para. 6.02- e). The main reason is the relative slowness with which new DEL's have been initially connected to the network, whereas the funds for the construction program has been disbursed closer to schedule. Anyway, the economic rate of return is high and this underlines the importance of the development of the telecommunications sector for the country's economy. 7. Project Sustainability 7.01 Project Benefit: The project has had short term benefits that are significant although lower than expected. They include: (a) an increase both in the quality and the coverage of telephone services; and (b) the turning of OPT into a profit generating entity with a positive net contribution to government resources. 7.02 Institutional Impact: Sustaining and improving those benefits in the long term will hinge on two factors: (a) the establishment of adequate sector institution, in view of the present fragile situation (pars. 6.02); and (b) the improvement of the strained OPT cash position. The impact has been limited during the project, but the institutional set uplrehabilitation will be strengthened in the framework of the public enterprise sector reform: Item (a) is being addressed under a plan to reform the sector institutions, the implementation of which started in 1986 and will culminate with the Institutional Development project; item (b) is related to the reduction of Government receivables (para. 6.02). 8. Bank's Performance 8.01 Bank's performance has been satisfactory on the supervision of the implementation of the physical component but, despite valuable efforts and insistence, the end result has been mixed on the institutional side. Supervision was conducted in a timely and adequate manner, but inastitutional improvements have been difficult to accomplisb on the borrower's side (para. 6.02) and thus more time and outside assistance than initially anticipated should have been provided. Table 3.8 in part III gives details of the supervision missions which were timely and took place at the pace of about two visits each year. 9. Borrower's Performance 9.01 Covenants: Government was the Borrower and OPT was the implementing agency. The status of compliance with the conditions of the Credit and Project Agreements is indicated in Table 3.7. The main non- compliance of Government was its de facto non-payment of telecommunications consumption due to critical public finance position, though some compensation of accrued debts was made in 1984. Concerning OPT's compliance, impact of tariff study was limited, assets revaluation was not applied, there were considerable delays in submitting the audited financial statements, and the rate of return covenant was not met (para. 6.02). 10. Proiect Relationship 10.01 IDA relationship with Government and OPT on the project has been good. Lack of adequate and timely information on OPT's financial status and management constituted a handicap in dealing with the managerial and institutional problems. Nevertheless, good will prevailed and to the extent possible under the circumstances of project delays and financial covenant non-compliance, cooperation was obtained and advice con.sidered. in particular as a result of the ongoing dialogue and consensus building with IDA supervision missions on institutional issues, in 1986, Government agreed on a more comprehensive sector restructuring program to be implemented under the PE project. Also, adequate liaison and communication were established and maintained under the project with the other donors (France, Canada, AfDB, UNDP, etc.), largely on IDA's initiative. 11. Consulting Services 11.01 Technicals The project provided for technical consultancy services to assist OPT in project preparation, detailed planning, project management, and supervision of execution of most of the works. About 40 manmonths of technical expert services were to be financed from the proceeds of the credit including about 13 manmonths for engineering studies under PPF. Technical assistance was also provided in parallel under projects financed from other donors or contributors (France, Canada, Switzerland, AfDB, UNDP, etc.). Specific assistance for the IDA financed components was slightly delayed at project start-up pending credit effectiveness. Due to project revision, additional expertise for about 20 manmonths was required, which was financed in part by IDA (five manmonths) and the complement by other contributors. In 1987, when the local networks component was almost completed, albeit lately due to project program revision and changes (para. 5.05), about 1,000 additional DELs were connected. This practically doubled the previous record of new DEL connections by OPT in any past year. As a whole the technical assistance services provided to OPT were satisfactory. 11.02 Financial Management and Audit: The project also provided for consultancy services to assist and advise OPT on financial management and other managerial and administrative matters. About 20 manmonths of services were to be financed from the proceeds of the credit, principally for assets revaluation, audit and advice on overall financial management. Parallel assistance was also provided from other contributors, in particular from France. Some additional assistance in these fields was also required due to the extension of the project period and the slow attention given by OPT to the reorganization and the compliance with financial covenants. The quality of the audit services was generally satisfactory. However, the technical assistance under the project for OPT's financial management improvement was discontinued by common agreement between the Government and IDA, since OPT's institutional development as appraised was substituted, in late 1986, by a more comprehensive scheme that became part of the Mali Public Enterprise Reform Program (PE), under IDA's stewardship. 11.03 Studies: The Project Agreement provided for a tariff structure study to be completed by December 31, 1982, and for OPT to furnish IDA for its comments a program for tariffs adjustments on the basis of the study. Table 3.6.D., Part III, gives details of the purpose of the study and its partial completion and results. In fact, several tariff adjustments were made by OPT during the project period based on both the partial tariff study completed only in 1985 and recommendations from financial consultants - 9 - under the project. In particular, tariffs were adjusted in 1982 and 1985 to be in line with tariff changes made in neighboring countries to follow inflation. Also, in 1986, the distribution of revenues from international services between OPT and TIM was adjusted from 50-50a to 70-30Z, which resulted in about doubling OPT's rate of return up to 72 from 3.52 in 1985. All these measures, however, proved inadequate to enable OPT to meet the 122 rate of return requirement set forth in the Project Agreement (see also para. 6.02-e). Furthermore, OPT and Government did not consult with IDA. before implementing new tariffs, as required in the Project Agreement. 11.04 In early 1984, when project status was downgraded for major managerial and financial problems, and because the institutional and financial problems of the sector were judged sufficiently acute, it was recommended during supervision that a comprehensive prograw of studies, technical assistance and training for accounting and financial management, be undertaken. This program included: (i) splitting telecommunications and postal/financial services into two separate entities; (ii) much closer coordination of the efforts of all lenders/donors, mainly the Bank, CCCE and Canada; and (iii) incorporating the OPT reform program, and the supplemental financial requirement, into the PE reform. The program started in 1985. Table 3.6.D. summarizes the purpose of the studies, their implementation and impact. Relevant comments in this respect are made in paras 7.02 and 8.02 above. After considerable amount of discussion involving the Bank, the Government and other lenders/donors, towards the end of 1986, the Government decided to implement a major restructuring of OPTITIM as a component of Mali PE reform. (Cr. 1937 and 1938 MLI). It started in 1989, on the basis of the studies recommendations and as a follow-up to the efforts made under the first and second telecommunications projects to improve the sector. There are still delicate issues of lender coordination, and search for consensus is necessary on such matters as to whether to set up the financial services arm of OPT as a separate entity. 12. Project Documentation and Reporting 12.01 The Development Credit and Project Agreements in the case of Credit 1200-MLI were not geared to achieve project objectives in the key areas of sector development and manageriallorganizational improvement. The appraisal report for the project provided a useful framework for review of project implementation by both IDA and OPT. Para 6.01, in particular, indicates that development requirement forecast was realistic and could have been feasible. OPT submitted the necessary information during project supervision and through quarterly reports for presentation and updating of the execution of the works. The reporting and exchange of information was, however, less thorough and timely with regard to institution building and improvement of financial management and overall administration of OPT, as, before 1986, the scope of the institutional component was very modest. This is often the case when comLined complex public utility sectors such as post (including financial services) and telecommunications are operated and managed with little or no financial autonomy from government treasury. However, this issue is now being tackled under the PE reform and Institutional Development projects (Credits 1937 and 1938-MLI) and will be part of specific actions on the future institutional structures for OPT/TIM and CCP/CNE. - 10 - 12.02 OPT and Government have been asked to prepare a draft project completion report to reflect the Borrower's perspective on the project, its implementation, and its results and impact for the future. The report has not been received yet. 13. Conclusion and Recommended Actions 13.01 The first and second telecommunications projects in Mali have shown that the process of institutional building and restructuring is complex and slow, involving political, cultural and human resource factors which require long time for appropriate evolution. Following the basic decision taken late in 1986 to restructure the post and telecommunications sector, splitting them into two separate autonomous operating entities, the Government expressed its wish for continued IDA assistance in the process, and for the development and further improvement of both services, as a reflection of its satisfaction for the timeliness and value of Bank's advice on institutional development. This should enable the Government to achieve the basic sectoral objectives, in particular with regard to the management and operation of the services. Several lenders/donors have indicated their interest in participating in these efforts. Appropriate coordination and complementary assistance could be exercised by IDA at a crucial time when restructuring, building up of new organizational set-ups and action plans for management improvement would have to be defined and implemented together with an appropriate investment program for the rehabilitation, balancing and further expansion of the networks. This would, no doubt, constitute a strong rationale for continued IDA involvement in the sector. - 11 - SECOND TELECOMMUNICATIONS PROJECT (CREDIT 1200-MLI) PROJECT CONPLETION REPORT PR II - COMMENTS FROM THE BORROWER ON PARTS I AND III (As made on June 8, 1990 on Parts I and III of the report, and sent to IDA under the signature of the Chairman of the Board of the Mali Telecommunications Company, SOTELMA) Introduction In general, the World Bank report reflects our views regarding project results. However, points that should be reformulated and additional aspects that would lead to a better understanding of the evaluation are the subject of the following comments and observations. ProJect Objectives 3.02 Point c. The Second Telecommunications Project was designed essentially to improve the national'telecommunications network through the construction, modernization and expansion of works (local networks, transmission trunk lines and switching stations). Although these activities had a positive impact on the quality of international service, there was no direct intervention to improve international facilities, as mentioned in the report. Proiect Description 3.03 Point d. The initial capacity of the telex exchange in accordance with the specifications was 666 lines and not 400. Point e. Should read the provision of tools, measuring devices... telephone sets and telex and other equipment...). Project Implementation Schedule The delay in construction was due not only to changes in design (following an increase in requirements), but also the procurement procedure for network supplies (cables in particular). Because the contract provided for delivery in three groups, the delivery dates of which were beyond our control, the resulting materials shortages considerably impacted the imlementation schedule. - 12 - Project cgst and revision Point c. The construction works for the roads network did indeed delay execution, but in no way were responsible for civil works having to be done twice. For these works, there was in fact coordination between OPT and Public Works, as reflected in the conclusion of a negotiated contract between the two entities that was carried out in full. Additional costs were due to: For civil works: - an increase in the real needs determined in the field; - additional works not envisaged (+ 10 - [?illegible 701) (increment for works on particularly hard terrain, raised room construction, etc.); - increase in surfacing materials (+ 1251). For the network: - increase in real needs; - the revision of unit costs for the third group (+ 292). Prolect results The project was carried out to the satisfaction of OPT, as it made it possible to automate much of its network, expand the telephone system and improve the quality of service. In addition to the expansion of the telephone system, the project helped make a significant improvement to the quality of service. For example, the rate of line trouble signals in Bamako fell from 1.67 to 1.16. Nevertheless, the results for maintenance are much more modest. The targets regarding line repair turnaround had to be revised downward. Project financing PZioU b. As regards collections, the firm contracted for the opening balance sheet recommended that a provision be established for bad claims in the amount of 4,116 billion at December 31, 1988, out of a total of 7,361 billion to be collected. In addition, the software for billing private clients (FACT 300) can be used to monitor client accounts, as introduced on January 1, 1989, since which time the data have been entered. The information dating to before that time will be processed manually until this section of the record is completely updated and then be loaded into the computer. - 13 - The auditors do not show any fixed assets reserve as part of the audit for fiscal 1988. Moreover, an accounting of TIN is no longer necessary following its liquidation. A buyout agreement was concluded with the partner, the financial cost being borne by the State. Point c. At present (end of May 1990), the billing lag is 22 days after the end of the 2-month calendar period and 7 more days for bill distribution. This is after one year. With the commissioning of the new B10 telephone exchange scheduled for July 1990, that 22-day billing lag will be reduced to a maximum of 15 days, owing to the automatic transfer of meter readings. Following the compensatory subsidy in 1984, at December 31, 1989 the State had paid CFAF 3,631 billion for its telephone and telex consumption. As part of the restructuring of the post and telecommunications sector, the State will have to considerably cut its telephone and telex arrears, which at December 31, 1989 totalled nearly CFAF 4,721 billion. In addition, its 1990 budget includes an appropriation of CFAF 1,846 billion for telephone and telex services. There has thus been a positive change in the behavior of the State. Pgint e. The restructuring of the telecommunications sector has stressed the aspects that would help improve management: - a credit for 36 man-months of consultancy services and financial management, with a view to establishing the management-finance function; - establishment of a finance and accounting department on the new organizational chart for SOTELMA (the telecommunications administration); - establishment of new central offices (staff) for functions such as monitoring/management and auditing. SOTELMA will increasingly have personnel trained in management techniques. It plans to use outside expertise, while at the same time promoting training in management. Training This aspect, which was not covered in the report, clearly had a favorable impact on project results. The training of 63 agents (42 linemen and 21 foremen) was very beneficial because it apparently enabled the agents to start on the B10 cable work and especially to improve their line construction technique. - 14 - Financial nerformance Point . To the best of our knowledge, although the project terms of reference included a tariff study, this was not done. However, a tariff study was conducted as part of the 1990-2010 Master Plan. The document has not yet been finalized. Institutional impact (a) The second [? line] should read "it. the light of the poor fit of the current structure" (para. 6.02 [sic: ?7.02]). Credit covenants The report mentions that fixed assets were not revalued. It is our understanding thst they were indeed revalued in 1984 by the TELESUISSE consulting firm as part of the project. A supplementary study was prepared by the same consultant in 1985. One of the reasons that the studies were not used was the lack of a tariff study. Conclusion We concur with the analysis regarding the improvements that could result from consultations amonig the donors for the management of future projects. Improved management would require: = Institutional restructuring associated with the legal environment and legislation relating to the articles of association of the companies and enterprises and their staff regulations. In this regard, the legal texts governing SOTELNA are available. The financial restructuring that remains to be done is at present the only major outside constraint to the success of the restructuring program. SOTELMA has a Master Plan for developing communications over a 20- year period, to be adopted in the near future. Implementation of the Plan first requires the financial rehabilitation mentioned earlier. In addition to the assistance that IDA can provide to SOTELMA in the financing of its investment programs (e.g. continuation of the expansion of the Bamako network, works at the Segou exchange, Mopti Tombouctou-Gao link, rural service, etc.), it should also provide financial assistance to help the enterprise achieve a healthier balance sheet. Bamsko, June 7, 1990 ^ 15 - SECO TEIRCO9OIIJIC&TTONR PROJECT (CREDIT 1200-.Ml PROECT COMPLRTIOU EPR PART ZIII RlAE BEN LOANS And=O CREi1s - ~~~~~~~~~TAtIE 3. 1 Credit Year of Title Purpose Approval Status Credit 321-MLI To help rehabilitate and June 6. 1972 Completed First Telecom expand local and long in 12179 Project distance telecommunications systems in Ms4li & to improve institutional and operating aspects of OPT TABLE 3.2: PROJECT TRMETABLE Date Date Date Item Planned Revised Actual Identification and preparation 1/ 05178 - 02 & 11/79 Goveruent Application 3178 Appraisal Mission 01116-02106181 Credit Negotiations 11/09 - 12/81 Board Approval 01107/82 Credit Signature 03/30/82 Credit Effectiveness 07/30182 11/24/82 2/ Credit Closing 06/30/88 06/30/88 Credit Completion 06130188 12131/88 1/ These were identification and preparation missions combined with supervision of the first project. 2I Two extensions of the date of effectiveness were required due to delays in obtaining, legal opinion on all documents and in fulfilling conditions of effectiveness of the parallel financing agreement with CCCE under the project. - 16 - TABLE 3.3: CREDIT ALLOCATION AND DISBURSEMENTS TABLE 3.3.A: ALLOCATION OF CREDIT PROCEEDS (SDR) Final Category Original Revisedl/ Disbursement 1. Equipment, materials and supplies (a) cables, auxiliaries; subscriber equipment 2,700,000 3,300,000 3,217,590 (b) radio links 2,000,000 2,000,000 1,957,778 (c) telex, teleprinters 1,390,COO 1,390,000 1,717,408 voice frequency equipment 2. Cable laying and connecting; and construction of ducts 2,090,000 3,100,000 3,343,553 3. Vehicles 350,000 562,820 562,813 4. Tools, instruments, and training equipment 270,000 170,000 164,276 S. Fellowships, training and consultants' services 960,000 600,000 631,356 6. Advance for project preparation 270,000 205,230 205,227 7. Unallocated 1,770,000 161,950 Total 11,800,000 11,800,000 11,800,000 1/ Revision was made on July 23, 1986, on the basis of the revised project and contractual costs of most items. TABLE 3.3.B: CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS (US$ Millions) Bank Fiscal Year Appraisal -- Disbursements-------- ended June 30 Estimate Actual Actual X of Estimate 1982 0.35 - 0.0 1983 2.00 0.20 10.0 1984 4.90 0.35 6.8 1985 8.00 2.55 31.9 1986 10.60 8.40 79.2 1987 12.40 11.29 91.0 1988 13.50 13.08 96.9 1989 1/ 13.50 13.50 100.0 11 Credit closing date was June 30, 1988. IDA honored qualified withdrawal applications received up to December 31, 1988. The whole Credit amount was then disbursed. - 17 - TABLE 3.4: PROJECT IMPLEMENTATION TABLE 3.4.As ADDITIONAL FACILITIES, ESTIMATED AND ACTUAL Appraisal Actual Estimate Installations Indicators Installations (or PCR Estimate) 1. Local Telephone - External plant capacity . (Connected pairs) in Bamako (new and expanded)l/ 3,000 3.000 . Eight provincial cities 5,000 5,000 Total 8,000 8,000 - Exchange capacity (lines) • New (San and Segou) 300 400 . Expanded (Bamako)l/ 2,000 2,000 Total 2,300 2,400 - Telephone sets 6,000 6,000 2. Long-Distance Systemll - No of LD main links 1 1 - No. of LD branch links 3 3 3. Rural Telephone - Secondary and rural links 7 7 4. Telex - Exchange capacity 400 400 - Teleprinters 150 150 S. Miscellaneous - Construction, maintenance and training and tool sets 1,1,1 1,1,1 - Vehicles 40 40 6. Technical Assistance - Expert manmonths (IDA, other 21) 60,90 75,125 3/ 1/ Financed in part by CCCE. 2/ Financed by CCCE, FAC, CIDA, AfDB, UAPT, and UNDP. 3/ Includes expert services under PPF and for project implementation through the end of 1988. - 18 - TABLE 3.4.ts COMPLETION DATES, ESTIMATED AND ACTUAL _-----Completion Dates 1/----- Appraisal Component Estimate Actual 1. Local Networks - External plant 09/86 12/88 - Switching 09/85 12186 - Telephone sets 09184 09185 2. Lond Distance Network - Microwave links 12185 12/86 (main and branches) 3. Rural Links 09/86 09/87 4. Telex - Exchange 06/85 12/86 - Teleprinters 09/84 03/86 5. Miscellaneous - Tool sets 06/84 06/86 - Vehicles 06/84 06/86 6. Technical Assistance 09/86 12/88 Completion Project Initial Estimate Actual Closing date 06/30188 06/30/88 Physical completion 12/31/86 12/31/88 2/ 1/ As a whole, completion was delayed by about 18 months due to late tendering for the sophisticated installations (telephone exchange, microwave links and telex exchange) and deliveries of terminal equipment (telephone, teleprinter) anl tools, and by about two years for construction of local networks. No extension of the closing date was required due to suffic'kent time having been allocated for final acceptance of the systems. 2/ Following physical completion of the local networks by December 1988, it was expected that the about 1,000 additional DELs from the project, still to be connected, would be in service by the end of 1989. -19 - TABLE 3.5: PROJECT COST AND FINAICING TABLE 3.5.As PROJECT COST t$'000) Item --Appralt Elattaat. j-- - Actual---- Loal forelgt Toal Lo.) Foreign Total - Local telephone network o,a84 6,210 11,000 2,194 2,188 4,827 - Interurban etork 472 3,116 6,688 190 5,608 6,698 - Telex 64 1,096 1,760 199 2,091 2,297 - Toole Instrumnts, vohicbel 1,192 1,192 - 848 848 - Tsclcal amsistanem and training 84 1,768 1,852 ^ 2,020 2,020 Total 7; 17N1@ J17D5 ;i~ 15P1 71T PPF - 808 808 - 287 287 7,= _ rW W. 6412 flrM _ S= amalga- amalgam TABLE 8.5.B: PROJECT FINANCIN (Tn billons of CPA France) % Actual to -Appraisal Estmate n/- -----Actual- -Approl al Estimates- Local Foreign Total Local Forelgn Total Local Foreign Total Coesonent A Financed by CCCE Switching 46 170 218 - 78s 765 - 450.0 364.2 Sson-Sever6 link 48 1,441 1,489 - 1,247 1,247 - 06.6 88.7 Tools, etc. - 80 80 - - - - Technical assistance, training 7 138 140 - 67 676 - 483.0 411.4 Total Component A 101 1.824 1.925 _ 2.SU 2.S88 141.9 184.4 Comoonent B Financed by DA. OPT Cables, etc. 1,560 1,184 2,604 2,194 1,8868 3,62 141.6 120.6 182.7 Secondary, rural llnks 70 588 658 75 8on 683 107.1 187.4 184.2 Telex 10 424 440 70 708 77 437.6 167.0 176.8 Tools, vehicle., etc. - 210 218 - 307 a07 - 140.8 140.8 Technical assistance, training 14 809 828 - 210 21* - 89.9 06.9 Total Component B 1.650 2.678 4.823 2.839 8.407 t;746 141.8 127.6 L82.9 Total Proecet Cost (excludina PPF) 1.751 4.497 6.246 2.389 ,99NS 8. U4 183.6 133.8 138.4 PPF - 77 77 - 94 94 - 122.1 122.1 Total Project Cost (includina PPF) 1.761 4.674 6.826 2.339 8.089 O .420 133.8 188.1 188.2 Project cost (in US8BOO0) h 7,004 18,299 26,800 8,412 16,688 23,048 91.6 90.9 91.9 3 Thl Includes contingncile. k The exchange rate for thU CFAF (equivalent Mali Franc) at appraisal was USB a 1 CFAF 250; the afnual exchange rate variations have been taken Into account In determining the actual cost In US dollars. This results In a proform. rate of us11s CfAF 386 during the projoect period. - 21 - TABLE 3.5.C: COUNTRY EXCHANGE RATES Exchange Rate Year (CFAF per $1) Annual Average 1980 250.00 1981 271.73 1982 328.61 1983 381.06 1984 436.96 1985 449.26 1986 346.30 1987 300.54 1988 288.97 Appraisal year average 250.00 Intervening year average 366.00 Completion year average 288.93 TABLE 3.6: PROJECT RESULTS TABLE 3.6.A: DIRECT BENEFITS Appraisal Estimated at Estimated at Indicators Estimate Year End of Full Development (Revisedl/) Closing Date 21 (by Dec. 1989) (12/31/88) 1. Local Telephone Service - Additional telephone connections 4,500 3,900 4,500 - Total number of connected main lines 9,200 8,600 9,200 2. Telex Service - Additional telex connections 150 140 150 - Total number of connected telex lines 310 300 310 3. Financial - Collection during year 75 93 for private consumers (percent of billings) 0 for gov't agencies - Operating ratio 60 87 - Rate of return (Z) 15 7 (on revalued assets) (on book value) 1/ Appraisal estimates were updated/revised in December 1985 at completion of the outstanding works under OPT's program vhich were under way at project inception (vide letter of December 2, 1985 and para. 6.01). 2/ Details on the growth of telephone and telex lines yearwise and operational performance as estimated during appraisal and actual are given at Annex 1. - 22 - TABLE 3.6.B: ECONOMIC RATE OF RETURN Appraisal Estimate Actual Internal Economic Rate of Returns 251 16Z Underlying Assumptions 1. Incremental revenues assigned to the program are based on the traffic increase brought about by the program, from 1983 to 1989 (forecasts for the last three years), until 2002. 2. Incremental costs excluding depreciation and interest are based on the additional assets, traffic and staff requirements brought about by the program. 3. Costs have been deflated to bring them to the 1981 price level and make them comparable with the capital expenditures. 4. Revenues have been calculated by estimating a portion of the consumer surplus, with prices expressed in real terms until the whole program is comissioned (1989), to show that existing and new subscribers are willing to buy services at tariffs increasing with inflation (US producers' price index, multiplied by rate of exchange index). 5. Labor has not been shadow priced, as OPT mostly employs skilled staff of which there is no surplus in Mali. 6. A sensitivity analysis on the above rate of return shows that with 1OZ higher capital and operating costs and 10? lower revenues, the rate of return would be 11X. 7. A-suwmary of the program incremental cost and benefit streams, at 1981 price level for cost and at current price level (until end of the implementation period) for revenues, is as follows: Capital Operating Net Year Expenditure Costs Revenues Benefits -in CPAF million-- 1982 748.4 - - -748.4 1983 7,713.1 150.8 345.6 -7,518.3 1984 865.8 242.4 579.9 -528.3 1985 911.1 338.7 759.9 -489.9 1986 815.7 441.1 1,088.8 -168.1 1987 - 652.5 1,669.7 1,017.2 1988 . 855.4 2,254.7 1,399.4 1989-2002 - 973.6 2,605.8 1,632.2 - 23 - TABLE 3.6.C: FINANCIAL AND FISCAL IMPACT Anpraisal Estimate Actual Internal Financial Rate of Returns 1St 9? Underlyins Assumptions They are the same as for the internal economic rate of return, except that incremental revenues have been deflated to bring them to the 1981 price level. Fiscal Imact The income taxes due by OPT and assigned over the 20-year life of the program would be CPA? 1,161 million compared to revenues of CFAF 43,179 million both expressed in 1981 price levels. The huge discrepancy between the two amounts (the ratio is 37, and should be well below 10) is the result of OPT's failure to reach the rate of return objective. _ 24 - TABLE 3.6.D: STUDIES Purpose as Defined at Impact of Appraisal Status Study Studies 1. Telecoamunications Develop principles Completed Limited 1/ Tariff Study.l and a basis to in 0911985 formrilate appro- priate structure & recommend levels for OPT's tariffs. 2. Sector restructuring Advise on sector Completed Restructuring Study and action plan structure, in 0411986 agreed by for management organization Government for improvement 21 financial implementation management and in 1989. other managerial and administrative matters. Comments: 1/ The study was made with delay under CIDA (Canada) Technical Assistance Program. It was, however, partial and its impact limited as proposals only covered first stage of interim changes and not a comprehensive plan for tariff structure or measures for progressive application and term adjustments. Tariffs structure and distribution with regard to international services were considered separately by OPT as recommended by IDA during supervision and the financial consultants under the project. In particular, the 501502 distribution of international revenues between OPT and TIM was changed to 70/30? in 1986 resulting in substantial improvement of OPTSs rate of return. 2/ The study was recommended during project supervision and made in the context of the Public Enterprise (PE) Sector Reform Program and in coordination with the technical assistance to OPT's operation and management under the project. Such assistance was enlarged to OPT's overall operation, including postal and financial services. Based on recommendations from the study, Government has agreed to implement a comprehensive sector restructuring program beginning in 1989. This would involve the splitting of OPT's operations into separate entities for posts (including financial services) and for telecommunications (including a merger with TIH, the mixed company for international telecommunications). Continued studies and assistance in the reform process is being sought by Government under PE program or a possible 3rd telecommunications project. - 25 - TABLE 3.7: STATUS OF COVENANTS Section of Description of Covenant Compliance with Covenants Agreement Ca 3.02 Government to take all action Complied necessary to enable OPT to establish and maintain current accounts in commercial banks with all funds resulting from its telecommunica- tions operations for the payment of its capital and operating expenses and its debt service. Government shall not permit any disbursement from such accounts for other purposes except to the extent that such funds are clearly surplus, as certified by the Minister respon- sible for telecommunications. CA 3.03 (a) Government shall pay and cause its No. Improved budgeting agencies to pay, promptly upon and payment procedures receipt of the corresponding bill, put into effect, but all telecommunications services critical public finance rendered by OPT. position and poor consumption control resulted in continued noncompliance. CA 3.03 (b) Government shall take, and cause Complied for private its agencies to take, all actions accounts. necessary to enable OPT to put into effect and enforce the procedures for the collection of telecommunications charges. CA 3.03 (c) Government shall refrain, and Complied for private cause its agencies to refrain, accounts. from taking any action which could interfere or in any way affect in an adverse manner the putting into effect and enforcement of such procedures. CA 3.04 Government shall make available to Partial. Up to FY84 OPT promptly as needed any funds settled as part of required to cover any deficits of Government/OPT its postal and financial operations. compensation. - 26 - Section of Description of Covenant Compliance with Covenants Agreement PA 2.02 OPT shall employ engineering consul- Complied. tants to assist it in the preparation of plans and specifications and bidding documents for the project and in the execuLtion of the project. PA 3.03 OPT shall maintain accounts in Complied. commercial banks for the deposit of all receipts from its telecommu- nications operations. Payments out of such accounts shall be made exclusively to meet OPT's operating and investment expenditures and debt service, and OPT shall not transfer funds deposited in such accounts for any other purpose unless the funds thereafter remaining on deposit would be sufficient to meet OPT's operational and investment requirements and debt service for the immediately following three-month period. PA 3.04 OPT shall: (a) by March 31, 1983, Yes in respect of furnish to IDA for its coments a private subscriber plan for the collection of charges accounts though with for its telecommunications services delay in start-up. such plan to provide, inter alia, Not enforced for for the suspension of telephone Government. services to users which have bills for such services overdue for a period of more than 30 days; and (b) by June 30, 1983, put into effect and thereafter enforce such procedures as shall be appropriate, as shown in such plan. PA 3.05 OPT shall: (1) by December 31, 1982 Yes with delay. Study, complete a study of the structure however, was only partial and levels of its tariffs for as proposal only covered telecommunications; and (2) by June first stage of interim 30, 1983, furnish to IDA for its changes. Does not take comments a program of tariffs for into consideration the its telecommunications based on the rate of return conclusions of such study and requirement. providing for adjustments of tariffs to take into account the rate of return requirements set forth in - 27 - Section of Description of Covenant Compliance with Covenants Agreement Section 4.03 of the project agreerent, as vell as general changes in pric.es in Hall. PA 4.02 OPT shall furnish: (1) unaudited Yes, but with financial statements as soon as considerable delay. available but in any case not later than four months after the end of the fiscal year, and (2) audited financial statements not later than nine months after the 1981 fiscal year and six months after the 1982 fiscal year and thereafter. PA 4.03 (a) OPT shall take all action as shall Not complied with. The be necessary to get an annual rate in FY86 is 7Z on return at a rate of at least 12Z non-revalued net assets on the average net current value of its fixed telecoammnications assets in operation. PA 4.03 OPT shalls (1) by June 30, 1982, Yes, but with delay. (b) (iv) furmish to IDA a proposal for a Proposal submitted method for the revaluation of its 12/84 and finalized telecommunications fixed assets, 02186. Revaluation and (2) revalue each year was not applied in beginning in respect of 1982 its PY86 accounts. telecomunications fixed assets in accordance with the method so approved by IDA. - 28 - Table 8.8: MISSIONS DATA Stage of Month/ No. of SW Specialitation Performance Types of Project Cycle Year Pers_ns in Field Represated Rating Ststu*4j Problim or Remarks Trousn AoAralal dt6fr - 30- 11et.1 Aetu4al 16. Acton) gat. Astual Ma. Let., . Actul *N.A. I. No. of 611140 SW6 Mo5 Mi7 160 MO4 NCO0 no4 9M0 Mg1 A main telephone lines (SILo) 2. Add=,Iina OILS ~ ~ ~ ~ ~ ~~~Eel !connected1 ,ithl. the prqj4stt (a) Damako 450 gm8 no0 98 154 -(48)41 on62 N.A. ( capitals 170 11 so 7 N.A. of regio n (a)Inreat of 40 10 1n - ", 1 -A. S. ..oftel ex - 1 N.A. aubacribera 4. Additional so 5 to 2 25 71 N.A. tele. line connected S.No.oil 1" 16 0 no 167 167 148 162 1isIl 164 NA.. Staff for tot... (Telecom Sept. coervic) per 1,000 DEL* 6. Faults per 1.7 1.7 1.6 1.5 1.0 1.8 1.0 1.2 1.0 1.1 NA. MEL per yer "average for all region) in automaeti 'ebnchng aremo 7. Duration of faults announce by aubsoribera In *tumtlc ,ehans areao2s/ (a) loss than s0 42 65 15 2OJ 11 *4J 18 40QJ 16 N.A. 4 houra(EM (b) 48 h.u 40 so 85 65 so0 1o 70 6 60 62 NA. oir mare (U S. Vehicles so MA 80 bJ so 7.8t so NA 80 N.A. N,A. In garp for servce or days Pa year for total Vehicl, fleet 9. Delay In 4 11 4 0 4 8 7 3 7 N.A. the p= rtton and dltributiOn of telephone a tolex bi ll. (n"ea fre 1ee day ot ble le" pw rOf bilIling poriod) 10.Amwuntof B0 O 70 s 6o0 57 80 Be N.A. collection during jeer es a S of amt. of tel.c.m bl lI In during Year 11. operio 66 s o0 8S 98 64 66 7 768 N.A. N.A. ratio - Tolece 12. Rn of rturn 15 8 15 5 12 5 12 I 12 N.A. N.A. on realu net by talesman * Plod vids lettr of Peeber 2, "5; ew N .A. 1M6 data or basis for PCR eatisa net oval lble. Act/ 1 re tlfet 94 hor dplays. FIGU have beeo qulied. c/ VIW R tlvae. for 24-horo delays. to not tern, espensic e deowe am D t . PROJECT COMLETION RP0 REPtELIC OF HU OFFICE DES POs E MELOE~CATION ODEMtTUET INCOME STATEOMET (tn CFAF e*IIton) Aralsal Acual Appr. Aclts. AW r AetuaI App. Actal Appr. AcuaI AWp. Ac1a Ac_ual l8 Dbecmber 1930 Io31 12 t3" 1934 136s 19 Operebating aus teophins 1510.6 3408.0 IWO9., 1417.0 176.9 1085.0 2216.0 1306.0 721.1 S501.0 8816.2 4891.0 4164.0 Talev/telos"pO 2490.0 461.0 1. 4200 17 43.0 116.0 532.0 811. 160.0 831.7 J0.0 034.0 Mlleulow. sa 00 .0 CC.00.0 10.0 U .0 210.0 f_j 24J 68.0 724 7.0 m o Total operat. rM. 141.6 2067.0 1160.51 20.0 2111.4 2U47.0 1U0.? 8247.0 311.9 4897.0 55.9 561.0 5560 Opeatig saeoe Passanel 824.5 312.0 8.5 887.0 82.5 410.0 482.0 427.0 476.0 420.0 6M.5 511.0 52.0 latevoatiemal 9116.0 1060.0 1040.0 1145.0 14.0 2004.0 150.0 Jol.t me"ulo (a) 1L£ e 13.0 18.0 1609.0 190.0 176.0 227.0 Depruatioe 17.5I 280.5 440.0 268.0 480.0 279.0 S.o 300.5 664.0 5M.0 570.0 15.0 9ad debt prwlln 8.0 414.0 20.0 460.0 Wlseelltrcem l h _406_.0 S0* SEJ MA MA 18.0 _6_ L 7. 70.2.6 Wi S U . 9 0 1 .04H Totel operat. *xp. _W_fl 2470.0 E.5 MM Ut ..0 _2. M1Z. 8.0 6J 4-4 51.0 IMAI 499E 0 4# 0 Nat operat. l..om 722.6 -418.0 m.o -681.0 1109.4 -29.0 1816.6 119.0 1550.0 673.0 1788.5 652.0 741.0 Lams tatere eJ2.6 _ 9.0 2 .l IA 72.4 174.0 192.1 ...1220 ..Ui.1 JI0 M.? 459.0 446-0 Nut I Sm 00.0 -412.0 74.2 -049.0 10W5.0 -108.0 I2M.6 00.0 1811.0 660.0 1861.0 805.0 216.0 Operntimo rdtUo 67.213 I0.1S 50.1 185.13 62.05 101.15 48.63 06.AS 60.81 64.03 U9.8 04.45 16.5 Sat of fouers e book Valvo 25.21 V.N 3.73 8I.13 1.43 n 5..03S 21.05 7.61 0.65 (a) rmobdss tul mspfestl elotemt 0040 up to 136, 05/86 thereftCer _ .~~~~~~~~~~~~~~~~~~~~~~~~~~I PROJECT COMPLETION REPORT REPUBLIC OF MALI OFFICE DES POSTES ET TELECMOMNICATIONS (OPT) TELECOMMUNICATIONS DEPARTMENT CONSOIDATED BLANCE SHEETS (in CFAF ml lI I on) Appraisal Appr. Actual Appe. Actual Appr. Actual Appr. Actual Appr. Actual Actual 31 December 1W80 1981 19U2 1983 1984 1985 1966 Gros fixed _s..t 6877.0 7170.0 156985.0 16702.0 17768.0 16869.0 lss accumul. depreciation 1966.0 2498.0 8197.0 4449.0 5694.0 7486.0 Net fixed assets In operat. 8049.0 8196.6 4411.0 3378.3 7 4063.0 12499.0 6977.8 T!WEi 10066.1 418.0 1IMS. Works In progress 1261.0 1047.0 128.0 4970.6 0.0 6694.0 154.0 0939.0 2070.0 6070.6 6201.0 9577.0 Curent Assets Inventory (a) 771.0 910.0 s80.0 514.0 514.0 8.0 Receivables - Tol com (b) 2529.0 3376.0 a366.0 2622.0 4694.0 7004.0 - Postl 2061.0 2087.0 3740.0 8264.0 sos9.0 2566.0 Treuoy e623.5 6428.5 9514.0 6623.5 2071.0 6528.5 2480.0 6525.5 2012.0 6523.5 2682.0 1806.0 Others 6S68. 9509.3 2741.0 10 n4.1 4399.0 11010.1 8106.0 12219 7 2022.0 12 80.0 S.0 Total IUIs 15992.8 16616. 17297.6 1944205 18188.6 TI 3 .0 16742.2 1lap8.6 19115.s5 1T633 12U16 Total Asets 19843.5s 20176.4 21150.0 25641.8 18114.0 29060.0 26884.0 32669.0 25657.0 34822.0 29783.0 82987.0 Liabilities Equity Share cspit. a resrvec 2218.0 1869.0 1265.0 1413.0 2000.0 22.0 Subsidies (c) 70.0 51.0 9099.0 8208.0 7084.0 6764.0 Year's prot t -69.0 -299.0 -70.0 437.0 246.0 120.0 . Totl SUO.5 U.8 1O.O -624.3 1901.0 U4flEKI 7T10225.6 ZHU M47. E55. 117T.1 57U9.0 gin. Long Torn Debt 91S.2 919.6 1204.0 1661.4 1188.0 4064.6 1492.0 5845.9 1911.0 6012.8 5896.0 9074.0 Current Liabilities CCP . 486.0 6468.0 0976.0 8466.0 3973.0 6486.0 8811.0 6468.0 6215.0 6489.0 7489.0 8196.0 Postal debt 4912.0 4022.0 8)67.0 2868.0 1684.0 1019.0 TIM/DTRE (d) 2121.0 2226.0 2974.0 8180.0 4010.0 4265.0 IMP 890s.0 4179.0 Others 6219.9 6145.6 626.0 8667.0 803.0 9002.6 1277.0 6879.0 1680.0 0064.7 678.0 1159.0, Total 470a7.9 Wli.e 176-87.0 15155.6 16026.0 168tO.5 15105.0 IR7.8i U1I39N0 14572.7 I1.5 181.0 Total Liabilities 19468.5 20175.4 21150.0 25641.8 16114.0 29060.6 26084.0 82659.0 25357.0 34822.0 29788.0 82887.0 Debt/(Debt * Equity) 19.2X 16.6% 34.31 17.61 868.5 28.41 12.7X 80.61 16.0 80.41 87.41 49.71 Current Ratio 1.1 0.9 1.1 0.9 1.2 0.9 1.2 0.6 1.8 0.8 0.6 Subscr. accte receiv. (athe) 14.9 15.8 12.4 7.2 10.1 16.0 t ) Substantial stock write-down, In 1963 ond 1984. e ib~) Public sctor netted out In 1984 *m part of Goverw rnOPt co_p*mion. Tot l tol-o oco i Iv b I aat^ 1984 wero CFAF 5.8 billion. to (c) ReVacts from 1964 dpreciatlon of assets f innced out of the Conadian subvntion. (d) From OPT due to pay arrears direct to France through DTRE (in 1986, CFAF 2.54 billion). ftL:a4.pcs:_ Jb F,AB:Vr