Bolivia - Telecommunications sector memorandum

Report No. 1261-BO Sector Memorandum TIE Bolivia Telecommunications July 12, 1977 Projects Department Latin American and Caribbean Regional Office FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Fank authorization. CURRENCY EQUIVALENTS Currency Unit - Bolivian Peso ($b) US$1.00 = $b20.00 $bl.00 = US$0.05 $bl million US$50,000 List of Abbreviations and Acronyms used in the Report HF - High Frequency Radio Microwave - Radio systems working at frequencies above 1,000 MHz Telex - Subscribers Teleprinter Exchange System DGT - Direcci6n General de Telecomunicaciones (General Directorate of Telecommunications) ENTEL - Empresa Nacional de Telecomunicaciones Carrier - A system providing several channels through one transmission mode CAF - Corporaci6n Andina de Fomento (Andean Development Corporation) INSTEL - Instituto Nacional de Telecomunicaciones (National Telecommunications Training Center) LABOTEL - Laboratorio Boliviano de Telecomunicaciones UNDP - United Nations Development Program UIT - International Telecommunications Union Fill - Percentage of Installed capacity of a cable or telephone exchange actually in service FISCAL YEAR = CALENDAR YEAR FOR OFFICIAL USE ONLY TELECOMMUNICATIONS SECTOR BOLIVIA Table of Contents Page No. SUMMARY AND CONCLUSIONS i - 11 I. INTRODUCTION 1 II. THE SECTOR - INSTITUTIONAL ASPECTS 1 Access to Service and Sector Organization 1 - General 1 - Access to Service 2 - Present Organization 2 Sector Problems and Recommendations 3 - Description of Sector Problems 3 - Fragmentation 3 - Recommendation 4 - Planning 4 - Recommendation 5 - Financing - Recommendation 7 - Accounting - Recommendation 7 III. THE SECTOR - DEVELOPMENT ASPECTS 8 Existing Facilities 8 - Local Telephone Service 8 - Long-Distance Service 8 - Rural Telephone and Telegraph Service 8 - International Service 8 - Quality of Service 9 - Ongoing Works 9 Market Demand 10 - Local Facilities 10 - Long-Distance Facilities 11 - Telex and Telegraph Facilities 11 - International Facilities 11 Investment Program 11 - Investment Requirements 11 - Development and Investment Priorities 12 Tariffs 13 Training 14 IV. RECOMMENDATIONS AND FUTURE ACTION 16 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Dank authorization.  LIST OF ANNEXES ANNEX 1 International Telephone Statistics. ANNEX 2 Basic Data for ENTEL, DGT and Telephone Companies, as of December 31, 1975. ANNEX 3 ENTEL - Comparative Statements of Financial Position, 1970 and 1975. ANNEX 4 ENTEL and Seven Main Telephone Companies - Comparative Statements of Sources and Applications of Funds, 1970 to 1975. ANNEX 5 Seven Main Telephone Companies - Comparative Statements of Financial Position, 1970 and 1975. ANNEX 6 Past and Planned Number of Telephone Lines 1971-1980. ANNEX 7 Summary of Investment Planned by Individual Companies 1976-1980. Comparison of Investment Actually Planned and Estimated. Investment with Sector Reorganization, 1976-1980. ANNEX 8 Estimated Sector Investment with Sector Reorganization, 1976-1980. ANNEX 9 Comparison of Telephone Tariffs, 1976.  TELECOMMUNICATIONS SECTOR BOLIVIA SUMMARY AND CONCLUSIONS i. This report analyzes the situation in the telecommunications sector of Bolivia and presents a diagnosis of its problems as well as proposals for its future development on an efficient and economic basis. ii. The Ministry of Transport, Communications and Civil Aviation is responsible for overall control of the telecommunications sector. The General Directorate of Telecommunications (DGT) which reports to the Ministry, is legally empowered to supervise, regulate, plan and operate the telecommunica- tions services in Bolivia. The sector comprises some 18 public and private enterprises which, at the end of 1975, employed an estimated 2,600 persons and had an aggregate share capital of about US$37 million. iii. The Empresa Nacional de Telecomunicaciones (ENTEL) operates national and international long-distance telephone, telegraph and telex facilities. DGT operates, at a loss, an open wire and HF radio network of telegraphy and tele- phony in rural areas. Two private companies are active in radiotelephone be- tween cities in Bolivia, and two others operate international telephone, telegraph and telex services. There are also nine Cooperatives and three Municipal enterprises for local telephone services which operate their own systems independently. These systems range from a high of about 32,000 telephone lines (La Paz) to a low of 100 lines (Villaz6n). iv. Telecommunications services are insufficient and of low quality due to: (a) fragmentation of operations with each enterprise working inde- pendently and in an uncoordinated manner; (b) absence of a national plan for expansion of services; (c) poor operating results and a shortage of invest- ment funds; (d) uncoordinated procurement of small quantities of equipment from suppliers; and (e) lack of technical and managerial capability in the majority of the entities. v. For an efficient, coordinated and economic development of tele- communications, the consolidation of the whole sector into a single national telecommunications entity is most desirable. The new institution could be a semiautonomous Government enterprise, and, as its first step, it should acquire at least a majority of the shares of the telephone companies. The main ad- vantages of consolidation would consist of: centralized planning, price advantages of bulk procurement, lower cost of capital through long-term borrowing, standardization of equipment, unified service standards, uniform accounting, rationalization of tariffs, better administration and centralized training. vi. The existing method of ownership of local telephone services (Municipal and Cooperatives) is based on share purchases by telephone sub- scribers. Current share price for a new subscriber is between US$530 and - 1 - US$750. This self-financing has resulted in haphazard development, poor operation, and high costs. It also restricts normal demand growth and is soon expected to reach a saturation level. This method of self-financing should be phased out as soon as possible, and other methods and financing should be made available to the proposed new integrated entity. vii. Past growth based on the availability of subscribers' share money and on independent programs carried out separately by each enterprise is re- flected in the absence of an overall development plan designed to achieve technical efficiency and economies. ENTEL's trunk network is expected to be congested from the very moment it becomes operational in 1977. Similarly, DGT plans its own rural network independently, without any standards of cost effectiveness, on the justification that it provides a necessary social service. It is urgent to define, therefore, a telecommunications policy upon which to prepare a five-year development program for 1976-80, corresponding to the current notional five-year (1976-80) plan. viii. From the financial point of view, operating results of almost all enterprises in the sector are unsatisfactory. Depreciation reserves are generally non-existent, and, in some cases, depreciation charges are used for covering operational losses. Some companies use a portion of the subscribers' share payments for fixed assets as a current income in order to show low operating losses. Except in ENTEL, the lack of long-term financing is a serious weakness in the sector, and the independently contracted, relatively small supplier credits increase overall equipment costs. ix. According to the General Law of Telecommunications (June 2, 1971) it is within the authority of DGT to suggest tariff rates and other charges for telecommunications services. In practice, however, this is left to the companies in the sector and DGT takes a passive attitude of approving the requests it receives as a matter of routine. Because of deficiencies in the level and structure of applicable tariffs, the vast majority of the operating entities have normally shown operating deficits. x. There was no serious attempt in the past to estimate the general demand for telephone service. On the urging of the World Bank sector mission, the first attempt to estimate demand was made by the Laboratorio Boliviano de Telecomunicaciones (LABOTEL). Assuming a reorganized sector - as proposed by the mission - withunsuppressed demand, the number of telephone subscribers is likely to grow from 63,900 in 1975 to some 150,000 in 1980. Such an invest- ment program for the five-year 1976-80 period would cost about US$135 million of which US$60 million would correspond to ENTEL and DGT for long-distance and rural development plans. Some US$67 million of the total is already backed by foreign loans and suppliers' credits. Xi. The Bolivian telecommunicationssectoris considering major expansion of its facilities, and this is the right time to embark on sector consolida- tion. The Government would consider making a request for external financing to enable it to improve the management and control of telecoummunications services, and to improve and extend those services throughout the country. TELECOMMUNICATIONS SECTOR BOLIVIA I. INTRODUCTION 1.01 At the request of the Government of Bolivia, the Bank agreed to assist in the review of the telecommunications sector in order to: (a) diagnose sector problems and difficulties; (b) propose measures for achieving an efficient and economic develop- ment of local and long distance telecommunications facilities; and (c) estimate the demand for telecommunication services and the total investment required for a five-year development program. 1.02 A preparatory mission visited Bolivia in November/December 1975 to carry out a preliminary review. A subsequent full sector review mission visited Bolivia in April 1976. This report was prepared in August 1976 by Messrs. N. R. Holcer and J. A. Datas and is based on information obtained from the various telecommunications entities in Bolivia. The recommendations contained in that report were discussed by Mr. M. DeLima with the Govern- ment in November 1976 II. THE SECTOR - INSTITUTIONAL ASPECTS ACCESS TO SERVICE AND SECTOR ORGANIZATION General 2.01 Bolivia has unusually rich and diversified natural resources most of which, however, require heavy capital investment for their development. The country, with an area of over one million square kilometers, is inhabited by only about 5.6 million people in widely dispersed locations. The rela- tively high cost of providing adequate transport, communications and social services due to this situation is further increased by the extremely rugged topography, which ranges from swampy flatlands in the north and east through Chaco and the valleys up to the mountain plateaus of the Altiplano at eleva- tions of over 3,500 meters. These conditions create serious obstacles to the development of an adequate modern infrastructure, and investment costs for a comprehensive transport system alone tend to be prohibitively high on a per capita basis. The difficulties of topography are compounded by adverse climate, with frequent incidences of both floods and droughts which adversely affect the transport system and agricultural activities. On the other hand, the country is heavily dependent on its foreign trade; in 1976 minerals ac- counted for roughly 47% of exports, and another 41% was accounted by hydrocar- bons and agricultural products. The main export products are dispersed widely over the territory so that together with the geographical characteristics of the country, efficient and economic use of transportation to arrange supplies - 2 - and to facilitate deliveries are mandatory. This process can be facili- tated by providing efficient and adequate telecommuncation services. Access to Service 2.02 The quality, quantity, spread, and coverage of telecommunica- tions services in Bolivia are very poor and are inadequate for meeting the needs of the economy. The present telephone density of 1.08 per 100 population is low compared with that in neighboring countries (Argentina 9.41, Brazil 2.50, Uruguay 8.97, Colombia 4.74, Ecuador 2.58 and Peru 2.14, see Annex 1). An estimated 98% of the telephones are in urban areas; of which 52% are in La Paz. The telephone density in La Paz of 5.2 per 100 population, however, still remains low in relation to other major cities in the region (Lima 8.1, Quito 13.0, Bogota 11.4, and Montevideo 16.1). Indicative of Bolivia's present lack of long distance telephone facilities is the low number of long distance conversations, i. e., 0.33 calls per subscriber per month, as compared to Philippines 1.4 and Malysia 6.7. Simi- larly, some 60% of the rural population or some 900 communities (ranging from 100 to 500 people) are still without any kind of telecommunications. Present Organization 2.03 The Ministry of Transport, Communications and Civil Aviation has overall responsibility for the telecommunications sector; the General Directorate of Telecommunications (DGT), which reports to the Ministry, is legally empowered to supervise, regulate, plan and operate the telecommunica- tions services in Bolivia. DGT, however, is poorly staffed and cannot perform its functions effectively (among its 800 employees working mainly in rural telecommunications operations, there is only one telecommunications engineer). 2.04 Requests for approval of tariff rates are submitted to DGT, which is supposed to review them for adequacy and composition. In practice, how- ever, DOT merely acts as a rubber stamp for these requests. DGT is also in charge of approving the individual investment plans of the entities included in the sector. Here again, however, DGT is not staffed adequately to per- form its role of planner and coordinator in a national context. 2.05 Telecommunications services in Bolivia are provided by some 18 en- tities, including private and public enterprises as well as cooperatives (Annex 2). The entire sector, at the end of 1975, employed an estimated 2,600 persons, its aggregate share capital was US$37 million and its fixed assets were US$36 million. 2.06 Empresa Nacional de Telecomunicaciones (ENTEL), a Government owned semiautonomous entity, created in 1965 to take over gradually all long distance, telegraph and telex services both national and international still has many problems (managerial, financial, technical) to overcome. Large investments carried out by this entity are not planned properly or followed with adequate institution bulding, while overstaffing is creating financial problems. Despite these shortcomings, the expected boom in long distance traffic with the new trunk network, referred to in para. 3.07, will generate sufficient revenues and lead to operating profits. - 3 - 2.07 There are nine cooperatives and three municipal enterprises for local telephone service, with a capacity of about 64,000 lines, which operate their own systems independently; these systems range from a high of about 32,000 telephone lines (La Paz) to a low of 100 lines (Villazon). 2.08 Four private companies are active in the field. Two of them, Radio Serrano and Radio Serval, operate HF radiotelephone circuits between Bolivia's biggest cities. The other two, All America Cables (a subsidiary of ITT) and Cable West Coast (a subsidiary of Cables & Wires Ltd.), operate international telephone, telegraph and telex services. Their franchises will expire in a few years (by 1982 at the latest), and ENTEL is expected to take over their operations. 2.09 In addition to the public telecommunications network, there are several private and Government telecommunications of different sizes and types which were built by those entities in the absence of adequate tele- communications in the country. SECTOR PROBLEM AND RECOMMENDATIONS Description of Sector Problems 2.10 Public telecommunications services in Bolivia are insufficient and of low quality due to the following basic problems: (a) fragmentation of operations among 18 public and private telephone/ telegraph entities working independently and in an uncoordinated manner; (b) absence of a national telecommunications plan for expansion of services; (c) poor operating results and shortage of development funds due to unsatisfactory tariffs and inadequate financing; (d) uncoordinated procurement of small quantities of equipment from suppliers, leading to high prices; and (e) lack of technical and managerial capability in the majority of the entities because of their small size and financial limitations. Fragmentation 2.11 The fragmentation of telecommunications services in Bolivia results in high cost due to lack of standardization and coordinated procurement, poor maintenance, operational deficiencies, and absence of planning at the sector level. None of the enterprises have sufficient technical or financial capabi- lity to meet the normal demand. Quality of service is generally unsatisfactory because of lack of managements' knowledge of the sector, varying standards in operation and maintenance, and absence of proper interconnections among the operating companies. 2.12 The problem of fragmentation is also present in rural telecommunica- tions. Besides its regulatory functions (para. 2.03) DGT is responsible for operating and developing telecommunications in the vast rural areas of low traffic that require subsidization. Recently, its operating deficits, covered by the Government, have been about $b 8 million (US$400,000) annually and are expected to rise. Services in rural areas that generate profits are provided either by ENTEL or the local telephone companies. At present, the largest telephone companies (La Paz, Santa Cruz, and Cochabamba) are tending to ex- pand services into some rural areas of their respective regions which appears to create a conflict with ENTEL and to reduce the overall efficiency of the network. Dividing development responsibilities among several entities leads to duplication of facilities, which in turn leads to high costs by foregoing the significant economies of scale possible in this sector, particularly in low density rural areas. The high cost leads, in turn, to high tariffs which reduce the demand for telephones and high unit costs. Recommendation 2.13 For an efficient, coordinated and economic development of the sector, consolidation through the integration of the different companies into a single national telecommunications entity is most desirable. Decentralized regional operational units would be in charge of operation, maintenance, ins- tallation, personnel and expansion in their respective regions. The new institution could be a semiautonomous, Government owned, commercial enter- prise with decentralized operations and a Board responsible to the Minister of Communications. It would control overall operation and development of public telecommunications in the country, under the direction of the Board, and would be responsible specifically for: (a) technical and financial planning for the sector; (b) procurement activities for the whole country; (c) technical and operational standards; (d) tariff policy; and (e) training. 2.14 Integration, as recommended above, should include telecommunications in rural as well as in urban areas; fragmentation of the services between the market towns and rural areas and between market towns and provincial towns should be eliminated. Future investment should be chaneled through the planning office of the new entity and done within the context of the whole integrated network. Planning 2.15 Expansion of local telephone service is presently determined by the availability of subscribers' share money and is carried out independently by each company in an uncoordinated manner. As a result, there is no overall devel- opment plan designed to achieve technical efficiency and economies. ENTEL's trunk network is expected to be congested from the very moment it becomes operational in 1977. Similarly, DGT has planned its own rural network independently without any standards of cost effectiveness, on the justification that it provides a necessary social service. The existence of so many independent telecommunica- tion systems with lack of standardization and interconnection understandably creates maintenance and operational problems. Recommendation 2.16 It is urgent to define a telecommunications development policy upon which to prepare a five-year development program for 1976-80. At a later date a long-term plan for the sector should also be prepared. The benefits of integrated sectoral planning would be reflected in: (a) improved technical efficiency as a result of integration and standardization; (b) lower equipment costs through organized bulk procurement; (c) better use of capital resources that will produce satisfactory operating ratios; and (d) greater productivity of scarce manpower. Planning functions could be performed by a central office in the new entity working jointly with the decentralized regional units. Financing 2.17 ENTEL's total assets expanded rapidly in the 1970-75 period from $b 34 million to $b 308 million (Annex 3). Almost 55% of this expansion was provided by long-term borrowing (mainly IDB) while increases in net worth contributed another 35% (Annex 4). The remaining 10% came mostly from increases in current liabilities. About 80% of all available funds went into fixed assets and most of the rest into increasing current assets. 2.18 The consolidated financial statement for seven telephone companies (currently accounting for about 92% of all telephone lines in the country) rose from total assets of $b 208 million in 1970 to $b 1,073 million in 1975 (Annex 5). This growth was made possible mainly by a 54% increase in net worth that reflects the purchases of shares by subscribers in order to obtain telephone service (Annex 4). Long-term debt contributed about 36%, and the remaining 10% came from increases in various liabilities. On the other hand, only 32% of available funds were converted into fixed assets during the five-year period. It is interesting to note that, while the net worth of these companies rose by $b 466 million in the period, the total fixed assets increased only $b 245 million because of a lag in converting subscribers' contributions into opera- ting fixed assets. It also appears that a portion of these contributions were used as current income in order to lower the operating losses rather than invested in the purchase of equipment. - 6 - 2.19 According to the laws applicable to ENTEL and the telephone companies, their operations should generate a reasonable return on the capital for the purpose of setting up reserves and providing funds for expansion. In practice, however, the operating results are disappointing. During 1970-75, ENTEL had deficits in every year except one. ENTEL's indebtedness is heavy, and revenues are below what they would be in similar companies because of the lack of tele- phone development and of coordination. A similar situation of continuous annual losses can be seen in the telephone companies. The insufficiency of current revenues is accompanied by the shortage of long-term funds at reasonable in- terest rates (except in the case of ENTEL). DGT operations show continuous and rising deficits (para. 2.12). 2.20 Depreciation reserves are generally non-existent, and in some cases, depreciation charges are used for covering operating losses. Some companies also use a portion of the subscribers' share payments for fixed assets as a current income in order to show lower operating losses. The level of inven- tories is inadequate, particularly for a country with difficult access to suppliers. Finally, the accounting practices followed, as well as the pre- sentation of financial statements, vary among companies and are of limited usefulness for monitoring and evaluating the operations properly. 2.21 ENTEL is the only enterprise in the sector that has received long- term financing (mostly from IDB) at reasonable interest rates. The local tele- phone companies finance their expansion with suppliers credits usually payable in four to eight years at interest rates between 8% and 10% annually. The basic issue in borrowing is to shift from medium-term costly supplier credits to long-term debt. 2.22 The cost of financing is further increased by the practice of each company purchasing goods on its own and in small quantities. The price advantage in bulk buying is lost; besides, a variety of equipment is bought and the standardization advantages are lost. Bulk procurement for the sector as a whole would result in important savings and improved equipment performance. 2.23 Finally, the existing method of ownership of local telephone services (Municipal and Cooperatives) is based on share purchases by telephone sub- scribers. Current share price for a new subscriber is between US$530 and US$750. This self-financing has resulted in haphazard development; it is severly restricting normal demand growth and is soon expected to reach a saturation level because, once the business and affluent residential sub- scribers have obtained their telephones (as in the case of La Paz and Sucre) the real demand (which would occur if no share contributions were requested) is suppressed. It is also likely that such rationing of connections is a self- defeating feature since it would lead to a steady overuse of the country's telephones in a few years which, in turn, would lead to repeated calling of many subscribers and very poor service. Some companies (Santa Cruz and La Paz) tried to counterbalance such difficulties by offering credit payment plans (i.e., the subscriber has the option to pay the share price in monthly installments, including interest, over a period of up to six years), but the response was unsatisfactory. -7- Recommendation 2.24 The existing method of self-financing telephone expansion should be phased out as soon as possible, and other sources of development financing should be made available to the new integrated entity. Long-term loans should replace short-term supplier credits and adequate tariffs should be introduced to generate sufficient funds for normal operation and part of development financing. If and when needed, the Government should contribute funds for the initial operation of the new entity. Furthermore, through the help of Government contributions, the new entity should, as a first step, acquire the majority (or all, if possible) of the shares of the telephone companies. Their estimated share capital was about US$30 million at the end of 1975, excluding reported reserves of US$1 million, and accumulated losses of US$0.6 million. This transaction should result in a structural transformation of existing private entities into a Government controlled semiautonomous public enterprise which would guarantee the subscribers (old and new) wider and better public services -- for a reasonable price. Bolivia's Law of Cooperatives permits the integration of the telephone companies into one national entity. Account.ng 2.25 Variations in accounting practices among companies and different formats used for the presentation of financial statements hinder meaningful analysis of the operations. Recommendation 2.26 A standardized accounting system applicable to the whole sector should be introduced providing analytical financial statements to monitor and evaluate the efficiency of the operations. - 8 - III. THE SECTOR - DEVELOPMENT ASPECTS EXISTING FACILITIES Local Telephone Service 3.01 In Bolivia, as of December 31, 1975, one manual and 21 local auto- matic exchanges were in operation with a total installed equipped capacity of about 63,900 lines and with some 60,276 working direct exchange lines. The number of lines with automatic service was 99%, and the average exchange fill, i.e., the number of connected lines to total installed capacity was 94% which is rather high as a result of high unsatisfied demand. Annex 6 sets out the development of exchange equipment in total capacity from 1971 to 1975. Long -Distance Service 3.02 No modern reliable long-distance system exists in Bolivia. Long-distance services are provided by HF radio systems, open wire carrier systems and open wire physical lines. As of December 31, 1975, the statistics for long-distance circuits were as follows: Physical lines 17,340 (km) Carriers on open wires 2,040 (circuit-km) HF radio 27,350 (circuit-km) The total number of long-distance interurban circuits provided by operating entities were: DGT 34 ENTEL 16 Radio Serrano 15 Radio Serval 26 Total 91 Rural Telephone and Telegraph Service 3.03 Bolivia's vast rural area is served by DGT's telephone and tele- graph network, consisting of open wire physical lines and HF radio systems. Some 837 rural communities (about 40% of the total rural population in com- munities ranging from 100 to 2000 inhabitants) in Bolivia's nine departments are served either by telephone (750 communities) or telegraph (87 communities) service. This include some 57 locations served by HF radio circuits. An additional 900 communities ranging in population from 100 to 500 inhabitants are still without any telecommunications coverage. International Service 3.04 Bolivia has limited international communications consisting of 19 HF radio telephone circuits and 11 radio telegraph (eight teleprinter and three - 9 - morse) circuits operated by ENTEL. The two private carriers, All America Cables and Cable West Coast, have four HF radio circuits each, used for telephone, telegraph and international telex service, which is operated on a semiautomatic basis. There are six commercially leased circuits. Quality of Service 3.05 The Bolivian telecommunication network has a number of deficiencies mainly caused by lack of investment and proper planning in the past, leading in turn to insufficient coverage and inadequate quality of service. The demand for service is apparently large, but the provision of facilities has been based on a system of self-financing (para. 3.09) with inherent demand suppression. Both local and long-distance telephone services are congested due to higher usage of many telephones than the existing system was desiged to accommodate. Persons trying to reach these telephones get busy signals, try again, tie up other available circuits and thus add to congestion and failure of calls. The many independent local systems are interconnected with long-distance circuits which are inadequate in terms of quality and number and also tend to create congestion. It takes hours, sometimes days, to get l9ng-distance service and even then the quality of transmission is poor. High fault incidence with extended outages in the local telephone system is the result of the poor maintenance on outside plant and poor insulation on cables due to unsatisfactory cable joints. The congestion in the local service also results from repeated calls made to subscribers whose lines are faulty over long periods of time. 3.06 There are no standards for fault clearance, and each entity decides on clearance time, depending on what they can afford to spend on maintenance, staff and facilities. Extended outages also contribute to the congestion of the long-distance circuits due to ineffective repetitive calls. Ongoing Works 3.07 ENTEL has under execution the much delayed 960-channel microwave network which will connect the four largest cities in the country (La Paz, Oruro, Cochabamba and Santa Cruz) and which is being financed by IDB; the network is expected to be in operation in 1977. The initial 120 channels will be served by manual switchboards acquired from Venezuela. The trunk switching equipment (to be operational in 1978) is being supplied by L.M. Ericsson and is being financed with a loan from Banco do Brazil. ENTEL has also decided to install an earth satellite station near La Paz, for which CAF is providing financing. However, problems in the award of bids have delayed the project, and it will not be ready for operation before early 1979. 3.08 The local telephone companies are engaged in piecemeal expansions (see details on page 1 of Annex 7). Similarly, DGT's plans for ongoing works include expansion of rural communications by open-wire lines and VF and UHF radio circuits. - 10 - 3.09 Due to the system of financing, the expansion of facilities in the 1971-1975 period was irregular and unsatisfactory. The three largest companies (La Paz, Cochabamba and Santa Cruz) expanded their telephone facilities (in terms of exchange capacity) by some 7.5% annually. The average growth rate for all the companies was 9.8% annually. Total growth of the country's telecommunications was far behind the country's needs and the growth rate of other countries in the region. (Costa Rica 16%, Colombia 11.5%, and Mexico 13.4% in the 1965-75 period). All of the expansions were carried out by suppliers on a turnkey basis. None of the telephone companies have a comprehensive telephone development plan. MARKET DEMAND Local Facilities 3.10 There was no serious attempt in the past to estimate the general demand for telephone service. Foreign experts and IDB technical assistance concentrated mostly on day-to-day operational issues. On the urging of the World Bank sector mission, the first attempt to estimate demand was made by the Laboratorio Boliviane de Telecomunicaciones (LABOTEL) - a DGT controlled unit. Similarly, due to the existing system of financing which restricts demand, the history of past growth is not a reliable source for forecast. 3.11 One of the projections in LABOTEL's study is a sum of the estimation of future expansion by each of the local telelphone entities, based on the existing system of financing, which gives a 16.8% annual growth in capacity (from 63,900 in 1975 to 139,000 in 1980, Annex 6). However, LABOTEL and the Bank mission agree that the real demand is not likely to grow by more than 12% annually (from 63,900 to 115,000 in 1980) if the present system of development financing is maintained. A market saturation will probably occur during 1978/79, with a strong demand suppression, because some of the potential subscribers will not be able to afford the rising cost of a share. 3.12 The second approach for demand forecast, based on undepressed demand, which assumes a different way of development financing (without share con- tributions), gives a much higher composite growth rate. This method assumes supplying, over the period, an initial unsatisfied demand existing at year end 1975 of about 30,000 subscribers, which appears reasonable on the basis of discussions with the telephone companies. It implies an 18.6% annual growth rate which would result in some 150,000 subscribers in 1980, still leaving some 20-30,000 waiting applications. This target approximates the projections proposed by LABOTEL and has been used as the basis for the invest- ment programs for 1976 to 1980. However, this projection assumes the utiliza- tion of the full five-year (1976-1980) period which is not likely, because of the necessity of a two-year delay in commencing the program. Long-Distance Facilities 3.13 ENTEL, DGT, and the two private companies (Serrano and Serval) do not have an operational demand forecast because there is no local telephone develop- - 11 - ment forecast. Some projections were made by consultants during the appraisal of the IDB loan for ENTEL in 1968 and 1972. They are out of date, however, due to a more than three-year delay in project execution. Despite all those difficulties in estimation, ENTEL expects a 200-300% increase in long-distance traffic when, in 1977, the 120 channels of the new microwave link, together with the manual switchboard, become operational. After that, the next traffic increase will occur when the trunk switching equipment together with additional multiplexing equipment, will be put in service in 1978 as a consequence of technical improvement. This will generate a second big jump in traffic, estimated to be at least some 150%. In addition to these two significant events, a minimum 20% annual increase in long-distance traffic can be expected based on past trends. Telex and Telegraph Facilities 3.14 There are no national telex facilities in Bolivia at present. ENTEL's plan includes, together with the initial installation of a telex exchange for some 300 lines, an increase of another 300 lines in the five-year period. How- ever,the real market demand, according to LABOTEL, appears to be much higher, most likely around three times that much, i.e., 2,000 lines in 1980. This would mean a 95% annual growth in the 5-year period, which appears feasible for this initial phase of the development of the telex network. 3.15 Because of the lack of telephone communications, the telegraph traffic is expected to grow for a few years by some 20% annually. However, later (near 1980) the traffic may taper off as a result of increasing telephone usage. Also, there are still some 900 communities without any communications, and DGT and ENTEL intend to reach these villages with open wire or radio circuits, which will inevitably contribute to the steady telegraph traffic growth in the five year-period. International Facilities 3.16 The existing international circuits are not sufficient, and their quality is low. To improve the situation and to cater for future traffic growth, the Government has authorized ENTEL to acquire a loan from Corporacion Andina de Fomento (CAF) for the procurement of an earth satellite ground station, which should be operational in 1978/79. There are also plans to ex- pand the new microwave links to Peru as a part of the future inter-American microwave network. The demand is expected to grow some 15% annually. INVESTMENT PROGRAM Investment Requirements 3.17 In the past there has not been any investment program at the sector level. ENTEL and DGT development was financed as a part of the Government budget, and the telephone companies, as well as other private companies, developed in an uncoordinated manner. - 12 - 3.18 One investment program, comprising the simple sum of ENTEL's, DGT's and the telephone companies' estimated investment in 1976-80, (and corresponding to 80,000 new lines), amounts to about US$107 million with some US$85 million in foreign exchange (Annex 7). This program assumes no changes whatsoever in organization, planning, method of financing, or operations. 3.19 If, however, the proposed changes in financing and organization toward sector integration and operational improvement are carried out, the investment program can be improved for a hypothetical integrated entity (Annex 8). In this case, it would be possible to achieve a much higher growth rate and an optimal development of the telecommunications sector at least cost. Such a program, which contemplates an addition of some 104,000 telephone lines during the five-year period, would cost some US$135 million, with about US$116 million in foreign exchange. The average cost per tele- phone line would be about US$550 (without long-distance equipment), which is reasonable. The total investment includes ENTEL and DGT long-distance telex and rural development plans costing about US$60 million (with a foreign exchange component of US$57 million); it would expand services to many new rural and suburban areas and would expand international communications as well. 3.20 A substantial part of the proposed investment, some US$67 million, is already backed by foreign loans and credits. ENTEL, for example, has obtained a CAF loan of US$8.5 million to procure an earth satellite station and a supplier credit of US$10.8 million from L M Ericsson, through Banco do Brazil, for trunk switching equipment. Similarly, the local companies have contracted about US$42 million in supplier credits from various equipment suppliers. Development and Investment Priorities 3.21 The scarcity of development funds in the country limits the invest- ment opportunities in telecommunications severely. Therefore, choosing develop- ment priorities in the sector is of first importance for achieving economic development goals. Moreover, the balanced expansion of telecommunications facilities is necessary to maximize economic benefits. It is important that the development of local, long-distance and international facilities should proceed in harmony and within the resources available not only to meet growth in demand in areas already served but also to extend the services to new areas. 3.22 Maintaining and improving the quality of service to existing sub- scribers is a task of the highest priority. Poor service standards have a relatively high economic cost, and, therefore, the extension of existing ex- changes and long-distance routes is a necessity in time of growing economic activities. These expansions have to cater both for traffic growth of existing subscribers and for growth of new subscribers so that the increased usage will not cause the quality of existing service to deteriorate. 3.23 The second highest priority should be given to the expansion of local and long-distance facilities in and between the main cities to satisfy - 13 - o part of the growing demand and to remedy the existing severe shortage of telephones in the country. 3.24 Political considerations in Bolivia influence the development priorities. A Government decision to provide all the rural communities having more than 200 inhabitants with some sort of telecommunications is a factor of integration which promotes better administration of the country. For this reason, the third priority should be the expansion of communications in rural area. TARIFFS 3.25 According to the General Law of Telecommunications (of June 2, 1971) it is within the authority of DGT to suggest tariff rates and other charges for telecommunication services. In practice, however, this is left to the operating companies while DGT normally limits itself to giving its approval. Contrary to the spirit of the telecommunications law, DGT has not accomplished its duties as regulator and planner, but has concentrated its efforts on oper- ating its rural telecommunications network. With the proposed sector reorga- nization, this trend would be reversed. 3.26 The above-mentioned law states that the tariffs will be just and reasonable, will cover the operating costs and will finance a part of the development of telecommunications, but it does not spell out the achievement of a particular rate of return. In actual experience, however, because of deficiencies in the level and structure of applicable rates, the operating entities in the sector have normally shown operating deficits. ENTEL had operating losses in five years of the six-year period 1970-1975. A similar pattern of losses or unusually low net incomes prevails in the telephone companies (La Paz, Santa Cruz, Cochabamba, Oruro, Sucre, etc.). 3.27 In the case of ENTEL, the rates currently charged are generally high in comparison with those of other countries in the hemisphere, but, because of the limited volume of realized traffic, such rates have been insufficient to yield even a modest return on the investment. The basic rate for a long-distance telephone call (including taxes) is US$1.90 for three minutes and US$0.70 for each additional minute, regardless of the distance involved. With the new trunk network coming into operation in 1977, it would be advisable to introduce a revised tariff structure with a lower average price and a sliding scale according to distance. There should be significant differences in the rates, say, from La Paz to Oruro (a distance of 200 km) as compared with La Paz to Santa Cruz (570 km) or with Tarija to Riberalta (1,201 km). Such a tariff revision should aim at encouraging a greater demand for long-distance services at reasonable prices based on the cost of providing service that will generate larger revenues for ENTEL. 3.28 The average number of long-distance calls per telephone in 1974 was only 2.5 in La Paz as compared with 5.5 in Cochabamba, 4.8 in Oruro and 4.4 in Santa Cruz, the other terminal cities in the new trunk network. Low calling rates are mainly a reflection of the high long-distance tariffs and - 14 - the poor quality of the service. Improving the long-distance telephone service with La Paz is particularly important since it represents about one-third of both the total traffic and the revenues. 3.29 The general level of telephone rates is low because it is partially compensated by the high share prices paid by subscribers. Rates charged by the local companies vary significantly even for similar sized exchanges (Annex 9). The monthly charge for professional subscribers is, for example, US$5.5 in the case of COTERI (Riberalta) and US$11.6 for COTEAUTRI (Trinidad), both operating exchanges of 800 lines or less. The average monthly residential rate in the sector is about US$3.6 but the range varies from US$2.2 to US$8.3 and commercial rates vary from US$4 to US$20 per month. Official rates are sometimes unduly low relative to commercial rates. On the whole, the revenues generated by these tariffs have been insufficient to cover the operating costs of the entities and to provide a reasonable contribution toward development financing. 3.30 Integration of the entities would allow the introduction of a single national policy for telephone rates which could merge considerations for size of exchange and cost of the services. The practice of providing telephone services at less than cost to some official subscribers, such as municipalities, should also be discontinued. This could be done by having only two categories (residential, and non-residential). Metered local tariff should be introduced since it guarantees a revenue increase as the tariff grows and, at the same time, is a restraint on local call growth and, thereby, helps to preserve the quality of service. A rationalization and standardization of tariffs should be included in the sector reorganization. TRAINING 3.31 A few years ago, neither ENTEL nor the telephone operating entities had any training centers; the only on-the-job training was provided by senior staff. Training was also given by contractors during equipment installation. The lack of proper training was, and still is, reflected in the maintenance inadequacies and the inefficiencies which exist in the services provided. 3.32 In 1971, a specialized institution for training in telecommunications, Instituto Nacional de Telecomunicaciones(INSTEL), was created by a Govern- ment decree. Later, during 1972, an UNDP/UIT technical assistance program (for an amount of some US$1 million) was signed for a two-year period to a assist INSTEL in the initial development period and to acquire training equipment. 3.33 The training center, which is under DGT authority, with its staff of some 20 instructors (of which eight are ITU experts) trained about 250 pupils in 1975, including some 90 operators. The majority of staff trained were for ENTEL, and only a few were for the telephone companies. Projections made by INSTEL indicate that there will be a steady need for training about 250 persons - 15 - annually if the entities wish to have properly trained staff; this does not include refresher courses and engineer training. The institution is equipped for these tasks, and, if needed, it can be enlarged. a/ 3.34 For any major investment program, it is essential that a supporting manpower and training program be introduced, fully integrated with develop- ment objectives in the sector. a/ In addition to training, INSTEL is proposing to help in other activities such as preparation of standards, special projects studies and other advisory jobs to DGT and to the operating entities with the aim of fully utilizing its staff and laboratory equipment capacities. - 16 - IV. RECO.MERDATIONS AND FUTURE ACTIOfl Recormmendations 11.01 The Government should aim at the gradual solution of the sector's institutional issues. If the Government is willing to take adequate measures, considerable benefits can accrue to Bolivia. Major improvements in services can be achieved as a result of: (a) consolidation of many entities into one national organization; (b) development of the sector on the basis of a balanced national plan including the provision of much needed facilities in the smaller towns and in rural areas; (c) adaptation of accepted modern technical standards and operational practices; and (d) establishment of a training program implemented as part of the overall, development in the sector. 4.02 Consolidation of the sector through integration would result in major savings in plant and equipment and in more effective use of available funds for development. Additional savings would also arise from the introduc- tion of bulk procurement through international. competitive bidding. The com- bination of these factors would, it is estimated, result in a substantial saving of at least 30% of future investments (some US$IO million over the next five 5ears) that could be applied toward meeting additional demand and serving new areas, thus benefiting all users. 4.03 While full integration of the sector is a lengthy process, interim measures may be taken, leading to it over a specified period of time. If such a step-by-step approach is preferred by the Government, the integration of the local telephone conpanies may be the first step, followed by consolidation of the whole sector, i.e., the integration of ENTEL, DGT, and the already integra- ted local companies into one national entity. Future I-;.on 4.04 The recommendations contained in the report were discussed with the Minister of Communications and the Ministry of Planning and Coordination. The Minister of Communications is in complete agreement with the recommenda- tions for consolidation of the sector in a new national Government telecommunica- tions entity and has instructed the Director of Laboratorio Boliviano de Telecomunicaciones (LABOTEL) to prepare a five-year (1976-80) telecommunications development plan which would include expansion of services in all telephone entities operating in the country. Depending on the financial resources required to implement that plan and the availability of such resources, a decision would be taken if the consolidation should be carried out simultaneously or in stages. The Ministry of Planning and Coordination has also prepared a tentative decision paper incorporating the recommendations for sector consolidation. July 12, 1977 BOLIVIA Telecommunications Sector List of Persons Met Ministry of Transports Canmunications and Civil Aviation M1inister Ing. Julio Trigo Ramirez Sub-Secretary for Communications General Jaime Ayala 14ercado Assistant to the Sub-Secretary Sr. Flores Director Planning Unit Ing. Cesar Bayer Jirecci6n General de Telecomunicaciones irector General Sr. Rene Osario i3eltrIn Ministry of Finance Director INDEF Lic. Jector Ormancliea Deputy Di;ector INDEF Lic. Enrique Ackerman Empres , Nicional de Telecomunicaciones (ENTEL) General Manager Ing. Federico Paz (Col.) Administrative Jirector Col. Juan Trigo Technical Director Ing. Jorge Cabrera Technical Dept. Ing. Carri6n Tel6fonos Autom9ticos de La Paz. S.A. (TASA) General MLanager Ing. fugo 3uhezo (Col.) Administrative Manager Lic. Guillermo Cuadros Chief Planning Dept. Ing. Le6n Viscarra Cooperativa Tel4fonos Automaticos de Santa Cruz (COTAS) President Sr. d. Gasser General Miager Ing. Fl'cido Holine Technical -irector Ing. Carlos Arana Financial Jirector Lic. Iver Jadillo Servicio iunicipal Tel6fonos Autom9ticos de Cochabariba (SATA) Generl 'fanager Gral. Edilberto Semp6rtegui Financial Jirector Mrs. Levi Technical Jirector Ing. Hugo Zanier Epresa de Tel4fonos Oruro. S.A. (ETOSA) Generl -anager nL:. Victor Augo I6nd1ez Technical Jirector in!. Arteage - 2- Tel6fonos automáticos Sucre (TASSA) Financial Jir,-ctor Lic. ario Cruz Instituto Naci.,iial de Telecomunicaciones (INSTEL) Jitrector Ing. Emilio Kellemberger Jefe Estudios Col. Antezana Laboratorio Boliviano de Telecomunicaciones (LAB=1'EL) Director Ing. Emilio Kellemberger Cable West Coast General Manager Mr. Manuel Jasa balde Prorrana de las Naciones Unidas para el >.sarrollo Resident Representative Mr. Henry C. Meyer ITU Project Director Ing. Uldarico Posada Interamerican Development Bank ENTEL Project Supervisor Mr. Gonsales Dbusdebes OLIVTAi TELE~0MUICATI0NS StCTOR International Telephone Statieties POHLATOt ROSH~S N4ATio?AL TEL.EIi - JAåN YdY 1075 POPULATION PROICT - 197 NATIONAL G.IT_C ES IMST OF COUNTRY Per Capita Per Av. Annual COUNTRY 1/1/75 Per Growth Total 100 Growth Rate Automa-- Total Per Percentage Total Per Percentage Capita Rate Number Popu- (1965-75) tization Number 100 of Nat'l Number 100 of Nat'l (~00s) US$ (1965-73) (0O's) lation (000's) Pop. % (000') lop. AFRICA East Africa 37,283 149 2.7 215 0.58 10.5 84.6 156 8.3 73.0 59 0.2 27.0 Fgpt, Arab Rep. of 36,730 250 0.8 503 1.37 n.a. 96.7 364 4.o 72.4 139 0.5 27.6 Ethiopia 27,495 90 1.6 66 0.24 12,1 88.5 52 3.4 78.8 14 0.1 212 Morocco 16,726 320 2.5 189 1.13 2.5 82.0 128 3.2 67.7 61 0.5 32-3 Nigeria 69,674 210 8.3 il 0.16 6.4 83.4 68 3.9 61.3 43 0.1 38.1 Rhodesia 6,205 430 3.5 172 2.77 6.2 93.4 138 14.2 80.2 34 0.7 19.8 South Africa 24,914 1,050 2.0 1,936 7.77 5.5 82.6 1,399 24.2 72.3 537 2.8 27.7 Sudan 18,112 130 -0.6 56 0.31 4.5 91.4 49 3.0 87.5 7 0.1 12.5 Tunisia 5,628 460 4.9 114 2.03 12.7 92.6 49 2.4 43.0 65 1.8 57.0 Zambia 4,687 430 -0.2 68 1.45 8.2 97.8 29 3.3 42.7 39 1.0 - 57.3 AME'RICA Argentina 25,225 1,640 2.9 2,374 9.41 4.9 96.8 1,378 18.9 58.1 996 5.6 41.9 Bolivia 5,612 230 3.0 64 1.14 9.7 99.0 55 5.2 85.9 9 0.2 14.1 Bratil 106,069 760 6.0 2'652 2.50 7.7 94.6 1,992 8.3 75.1 660 0.6 z4.9 Canada 22,661 5,450 3.5 12,454 54.96 5.9 97.8 6,254 59.0 50.2 6,200 51.5 49.8 Colombia 25,025 440 3.1 1,186 4.74 11.5 99.7 813 7.8 68.6 373 2.6 31.4 Costa Rica 1,960 710 3.5 98 5.02 16.1 99.0 88 10.5 89.8 10 0.9 10.2 El Salvador 4,065 350 0.8 50 1.22 8.6 97.2 44 2.9 88.0 6 0.2 12.0 Mexico 58,265 890 2.8 2,546 4.37 13.4 94.8 2,069 10.2 81.3 477 1.3 18.7 Trinidad & Tobago 1,060 1,310 2.2 66 6.26 6.0 99.9 41 41.8 62.1 25 2.6 37.9 us 212,013 6,200 2.5 143,427 67.65 5.0 99.9 75,904 73.5 52.9 67,523 62.1 47.1 Venezuela 11,918 1,630 1.3 554 4.65 7.9 99.2 477 9.3 86.1 77 1.1 13.9 ASIA China, Rep. of 15,856 660 7.3 901 5.68 19.8 92.5 591 12.0 65.6 310 2.8 34.4 India 582,596 120 1.5 1,690 0.29 8.4 82.3 879 2.7 52.0 811 0.2 48.0 Indonesia 123,840 130 4.5 285 0.23 3.4 63.3 201 1.4 70.5 84 0.1 29.5 Iran 33,565 870 7.4 806 2.40 16.1 94.1 541 5.3 67.1 265 1.1 32.9 Iraq 10,770 153 1.42 9.4 93.1 126 2.9 82.4 27 o.4 17.6 Israel 3,408 3,010 6.7 735 21.57 13.1 100.0 562 30.9 76.5 173 10.9 23.5 apan 110,626 3,630 9.6 41,905 37.88 13.1 97.4 26,527 42.9 63.3 15,378 31.5 36.7 alaysi 11,738 570 3.7 259 2.21 7.9 96.6 n.a. n.a. n.a. r.a. n.a. n.a. Nepal ._ 12,423 90 -0.1 11 0.09 13.9 n.a. n.a. n.a. n.a. n.a. n.a. n.a. Pakistan. / 69,710 120 2.5 214 0.31 5.9 83.0 n.a. n.a. n.a. n.a. n.a. n.a. Philippines 40,941 280 2.6 446 1.09 11.4 96.0 374 4.3 83.9 72 0.2 16.1 bir.gapcre 2,237 1,830 9.4 280 12.53 13.5 100.0 280 12.5 100.0 - - - 2yria 3/ 7,121 400 3.6 152 2.14 7.8 89.7 126 5.2 82.9 26 0.6 17.1 Thailand 41,036 270 4.5 271 0.66 15.3 96.0 234 4.4 86.4 37 0.1 13.6 France 52,742 4,540 5.0 12,405 23.52 8.1 94.0 4,546 46.2 36.7 7,P59 18.3 63.3 Germany, Fed. Rep. of 62,040 5,320 4.0 18,767 30.25 8.7 100.0 8,185 46.1 43.6 10,5'2 23.9 56.4 Eweden 8,178 5,910 2.4 5,178 63.32 4.3 100.0 2,529 75.1 48.9 2,649 55.1 51.1 bwitzerland 6,375 6,100 3.0 3,790 59.46 5.9 100.0 1,793 76.2 47.4 1,992 49.6 52.6 i rkey 39,127 600 4.4 900 2.30 11.3 78.9 618 8.6 68.7 282 0.9 31.3 UK 56,102 3,060 2.3 20,342 36.26 7.4 99.9 8,087 45.8 39.8 32,55 31.9 60.? 1S-R 253,323 2,030 3.5 15,782 6.23 8.2 94.8 4,234 17.4 26.8 11,548 5.1 73.2 YaGisavia 21,243 1,060 6.0 1,143 5.38 11.9 97.2 532 17.3 46.6 611 3.4 53.14 A)straJia 13,337 4,350 3.0 5,000 37.119 6.5 95.2 3,840 42.9 76.1 1,16 26.8 23.c New Zealand 3,106 3,680 2.0 1,495 48.12 4.5 92.7 1,135 53.0 75.9 360 37.4 24.8 P- ti at January 1, 1975' derived from the "Total Telephones" and "Telephones per loo Fpulation" appearing in p.liestion, Telephe and popu3atie- tatintics for Nepal and P,kirtan are not av&llal le -r, AT>Ær. 'r ler, fi_ (January 1, i 2). TIhe fien r are estimates deri- .4 ir.fo-atio: av'dialle from reporta in the Bank. 3/ Telep,,hie and population. st,atisties for lyria is not available in AT&T's Wrrld Teinp3o e (January 1, 1975). The fir,ren e ,w, are derived fr-m 3ýTE'E Statlstiral Abstract of lecon.iea'lo:, 1175. SOC'3H - GNP Statistica: World bank Atlas 1975. - ' ,elep -t. l l tieicr: World Telej,nen ty AT&T (1'75). ^ugust 1976 ANNEX 2 BOLIVIA: TELECOMMUNICATIONS SECTOR Baaic Data for ELNTEL, DGT and Telephone Companies in the sector, as of Jecember 31, 1975 Estimated Telephone Share Fiked Total Lines Capital aLssets Name Employees Capacity Hillions US4 Empresa Nacional de Teleoomunicaciones 900 6.33 12.11 Jirecci6n General de Telecomunicaciones (DGT)300 - --- 0.41 Telefono Automfticos de La Paz (TASA) 351 32,000 13.50 7.61 Cooperativa de Telefono Automaticos de Santa Cruz de la Sierra, Ltda. (COTAS) 160 9,300 10.12 8.67' Servicio Municipal de Tel6fonos Auto- viaticos de Cochabamba (SMTA) 190 8,700 1.36 3.09 Empresa de Tel4fonos Oruro (ETOSA) 40 4,500 1.13 1.00 Telefonos Automaicos Sucre (TASSA) 17 3,000 0.32 0.31 TelAfonos Automa'ticos Potosi (TAP) 16a) 2,000 n.a. n.a. Empresa de Telefonos Tarija (ETT) 16a) 2,000 0.7L 0.-5 Cooperativa Telifonos Automaticos Tupiza Ltda. (COPE) 8a) 300 0.09 0.06 Cooperativa Telefonos Automticos Camiri (CoTEA) 10 500 0.47 0.27 Cooperativa Telfonos AutomAticos Riberalta b (COTERI) 7 200 0.02b) 0.02 Cooperativa Telifonos Automaticos Trinidad b) (COTEAUTRI) 11 300 0.1 0.43' Cooperativa Telefonos de Villazdn (COTEVI) 5 100 n.a. n.a. Total Reporting Companieso-)2,450 63,900 34.99 34.80 a) Approximation b) Dec. 31, 1974 c) Does not include four private corpanies (Radio Serval, hadio Serrano, All America Cables and Cable West Coast) for which comparable data are not available. August 1976 ANNEX 3 BOLIVIA: TELECOMMUNATIONS SECTCR Empresa Nacional do Telecomunicaciones CEMNEL) Comparative Statements of Financial Position Dec. 31, 1970 and Dec. 31, 1975 (In millions of Bolivian pesos) Amount of: Fercent of: Incre ase Increase 127 i2. Decrease (-) Decrease (-) ASSETS Fixed Assets Plant in service 9.0 24.4 15.4 171.1 Less: Accumulated depreciation 2.4 9.0 6.6 275.0 Net plant in service 6,. 15.4 8.8 133.3 Plant under 4onstruction 15. 226.8 211.7 1,402.0 Total fixed assets 21 242.2 220.5 1,016.1 Investments Advanced to Contractors Deferred Payments - 0.9 8.5 Other Assets - - Current Assets 1.7 48. 7 4.0 2,764.7 Cash and Banks 0.5 25.2 24.7 4,90.0 Accounts receivables (net) 1.0 14.5 13.5 1,350.0 Inventories - 2.0 2.0 Other 0.2 7. 6.3 3,400.0 Total assets .0. 807.1 LIABILITIES Net Worth 1 121.0 9. 382.1 Capital 25.2 T2r 101.3 402.0 Capital from revaluations - 6.6 6.6 Reserves - - - Accumulated losses or surpluses -0.1 -12.1 -12.0 Long-term Debt 2 1 .14.2 2,869.2 Loans 5.2 149.4 1 4.2 2,773.1 Other - 5.0 5.0 Current Liabilities 27. 23. 640.5 Reserves for Indemnization -5.6 .6 Other Liabilities - - Total liabilities 28-3. 307.1 Long-term Debt/Net Worth 17/83 56/46 Current Ratio 0.5 1.8 Working Capital (millions) -2.0 21.3 August 1976 AINNE- 4 BOLIVIk TELECOWKUNICATIONS SECTOR Empresa Nacional de Telecomunicaciones (ENTEL) and Seven Telephone Companies Comparative Statementp of Sources and, Applications of ftyds. Dec. 31, 1970 to Dec. 31, 1975 ENTEL Telephone Companies Million Pesos Percent Million Pesos Percent Sources of Funds Net Worth 95.9 35.0 465.3 53.3 Long-term Debt 149.2 54.4 310.4 35.9 Current Liabilities 23.7 8.6 50.1 5.3 Reserves for Indemnization 5.6 2.0 15.6 1.8 Other Liabilities - - _.- 2_. 100.0 100.0 Application of Funds Fixed Assets 220.5 80.4 279.0 32.2 Investments 4.7 1.7 - - Advances to Contractors 1.3 0.5 - - Deferred Payments 0.9 0.3 0.7 0.1 Current Assets 47.0 17.1 151.2 17.5 Other Assets - - .2 0.2 00.036 10.0 August 1976 ANNEX 5 BOLIVIA: TELECOMUNICATIONS SECTOR COmParative Statements of Financial Position for Seven Telephone Companiesll 1970 and 1975 (in millions of Bolivian pesos) Amount of: Percent of: Increase Increase 1970 12a Decrease (-) jecrease (-) ASSETS Fixed Assets Plant in service 183.0 427.7 244.7 133.7 Less: Accumulated depreciation 53.6 113.4 59.3 111.6 Net plant in service 129.4 314.3 184.9 142.9 Plant under cowtruction 13.0 107.1 94.1 723.9 Total ftnd assets 14i2. 421.4 279.0 195.9 Investments 0. 0.2 - - Deferred P"Meits 0 .2 0.7 140.0 Other Assets 186 2 2 2,32L.7 Current Assets 151.2 328.0 Cash ond Banks 4.7 23.9 19.2 408.5 Accounts Receivable (net) 16.6 89.3 73.2 441.0 Inventories 10.6 21.4 10.8 101.9 Other 1-.2 6 8.0 333.0 Total Assets 2073 1,072.9 816.3 LIABILITIES Net Worth 1-56.6 622.4 6 297.5 Capital 10 9.399.6 Capital from revaluations 34.5 63.6 29.1 S4.3 Reserves 11.6 20.5 8.9 76.7 Accumulated losses or surpluses 0.5 -11.3 -10.3 2,160.0 Long-term Wbt _29 350.3 310. I 777.9 Loana 39.9 330.0 310.1 777.2 Other - 0.3 0.3 - Current Liabilities 8.1 3.2 0.1 61d.5 Reserves for Indemnization - 15.6 624.0 Other Liabilities 0.7 2. 2. 3,3'4.3 Total Liabilities 207.8 102.9 3651 413.3 Long-term Debt/Net Worth 20/80 36/64 Current Ratio 5.7 3.4 Working Capital (millions) 38.0 139.1 a/ Includes companies of La Paz, Santa Cruz, Cochabamba, Oruro, Sucre, Caniri, and Tupiza with a total capacity of 57,380 lines in 1975 or about 92% of lines in thLe country. August 1976 BOLIVIA: TELECOMMUNICATIONS SECTOR Past and Planned Number of Telephone Lines, 1971-80 Capacity of Exchanges Actual Planned Company .71 1972 1973 1974 1975 1976 I1 1979 1980 TASA 22,500 22,500 31,500 31,860 32,000 32,000 42,ooo 52,000 52,000 62,000 LOTAS 8,000 8,000 9,000 9,000 9,800 9,800 19,800 19,800 29,800 29,800 SMTA 7,300 7,300 8,800 8,700 80,700 1, 400 14,400 15,000 15,000 17,000 ETOSA 3,000 3,000 3,000 4,500 4,500 4,500 6,000 6,000 9,000 10,000 TASSA 1,500 1,500 2,000 2,020 3,000 3,000 3,000 5,000 5,000 7,000 TAP 500 500 2,000 2,000 2,000 3,ooo 4,000 5,000 5,000 5,000 ETT 360 360 360 2,000 2,000 2,000 3,000 4,000 4,000 4,000 COPELECTRICA - - - - 300 300 300 300 400 400 COTECA 300 300 300 500 500 500 800 800 800 800 COTEI 200 200 200 200 200 350 400 500 550 600 COTEAUTRI 400 400 400 400 800 800 800 800 2,000 2,000 COTEVI - - - 100 100 100 200 200 200 200 GUAYARAMERIN -30030030 - -- ... - .. ..-,.. -0030030 TotAL ugust 4 _ LA6 61,280 63o900 2 oo lo9,7oo 124,050 139,1oo August 1976 oC ANNEX 7 Page 1 of 2 BOLIVIA: TELECOMMUNICATIONS SECTOR Summary of Investment Planned by Individual Companies in 1976-80 (in millions of US Dollars) Financing Company Investment Total Committed Pending ENTEL Microwave expansion telex 37.1 24.1 13.0 and HF network expansion International and LD circuits DGT Physical lines and HF 1.0 1.0 - rural network TASA 20,000 line expansion 27.7 25.7 2.0 COTAS 20,000 line expansion, 13.9 8.9 5.0 rural network SMTA 2,000 line expansion 14.8 3.0 11.8 ETOSA 1,500 line expansion 4.7 0.9 3.8 TASSA 2,000 line expansion 3.5 1.5 2.0 TAP 3,000 line expansion 1.6 1.6 - ETT 2,000 line expansion 1.2 1.2 1.2 COTEAUTRI 1,200 line expansion 0.7 - 0.7 COTECA 300 line expansion 0.2 0.2 - COTERI 600 line expansion 0.4 0.2 0.2 COPELECTRICA 100 line expansion 0.1 - 0.1 COTEVI 100 line expansion 0.2 - 0.2 GUAYARAMERIN 300 line expansion 0.3 - 0.3 Total 107.4 67.1 40.3 August 1976 ANNEX 7 Page 2 of 2 BOLIVIAs TELOMUNICATIONS SECTOR Comparison of Investment Actually Planned and Estimated Investment with Sector Reorganization, 1976-80 (in millions of U3 dollars) Planned Actually With Reorganization local Telephone Services 63.9!/ 56.7y long Distance Services 34.0 53.6 Telegraph and Telex 2.5 6.9 Rural Services 6.4 - Training and Consultants 0.6 5.0 Contingencies (10%) - 12.2 Total 1 4 134.4 a/ Corresponds to 80,198 lines or US797 per line. b/ Corresponds to 104,000 lines or US$545 per line. August 1976 OLIVIA t TEMOOMUIICATIONS SECTR T ED SECTOR ITESTdmT WITH CTOR Ra= mgr?ATION, 1976-80 (in milliona of US dollar) Eisting Additional 176 1977{ 1978 1979 1980 1976 - 80 aait U oølaTta brin-oa TQ2 Yorol %o imÉ båk Ereiffi Total Categtory =17- Land & buildings .60 0.6 0. O 2.06 eitcehing equip t 6104,000 - Cable & subm. inntallation linen lines 4.27 6.10 4.27 6.10 6.10 8.70 3.00 4.60 5.13 7.46 23.07 32.90 Long-DistanCe Service 5 O:i .o 23 .0 97 18.00 20.00 4.45 8.80 9.00~O5d 53.60 - Tra~ sion equpent T MX-1 i r. 3.00 1M 50 WX - &itching equipment 1.20 1.20 9.20 9.20 2.00 2.00 2.60 2.60 h.00 4.00 19.00 19.00 - Internati 5.00 6.00 5.00 6.00 Telegram and Telex 310/ i ,99 .0 . 2300 300 6 6. Rral Services Tralning and Cansultante 0.0 1.0. & 2.00 0-60 1i 0 0 0.20 2.£ L Contingencles (10%) j.80 2.10 2.05 2.20 L. L J 2-25 2.80 10-6 12.20 20TAL TOTAL 197 Z2.50 22.22 230 66. 144.6 00 214.38 -. i. } "='er of Li chcnnels in June 1976. "Zw , ber of LJ cJ nnels in 1)31. c r.be r of telex ter!ina,ýls. Costs included in .cI and long-di nce service costs. SOULCE.: L3TL August 1976 O BOLIVIA: TELECOMMUNICATIONS SECTOR Comparison of Telephone Tariffs, 1976 Pesos per Month Conany and City -----Residential---- ---Professional------ ------Commercial----- ------Official------- -------Other--------- Observations Net Taxes Total Net Taxes Total Net Taxes Total Net Taxes Total Net Taxes Total TASA (La Paz) 69.oo 17.60 86.8o 175.00 4o.OO 215.00 320.00 73.00 393.00 320.00 33.00 353.00 480.00 105.00 585.00 "Other" is PBX COTAS (Santa Cruz) 39.00a/ 39.00/ 39. 39-00J 39.00a/ Up to 50 call8/ SNTA (Cochabamba) 49.39 13.61 63.00 109.84 28.86 138.70 200.71 51.89 252.60 1o9.84 28.86 138.70 ETOSA (Oruro) 42.00 9.40 51.40 83.00 17.60 100.60 148.00 30.60 178.60 83.00 17.60 100.60 58,00 12.60 70.63 "Other" is hospitals and schools. TASsA (Sucre) 35.10 9.60 44.70 52.10 13.90 66.oo 86.20 22.30 108.50 86.20 18.20 104.40 26.00 6.co 32.20 "Other" is municipality. TAP (Potosi) n.a. n.a. n.a. n.a. n.e. ETT (Tarija) 40.00 10.00 50.00 60.00 15.00 75.0 80.00 20.00 100.00 80.00 20.00 100.00 COTEAUTRI (Trinidad) 136.32 20,8.26 164.58 192.00 39.40 231.40 245.76 50.16 295.92 COTECA (Camiri) 43.00 13.60 56.60 63.00 17.60 8o.60 Up to 120 calls/ COlERI (Riberalta) 66.00 17.80 83.80 90.00 20.80 110.80 90.00 20.80 110.80 90.00 20.80 110.80 COPELEC"RICA (Tupiza) 45.o 1o.oo 55.00 70.00 15.00 85.00 80.00 17.00 97.00 70.00 15.00 85.00 COTEVI (Villazon) n.a. n.a. n.a. n.a. AverageL/ 73 114 180 110 Range 45-165 66-231 81-393 85-353 a/ Each additional call $bO,30 (08$0.015). Taxes are the same percentages as in La Paz. b/ Each additional call $bO,4o (US$0.020). _/ Excludes COTAS which has a metered tariff. August 1)76