Upper Volta - Third Telecommunications Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 3>542-UV STAFF APPRAISAL REPORT UPPER VOLTA OFFICE DES POSTES ET TELCOMMUNICATIONS THIRD TELECOMMUNICATIONS PROJECT March 25, 1982 Western Africa Regional Office Transportation, Water and Telecommunications Department I This document has a restricted distribution and may be used by recipients only in the performance of their officiai duties. Its contents may not otherwise be disclosed without Worid Bank authorization. |  CURRENCY EQUIVALENTS US$1 = CFAF 270 CFAF 1 = US$0.0037 SDR 1 = US$1.1478 US$1 SDR 0.871199 SDR 1 CFAF 309.91 FISCAL YEAR January 1 - December 31 WEIGHT AND MEASURES Metric System LIST OF ABBREVIATIONS AND ACRONYMS USED 1N THE REPORT AfDB : African Development Bank. Cabinets Connecting points in a cable network which provide flexibility between main and distribution cables. CAMA : Central Automatic Message Accounting. Equipment which allows separate details of long distance calls to be recorded rather than bulked charges on the local call meters. CCCE : Caisse Centrale de Cooperation Economique (French lending agency). Channel : Frequency band of a carrier or multiplex system carrying signais of one telephone telex or data circuit. CIDA : Canadian International Development Agency. CIF , Cost Insurarice and Freight. CNDI : Caisse Nationale des Depots et d'Investissemerits. ICB : International Competitive Bidding. INTELSALT International Consortium for Telecommunications via satellites ITU I International Telecommunication Union. Microwave Wide band radio system working at frequencies above 2 GHz. Equipment used to provide a number of speech, telex or Multiplex : data circuits over one bearer. MIP : Management Improvement Program. NTF : Nigerian Trust Fund. OPT : Office des Postes et Telecommunications. PANAFTEL Panafrican Telecommunications Network (main transmission routes between African countries. PCAS : Postal Checking Account System. Public Call : Telephones installed at a convenient location for public use, Offices usualiy under control of an attendant (in the Post Office). Satellite Earth : Low capacity and low cost type of earth station standardized Station Type B by INTELSAT. GDR : Special Drawing Right (IMF monetary unit). STD : Subscriber Trunk Dialing (direct long distance dialing). Subscriber Lines : Main lines terminating on telephone exchanges. or Connections Telephones : Telephones of all types, whether connected individually on main lines or as extensions. Telex/Gentex : Teleprinter exchange used for switching private or public (telegraph office) messages. UAPT : Union Africaine des Postes et Telecommunications (P&T union restricted to French speaking countries). UHF : Ultra High Frequency. Radio systems working in the range of 300-3,000 MHz. VHF : Very High Frequency. Radio systems working in the range of 30-300 MHz.  FOR OlFICIAL USE ONLY UPPER VOLTA OFFICE DES POSTES ET TELECOMMUNICATIONS (OPT) APPRAISAL OF THE THIRD TELECOMMUNICATIONS PROJECT Table of Contents Page Number I. THE TELECOMMUNICATIONS SECTOR ........ ................. . 1 Background and Organization .............. ... .............. 1 Access to Service ....................................... . 2 Usage of Service ........................................ . 2 Quality of Service and Existing Facilities ............ .. . 2 Demand for Service ................................... 3 Sector Goals .......................................... . 4 Sector Constraints ......... ..................... . 5 The Association's Role ........ .................... . 6 Il. THE PROGRAM AND THE PROJECT ....... ................... . 7 The Program ...................................... . 7 Project Concept .......................................... 8 The Project ...................................... . 8 Project Cost ................................... . 9 Contingencies ..................................... . il Items and Sources of Financing ...... ................ . il Procureinent . .............................................. 12 Project Implementation ......... .......................... 13 Disbursements ............................................ 13 Performance Indicators ......... .......................... 14 III. ECONOMIC ANALYSIS .......................................... 14 Telecommunications and Economic Development ............. . 14 Tariff Policy ...................... ...................... 15 Least Cost Solution ...................................... 16 Return on Investment .................. ................... 16 Risks .................................................... 17 Environmental and Health Aspects .......... .. ............. 17 IV. THE IMPLEMENTING AGENCY ................................... 17 Organization ............ ................................. 17 Postal Branch ............................................ 18 Postal Checking Account System (PCAS) .................... 19 Staff . .................................................... 20 This report is based on findings of a Bank appraisal mission composed of Messrs. G. Buttex, Sr. Telecommunications Engineer, and H. Busz, Financial Analyst, which visited Upper Volta in February 1981. This document has a restricted distribution and may be used by recipients only in the performance of their officiai duthes. Its contents may not otherwise be disclosed without World Bank authorization.  Table of Contents (Cont'd) Page Number Accounting . .............................................. 20 External Auditing Arrangements ........................... 21 Data Processing ................................ 21 Insurance ............ 21 Managemerit Improvement Program (MIP) ..................... 21 V. FINANCIAL ANALYSIS ........................................ 22 Past Performance and Present Financial Position .... ...... 22 Accounts Receivable ...................................... 24 Valuation of Assets ...................................... 25 Financing Plan ........................................... 25 Other Investments ........................................ 27 Future Finances .......................................... 27 VI. AGREEMENTS AND RECOMMENDATIONS ............................ 28 LIST OF ANNEXES, CHARTS AND MAPS 1. International Telephone Statistics ...................... 31 2. Survey of Telephone Book Listing ........................ 32 3. Exchange Capacity and Subscriber Lines as of December 31, 1980 and Forecast (1981-1987) ......................... 33 4. Historical and Projected Growth of Expressed Demand and Subscribers ........ 34 5. Summary of Physical Targets at End 1980 and 1985 .... .... 35 6. Investment Program 1982-1985 ............................ 36 7. Construction Schedule (chart WB 22659) .................. 37 8. Disbursement Schedule ................................... 38 9. Performance Indicators .................................. 39 10. Summary of Principal Tariffs ............................ 40-41 11. Rate of Return on Investments ........................... 42-43 12. Existing Organization Chart ............................. 44 13. Income Statements (1974-1987) ........................... 45 14. Funds Flow Statements (1974-1987) ....................... 46 15. Balance Sheets (1974-1987) .............................. 47 16. Notes and Assumptions on Financial Statements .... ....... 48-49 17. Terms of Reference for Management Improvement Program.... 50-56 18. Documents Available in the Project File ..... ............ 57-58 Map: IBRO 15669  I. THE TELECOMMUNICATIONS SECTOR Background and Organization 1.01 Upper Volta, a Sahelian country, has an area of 274,000 km2 and a population estimated at 5.7 million. The population growth rate is about 1.6% per year. The country's economy faces a number of constraints to development. Among them are generally poor soils, lack of water, landlocked position, uneven population distribution, low level of education and technical know-how, and limited domestic markets. The economy is overwhelmingly agriculture-oriented and extremely vuinerable to the vagaries of the weather. Agriculture provides a livelihood to some 90% of the population and is characterized by a low level of productivity. Exports consist virtually exclusively of agricultural products, including livestock. Modern manufacturing, though still young and confined largely to food processing and textiles, has been expanding over the years'\and is beginning to diversify. The development of modern industry has been stimulated by government policy, but in spite of this, the industrial sector is still dominated by small scale industries which provide the bulk of industrial employment. There is no significant mineral production in the country. The GNP per capita, close to US$180 in 1979, is among the lowest in the worid. 1.02 As is the case with other Sahelian countries, Upper Volta has significant communications problems. Efficient telecommunications services are particularly vital for stimulating the development of industrial, business and agriculture-related activities, encouraging decentralization of economic development outside of the main cities and reducing transport and communications related costs for a wide spectrum of economic and social sectors. 1.03 In 1969, following IDA recommendations, a new automonous entity, the Office des Postes et Telecommunications (OPT), took over responsibility for the domestic and regional telecommunications services in addition to the postal/financial services. Since 1977, following the commissioning of an earth satellite station, OPT also provides international overseas telecommunications services which were previously provided by the French company France Cable & Radio (FCR). At present, with the exception of military, civil aviation and railways weich, as in many countries, have their own telecommunications network, OPT provides all domestic, regional and overseas international telephone, telegraph and telex services. The Ministry of Information, Posts and Telecommunications is the licensing authority for the telecommunications sector but control and policy direction is exercised mainly by OPT's Board of Directors. There is no manufacture of telecommunications equipment in the country.  - 2_ Access to Service 1.04 In 1980, the telephone density in Upper Volta averaged 0.16 telephones per 100 inhabitants, one of the lowest in the world. A comparison with other developing countries shows the following: Kenya 1.05, Senegal 0.79, Tunisia 2.65, India 0.38, Pakistan 0.40 and Thailand 0.91. The telephone density in the two main cities of Ouagadougou and Bobo Dioulasso averaged 1.97. Annex 1 sets out international telephone statistics. About 80% of the main telephone lines are installed in the capital city Ouagadougou (59%), and Bobo-Dioulasso, the second main economic center (21%). Ninety one percent of the main telephone lines are connected to automatic exchanges located in the two above-mentioned cities and in four major provincial towns. Subscriber long distance dialing has been introduced in the domestic network and with France. In the six other provincial towns where the population exceeds 10,000 inhabitants each, telephone service is provided through small manual switchboards linked to the national network by overhead lines and rural carrier equipment. Public telephones are available at the post office in each of the few localities provided with telephone service. Telegraph service is also available to the public in each post office which transmits the messages directly by teleprinter through the domestic and international gentex system, or by telephone to the main telegraph center in Ouagadougou. In some remote locations without telephone service, transmission is by morse telegraphy through HF radio. 1.05 Mhen new telephone lines become available, priority allocation is given to government services, senior officials, embassies, medical doctors and the press. Any remaining lines are allocated to registered waiters on a first come first served basis with no distinction between business or residential applicants. Usage of Service 1.06 Comprehensive data on the characteristics of telephone users, and the purposes for which their telephones are used, are not available. A recent survey of telephone directory listings (see Annex 2) for three provincial towns with local and long distance subscriber dialing and for six smaller towns with small manual exchanges shows, however, that a very high proportion of main telephone lines are related to government administration and business usage. In the three larger towns which were surveyed, 37% of the lines relate to central and local government service activities while 43% are clearly associated with business endeavors; less than 20% of the telephones are listed only under the names of individual subscribers. In the six smaller locations, public services activities represent 67% of the total copnected lines, and businesses 20%. The remaining 13% of the lines in the smaller towns are listed under individual names which could also include some shops or businesses. Quality of Service and Existing Facilities 1.07 Since the commissioning of the new transmission and switching facilities under the second IDA project, the quality of the local, domestic  -3- long distance and overseas telephone service in Upper Volta is generally above the rather poor quality of service available in most other Western African countries. This applies, primarily, to those subscribers who have access to the automatic telephone and telex services. 1.08 Upper Volta has presently eight local automatic telephone exchanges with a total installed capacity of 7,800 lines, 5,549 connected main telephone subscriber lines, and 210 telex subscribers. Exchange capacity and subscriber lines as of December 31, 1980 and forecast (1982-1987) are given in Annex 3. The outside plants in urban areas are saturated, fault prone, and repairs are often slow. The proposed third telecommunications project is aimed partly at improving the reliability and capacity of these local networks which are now the weakest link of the currently installed Voltaic telecommunications system (para. 2.04). 1.09 The main domestic and regional long distance transmission facility consists of a backbone microwave link from the south western border with Ivory Coast to the eastern border with Niger. This link, which is part of the PANAFTEL telecommunications network, carries both the main domestic long distance traffic and the regional/international traffic with the neighboring countries of Ivory Coast, Niger, Mali and Togo. The long distance transmission routes which serve the rural areas consist of overhead lines with copperweld wires supplemented with radio carrier equipment. Most of these long distance overhead lines have been constructed or rehabilitated under previous development programs and are in acceptable condition (see Map IBRD 15669). OPT's subscribers have access to overseas telephone, telegraph and telex services through a Type B satellite earth station located near Ouagadougou. Demand for Service 1.10 Given the extremely low telephone density in Upper Volta, the embryonic nature of the network and the lack of penetration into many regions of the country, it is difficult to accurately forecast the future demand for telecommunications services. Historical expressed demand and traffic levels reflect, in many cases, a supply constraint rather than the real existing or potential demand. Annex 4 shows historical and projected growth of expressed demand and connected subscriber l