Nepal - Fourth Telecommunications Project

Document of The World Bank FOR OFFICIAL USE ONLY fILE GOPY Report No. 4915-NEP STAFF APPRAISAL REPORT NEPAL NEPAL TELECOMMUNICATIONS CORPORATION (NTC) FOURTH TELECOMMUNICATIONS PROJECT March 18, 1985 Industry Department Energy and Industry Staff 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 Bank authorization.  CURRENCY EQUIVALENTS Currency Unit: Nepalese Rupees (NRs) US$1 = NRs 18.501/ NRs 1 = US$0.540541/ NRs 1,000,000 = US$54,054.05'/ WEIGHTS AND MEASURES Metric System FISCAL YEAR (FY) July 16 to July 15 LIST OF ABBREVIATIONS AND ACRONYMS CIF - Cost, Insurance and Freight ERR - Economic Rate of Return FPU - Fundamental Planning Unit FRR - Financial Rate of Return HF - High Frequency HMG - His Majesty's Government of Nepal ICB - International Competitive Bidding IDA - International Development Association ITU - International Telecommunication Union JICA - Japanese International Cooperation Agency NCC - National Computer Center NTC - Nepal Telecommunications Corporation ODA - Overseas Development Agency of United Kingdom PCO - Public Call Office PCR - Project Completion Report PPAR - Project Performance Audit Report SDR - Special Drawing Rights STD - Subscriber Trunk Dialing TDN - Telecommunications Department of Nepal TTC - Telecommuncations Training Center UHF - Ultra High Frequency UNDP United Nations Development Programme VFT - Voice Frequency Telegraph VHF - Very High Frequency Currency exchange rate as of mid-January 1985.  NEPAL FOR OFFICIAL USE ONLY NEPAL TELECOMMUNICATIONS CORPORATION (NTC) FOURTH TELECOMMUNICATIONS PROJECT Table of Contents Page No. CREDIT AND PROJECT SUMMARY ......................... . ....... . iii Is INTRODUCTION ..................... ses .........so * ... s1 II. THE TELECOMMUNICATIONS SECTOR . .................... 2 A. Background and Organization ............... ... 2 B. Access to Service .e ... a ....... .......... 2 C. Usage of Service .......... ............. e...... 3 D. Existing Facilities and Service Quality 3 E. Demand for Service *........................ ........ 4 F. Sector Constraints ............................. e.. 5 G. Sector Goals .......... O..... 0 .... . .............. .a. 5 H. Role of the Bank Group ................ ............ 6 III. THE PROGRAM AND THE PROJECT ................ . a ...... . 8 As The Program so... ... v....at.....................%. 8 B. The Project .................a..........a... 9 C. Project Description ... *o. ...... ........a. aa 9 D. Project Costs ............. *.... ............ Is. 11 E. Contingencies ......... a a . . . a . O*aaa .* a aa 12 F. Project Financing .......... ........... o.......a.a.a.a..a.*....a.a.a.*. 13 G. Procurement ...... ... a ....a.a.... * ...... .. . e a s .e. 14 H. Project Implementation ....,..... ................... 15 I. Disbursements ..*..... a,.a.a...a.a . *0 ...a..a..... *..a 15 J. Performance Indicators ao o ...aaaa a . .. a aa*a 16 IV. THE IMPLEMENTING AGENCY ....aa........a ....a.a ... aa aa . as. 16 A. Organization and Management ...., .... ,... . ... 16 B. Consultants as ...a.. a ............... C . . 17 C. UNDP/ITU Experts ........aa a.......... a ....... a a . a 18 D. Staff ao,. * s a.. .......... a.aa. *.........aa.... 18 E. Training a....a ..a.a ..a ..a.....a..a.a..a*a.a....*a a* a 19 F. Accounting ..a..a .....aa ..aaa.aaaa...aaa.aa a aaa ..a oa a aa 20 G. Audit ............ a a a a ..............................aaa aa. 20 H. Billing and Collection a.. a a .... a aaa a a 21 I. Insurance a ..... a...... so .... a o ........... ...... aaa 22 This report was prepared by Messrs. D.F.D. Joshi (Senior Telecommunications Engineer), M. Sergo (Senior Financial Analyst) and B. Wellenius (Senior Economist) based on the information supplied by the Nepal Telecommunications Corporation (NTC) and the findings of Messrs. Joshi and Sergo during appraisal of the project in Nepal in September 1983, and during updating mission in February 1985. 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 Bank authorization.  - ii - Table of Contents continued Page No. V. FINANCES Finan.al.erforance. ............... 22 A. Past Financial Performance .......................... 22 B. Present Financial Position ................. ... 23 C. Valuation of Assets ............ 24 D. Projected Financial Performance ..................... 24 E. Financing Plan .. ................s. 25 VI. ECONOMIC ANALYSIS ................. ... ... . ... 27 A. Telecommunications and the Economy .................. 27' B. Distribution of Benefits ......... ....... 28 C. Program Size and Composition .............29 D. Least Cost Solution ........... *..... *... ....... 30 E. Fiscal Impact ................... ,....... o 31 F. Coverage of Foreign Debt Service .... 31 G. Tariffs ..31 H. Return on Investment ... ... . ................32 I1 Risks . ....... 33 J. Environmental and Health Aspects ... . .. 33 VII. AGREEMENTS REACHED AND RECOMMENDATIONS ..... ........ 34 List of Annexes 1. Distribution of Telephones between UJrban and Rural Areas . 36 2. Distribution of Telephone Lines by Economic Activity ..... 37 3. Existing Telephone Facilities ........................... 38 4. Telephone Demand and Supply ......................39 5. Investment Program and Sources of Financing, FY86-90 ..... 40 6. Annual Investment Program, FY86-90 ....................... 41 7. JICA Project ......... .........*..** ....ses......s . 42 8. Main Equipment Installations ............................ 43 9. Local Telephone Exchange Installations ............. .....* 44 10. Transmission Equipment Installations ..............*...... 45 11. Access to Telephone Service in Administrative Districts .. 46 12. Implementation Schedule (IBRD 25552) ................. *....s. 47 13. Schedule of Disbursements ............................... 48 14. Performance Indicators ......* *0O..... ******.... * 49 15. Organization Chart (IBRD 25553) ....................... 50 16. Fundamental Planning Unit (FPU) in NTC ................... 51 17. Staff in Different Categories ............................ 56 18. Income Statement ...................