Oman - Second Telecommunications Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 10743 PROJECT COMPLETION REPORT OMAN SECOND TELECOMMUNICATIONS PROJECT (LOAN 2513-OM) JUNE 16, 1992 Industry and Energy Operations Division Country Department II Middle East and North Africa Regional Office 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 AND EOUIVALENT UNITS Curtency Unit = Rial Omani (RO) RO 1 = US$2.895 (1985) US$2.895 (1986) = }US$2.6247 (1987 = JUS$2.7174 (1988) =- US$2.72 (1990) ABBREVIATIONS MP'IT = Ministry of Posts, Telegraphs and Telephones GTO = General Telecommunications Organization SOO Sultanate of Oman RO = Rials Omani TELEX = Switched Teleprinter Service FISCAL YEAR January I - December 31  FOR OFFCIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. ice of DirectwoG.eneeal )Peatknn Evaluatbn June 16, 1992 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on OMAN First Telecommunications Proiect (Loan 2513-OM) Attached, for information, is a copy of a report entitled "P-oject Completion Report on OMAN - First Telecommunications Project (Loan 2513-OM)" prepared by the Middle East and North Africa Regional Office. No audit of this project has been made by the Operations Evaluation Department at this time. Attachment 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.  FOR OFFICIAL USE ONLY PR'- ECT COMPLETION REPORT OMAN SECOND TELECOMNUNICATIONS PROJECT (LOAN 2513-OM) TABLE OF CONTENTS ZAgn Preface ......... ....................................* * i Evaluation Summary ..... ...... ... ........ ii Part I 1. PROJECT IDENTITY .... . ....... . .. ...1 2. BACKGROUND .......................................... 1 3. PROJECT OBJECTIVES AND DESCRrPTION ............. ..... 2 Project Objectives . ... ............**.*. 2 Project Description . ..... ....... . 3 4. PROJECT DESIGN AND ORGANIZATION . . . 3 5. PROJECT IMPLEMENTATION ............ ........ . 4 Loan Effectiveness and Project Stirt-up ........**..... 4 Implementation Schedule ....... ...................... 5 Project Costs ....... ........... ...... . 5 Disbursements .... . ..... ..... 5 6. PROJECT RESULTS ....... ........ . .... . 6 Overall Project Results ............ . 6 Results of Bank-Financed Components ................ 6 Operating Performance .............. .. 8 Institutional Performance . . 9 Manpower and Training . ........ . ... ..... 9 Accounts and Audit ... 9 7. PROJECT SUSTAINABILITY ...................... . 10 8. BANK PERFORMANCE ............. ... .............. . 10 9. BORROWER PERFORMANCE. ..... .... ..... . 10 10. COMPLIANCE WITH COVENANTS ........................... 11 11. PROJECT RELATIONSHIP ................ 11 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.  TABLE OF CONTENTS (Cont.) Page 12.. CONSULTING SERVICES .. ....... ..... * * * * 11 13. PROJECT IMPLEMENTATION AND DATA ..................... 11 14. CONCLUSIONS AND RECOMMENDATIONS . . ................... 11 Part II PROJECT REVIEW FROM BORROWER'S PERSPECTIVE .... 1 Part III STATISTICAL INFORMATION (Annexes).. *......... 31 Annex 1 - Related Bank Loans . . 32 Annex 2 - Project Timetable. 33 Annex 3 - Project Costs and Financing.......... 34 A. Project Costs.... . ..... 34 B. Project Financing .... 35 Annex 4 - Loan Disbursements. 36 Annex 5 - Project Implementation........... 37 A. Installed Plant Under Bank Financing 37 B. Buried Service Wire Project . 38 Annex 6 - Project Results.............. 39 A. Performance Indicators . ...... 39 B. Studiestudies...... 40 Annex 7 - Financial Statem en te 41 Annex 8 - Financial and Economic Rates of Return 44 Annex 9 - Missions.................... 45 Annex 10 - Compliance with Covenante 46  PROJECT COMPLETION REPORT OMAN SECOND TELECOMMUNICATIONS PROJECT (LOAN 2513-OM) PREFACE 1 . This report covers the Second Telecommunications Project in Oman, suppcrted by Loan 2513-OM. The Loan for US$23 million to the General Telecommunications Organization was signed on September 20, 1985 became effective on June 12, 1986 and was closed on June 30, 1991, the original closing date. 2. Parts I and III were prepared by Bank staff based on information available in the project files and information supplied by the General Telecommunications Organization. 3. Part II was prepared by the Borrower (General Telecommunications Organisation).  - li - PROJECT COMPLETION REPORT OMAN SECOND TELECOMMUNIZATIONS PROJECT (LOAN 2513-OM) EVALUATION SUMMARY BACKGOUND 1. Public Telecommunications services in Oman are provided by the General Telecommunications Organization (GTO), a government owned commercial enterprise under the overall direction of the Ministry of Posts, Telegraphs and Telephones. 2. The Bank has been associated with the telecommunications sector in Oman since 1977 through three telecom operations. The first operation was a Technical Assistance loan granted to the Government. Through this TA, consultants were employed for preparing the development program that formed the basis for the First Telecommunications Project. The First Telecommun!cations Project, Loan 1884-OM for US$22.0 million was approved on June 24, 1980 and closed on March 25, 1985. The Second Telecommunications Project, Loan 2513-OM was a follow up project, approved on April 11, 1985 and closed on June 30, 1991. PROJECT OBJECMYE AND PROJECT DESCRIPI ON 3. In the Third National Development Plan (1985-1990), The Sultanate of Oman set the following goals for the telecommunications sector: i) the provision of an effective telecommunications service as a prerequisite of economic diversification; and ii) the continued development of GTO as an efficient telecommunications organization with effective technical and financial management. To achieve these objectives the project aimed at: (a) installing a total 65,000 additional exchange lines and expanding the international, long distance and external line plant networks to match the additional lines; and (b) carrying out studies and implementing technical and financial training programs. PROJECT IMPLEMENTATIQON 4. To ensure timely implementation of the project, bid invitation for Bank financed goods was made a condition of Loan effectiveness. This lead to start up delays of about one year. The bids which, during negotiations in December 1984 were planned to be issued in April 1985, were not issued until April 1986. The main reason for the delay was a change by the Government and GTO in the location of the physical components to be financed under the Bank loan. In September 1985, the new locations were agreed upon between the Bank and GTO after which GTO proceeded to prepare the bid documents. Even with the initial start up delay of one year, the project was substantially completed by December 31, 1990, as had been originally scheduled. PROJECT COSIS 5. At appraisal in July 1984, the estimated total project cost was RO 78.5 million (US$227.8 million equivalent). In 1985, the GTO completed preparation of its 3rd five-year (1986-1990)  - iii - development program which was larger in scope than that appraised for Loan 2513-OM; the total cost of the new program was RO 125.4 million. In 1987, due to depressed economic activity, the program was reduced to RO 104.3 and spread over a longer implementation period to 1993. At completion i.e. December 31, 1990, total investment costs were RO 60.9 million i.e. US$169 million equivalent. PROJECT RESULTS 6. Even with the reduced investments GTO achieved most of the physical objectives set at appraisal. The project aimed at 129,900 lines of local exchange equipment. At the end of the project, the achievement was 152,380 lines (17% above target). Subscriber connections were planned to reach 110,500 lines by end of 1990 but the achievement was 97,730 lines i.e. 11%. below appraisal estimate due to depressed economic activity. By the end of the project, the telephone penetration was about 6.5% per 100 inhabitants compared to a target of 7.2. This was satisfactory considering the adverse economic conditions. There was practically no registered unmet demand at the end of the project. 7. GTO's financial performance was generally satisfactory throughout the project. The financial objectives set at appraisal assumed a favorable economic growth consistent with the previous years. The oil glut slowed down the economy substantially, but due to prudent financial management, the adverse impact on the financial performance of GTO was minimal. 8. The internal rate of return for the 1985-1990 investments was 29% compared to an appraisal estimated of 16%. The Economic rate of return was 35% compared to 29% estimated at appraisal. 9. GTO's financial management was weak in the area of collection. The performance on receivables was unsatisfactory throughout the project, reaching a figure of 100 days at the end of 1990 instead of the 60 days estimated at appraisal. The main debtor has been the Government, accounting for 56% of the total debt although constituting only 22% of billing. Receivables from non-government users were within the set target of two months of billing. GTO is now discussing the receivables problem with the Government. 10. In the billing area, GTO made tremendous improvement from quarterly billing at the beginning of the project to monthly billing at the end of the project when bills are issued within 8 days of the month end. ISiUTITUMNAL. PERFORMANCE 11. ibe management of GTO has been sound and the successful implementation of the project bears witness to this. At appraisal, it was noted that although the present management was capable of efficiently administering the present organization, the decision-making structure was highly centralized. The GTO has recently adopted a new organization structure. The structure has been designed to meet GTO's present and future challenges of satisfying Oman's economic and social requirements for telecommunications services. The structure is less centralized and it is gratifying that most of the top positicnc (lst and 2nd level) have been filled by competent Omanis.  - iv - MANPOWER AND TRAINING 12. The project set out to achieve two objectives in this area. Firstly, the staff ratio, i.e. the number of staff per 1,000 connected lines would be reduced from a figure of 70 in 1983 to 26 in 1990 an efficiency improvement of 63%. Secondly, Omanization would be increased through intensive training. The staff ratio achieved of 19 exceeded appraisal estimates by 27%. Omanization, now at 80% compared to 68% at the beginning of the project, proceeded very satisfactorily. PROJECT SUSTAINABILITY 13. The project was instrumental to the installation of an institutional system that will steer GTO through to the future. The Management Information Systems that have been introduced in GTO throigh the Computerization Program have put GTO on a level of financial management operations equal to those in the industrialized world. The establishment of a Corporate Planning Unit has created a process which is constantly reviewing tariffs in accordance with the varying costs of providing service. The overall management of GTO ha5 been modernized and thanks to intensive training, most of the systems established can be manag'id by Omanis. Thus, although there are still many expatriates assisting in the management of these systems, the backbone Omani staff is capable of sustaining their operation. However, more training :.eeds to be done before the expatriates can be completely replaced. 14. Un the physical part, modern equipment has been installed and utilization is satisfactory considering the adverse economic conditions. Revenues to De realized from this equipment will enable GTO to reinvest in future expansion of the network. GTO is now completely self sufficient financially generating sufficient revenues for its operational and developmental requirements. CONCLUSIONS 15. There were no major problems encountered in this project. The objectives of the project were substantially fulfilled as outlined above. Bank's main contributions were two fold: (a) rendering assistance in the establishment of appropriate management systems which substantially enhanced the efficiency of GTO; and (b) through international competitive bidding, enabling GTO to obtain equipment at very competitive prices. The unit costs for the equipment procured under Bank financing were more than 30% below equipment procured through direct contracting. 16. There are two main lessons to be learnt from this project: (a) with disciplined management, judicious use of consultants and execution of turnkey projects, project implementation can be achieved economically and on time; and (b) building of manpower capacity is a long and arduous process. For it to succeed it must be well planned and implemented over a long time. Despite GTO's commendable intensive efforts to train Omanis it will still need expatriates for a long time if it is to maintain its efficiency. The GTO has been very realistic as far as this problem is concerned and has replaced expatriates where it was absolutely sure that Omanis could perform the duties.  PROJECT COMPLETION REPORT ONAN SECOND TELECOMMUNICATIONS PROJECT (LO&N 2513-ON) PART I 1. pROJECT IDENTITY Title: Second Telecommunications Project Loan No: 2513-OM RVP Unit: EMENA Country: Oman Sector: EM3IE Subsector: Telecommunications 2. BACKGROUND 2.01 Public Telecommunications services in Oman are provided by the General Telecommunications Organization (GTO), a govermment owned commercial enterprise under the overall direction of the Ministry of Posts, Telegraphs and Telephones (MPIT). It was established on June 30, 1980 under Royal Decree 43/80. GTO is managed by a President who is the Chief Executive and a member of the Board of Directors. He is responsible for carrying owt the directives of the Board whose ex-officio chairman is the Minister of Posts, Telegraphs and Telephones. 2.02 The Bank has been associated with the telecommunications sector in Oman since 1977 through three telecom operations (Annex 1I: (a) The first operation was a Technical Assists; ..e (TA) Project, Loan 985-OM, granted to the Government of Oman. Through this TA, consultants were employed for preparing the development program that formed the basis for the First Telecommunications Project; (b) The First Telecommunications Project, Loan 1884-OM for US$22.0 million was approved on June 24, 1980 and closed on March 25, 1985; and  (c) The Second Telecommunications Project, Loan 2513-OM was a follow up project approved on April 11, 1985 and closed on June 30, 1991. 3. PROJECT OBJECTIVES AND DESCRIPTION 3.01 Setor evelopment Obiectives The early eighties witnessed a sharp increase in infrastructure investments fueled by rising oil revenues. The Sultanate of Oman (SOO) having realized the importance of telecommunications as an essential infrastructure increased its 1981-85 investment from a planned US$160 million to US$287 million because of the rapid growth in the demand for telecommunications services due to the rapidly expanding economy. In the Third Na- :onal Development Plan (1985-1990), SOO set the following country sector goals: i) the provision of an effective telecommunications service as a prerequisite of economic diversification; and ii) the continued development of GTO as an efficient telecommunications organization with effective technical and financial management. Specifically, over the development period 1985-1990, the total telephone exchange capacity was planned to grow at an average rate of 28% per annum to 129,900 lines to enable 95% of anticipated demand to be met by 1990; the percentage of total population with access to telephone service was to be increased to about 65% with the installation of exchanges and public call offices in additional rural townships and village communities; the connected lines per 100 population was to be increased from 1.7 (in 1983) to 7.2 in 1990; and GTO's efficiency was to be increased through improvements in organization and management and increased staff training. 3.02 Project Objectives The project was designed to: a) further strengthen GTO as an institution to enable it to manage most work in the sector by 1990 including support of: i) GTO's efforts to increase the number of trained, qualified Omanis; and ii) creating in-house capabi,..y for economic studies and demand forecasting, and helping GTO to establish appropriate tariff structures in the light of the foreseen expansion of services. b) through a balanced package of works, expand the local telephone faci.ities in existing telephone switching centers, provide telephone service for the first time to about 37 rural communities and expand domestic long distance and international telephone facilities to carry the additional traffic genezated by local network expansions.  -3 - 3.03 preject Descriptlon The main components of tde project were: a) provision and installation of: i) about 65,000 additional lines of local exchange equipment (36,000 in the. Capital area, 10,000 in Salalah and 19,000 in the rest of Oman) with associated cable and subscriber plant to provide about 62,000 subscriber connections and about 460 local/long d.stance public call offices; if) a digital international exchange of about 600 lines; iii) equipment for upgrading one existing coaxial cable and four microwave backbone links and for providing two new microwave links and eight spur links; iv) satellite communication equipment for upgrading the earth station at Salalah, expanding the Al Hajar earth station and establishing additional TV receive only stations in rural areas; v) equipment for extension of the mobile telephone network; vi) a computer for telephone billing and other data processing applications; vii) training equipment; and viii) other equipment (primarily, equipment for maritime communications, teleprinters and vehicles). b) construction of exchange buildings and staff accommodation; and c) carrying out of tariff studies, establishing of an economic studies unit, computerization of accounting and other functions, and development and Lnplemen'..on of technical and financial training programs. 4. PROJECT DESIGN AND ORGANIZATION 4.01 The project was designed within the framework of the Government's Telecommunications Development Program for the period 1985-90 which was under preparation during appraisal. The project was prepared by GTO with the assistance of consultants. Appraisal of the Project by the Bank took place in July 1984. The experience gained in the implementation of the first project played a major role in designing the second project. The thrust of the second project was directed towards continued institutional improvement of GTO in planning, project implementation and strengthening its financial position in the light of GTO's desire to accelerate network expansion. The Technical Assistance component of the project therefore included carrying out tariff studies, establishment of a corporate planning unit, computerization of accounting and other functions, aP4i uevelopment and implementation of technical and financial  -4 - training programs. To underscore the importance of the T.A., the issuance of Letters of Invitation for the consultants to carry out the studies was a condition of Board presentation. 4.02 The concept of the project was well understoou by GTO management as manifested by its very effective and timely implementation of the project. The project was well prepared and timely, serving as a critical bridging between dependency of GTO on external financing and complete self financing from internally generated funds. 4.03 At the appraisal time the cost of components to be financed by the Bank was set at US$10.0 million but at negotiations, with the request of the Oman Delegation, the amount was increased to US$23.0 million to ensure a more significant impact of Bank participation in the project. 5. PROJECT IMPLEMENTATION 5.01 Loan Efeivenes a-up. To ensure timely implementation of the project, bid invitation for Bank financed goods was made a condition of Loan effectiveness. This resulted in start up delays; thus, although the loan was signed on September 20, 1985 and scheduled to be effective on December 20, 1985, the loan was not effective until June 12, 1986 (Annex 2). The bids which, during negotiations in December 1984 were planned to be issued in April 1985, were not issued until April 1986. The main reason for the delay was a change in the location of the physical components to be procured under the Bank financed loan. 5.02 During negotiations it was agreed that the Bank loan of US$23.0 million would finance, besides consultancy and training, the switching and external cable network of the rural component of the development program. The rural component consisted of provision of modem telephone facilities to about 37 rural areas scattered all over Oman. The rural component was specifically chosen for Bank financing because of its economic impact and since the facil.ties to be installed were new, this part of the program easily lent itself to procurement by international competitive bidding. However, after Board approval, SOO decided that services to 36 of these rural areas should be provided by the National day on November 18, 1986. To meet this date, GTO directly contracted the supply and installation of the switching and external cable network (from Main Distribution Frame to Distribution Point) to L.M. Ericssor of Sweden. The Subscriber Service Leads (from Distribution Point to subscriber Premises) were not included in the Ericsson contract. This part was included under Bank financing. 5.03 Following GTO's decision to contract the bulk of the rural portion to L.M. Ericsson. new project components had to be identified for financing under the Bank. These included: a) Subscriber service leads for about 23,000 lines for the 36 rural areas contracted to L.M. Ericsson (para 5.02); and b) transmission network, switching and local networks for six main towns in Batinah Coast namely: - Quriyat: 1,400 lines - Suwaiq: 2,600 lines - Rustaq: 1,500 lines - Saham: 2,300 lines  - Barka: 3,368 lines - Khaburah: 2,496 lines and six other small towns namely: Dhagmar, Mazara, Nakhal, Awabi, Huqain, Bidaya c) Network expansion in Seeb, Masnah, Fanjah and Masirah by about 1,800 lines. The new components were consistent with those originally contained in the Staff Appraisal Report and GTO attached highest priority to the implementation of these components. 5.04 After agreement with the Bank on the project components in September 1985 GTO prepare i the bid documents which were issued in April 1986. Since then the project proceeded without any hitches. Implementation Schedule 5.05 Procurement action by GTO was carried out expeditiously. There were no major procurement issues experienced in this project due to the discipline of GTO management (Governance) to observe laid down Bank rules and regulations. Even with the initial start-up delay of about one year, the project was substantially completed by December 31, 1990 as had been originally scheduled. PEriec Costs 5.06 At appraisal, the estimated total project cost was RO 78.5 million (US$227.8 million equivalent), with a foreign exchange component of US$154.8 million or 68 percent of total project cost. In 1985, the GTO completed preparation of the 3rd five-year (1986-1990) development program which was larger in scope than that appraised for Loan 2513-OM; the total cost of the new program was RO 125.4 (US$363 million equivalent) i.e. 62% above appraisal total costs. Due to a down-turn in economic activity arising from the oil glut, GTO decided to reduce the investment program to RO 104.3 million (US$301.1 million equivalent) and extended implementation period by three years to 1993. At compL!ticn of the project i.e. December 31, 1990, total investment costs were RO 60.9 million i.e. US$169 million equivalent. Amex 3 of part III details the estimated original and final actuals. The reduced investment was due to a down-turn in economic activity, and thus demand, arising from the oil glut. Equipment costs for the Bank financed portion were very competitive due to International Competitive Bidding. It is estimated that the unit costs were more than 30% below costs of equipment procured through other means. GTO used this low unit cost as a reference to negotiate prices for all other equipment in the program. As a result, the overall cost of the investment program was substantially reduced. Disbursements 5.07 Disbursements were lagging in the first two years because of implementation start up delays (para 5.01), but after that they picked up and the Loan was closed as originally scheduled, on June 30, 1991. The original and actual disbursements and allocation by categories are shown in Annex 4. The last disbursement was made on July 17, 1991.  -6 - 6. PROJECT RESULTS A. Oaerall Results 6.01 GTO implemented the project according to the revised plan (para 5.06) and the results were satisfactory. a) The following installations were done: i) 78,920 lines of local exchange equipment i.e. 21 % above planned target of 65,000 lines; ii) a 1,000 line international digital exchange (600 line planned); iii) one coaxial cable and four microwave links upgraded, two new microwave and eight spur links provided as planned; iv) Salalah and Al Hajar earth stations upgraded as planned; v) limited expansion of mobile telephone network to cover all major towns compared to Muscat and Salalah only at the beginning of the project; vi) a computer for telephone billing and other data processing applications was bought from the Ministry of Finance at a reasonable cost; and vii) training equipment to upgrade the training school to a medium level training school. Items which were not implemented due to depressed economic conditions are: additional TV receive only stations for rural areas, maritime communications and teleprinters. b) Construction of exchange buildings and staff accommodation. B. Bank-Financed Components 6.02 Subscriber Buried Service Wire. This component provided complementary plant for the switching equipment contract with L.M. Ericsson of Sweden. A total of 35 rural locations (Armex 5) were covered and some 226 cabinets have beea installed. Customer response has been so good that most of the original capacity of 26,000 lines has already been expanded under GTO financing. 6.03 Batinah Coast Expansion. This component provided a total of 16,448 lines of switching capacity in 12 towns served by 82 cabinets covering 101 communities. The list of towns covered is attached as Annex 5. Subscriber response has also beeii so positive that additional capacity of about 14,000 lines has been installed and another expansion of 2,200 lines has already been contracted.  - 7 - 6.04 Network Expansion in Seeb. Masnah. Faniah and Masirah. The contract for extending the external cable networks in these areas was completed at the end of 1988 leading to an increase of 1,800 subscribers by the end of 1989. Technical Assistance 6.05 Tariff and CorMorate Planning Studies. Consultants (Coopers and Lybrand of U.K.) were employed to carry out studies on tariffs and to advise on appropriate organizational changes that are necessary in GfO to strengthen corporate planning. These studies were completed at the end of 1986 culminating in proposals for changes in tariff levels and structure and the creation of a corporate planning unit. The first task of the unit was to review the tariff recommendations made by the consultants and since then the GTO has implemented a number of changes in tariffs including: reduction in telex tariffs; change of tariff levels and structure of local and long distance telephone calls including the introduction of local call timing; and reduction of international tariffs. GTO has now got a system for regular review of tariffs. The last tariff review in October 1991 resulted in reduction of international rates. 6.06 ComDuterizatio. This component, which started with the formulation of a long term strategy for computerizing practically all the activities of GTO, has gone a long way. Five major systems have been implemented and are operating satisfactorily. These include: subscriber billing; inter-administration accounting; network records; traffic analysis; payroll; and personnel. The introduction of these systems has greatly enhanced the efficiency of GTO. The most remarkable achievement is the issuance of bills within 8 days of month end compared to quarterly billing at the beginning of the project. Operating Performance 6.07 GTO maintained satisfactory technical and financial performance throughout the project. GTO met most of the operational performance targets and exceeded in some of them. This is commendable considering that the economy was in a depressed state for most of the project period due to falling oil prices. Technical Performance 6.08 The project achieved most of its operational objectives as indicated in the performance indicators, Annex 6. Subscriber connections were planned to reach 110,500 lines by end of 1990 but the achievement was 97,730 lines i.e. 11% below estimated target due to depressed economic activity. By the end of the project, the telephone penetration was about 6.5 per 100 inhabitants compared to a target of 7.2%. This was satisfactory considering the adverse economic conditions. 6.09 Telex demand declined throughout the project due to increased use of facsimile, which is a worldwide phenomenon. Thus the target of 2,600 lines was not achieved and instead there was a decline from 1,470 lines in 1985 to 1,070 at the end of the project (27% decline). Telex service is expected to continue declining at the rate of 13% in the next five years. GTO has been urged to review the tariffs for these services to stimulate utilization.  Financial Performance 6.10 GTO's financial performance was generally satisfactory throughout the project (Annex 7). The financial objectives set at appraisal assumed a favorable economic growth consistent with the previous years. *The oil glut slowed down the economy substantially but due to prudent financial management, the adverse impact on the financial performance of GTO was minimal. Annual revenue per DEL declined from RIAL OMANI (RO) 872 in 1985 to RO 465 in 1989 and in 1990 it rose by 4% to RO 485. Appraisal estimates projected a decline from RO 872 in 1985 to RO 643 in 1990. The rise in 1990 was an indication that the economy was picking un but it was also a reflection of tariff adjustments and the marketing efforts of GTO. Cash operating cost per DEL was kept low at RO 213 compared to an appraisal estimate of RO 290. Telex revenue per line dropped to RO 2,173 compared to RO 6,000 estimated at appraisal. The profitability of GTO was sound throughout the project enabling it to pay an annual dividend of RO 10.7 million to its shareholder, the SOO in 1989 and 1990. The target rate of return on average net fixed assets of 19% could not be achieved at the end of the project but only 11 % was achieved. The lower figure achieved was mainly due to less utilization of the network (66% fill against an appraisal estimate of about 85%) and a revised depreciation policy which allows for a much higher factor for obsolescence than estimated at appraisal. GTO's financial structure remained sound throughout the project although the current ratio of 1.7 at the end of 1990 was much lower than the estimated figure of 4. The major reason for the variance is the financing of work in progress from GTO's internal cash generation. Debt service coverage was kept in control with a coverage of 16 compared to 3 because of the funds which were intended to be borrowed from the SOO (RO 22.4) were given as equity. 6.11 GTO's financial management was weak in the area of collection. The performance on receivables was unsatisfactory throughout the project reaching a figure of 100 days at the end of 1990 instead of the 60 days estimated at appraisal. The main debtor has been the SOO, accounting for 56% of the total debt although constituting only 22% of billing. Receivables from non-government users were within the set target of two months of billing. GTO is now discussing the receivables problem with the Government. 6.12 In the billing area, GTO made tremendous improvement from quarterly billing at the beginning of the project to monthly billing at the end of the project when bills are issued within 8 days of the month end. Financial and Economic Rate of Return 6.13 The internal rate of return for the 1985-1990 reduced investment was 29% compared to an appraisal estimate of 16%. The economic rate of return was 35% compared to 29% estimated at appraisal. Institutional Performance 6.14 The management of GTO has been sound and the successful implementation of the project bears witness to this. At appraisal, it was noted that although the present management was capable of efficiently administering the present organization, the decision-making structure  9 - was highly centralized. The GTO has recently adopted a new organization structure. The structure has been designed to meet GTO's present and future challenges of satisfying Oman's economic and social requirements for telecommunications services. The structure is less centralized and it is gratifying that most of the top positions (1st and 2nd level) have been filled by competent Omanis. Manpower and Training 6.15 The project set out to achieve two objectives in this area. Firstly, the staff ratio, i.e. the number of staff per 1,000 DELs would be reduced from a figure of 70 in 1983 to 26 in 1990 an efficiency improvement of 63%. Secondly, Omanization would be increased through intensive training. The staff ratio achieved of 19 exceeded appraisal estimates by 27%. Omanization, now at 80% compared to 68% at the beginning of the project, proceeded very satisfactorily. Until recently, Omanization was concentrated on the lower levels but GTO has now turned its attention to the middle levels where Omanization is still less than 50%. GTO has placed Omanis in key middle level management positions and the expatriates have been asked to take the back seats. There is a need for GTO to prepare a comprehensive manpower plan to map out exacdy how and when 100% Omanization is going to be realized at the middle level. Training is key to the success of the whole plan and the need to develop individual tailored training for each of these managers was emphasized during supervision missions. Accounts and Audit 6.16 GTO accounts and audit were completed on time as covenanted in the Loan Agreement that is 4 months to complete draft accounts and 6 months to complete the audit. The audits were normally completed by end of April of the year following. The main reason for this excellent performance was good management and the computerization of accounts that was done as part of this project. 7. PROJECT SUSTAINABILITY 7.01 The project was instrumental to the installation of an institutional system that will steer GTO through to the future. The Information Management Systems that have been introduced in GTO through the Computerization Program has put GTO on a level of financial management operations equal to that in the industrialized world. The establishment of a Corporate Planning Unit has created a process which is constantly reviewing tariffs in accordance with the varying costs of providing service. The overall management of GTO has been modernized and thanks to intensive training, most of the systems established can be managed by Omanis. Thus, although there are still many expatriates assisting in the management of these systems, the backbone Omani staff is capable of sustaining their operation. However, more training needs to be done before the expatriates can be completely replaced. 7.02 On the physical part, modern equipment has been installed and utilization is satisfactory considering the adverse economic conditions. Revenues to be realized from this equipment will enable GTO to reinvest in future expansion of the network. GTO is now  - 10- completely self sufficient financially generating sufficient revenues for its operational and developmental requirements. 8. BANK PERFORMANCE 8.01 The overall Bank performance in this project has been good. The Bank identified basic institutional weaknesses in the GTO in the areas of corporate planning, tariffs, and computerization. The Bank assisted GTO to prepare the terms of reference for the consultants and assisted in the review and implementation of their recommendations. As a result, a Corporate Planning Unit was established and computerization was implemented in a number of activities in the GTO (paras 6.04 and 6.05). 8.02 The Bank dealt with the processing of bid documents expeditiously. Some minor delays were experienced at the beginning in the clearance of bidding documents but this was quickly resolved after a team of GTO engineers visited Washington. 8.03 The Bank supervised the project once a year and a total of 7 missions were made during the project (Annex 9 . The missions were adequate and very beneficial to both parties. GTO prepared thoroughly for these missions and basically all issues were cleared during the supervision missions. 9. BORROWER PERFORMANCE 9.01 Borrower performance was excellent. The Borrower understood the objectives of the project very clearly and employed all required resources to make it a success. Anv shortcornings in meeting set objectives were normally outside the competence of GTO. For instance, the problem of meeting the rate of return was mainly due to adverse economic conditions and the accumulation of receivables could only be handled by the Government. The greatest strength of GTO is management discipline which is exemplary. GTO management was fully aware of what to expect from the consultants and this paid high dividends. 10. COMPLIANCE WITH COVENANTS 10.01 The Borrower complied with covenants except those related to rate of return and Accounts receivable (Annex 10). Accounts receivable were 100 days (para 6.09) at the end of 1990 compared to a covenanted target of 60 days. The S00 was the main debtor and discussions are still going on regarding offsetting this debt against dividend payment. The rate of return on fixed assets was 11% compared to a projected figure of 19 %. This could not be achieved because of the depressed economy, which led to less utilization of the network, and much higher asset depreciation figures adopted by GTO. GTO is trying to improve utilization through marketing, including reduction of tariffs. 11. PROJECI RELATIONSHIP 11.01 The relationship between the Bank and the Borrower was maintained at an excellent level. The main reason for this good relationship was the mutual understanding of their common  - 11 - objectives to develop telecommunications in Oman. The Bank and GTO worked as a team during project preparation and appraisal and all the project components (physical and T.A.) were decided jointly which made GTO fully committed to them, especially the T.A. The role of the Bank as a partner in development has been demonstrated by GTO's intention to maintain contacts with the Bank in this sector even after the Project has been closed. Oman has now graduated from Bank lending but GTO has indicated that it may finance Bank missions on reimbursable basis in future to maintain the exchange of ideas that has prevailed in the last decade, when the Bank first got involved in the sector. 12. CONSULTING SERVICES 12.01 Consultants played a very important role in this project. The consultants were retained to undertake three studies: establishment of a Corporate Planning Unit within GTO; tariffs, and computerization. The consultants successfully carried out those studies and assisted GTO in the implementation of their recommendations. A Corporate Planning Unit is now established, tariffs are regularly reviewed by this Unit and many management systems have been computerized. These achievements would have taken GTO a long time to achieve on its own. 12.02 The physical implementation of the project went on very smoothly mainly because the contracts were awarded as supply and erection contracts thus reducing the coordination work on the part of GTO. The contractors generally performed satisfactorily. 13. PROJECT DOCUMENTATION AND DATA 13.01 The Staff Appraisal Report and the Legal Agreements provided a good framework for the Bank and the Borrower during project implementation. The targets set were generally realistic and variances could be explained. The supervision mission have been well documented and the data for this PCR was essentially obtained from the Supervision Reports. 14. CONCLUSIONS AND RECOMMENDATIONS 14.01 There were no major problems encountered in this project. The objectives of the project were substantially fulfilled as outlined above. Bank's main contributions were two fold: (a) renrdering assistance in the establishment of appropriate management systems which substantially enhanced the efficiency of GTO; and (b) through international competitive bidding, enabling GTO to obtain equipment at very reasonable prices. The unit costs for the equipment procured under Bank financing were more than 30% below equipment procured through direct contracting. GTO used the low unit costs as reference to negotiate prices for all other equipment under the program. 14.02 There are two main lessons to be learnt from this project: (a) with disciplined management, judicious use of consultants and execution of turnkey projects, project implementation can be achieved economically and on time; and (b) building of manpower capacity is a long and arduous process. For it to succeed, it must be well planned and implemented over a long time. Despite GTO's commendable intensive efforts to train Omanis, it will still need expatriates for a long time if it is to maintain its efficiency. The GTO has been very realistic as far this problem is concerned and has replaced expatriates where it was absolutely sure that Omanis could perform the duties.  - 12 - 14.03 Oman's telecommunications sector is a success story for the Bank. There is a lot that can be learned from the GTO's performance by other Borrowers of the Bank. Through two projects the Bank has assisted GTO to reach a level of performance commensurate to that attainable in the industrialized countries.  - 13 - PROJECT COMPLETION REPORT OMAN SECOND TELECOMMUNICATIONS PROJECT (LOAN 2513-OM) PART II PROJECT REVIEW FROM BORROWER'S REVIEW PERSPECTIVE  - 14 - t?1t 1oA 4k ~~~~~~~~~~~~4~ J JtSLj sh1 i- Our Rof. r:TO/8/ /92 Dow: 29th April 1992 : Mr. Rogati Kayani Senior Telecommunications Engineer Africa Region World Bank Telecommunications Divisi ,n 1818 H Street Washington DC 20433 United States of America Dear Rogati, Please find enclosed a draft copy of the Project Completion Report. Before proceeding on leave I left a copy with His Excellency President for his approval. Please let me know If you have any suggested chonges or additions. I will confirm H.E. President's approval on my return from leave. best regards, Yours faithfully, shworth ir tor General of Finance 6Y7W..S7 .-5soo GTOF CEON - ,J 41 Jl4 J,.. A.5t .5 j : . /.Zgmut.96 J. .: #J,v V - ~ J~J CaL,o1 V A  - 15 - CONTENTS 1. THIRD FIVE YEAR PLAN 2. ACHIEVEMENTS DURING THE THIRD FIVE YEAR PLAN 3. FINANCIAL PERFORMANCE 4. DEBT COLLECTION 5. INTER-ADMINISTRATION 6. ESTABLISHMENT OF CORPORATE PLANNING DEPARTMENT AND REVISION OF TARIFFS 7. COMPUTERISATION B. PROJECTS FINANCED BY WORLD BANK 9. RELATIONSHIP WITH WORLD BANK  - 16 - 1. THIRD FIVE YEAR PLAN The Third Five Year Plan covered the period 1986-1990 and was initiallly set at RO.125.4 million. This five year development plan was based upon the telecomnvrnication Master Plan which was finalised in April 1986. The sharp fall in oil prices in 1986 seriously slowed the economy and led to the delay in implementation of some telecommunication projects. The result was that at the end of 1990 a number of the planned projects were still in progress. It was decided that those projects that had not commenced would be deffered to the Fourth Five Year Plan from 1991-1995 and hence the Third Five Year Plan was reduced to RO.104.3 million. The Fourth Five Year Plan amounts to RO.93.3 million. (RO.million) Original Revised 86 87 88 89 90 91 92 93 125.4 104.3 4.156 17.395 8.763 14.082 16.561 14.410 20.307 9.824 THIRD FIVE YEAR PLAN EXPENDITURE BY REGION MUSCAT BATINAH DHOFAR MUSSANDAM 0.6% SHRQULAH DHAHIRAH DAKHELLAH  - 17 - 2. ACHIEVEM_ENTS DURING THID FIVE YEAR PLAN At the commencement of the third five year plan GTO had an exchange capacity of 73,436 and 36,654 fixed telephone subscribers. By the end of the plan in 1990 capacity had increased by 96% to reach 143,580 with 97,735 working subscribers. As at the end of 1991 capacity was 159,600 of which 113415 were working, an exchange capacity of 71%. GTO introduced a mobile telephone system in November 1985 with an exchange capacity of 4500 lines. By the end of 1990 working subscribers had reached 2591 with a further substantial increase in 1991 to 3542. _XCHANGE CAPACITY AND WORKING LINES_ 160K -I 140K- 120K- 100K- 80K * WORKING 60K - l CAPACITY 40K- 20K * 81 82 83 84 85 86 87 88 89 90 91 During the period of the plan GTO conducted trials with card operated payphones. The prefered payphones were introduced in 1988 with 178 working by the end of 1990, and 930 by the end of 1991. A further 2000 are due for delivery in 1992. Revenue from card sales continues to outstripe forcasts and is still increasing. GTOs experience is that cardphones meet a market demand allowing people who previously did not have easy access to a telephone to now make calls. Cardphones are relatively easy to maintain and provide good cashflow with no credit risk for a minimal commision to card agents. GTO would recomend that other clients of the bank consider installing cardphones as a priority to new and existing networks.  - 18 - As part of the fourth five year plan GTO 5K MOBILE TELEPHONES introduced a radio paging network in December 1991 which was well recieved and 4Kn met initial heav-' demand. The paging 3 WORlO service will co, cr the majority of the country 3K lllJUNO by the end of 1992. 2K OCl ACIlY IK 86 87 88 89 90 91 3. FINANCIAL PERFORMANCE, GTO has been profitable since its inception in 1980 with an increasing profit trend upto 1986. Lower economic activity following the oil price collapse of 1986 led to a reduction of profits in 1987. However, strict management control of operating costs and manning levels ensured that GTO still generated a respectable level of profit despite adverse economnic conditions. Since the decline in 1987 profits have resumed their upward climb reaching nearly RO 20 million in 1991. OPERATING PROFIT 20K 15K- 10K- SK- SI 82 83 84 85 86 87 88 89 90 91 (3TO suffered a considerable loss on exchange in 1985,19076 and 1987 due to the devaluation of the Omani Rial following the oil price fall of 1986 and the general weakening of the US Dollar to which the Sultanates currency is linked.  - 19 - During 1987 GTOs outstanding loans to the governmer,t were converted to equity bringing total shareholders funds to RO 50 million. At the same time GTO agreed to commence divedend payments which by the end of 1991 have totalled RO 52.7 million. Hence in the relatively short period of only CUMULATIVE DIVIDENDS eleven years GTO has built an extremly modem 60K telecommunications network covering the vast SOK majority of the country at what is effectively 40K zero cost to the government. At the same time 30K - GTO has been able to implement a programe of 20K - continuing tariff reductions, meet loan 10K* repayments and finance a substantial capital L _ expenditure investment programe,all from 85 86 87 88 89 90 91 internally generated funds. 20K -NET PROFIT 15K- 10K- 5K- 81 82 83 84 85 86 87 88 89 90 91 Revenue per line has fallen sharply REVENUE PER LINE since the beginning of the third five REVENUE PER LINE year plan, from RO.872 in 1985 to 800 - RO.501 in 1991. This reduction reflects 800 the increasing rural coverage of the 600. _ _network. However, the revenue per line 600 - - now seems to have levelled off at 500- approximately RO.500 probably due to 400. increasing economic activity. 300* 200 100 85 86 87 88 89 90 91  - 20 - PERFQRNM I@CATORS (RO.OOOs) 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 Operaing profit 3,132 5,489 8.179 12,000 14,637 16,112 11,122 1-,624 12,967 14,710 19,592 Net Profit 3,560 6,672 9,077 12,432 10,790 9,064 5,007 13,818 13,650 13,461 19,908 Dividend - - - - - - 4,005 11,054 10,920 10,769 15,926 Retur on ave. 27.18 49.23 48.56 31.47 20.40 7.75 3.73 9.89 9.84 9.66 14.24 assets (%) Returnoncap. 10.75 16.52 18.25 19.85 15.09 8.82 4.82 12.97 12.49 12.02 17.17 employed (0/%) Curfent Ratio 4.20 5.51 4.41 1.89 1.36 1.02 1.80 1.99 2.16 1.58 2.94 (excl. divs) NetDebtordays 103 101 100 95 120 113 106 90 85 85 69 Debt Service -12.8 -7.0 -12.7 -343.2 13.6 7.8 9.7 13.6 18.9 2.4.7 47.3 coverage (X) Ernigs per 129 241 328 447 388 181 100 276 273 269 398 share (Bains) Employees 77 70 70 72 52 36 31 24 22 20 18 per 1000 lines The World Bank target of a return on average assets of 19% by 1991 would now seem to be a little unrealistic. Such a high return was possible when relatively high levels of traffic where generated by a much smaller network. The considerable increase in fixed assets over the period obviously make such a target now difficult to achieve. However, if revenue continues to increase in line with recent trends then a return on assets approaching 19% may be possible in the near future.  - 21 - 4. pEBTICQLLECTION In 1987 GTO appointed a collection agent for its private bills. GTO still produces the bills and therefore retains essential control of the billing system but with the agent responsible for delivery of bills and subsequent collection. The agent pays GTO the full billing amount less commission after the month end irrespective of the amount collected and assumes responsibility for all bad debts. The arrangement has been highly beneficial to GTO resulting in assured and improved cashflow. The commission payment is less than the bad debt percentage that GTO historically suffered when responsible for its own private bill collection. GTO is still responsible for the collection of bills due from Government subscribers. However, despite strenuous efforts and an improvement by some Govemnment Ministries and agencies, the amount due from Government has continued to increase. Discussions are continuing with the Ministry of Finance and Economy and GTO is hopeful that the matter can be resolved especially considering the substantial dividend that OTO is now paying. S. IER-ADMIN ISTRAIIO It is GTO's policy to attempt to balance payments to and from other telecommunication administrations and hence be in a neutral payment position. To date outpayments have been between on average 10-15% above inpayments despite a vast increase in international traffic from Oman. GTO has been able to achieve this by continually negotiating accounting rate reductions with other administrations resulting in substantial cost savings. INTERADMINISTRATION PAYMENT RATIO 9K 8K- 7K- 6K- 5K [jAY] 2K IK- 81 82 83 84 85 86 87 88 89 90 91  - 22 - 6. ESTABLISHMENT OF CORPORATE PLANNING DEPARTMENT AND EVSION OF TARIFFS The work and subsequent report by the consultants Coopers and Lybrand laid the foundation for the tariff structure adopted by GTO. It was crucial to the success of our tariff revisions that the structure was agreed prior to effecting any changes. Tariffs send strong messages to our customers and greatly affect the demand level for our various services. If incorrectly planned tariff revisions can have an adverse impact not only on profitability and cashflow but also may cause customer dissatisfaction when increased demand cannot be serviced or lead to unnecessary increases in capital expenditure. As a consequence of our planned approach GTO has been able to successfully implement tariff revisions to all services resulting in increased traffic volumes and revenue but without the need for unplanned expenditure on capital equipment. There have been reductions in telex call fees, a change in tariff levels and structure of local and long distance telephone calls including the introduction of local call timing, reductions in leased circuit and modem rentals and the introduction of off-peak national and international telephone call rates. This was subsequently followed by significant reductions in international telephone call tariffs themselves. GTO is now fortunate to have in place an established Corporate Planning Department and tariff structure which will allow an ongoing regular review of tariffs. Besides tariffs, the Corporate Planning Department has been instrumental in GTO's policy of liberalising terminal equipment. To date this has included telephone instruments, facsimile, and private switchboards. INTERNATIONAL TELEPHONE CALL MINUTES 35K- 30K - 25K - 20K- ISK- 10K- 5K- 81 82 83 84 85 86 87 88 89 90 91  - 23 - 7. COMPUIERISATIOl At the commencement of the Third Five Year Plan in 1985 GTO's financial and administrative systems were entirely manual with customer billing being processed on our behalf by the computer department of the Ministry of Finance. Following the appointment of Consultants P.E. Computer Services in 1985 a long term strategy for the computerisation of GTO activities was completed. GTO purchased the computer from the Ministry of Finance in 1986 and assumed responsibility for bill processing. Monthly billing was introduced and the billing date brought back to within eight days of the month end resulting in substantial cashflow benefils. Despite a four-fold increase in numbers of subscribers the billing date has never been missed. Four other major systems have also been computerised, inter-administration accounting, network records, traffic analysis, and payroll and personnel. The financial accounting and budgetary control systems have also been computerised using a departmental computer network. Corporate Planning Department has also made extensive use of financial modelling software. Contracts have recently been signed for the purchase of a Hewlett Packard Mainframe computer to replace the aging IBM, plus approximately 150 personal computers for departmental networks. GTO is in the process of identifying a Customer Service System which will run under the Unix operating system and with Oracle database. 8. PROJECTS FINANCED BY WORLD BANK (i) Provision of telecommunication facilities in the Northern Coastal Region - Batinah Coast. (ii) Installation of Btuied Service Wires to complete the portion not executed under the Rural contract. The aim of the projects were to install 16,450 exchange lines in the Batinah Coast (Appendix I) and provide 35 villages in the Rural Areas with Buried Service Wire and Subscriber Service Leads (Appendix II). The projects were completed as scheduled. The Batinah Coast project proved extremely successful, that in 1989 the average exchange loading stood at 69% having 11.329 working subscribers generating RO.360/- per line. Subsequently GTO has undertaken a project for Phase II of Batinah Coast covering a wider geographical area and installing fwuther exchange capacity of 16.470 including the expansion of some Phase I exchanges. Favouable rates obtained during negotiations meant that the total loan was not required to meet the cost of these two projects. Therefore, GTO suggested and the Bank agreed that the surplus funds be used to finance the material portion of outside plant works in a further 4 sites (Appendix III).  - 24 - 9. RELATIONSHIP WITH WORLD BANK The projects financed by the World Bank were successfully implemented as planned. The establishment of the Corporate Planning Unit, tariff revisions, and computerisation have all proved to be extremely beneficial to the administration of GTO. GTO would like to thank the World Bank for its most valued advice and assistance during the period of the project and hopes that the experience it has gained from our success at GTO will be useful in its relations with other clients of the Bank.  - 25 - Appendix I Page 1 COMPONENTS OF PROJECT FINANCED BY WORLD BANK LOAN NO.2513-04 1. BATINAH COAST PROJECT 1.1 Contractor - M/s Siemens AG., West Germany. 1.2 Submission of bid documents to Bank : 26 December 1985 1.3 No objection by Bank : 7 April 1986 1.4 Bid invitation : 22 April 1986 1.5 Bid opening : 15 July 1986 1.6 Submission of evaluation report to Bank: 28 October 1986 1.7 No objection by Bank : 4 December 1986 1.8 Date of Contract : 6 January 1987 1.9 Contract Period : 15 Months - 5th April 1988 1.10 Contract Completed : 5th April 1988 with extension of Al Bidaya Transmission link to 19th July 1988 and Outside Plant to 10th March 1989. 1.11 Contract Price : Materials funded by World Bank DM 30,611,000 Installation RO 4,534,000 1.12 As Built Costs : Materials - DM 32,054,000 Installation-RO 5,129,000  - 26 - Appendix I Page 2 1.13 Planned Project Thirteen (13) sites with a total capacity of 16,680 lines was contracted of which six (6) were Main Switching Units and seven (7) Remote Switching units. One site (Al Hawasina) was deleted during implementation. 99 Cabinets were planned under External Plant with a direct feed cabling to serve Hawasina. The total number of communities to be served was 86. 1.14 Implemented Project The total installed capacity of Switching lines was 16,448 served by 82 cabinets covering 101 communities. The Outside Plant extended to cover 3 additional communities namely, Hail Al Ghaf, Misfah, Abayah and more important cabinet areas resulting in some 30 cabinets being deferred. However, thirteen (13) of these cabinets were installed. Subscriber connection was much greater than anticipated and therefore additional subscriber connections have been included in Phase II of the Batinah Coast Project. BATINAH COAST WORKING SUBSCRIBERS MSU/RSU Capacity Old lines 31.12.89 31.12.90 31.12.91 Quriyat 1,400 - 1,144 1,183 1,189 Dhagmar 400 - 212 213 195 Mazara 104 - 100 100 83 Barka 3,368 191 1,558 1,703 1,710 Nakhal 884 - 693 901 898 Rustaq 1,500 195 1,298 1,443 1,430 Suwaiq 2,600 234 1,368 1,421 1,400 Awabi 260 - 221 244 252 Huqain 252 - 192 192 186 Khaburah 2,496 200 1,870 1,944 1,696 Saham 2,300 196 1,815 2,011 1,886 Bidaya 884 - 858 1,008 990 TOTAL 16,448 1,016 11,329 12,363 11,831  - 27 - Appendix II Page 3. RURAL TELECOM EXPANSION - BURIED SERVICE WIRE PROJECT 3.1 Contractor M/s Telecommunications Consultants (India) Limited, (TCIL) 3.2 Bid invitation 1 October 1985 3.3 Bid opening 23 November 1985 3.4 Submission of evaluation report to Bank 8 January 1986 3.5 No objection by Bank 21 February 1986 3.6 Date of Contract 8th May, 1986 3.7 Contract Period 12 Months - 7th May 1987 3.8 Contract Completed 22nd October 1987 - implementation period extended due to additional work. 3.9 Contract Amount Materials (Funded by World Bank) - US $ 2,533,936 Installation and other costs - RO 1,046,690 Variation - RO 202,985 RO 1,249,695 3.10 Planned Project Buried Service wires, Subscriber Service leads and Subscriber connections were to be installed in 35 Rural sites - the main contract of which was implemented by L.M. Ericsson of Sweden. 3.11 Implemented Project The BSW Project was completed approximately 51/2 months after the scheduled completion date due to additional work being awarded. A total number of 35 sites and some 226 cabinet areas were covered with BSW. The uncompleted portion was awarded to a local company, M/s Oman Cycle Industries Company (O.C.I.C.) at a total cost of RO 691,500.  - 28 - Appendix III Page 1 SUPPLEMENTARY CONTRACT TO BATINAH COAST PROJECT 2. SEEB, MASNAH, FANJA, MASIRAH PROJECTS - OUTSIDE PLANT 2.1 Contractor Siemens AG., West Germany 2.2 Date of Contract 18th October 1987 2.4 Contract Period 12 months - 17.10.1988 2.5 Contract Amount as Materials funded by World Bank installed - DM 3,496,000 Labour - RO 1,117,000 2.6 Planned Project Seeb and Fanja were installed with Ericsson ARF Exchanges which were relocated from Qurum and Buraimi respectively. These areas were not covered by adequate Outside Plant. As a new Digital Exchange was ear- marked for Masnah as a separate contract, the Outside Plant was installed in anticipation of its early commissioning. The Exchange was finally included in the Batinah Coast Phase II contract with Siemens and installation is in progress. 2.7 Implemented Projects At the completion of the projects approximately 700 subscribers were connected in the Musnah exchange. Seeb brought in about 1500 subscribers and Fanja and Masnah 200 subscribers each. Subscriber working as at: 31.12.1989 31.12.1990 31.12.1991 Seeb 2,303 2,518 2,593 Masnah 60 1,607 1,721 Fanja 438 474 526 Masirah 352 349 331  - 29 - THIRD FIVE YEAR PLAN PROJECTS Appendix tV Page I Budget Budgq ID Description of Pro1ect RO'OO 8601 RURAL PROJECT (SUPPLBEHNTARY) LME Provision ot outelde plant in 35 villages 8,076 8602 RURAL PROJECT BURIED WIRE Provision of Buried service wirc end subscriber leads in 3S villages 2,232 8603 PHASt - EXTENSION OF OF IBRI ROAD Extension of Public Mobile Aueomatic telephone servifee to Ibri area 1,450 8604 MDC KItAABA EXCHANGE New 1000 line EWSD exchange at Khaseb 8603 CAPITAL AREA-OUTSIDE PLANT WORK 8606 CONSULTANCY SERVICES Prov!slon for value added services 8607 FUJRNITURM AND FITTINGS 1I Purchase of office accoodation furniture In the current plan 8608 MOTOR VEHICLES 1. Purchase of motor vehicles in the current plan 8609 PAYPBONES AND BOOTHS Procuremnt of 1250 card payphone and 1525 peyphone booths and associated units 1,255 8610 COMPUTER HARDWARE & SOFTIARE Implemntation of LLIS system and procurement of computers for individual 1,000 departmen use. 8611 TRANSPORTABLE EARTR STATION Procurewnt of Mobile Earth Station 500 8612 SATELLITE COMMUNICATION Expansion of Al Aserat Earth Station, New Alternate Route Std. 'Al Earth Station and Radoms for 11 M Antenna 5, 8613 EXPANSION OP RECORD SERVICES Procuremat of voice frequenty telegraph equipment, tim diversion mltiplex and associated equlpment. 280 8614 SUBSCRIBER TERMINAL EQUIPMENT Procuremnt otf telephone instruments for new the projects that were ilemented under the current plan. 1,111 8615 BATINA COAST PROJECT PHASE I Installation of 13 new EWSD exchanges with a total of 16448 exchange lines. 16,144 8616 SEBe. PANJA. HASNAR. MASIRAB EXPANSION & SHATI AL OURUM installation Of outside plant network 1,939 8617 GENERAL NETWORK EXTENSION IN MUSCAT AREA AND SALALAH Extension of outside plant networR in Madinat Al Nadha Social Houstig, Baushar Soeial Housing and Janub Al Rhuwair Developmat 2,801 8618 RURAL PROJECTS - NETWORK EXPANSION Installation of burled service wire In the Interiors 2,036 8719 EXPANSION OF TAQA. HIR8AT. RAYSUT 6 SUDH AL SAADAB 2 AL AADAN 3 4,164 Installation of 2 new exchanges and expansion of 4 exchanges with a total capacity of 2568 exchange lines. 8720 CIVIL WORKS Construetion of shelter for Mobile Earth Station and new technical building. 1,520  - 30 - THIRD FIVE YEAR PLAN PROJECTS AODendig IV g ge 2 Budget DaserDton of Prolect Roudg t 8721 TRANOW.SSION OF LINKS-FIBRE OPTIC CABLE Installetion of an Alternate route and 1,708 Pujireh-heat.at Malshe 140 H/Bft F.O.C. (Completed) 8722 RELOCATION OF ART CONTAINERS - FANJA 20 8823 8ATINAN COAST PROJECT PHASZ tl HASNAN & EXPANSION OF AHtLA 22,542 Installation of 8 nov EVSD exchanges Ln the outlying areas and expansion of 3 exchanges with a total capacity of 16470 exchange lines. 8924 RURAL EXPANSION 1989 Expansion of 26 AXE existing exchanges with 17100 exchze lin e 4.352 9025 PROVISION OF DIGITAL EXCHANGE DAKHILIAH REGION - PHASE I AND FIBRE OPTIC CABLE TO hURl 9,546 Expansion of 8 exchanges by 25276 lines 9026 UXPANSION OF EWSD EXCHANGES IN MUSCAT DATINAM & JANOBIAH REGIONS 6,371 EXPANSION OF EXISTING EXCHANGES Expanaioa of 14 existing exchanges by 23956 lines 9027/9030 EXPANSION OF EXISTING AXE EXCHANGES IN RURAL AREAS 6,482 AND PROVISION OF NEW EXCHANGES EXPANSION OF EXIStINC EXCHANGES Expansion of 7 exchangea with 1792 lines. 9028 PUBLIC PAGING SYSTEM Shifced to fourth five year plan 9029 DATA PACXZT SWITCHING Shifted to fourth five year plan TOTAL 104,300  - 31 - PROJECT COMPLETION REPORT OMAN SECOND TELECOMMUNICATIONS PROJECT (LOAN 2513-OM) PART III STATISTICAL INFORMATION (Annexes)  PRO,JCT COKPLETION REPORT SECOND TELECOHMIICATIONS PROECT (LOAN 2513-Ot) RELATED BANK LOAS inuinXmmmm.in..... YEAR LOAN OF AKOUNT LOAN TITLE PURPOSE APPROVAL US$MILLION STATUS COKMENTS a) Techfical Assistance Preparing Investment 1977 0.075 Completed Basis for the First Loan 985-ON Program Telecom Project b) First Telecommunications Expansion of Telecom- 1980 22.0 Completed Very Successful w Project municatLons services 06/30/86 Loan 1884-ON  PROJECT COMPLETION REPORT Annex 2 OMAN SECOND TELECOHWUNICATIONS PROJECT (LOAN 2513-OH) PROJECT TIMETABLE Item Date Planned Date Revised Date Actual Identification Oct. 17-25, 1983 - Oct. 17-25, 1985 Preparation March 19-26, 1984 - March 19-26, 1984 Appraisal Mission July 10-31, 1984 - July 10-31, 1984 Loan Negotiations Dec. 17-21, 1984 - Dec. 17-21, 1984 Board Approval April 11, 1985 April 9, 1985 April 11, 1985 Loan Signature - - Sept. 20, 1985 1/ Loan Effectiveness Dec. 20, 1985 March 31, 1986 2/ June 12, 1986 Loan Closing June 30, 1991 June 30, 1986 June 30, 1991 Loan Completion Dec. 31, 1991 - Dec. 31, 1991 1/ Delay in signature due to queries by GTO on interest rates calculations in the Loan Agreement document. 2/ Loan Effectiveness delayed due to late issuance of bid documents.  PR0J8CT COHPLETIOI REPORT OHAD Annex 3 Page 1 of 2 SECOND TELECOHKU?ICATIONS PROJECT (LOAN 2513-ON) PROJECT COSTS AND FINANCING ___________________________ A. PROJECT COSTS (US5MILLION) ______________________________ ----------APPRAISAL ESTIMATE----------- ----REVISED ESTIMATE---- ---------ACTUAL---- ITEM LOCAL COSTS FOREIGN COST TOTAL LOCAL FOREIGN TOTAL LOCAL FOREIGN TOTAL Switching Equipment 3.1 14.6 17.7 31.6 21.1 52.7 18.4 11.6 30.7 External Subscriber Plan 19.2 26.1 45.3 76.1 50.8 126.9 44.5 32.4 74.2 Transmission Syst 5.0 33.0 38.0 35.2 23.4 58.6 20.5 13.7 34.2 Moblle System 8.4 19.1 27.5 4.2 - 4.2 4.2 - 4.2 Buildings 12.8 11.1 23.9 30.2 - 30.2 17.6 - 17.6 Consultancy Services 4.0 4 6 8.6 11.6 - 11.6 5.0 - 5.0 and Training Miscellaneous 10.1 19.2 29.3 5.0 - 5.0 3.1 - 3.1 (Gentex Computer Coin BDoXes, Vehicles, etc.) Total Base Cost 62.6 127.7 190.3 Physical Contingencies 3.0 2.5 5.5 Price contingencies 7.4 24.6 32.0 Total Project Costs 73.0 154.8 227.8 193.9 95.3 289.2 113.3 57.7 169.0 .s= ,=um sm u ss  - 35 - PROJECT COMPLETION REPORT Annex 3 Pago of 2 of SECOND TELECOIONUICTIONS PROJECT (LOAN 2513-0M S. PROJECT FINANCING (USSMZLLION) PLANNED SOURCE (LOAN AGREEMENT) REVISED FINAL COMMENTS ___ __ __ __ __ __ __ __ ___ __ __ __ __ __ __ __----__ _____ ____ _____ _____ ____ SDAD 23.0 23.0 23.0 3xo nditur- categories Government Loan 47.9 47.9 62.2 Equity OTO Self Generated 156.9 230.2 83.8 227.8 301.1 169.0 TOTAL uuu*uu .. .... min...  OHMN Annex 4 SECOND TELECOUIIIICATIONS PROJECT (LOAN 2513-OM) LOAN DISBURSEMENTS (US$MILLION) CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS Semester Ending Appraisal Estimate Actual % of Estimate FY 86 December 31, 1985 4.0 0.0 0.0 June 30, 1986 6.1 0.0 0.0 FT 87 December 31, 1986 8.9 4.0 44.9 June 30, 1987 12.3 9.1 74.0 FY 88 December 31, 1987 15.7 15.7 100.0 June 30, 1988 17.0 18.5 108.8 FY 89 December 31, 1988 18.0 18.5 102.8 June 30, 1989 19.0 19.1 100.5 FT 90 December 31, 1989 20.5 20.7 101.0 June 30, 1990 21.5 22.7 105.6 Fr 91 December 31, 1990 22.5 22.7 108.9 June 30, 1991 23 22.7 98.7 Final disbursement was July 17, 1991 i.e. 17 days beyond the closing date.  - 37 - Annex 5 PROJECT COMPLETION REPORT P 1 of 2 SECOND TELECOMMUNICATIONS PROJECT (LOAM 2513-0OM) A. INSTALLED PLANT UNDER BANK FINANCING -----------_-__------------------------- BATINAH COAST PROJECT WORKING SUBS. NAME OF ------------- EXCHANGE TYPE CAPACITY 1990 Quriyat MSU 1,400 1,183 Dhagmar R8U 400 213 Mazara RBU 104 100 Barka HsU 3,368 1,703 Nakhal RSU 884 901 Rustaq MSU 1,500 1,443 Suwaiq MSU 2,600 1,421 Awabi R8U 260 244 Huqain RSU 252 192 Khaburah MsU 2,496 1,944 Saham MSU 2,300 2,011 Bidaya RSU 884 1,008 Al Hawasina - - 16,448 12,363 TOTAL  - 38 - Anrex 5 PROJECT COMPLETION REPORT ...... Page 2 of 2 OMAN SECOND TELECOMMUNICATIONS PROJECT (LOAN 2513-OM) B. BURIED SERVICE UIRE PROJECT ........................... WORKING SUBS. NME OF CURRENT EQWIPMENT ---------------------- EXCHANGE TYPE CAPACITY 1990 Apr. 1991 ................. ..................................... e........ .................. DAiHLIYA AREA ............ Nizwa AXE (L/P) 3,840 2,220 2,255 Nizwa 2 RSU 640 Manah RSU 896 402 416 Al Ghafat RSW 256 216 218 Adam RSU 1,024 498 497 Firq RSU 384 284 302 At Hamra RSU 1,280 623 642 Sahla RSU 896 792 822 Saiq RSU 384 108 111 Birkat At Maows RSU 512 276 287 . ....... ............ ......... Sub-Totat 10,112 5,419 5S550 333333 .n. 3333. DAHIRA AREA ........... Ibri AXE 2,048 1,674 1728 Dritz RSU 640 334 340 Iraqi RSU 1,024 608 615 Ohank RSU 896 503 503 Yanqul RSU 896 406 502 Tanaam RSS 384 103 91 Buratmf AXE 2.048 1.994 1.976 Mahdah RSU 384 154 135 ........ ........ . ... ........ ....... .... Sub-Totat 8.320 5,776 5,890 SHAROIYA AREA ............. Sur AXE 5,504 2.939 2,742 At Kamil/At Waf RSU 896 660 6S1 Bani 8u Alt RSU 1,152 747 648 lenf bu Hassan RSU 1,280 652 713 Al Ashkara RSU 256 237 228 Ibra AXE 1,280 966 952 Sanaw RSW 896 501 439 Samed RSU 896 411 416 Wadi Bni Khatid RSS 512 126 122 Al Kabit RSU 640 399 372 Al Nudhafbt RSU 640 421 440 AL Mintrib RSU 896 667 671 ........ ........ . ... ......------......... Su.b-Total 14,848 8.n 6 8,444 *c-sLrs s--w- *---so SONAR AREA .......... Sohar AXE (L/P) 3,840 2,211 2.108 Majis RSU 1,024 518 513 Liwa RSU 1.024 601 615 Shines RSU 896 670 612 ........ ........ . ... ........ ....... .... Sub-TotaL 6,784 4.000 3,848 .53 3333 33  Ztonct. 011o ISPOItT gco m mrocwnZs noUcT -- -~~Aiim SECOND TZLEKOMUKhIMCT FIWICT (LOAN 2513-Ql PUNWVA3 tiScATIU ............ ..... !!.'... VW ~~~aloin tMI s1 ... ...... ... iiiEAiil MIVAT ACRWL EITFTESIUtI WilM1M ~~~~~~~~~~~............. ........ ............,,,,,,............. ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,_ ...................... .............................. ...................... ......................... !..!........!... *) t 3,OWO, 460.0 00.0 n3.o4"0 0,10.0 1,ao.o 129,900.0 129,0.0 131,658.0 12,9"0.0 152,310.0 b) U mIw1IN1w Limes 21,497.0 39,0.0 ,6454.0 57,00.0 H,45.0 0,00.0 56,099.0 ss,000.0 7,360.0 97n,5.0 0,92.0 110,50.0 9,m.0 el TtoS lhcrbwe M70.0 1,500.0 1,a4.0 o .0 1,474.0 2,000.0 1,422.0 2,260. 1,350.0 2,40.0 1,233.0 2,460.0 1,072.0 *) lwy0q.8"Iia= 31o n.o 15.o n1.o 8.o 11. 9.0 13.O .4 lS.O 10.6 t9.0 9.4 b) !fiLtrice Cos_g 1100.0 4.0 14.0 4.0 8.0 4.0 10.0 2.0 13.0 3.0 16.0 . 25.0 c) f9mrmsgt tle 2.9 1.0 1.4 1. 1.0 1.5 1.8 1.7 2.0 2.6 1.? 4.0 1.6 d) mrw. flam ) 103.0 30.0 124.0 71.0 13.0 60.0 ID.0 60.0 15.0 60.0 71.0 60.0 100.0 *) $S.M!!~U~J?33 f St W a9.0 32.0 * 4e0.0 85.0 169.0 217.0 30 * f) jf6t J 3vsm 730.0 7t4.0 P2.0 459.0 455.0 419.0 548.0 631.0 520.0 40.0 446.0 44.0 405.0 b O3 TcIIejw_te ex 5,63.0 6,000.0 5,1Z.0 6,00D.0 4,217.0 6,.00.0 3,015.0 6.000.0 2,441.0 6,00.0 2.13.0 6.000.0 2,19.0 03 tyli emu 31.0 355.0 * , 313.6 * 362.0 - 294.0 - 290.3 210.0 290.0 213.0 it1. Itll1titUl ................... tl l fn 170.0 50.0 52.0 40.0 35.0 35.0 31.0 30.0 24.0 20.0 22.0 20.0 b) MI,,d,ttp 12^l WI2 c) JiLn 1231 l1us d) #M Iof Ion3l 12/31 0 Z! 1m .9 AdA 123 2 I 1mm n w~~~~~a fmene e.eTaulfft,  - 40 - Annex 6 Page of 2 of 2 POJECT COMPLETION EE'ORT SZCOND TELECOIOMUNICATIONS PROJECT (LOAN 2513.OM) S. STUDIES poSE AS DEFINED AT APPRAISAL STATUS IMPACT OF STUDY riff Study - to develop Completed Principles and procedures established inciples and procedures and being used regularly to review tariffs oulde the formulation and -ezmentation of approerlate elm and structuro of 1tffs Establishment of an Economic Eztablished A Corporate PlannLng Unit Studies Unit was established and li operating satLsfactorlly mput:rization - Assess and Completed A number of flnancial operations -lment a suitable program computerized Lncluding billing e the Lmprovement of the and accounts - Bills now produced monthly nance divislon instead of auarterly before the project - Accounts and Audit produe d promptly wLthin the first 4 months of the followlng year.  PROJECT COMPIETIO REPORT Amex 7 Page 1 of 3 SECOND TELCOICCATIONS PROJECT (LOAN 2513-Ot) Income Statements ...................... (RO'OOO) 1985 1986 198? 1988 1989 1990 Year Ending DOceeber 31 SMR Actual - SR Actual SMR Actual SAt Actual SAR Actual SAR Actual Revame Service revenue 32,263 36,73 At.012 40,624 53,518 39.516 63,188 44.055 73O212 47,616 83.359 53,883 External adwinistrations revenue 4,092 3,512 4.f951 4,893 5,834 4,528 6.758 4,816 7,814 5,516 9,028 6,805 External administration expenditure (5,115) (4,591) (6,189) (5,100) (7,292) (4.959) (8,448) (5.325) (9,768) (5,734) (11,285) (6,748) Total 31,240 35,694 41,774 40,417 52,060 39,085 61,498 43,546 71,258 47.398 81.102 53,940 Expenditure Salaries and eoployee benefits 9890 9346 11846 9293 13219 8615 14163 9401 14850 10401 15510 12363 Operations, maintenance, coomission and administration 4697 5442 6776 6079 8904 8849 10850 9089 12775 8564 14560 8858 Depreciation 7,379 5,196 10,533 7,220 12,762 10,399 14,390 12,282 15,438 15,286 16,198 17,830 Provision for daobtful debts 625 1,073 835 1,713 1,041 100 1,230 150 1,425 180 1.622 180 Inflation factor 729 1,909 3,485 5,390 7,632 10,227 Total 23,320 21,057 31,899 24,305 39,411 27,963 46,023 30,922 52,120 34,431 58,117 39,231 Operating profit 7,920 14,637 9,875 16,112 12,649 11,122 15,475 12,624 19,138 12,967 22,985 14,709 Other inceme 57 231 28 346 0 212 86 685 514 1,118 1,313 1,180 Interest wnd other dharges an loans 2,842 1,758 3,731 2,977 4,033 2,222 3,780 1,832 3,154 1,498 2,532 1,318 Exchange (loss) gain (2,320) (4,417) (4,105) 2,341 1,063 (1,1'0) Profit for the financial year 5,135 10,790 6,172 9,064 8,616 5,007 11,781 13,818 16,496 13,650 21,766 13,461  PROJECT COMPLETION REPORT Amex 7 Page 2 of 3 SECOND TELECOMKINICATIONS PROJECT (LOAN 2513-OM) Balace Sheets (RO 000) 1985 196 1967 1988 1989 1990 Year Ending December 31 Su Actual SAN Actual SAR Actual SMR Actual. SR Actual SAO Actual Net fixed assets (Cncludins work in progress) 109.028 108.101 123.48 127,960 133,874 140.244 133.575 139,202 128,550 138.099 120392 140,586 Current assets Inventories 2,380 3.449 3,021 4,024 3.524 3.717 3.856 4.000 4.061 3,961 4,246 4,947 Receivables and prepayments 8216 14985 9613 16719 10270 13831 12131 12747 14057 13539 15998 15364 Cash at bank and in hand 1,432 1.933 752 2,221 837 2.488 2.184 9,868 12.901 14.819 32,886 12,954 Total current assets 12.028 20,367 13,386 22,964 14,631 20.036 18,171 26.615 31.019 32.319 53,130 33.265 Total assets 121056 128468 136874 150924 148505 160280 151746 165817 159569 170418 173522 173851 Liabilities Payables and accruals 24,115 28,480 15,974 15.316 17079 24.403 Long-term loans repayable within one year 1,631 6,712 4,285 3.802 4,075 3383 Dividend payable to Government 4.005 11,054 14,974 10.769 Total current liabilities 6,847 25,746 8,584 35,192 9.984 24,264 10,952 30,172 11,714 36.128 13.332 38.555 Long-term loans payable after more than one year 54,278 31,196 62,188 35.142 63,809 32.236 54,304 29,101 44,867 25.017 35,434 23,331 Capital 27,692 27,812 27,692 27.812 27,692 50,000 27,692 50,000 27,692 S0,000 27,692 50,000 Retained profit and reserve 32,240 43,714 38.412 52,778 47,019 53.780 58.799 56,544 75.296 59,273 97.063 61,965 Total equity 59.932 71,526 66.104 80,590 74,711 103,780 86,491 106,544 102.988 109.273 124.755 111,965 Total tiabilities 121057 128468 136876 150924 148504 160280 151747 165817 159569 170418 173521 173851  PROJECT COMPlETION REPORT Annex 7 f1fAN Page 3 of 3 SECOND TULECOSHMUICATIONS PROJECT (LOAN 2513-OH) Funds Flow Statements (Ro 000) 1985 1986 1987 1988 1989 1990 Year Ending December 31 SAR Actual SAR Actual SAR Actual SAR Actual SAt Actual SAR Actual Sources of funds Profit for the firnncial year 7920 10790 9875 9064 12649 5007 15474 13818 19137 1650 22986 13461 Adjustents for Item not imwolving the m.vement of funds Depreciation 7,379 5,196 10.533 7,220 12,762 10,399 14,390 12,282 15,438 15,286 16,198 17,830 Others 625 (84) 835 74 1,041 167 1,230 (38) 1,425 5 1,622 (74) Furds Generated from operations 15924 15902 21243 16358 26452 15S73 31094 26062 36000 28941 40806 31217 Furds from other sources Long-term loans received & capitalised 22,800 14,180 9,176 6.315 4,326 39,105 786 2,604 855 621 859 799 Other proceeds 19 7 6,268 169 13 121 Total Sources 38724 30101 30419 22680 30778 60946 31880 28835 36855 29575 41665 32137 Application of funds Additions to fixed assets 37,097 34,417 27,083 27,232 23,148 22.869 10,091 11,371 10,413 14,202 8,040 20,365 Debt service 4,108 1,535 4,998 2,297 6,738 25,946 14.071 3,614 13,446 3,467 12,823 3802 Dividends paid 4,005 7,000 14,974 Exchange gain on long term loosm 2,125 965 (626) Total Applications 41205 35952 32081 29529 29886 48815 24162 21115 23859 25634 20863 38515 Increase in Working Capital (2.481) (5,851) (1,662) (6,849) 892 12,131 7,718 7,720 12,996 3,941 20,802 (6,378)  -44 - PROJECT COMPLETION REPORT AnnIx 8 OMAN SECOND TELECOMMUNICATIONS PROJECT (LOAN 2513-OM) RETUaN ON INVESTMENT 1. investments on which the rate of return in calculated are those new works contained in the second telecommunications project 1985-90. 2. The benefit period extended from 1986 to 2005, when on average tho equipment provided under the project is expected to have substantially completed its useful life. 3. Capital expenditure is as actually made over the period 1985-90 project. No residual asset values are taken into account as by the year 2005 their discounted real value will be negligible. Incremental revenues are based on the expected additional telephone subscribers and the traffic increase they are expected to bring about. No provision has been made for incremental telex revenues as no new correspond- ing investment is envisaged. Incremental operating costs excluding depreciation and in'erest are actual for the period 1985-90 and estimated for the period 1991-2005. All revenues and operating costs have been deflated by S Per annum, the expected rate of inflation to bring them to the 1986 level to be comparable with capital expenditure. 4. A summary of pro3ect cost and benefit streams at 1985 prices is given (in Ro million) below as follows: CAPITAL OPERATING NET YEAR EXPENDITURE COST REVENUES BENEFITS 1985 _ 1986 4,15S.0 (4,155.0) 1987 17,396.0 - - (17,396.0) 1988 8,762.0 1,162.0 5,569.0 (4,356.0) 1989 14,0850 1,826.0 10,105.0 (5,806.0) 1990 1l,559.0 2,364.0 14,398.0 (4,526 0) 1991 4,635.0 18,818.0 (14,182.0) 1992 5,487.0 23,197.0 (17,710 0) 1993 6,490.0 27,438.0 (20,948.0) 1994-2005 - 7,573.0 32,016.0 (24. 0) S. The internal financial rate of return for the above net benefit stream is 29%. Considering consumer surplus, the economic rate of return with constant real tariffs is expected to be higher than 35%. No shadow pricing is necessary because of the openness of the Oman e-onomy, and the fact that market prices reflect opportunity costs for most goods and services. 6. A sensitivity analysis was performed on the financial rate of return to reflect the possible changes in revenue and costs forecasted for the period beyond 1990. The following results were obtained: Rate of Return ______________ a) 10% increase in operating costs 27 b) 10% decreaso in revenues 26 c) Combination of all factors 24  PROJECT COMPLETION REPORT A x 9 OMAN SECOND TELECOMMUFICATIONS PROJECT (LOAN 2513-OM) B. MISSIONS STAGE OF PROJECT MONTH/ NUWBER OF DAYS IN SPECIALIZATION PERFORMANCE RATING TYPES OF CYCLE YEAR PERSONS FIELD REPRESENTED STATUS PROBLEIS . *....................... ..................... ............................................... ..... ......... ............... ........................ ......... Through Appraisal 10/83 1 7 Engineering 3/84 2 7 Engineering * Finance Appraisal through 7/84 2 21 _ Board Approval Board Approval 9/85 2 9 through Effectiveness Supervision 6/86 1 5 Engineering 1 2/87 2 10 Engineering + Finance 1 2/88 1 5 Engineering I Goverrment Receivables Not Improving 2/89 2 5 Engineering + Finance 1 Receivables + Low Rate of Return 1/90 1 5 Engineering 1 6/91 1 6 1  PROJECT COMP'ETION REPORT Annex 10 Page 1 of 3 OMAN SECOND TELECOMMUNICATIONS PROJECT (LOAN 2513-OM) Compliance with Covenants Covenant Section Brief Description of Covenants Compliance Status Loan Agreement 3.02(a) Employ consultants to assist GTO in: (a) 12/31/85 Complied carrylng out tariff studies; (b) establishing an economic studies unit; (C) developing and introducing data processing methods. The consultants shall be employed in accordance with Bank guidelines. 3.04(a) GTO to furnish to the Bank for review, the 12/31/86 Complied finding and recommendations of the consultants on tariff studies. After exchange of views with the Bank, implement agreed reccmmerndations. 3.04(b) GTO to furnish to the Bank for review 12/31/86 Complied action plans for the establishment of the economic studies unit, the introduction of data procesaing methods and implementation of financial training program. 3.05(b) Maintain records adequate to reflect its Throughout Complied operation and financial conditions. the project 5.02 Furnish to the Bank: (a) no later than Complied four months after the end of each fiscal year its accounts and financial statements for such year in unaudited form; (b) not later than six months after the end of each fiscal year certified copies of its financial statements for such yaar as so audited. 5.04(^) OTO to earn an annual return of not less Not Complied than 19* of the average current net value The return for 1990 of its fixed assets in operation for was 11%. The return was fiscal year ending on December 31, 1990. lower to a large provision made for obsolescence and less network utilization. 5.05(a) GTO to ensure that subscriber accounts Not Complied receivable does not exceed its billings Achievement was 100 days. for the preceeding 60 days. Government Agencies are the main defaulters. Government debt expected to be offset against dividends.  Annex 10 PloECT COMUPLEON RPORT Page 2 of 3 SECOUD TIZCOICATIOUS PROJECT _ LOW 2s13-OKt Compliance with Covenants Deadline for Section Brief Description of Covenants Compliance Status Guarantee Agreement