Niger - Telecommunications Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4762 PROJECT COMPLETION REPORT NIGER: TELECOMIUNICATIONS PROJECT (CREDIT 634-NIG) October 27, 1983 Industry Department November, 1982 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 PROJECT COMPLETION REPORT NIGER: TELECOMMUNICATIONS PROJECT (CREDIT 634-NIG) Table of Contents 9 .Page No. * PREFACE ..................... * ........................................... i BASIC DATA SHEET ............................................... ii HIGHLIGHTS ........................ e ..................... iii I. INTRODUCTION ........ .... 00.... 00.0. 000 * 00 . 1 II. PROJECT PREPARATION AND APPRAISAL .............1 III. PROJECT IM4PLEMENTATION ............................... 4 IV. OPERATING PERFORMANCE ............................... 9 V. FINANCIAL PERFORMANCE ................................ 12 VI. INSTITUTIONAL PERFORMANCE ............*.e .............. 14 VII. ECONOMIC REEVALUATION .............. 17 VIII IDA PERFORMANCE ...................... -.. 18 IX. CONCLUSIONS ,................. * . . . . . ............. 18 ANNEX 1 - Implementation Schedule ......................20 ANNEX 2 - Dates of Bid Opening and Letter of Intent 21 ANNEX 3 - Income Statement for Total- Operations ......... 22 ANNEX 4 - Balance Sheet for Total Operations ......... 23 ANNEX 5 - Funds Flow Statement for Total Operations .... 24 ANNEX 6 - Cash Flow Statement for Total Operations. 25 ANNEX 7 - Return on Investment .......................... 26 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.  PROJECT COMPLETION REPORT NIGER: TELECOMMUNICATIONS PROJECT (CREDIT 634-NIG) PREFACE This report covers the first telecommunications project in Niger supported by Credit 634-NIG. The credit of US$5.2 million approved in June 1976, bzecame effective in November 1976 and was closed in September 1981, fifteen months after the original closing date. The Project Completion Report (PCR) was prepared by the Industry Department of the Bank on the basis of information and data provided by the Office des Postes et Telecommunications du Niger (OPTN) and gathered by a project completion mission which visited Niger during January 1982. The project has not been subjected to an audit by the Operations Evaluation Department (OED). Following standard OED procedures, copies of the PCR were sent to the Government and the Beneficiary (OPTN) for their comments, but none were received.  - iL i - PROJECT COMPLETION REPORT BASIC DATA SHEET NIGER - TELECOMMUNICATIONS PROJECT - CREDIT 634-NIG KEY PROJECT DATA Appraisal Actual or Item Expectation Current Estimate Total project cost (US$ million) 6.5 7.9 Overrun (%) - 21 Credit amount (US$ million) 5.2 5.2 Disbur sed 5.2 5.2 Canceled - - Date for completion of physical components 12/79 4/82 Proportion completed by appraisal target date (%) 100 20 Proportion of time overrun (%) - 64 Economic rates of return (%) 24 29 Financial performance - Weak Institutional performance Weak OTHER PROJECT DATA Actual or Item Original Plan Revisions Estimated Actual First mention in files or timetable 09/15/691 05/19/721 01/21/75 Government's application 09/15/691 05/04/731 07/24/75 Negotiations N.A. N.A. 04/12/76 Board approval date N.A. N.A. 06/03/76 Credit Agreement date N.A. N.A. 06/11/76 Effectiveness date 09/09/76 11/09/76 11/09/76 Closing date 06/30/80 08/31/81 09/14/81 Borr ower Republic of Niger Executing agency Office des Postes et Telecommunications de la Republique du Niger (OPTN) Fiscal year of Borrower October 1 - September 30; (OPTN) January 1 - December 31) MISSION DATA Item Month/Year No. of Days No. of Persons Staffweeks Date of Report Identification 04/72 6 3 2.6 05/19/72 & 05/23/72 Preappraisal 10/74 11 2 3.1 01/21/75 Appraisal 10/75 23 2 6.6 /4/28/76 Total 40 12.3 Supervision I 11/76 8 1 1.1 12/07/762 Supervision II 11/77 11 2 3.1 12/22/77 Supervision III 06/78 11 1 1.6 07/11/78 Supervision IV 03/79 10 1 1.4 04/18/79 Supervision V 05/79 6 1 0.9 05/21/79 Supervision VI 05/80 12 1 1.7 06/06/80 Supervision VII 11/80 9 1 1.3 12/05/80 Completion 01/82 8 3 3.4 11/22/82 Total 75 14.5 COUNTRY EXCHANGE RATES Name of currency: CFA Franc francs (CFAF) Year, Appraisal year average - 1975 Exchange Rate: US$1 = CFAF 214 Intervening years average - 1976-1980 US$1 = CFAF 227 Completion year average - 1981 US$l = CFAF 257 1/ Initial request for Bank assistance was for the financing of telecommunications facilities for educational television. 2/ Letter to Beneficiary. Mission duration was only two days. INDD5 - 11/82  PROJECT COMPLETION REPORT NIGER: TELECOMMUNICATIONS PROJECT (CREDIT 634-NIG) HIGHLIGHTS 1. The first IDA supported telecommunications project in Niger was aimed at establishing the basic long distance network, extending and improving domestic and international services and improving OPTN's (Office des Postes et Telecommunications du Niger) organization, management and accounting. It was designed within the framework of OPTN's investment program the objectives of which were to improve the availability and the quality of telecommunications services in the economically more important areas of Niger. In addition to the project financed by IDA, the program included the construction of microwave links the costs of which were financed by the Niger government and Canadian and French bilateral aid. 2. In general, the time needed for various project activities appears underestimated at appraisal. The consultancy contract was not signed until ten months after the Board's approval of the credit and OPTN was slow in acting on the consultant's recommendations. Largely due to frequent changes in the management positions of OPTN, shortage of qualified staff and insufficient allocation of project funds to consultancy inputs, OPTN's financial management and accounting did not improve as much as had been envisaged at appraisal. 3. The original estimated cost of the project (US$6.5 million) was exceeded by about 21 percent and the cost overrun was absorbed by the Nigerien government. The timing of bid openings and contract signatures slipped by about 1-1/2 years on average. Completion targeted at appriisal for June 1979 was delayed by 2-3/4 years with full utilization of th-t facilities expected by March 1982 (Paras 3.03-3.05). 4. The starting up of the project was slow due to the relatively long time needed in Niger for the ratification process (p3ra. 3.01), and could have been improved if hiring of consultants and subsequent project preparation had been started before Board presentation. A use of the project preparation facility would certainly have been useful in expediting the implementation of the project. Such a facility was suggested to but was not accepted by the borrower. More frequent supervision during the later stages of the project also may have helped to enhance OPTN's benefit from the technical assistance component of the project. OPTN needs additional assistance for institutional development (Para 5.05).  PROJECT COMPLETION REPORT NIGER: TELECOMMUNICATIONS PROJECT (CREDIT 634-NIG) I. INTRODUCTION 1.01 The public telecommunications services in Niger are provided and operated by a parastatal enterprise, the Office des Postes et Telecommunications du Niger (OPTN). A government-appointed Board of Directors establishes policies and the Minister of Posts and Telecommunications is responsible for the political supervision and for coordination with military and security users of telecommunications installations. OPTN also handles mail services and money orders, a postal checking system and, as a special undertaking, a public savings account activity. A company, Societe des Telecommunications Internationales du Niger (STIN), owned 20 percent by France Cable et Radio and 80 percent by OPTN and various other organisms of the Republic of Niger was instituted during project implementation to handle international common carrier facilities which were ,reviously operated by France Cable et Radio. The capital transfer and the operational/financial questions have not yet been resolved between OPTN and STIN. 1.02 In June 1976, IDA approved a credit of US$5.2 million to the Republic of Niger (Credit 634-NIG), with OPTN as the beneficiary. The credit was for the support of a project for improvement and expansion of domestic telecommunications services within the framework of OPTN's 1976-79 telecommunications investment program and for assistance in OPTN's institutional development. The proceeds of the IDA credit were onlent to OPTN, under a subsidiary loan agreement, at 8-1/2 percent annual interest rate, for 20 years, including a four-year grace period. II. PROJECT PREPARATION AND APPRAISAL Preparation, Appraisal and Negotiations 2.01 IDA was approached by the Niger Government in 1969 to finance telecommunications facilities for educational television. After reviewing the proposed project, namely the educational aspect, IDA questioned its viability and suggested instead to support the whole public telecommunica- tions sector. A first identification mission visited Niger in April 1972 and reviewed OPTN's 1976-79 telecommunications investment program, which was based on a master plan prepared in 1970 by consultants and on relevant parts of a Panafrican telecommunications network (PANAFTEL) system. However, taking into account OPTN's financial commitments at the time in the ongoing program and the preparatory work still required for the 1976-79 program, IDA decided to postpone further action until FY74. Preappraisal  - 2 - of the project was carried out in October 1974 followed by appraisal in October 1975. Negotiations between IDA and the Government of Niger were concluded on April 15, 1976 and the Credit was approved by IDA's Board of Executive Directors on June 3, 1976. 2.02 The principal sector objectives for the 1976-1980 period were: (a) to establish the basic long distance network; (b) to keep pace with the expected growth in subscriber demand; (c) to rehabilitate, improve and expand secondary long distance routes and extend service to rural areas; (d) to extend and improve domestic and international services, and (e) to improve OPTN's organization, management and accounting. In following these objectives and with the aim of supporting specific country development efforts, OPTN's investment program was designed to improve the availability and the quality of telecommunications services in the economically more important areas of Niger: the Maradi and Zinder regions, the Niger valley, the Niamey, Dosso and Tahoua departments, and the mining areas in the Sahara. 2.03 Besides the project financed by IDA, the program comprised (a) the construction of the Dosso-Zinder (paragraph 2.04) microwave link financed by the Niger Government, French bilateral aid (CCCE/FA) and supplier credits; (b) the construction of the microwave links to Benin and Upper Volta as part of the Sahalian route of PANAFTEL financed by the Canadian bilateral aid (CIDA). The concept of the IDA financed project was also to group into a balanced and well defined configuration those portions of the program that were not taken care of by other donors; it included, in particular; important measures for achieving institution building objectives [paragraph 2.02(e)]. At the time of project appraisal, the program cost was estimated at about US$20.0 million, with US$16.2 million in foreign cost. Project Description 2.04 The project comprised the following elements: (a) installation of new automatic telephone exchanges, with a total capacity of 1,400 lines at Dosso Tahoua and Zinder, and expansion of the existing exchanges in Niamey by 2,000 lines and at Maradi by 400 lines installation of toll exchange equipment at all these locations with a general introduction of the R2 signaling system; (b) expansion of local cable networks in several cities and towns; (c) construction of line-of-sight radio links on the routes Oualam-Banibangou, Maradi-Dakoro and Zinder-Tanout and of HF radio links on the routes Niamey-Agadez and Agadez-Arlit- (d) construction of an open wire pole line between Tera and the Upper Volta border and installation of multichannel carrier facilities on the existing lines to the towns of Goure, Keita, Loga and Maine;  - 3 - (e) provision of miscellaneous equipment. vehicles and tools; and (f) provision of services of financial and engineering consultants. Project Cost Estimate 2.05 The project cost was estimated at US$6.5 million, of which the foreign component was US$5.2 million corresponding to the IDA credit. The local cost of US$1.3 million was to be financed by funds generated in OPTN's operations. Covenants 2.06 The Credit and Project Agreements provided that: (a) all debts owed by the Government to OPTN as of June 30, 1976 shall be paid not later than December 31, 1976 and all charges for services rendered by OPTN to Government after June 30, 1976 shall be paid within two months of billing date (CA 4.01); (b) an arrangement shall be made satisfactory to IDA for cost sharing, between OPTN and other users, in respect to the microwave installations on the route Niamey-Zinder (CA 4.02); (c) OPTN shall continue to earn interest on its liquid funds (CA 4.03); (d) OPTN shall review its staff structure and requirements before July 1, 1977, furnish the result of the review to IDA and, based on IDA's comments, implement a staffing program that is conducive to operational efficiency (PA 3.02 a); (e) OPTN shall establish and implement an efficient planning structure by June 30, 1978 (PA 3.02 b); (f) OPTN shall employ consultants satisfactory to IDA (PA 3.03 b); (g) OPTN shall construct the microwave route Dosso-Zinder in an appropriate fashion (PA 3.06); (h) as from the fiscal year 1978 OPTN shall separate, for the telecommunications services and for the postal/financial services, the budgets, the income and expenditure accounts, the funds flow accounts, and the balance sheets (PA 4.01 b); (i) audited accounts and reports of audit shall be furnished, within six months after the end of a fiscal year, as from the fiscal year 1977 (PA 4.02);  - 4 - (j) OPTN shall reorganize its billing and collection system by December 31, 1977 (PA 4.03); (k) OPTN shall undertake a tariff study prior to December 31, 1978, consult with IDA on the outcome of the study and, sub- sequently, introduce a tariff structure and level, aiming at a rate of return of 8 percent in FY80 and 10 percent there- after, aiming at an optimal use of the network (PA 4.04); (1) investment outside the program shall be limited to US$250,000 in any one year until the project has been completed (PA 4.05); and (m) outstanding short term debt shall be limited to an amount corresponding to three months' operating expenses (PA 4.07 b). III. PROJECT IMPLEMENTATION Credit Effectiveness and Project Start-Up 3.01 The conditions of effectiveness required that the subsidiary loan agreement be ratified and that financing from Fonds d'Aide et Cooperation and Caisse Centrale de Cooperation Economique of France be secured for the construction of the microwave link between Dosso and Zinder. The credit agreement became effective on November 9, 1976, about five months after the date of signature. The delay was due to the relatively long rime needed in Niger for the ratification process. Following effectiveness, the OPTN started up project execution with the engagement of consultants. On January 8, 1977 a contract was signed with the International Telecommunication Union (ITU) for support to both the engineering and the institutional aspects of the project. Project Revision 3.02 Project composition did not change significantly, although some quantities of equipment were increased, some unit costs were higher than expected and the implementation schedule slipped (paragraph 3.03). For system engineering reasons, the envisaged HF circuit Agadez-Arlit was constructed between Niamey and Arlit. The open wire carrier system on the route Tera to Upper Volta border was deleted as unnecessary with facilities to be available with the adoption of the Liptako-Gourma project (between Mali, Niger and Upper Volta). Implementation Schedule 3.03 After the comipletion of the engineering work by consultants tender documents for switching and transmission equipment were issued on January 12, 1978. The tender documents for cables, auxiliaries and  -5- subscriber equipment were issued by August 29, 1978. Annex 1 shows a compar'son between the actual project implementation schedule and that at appraisal. In general, the time needed for various operations appears underestimated at appraisal. Other factors that contributed to the divergence between the two schedules are: (a) inadequate planning and coordination within the OPTN of various categories of work; (b) shortage of qualified staff; (c) delay in the construction of exchange buildings and of cable ducts, partly as a result of (a), and partly due to less than satisfactory performance of contractors. Annex 2 gives details of dates of bids opening and issue of letters of intent for principal contracts. 3.04 As for the institutional development aspect of the project, the consultants were contracted to (references to Project Agreement sections): (a) prepare a proposal to modify OPTN's staffing with a view towards increasing its efficiency (PA 3.02 a); (b) review OPTN's planning activities and propose an efficient planning system to be applied not later than June 30, 1978 (PA 3.02 b); (c) reorganize OPTN's accounting and introduce commercial accounting separating the telecommunications services and postal/financial services, as from the financial year 1978 (PA 4.01 b); (d) improve OPTN's billing and collection system (PA 4.03); and (e) study OPTN's tariffs and propose before December 31, 1978 a new tariff structure and, possibly, new tariff levels (PA 4.04 a). 3.05 In general, the consultants' reports on these items were submitted to OPTN on time according to contract, or with minor delays only. However, as the consultancy contract had not been signed until ten months after the Board's approval of the credit, the reports became available later than envisaged at the time of appraisal. Moreover, OPTN was slow in acting on the recommendations of the reports and, consequently, it could not observe several of the agreed covenaiits. More important still, OPTN's financial management and accounting has not improved as much as had been envisaged. This shortcoming was due to a variety of reasons, the most important being: - frequent changes in the management positions of OPTN;  - 6 - - insufficient allocation of project funds to consultancy inputs and inadequate definition of tasks and responsibilities in consultancy agreements; - insufficient collaboration between consultants and OPTN's management and staff; and - insufficient response by OPTN to experts' recommendations. Procurement 3.06 The procurement of equipment, material and services for the project was generally smooth. The Bank's guidelines were followed and the agreed procurement conditions complied with. The limit of US$20,000 set for local procurement, was exceeded in the case of vehicles with IDA's approval. Project Costs 3.07 The project costs as appraised and actual costs are summarized below: Appraisal Actual Item Local Foreign Total Local Foreign Total - - - --- In US$ millions Automatic exchange 0.60 2.27 2.87 1.02 3.29 4.31 equipment Local networks 0.37 0.81 1.18 0.52 1.16 1.68 Long distance links 0.09 0.66 0.75 0.42 1.11 1.53 Tools, vehicles - 0.18 0.18 - 0.18 0.18 Consultants - 0.26 0.26 - 0.20 0.20 Physical and price contingencies 0.27 1.02 1.29 - - - Total project cost 1.33 5.20 6.53 1.96 5.94 7.90 The original estimated cost of the project (US$6.5 million) was exceeded by about 21 percent and the cost overrun was absorbed by the Nigerien government. The cost increase was partly due to some increase in the quantities of equipment and cables and to the cost of the associated civil work which substantially exceeded the appraisal estimates. This was accentuated by the slippages in the timing of bid openings and contract signatures by about 1-1/2 years on the average, and the intervening price  -7 - increases due to inflation. A further reason for the relatively high prices was that the participation in the bidding turned out to be rather limited, mainly due to the small size of the procurement and the lack of knowledge of the local conditions and environment by most of the international telecommunications suppliers. Disbursements 3.08 The estimated and actual total disbursements of the IDA credit year by year through 1982 were as follows: IDA FISCAL YEAR Accumulated Disbursements Actual Appraisal Actuals as % of US$ (000) Appraisal 1977 1,120 100 1.9 1978 3,050 150 2.9 1979 4,630 1,900 36.5 1980 5,200 2,060 39.6 1981 4,920 94.6 1982 5,200 100.0 During the first two years of project execution, the disbursements slipped significantly when compared to forecasts. Thus, on June 30, 1978, only 3 percent of the credit had been disbursed as against an estimated 60 percent. A certain improvement was achieved from 1979, however, and the final payment was about 14 months later than anticipated at appraisal. Credit Allocation 3.09 The allocation of the IDA credit to disbursement categories did not change much from the appraisal estimate, as can be seen from the table below:  -8- Allocation on Disbursement Categories Credit Agreement Revision by Actual Schedule 1 letter 11/8/78 Disbursements US$ equivalent US$ equivalent US$ equivalent (OOOs) (OOOs) (OOOs) 1. Automatic telephone exchange equipment and trunk switching equipment 2,270 2,900 2,897 2. Cables, ducts, sub- scriber apparatus and other equipment for project part B 810 1,000 1,025 3. VHF/HF radio equipment over head lines and carriers 660 860 874 4. Equipment, vehicles and tools for project Part E. 180 185 188 5. Consultants' services 260 255 216 6. Unallocated 1,020 _ _ 5,200 5,200 5,200 Operations 3.10 The equipment installed within the framework of the project has functioned satisfactorily. Consultants' participation in preliminary acceptance and in the checking of the results thereof, was helpful in this respect. Performance of Consultants, Contractors, Suppliers and Borrower 3.11 After initial delays in engaging consultants, the project execution proceeded relatively well. The international suppliers and contractors have generally performed in accordance with their contractual  -9- obligations. Expatriates were provided by the foreign manufacturers, within the framework of their contracts, for the installation and initial operation and maintenance of new equipment. 3.12 Given the circumstances the consultants' performance was acceptable. 3.13 Although some deficiencies have been noted in the implementation of the institutional improvement part of the project (paragraphs 3.04 3.05, and Chapter VI), OPTN performed relatively well on the whole. IV. OPERATING PERFORMANCE Market 4.01 In Niger, there were 9,517 telephones installed by the end of 1981 with 6,360 direct exchange lines (DELs). These figures give the densities of 0.17 telephones arid 0.11 DELs per 100 population, which are very low even compared to other countries south of Sahara where the average (except for the Republic of South Africa) is 0.4 DELs per 100 population. As shown in the table below, there are also big variations inside the country with most telephones and DELs concentrated in a few cities (figures reflect conditions by end of 1981). DELs per Telephones per % of % of Total % of Total 100 population 100 population Population DELs Telephones Niamey 1.25 1.94 6.1 69 71 Zinder ) Maradi ) 0.50 0.05 3.6 16 29 Tahoua ) Rest of Country 0.02 - 90.3 15 - Niger Total 0.11 0.17 100.0 100 100 All regional centers have automatic exchanges, both for local traffic and for long distance traffic. Of the 30 district centers which are not regional centers, one (Arlit) has an automatic exchange and the others have manual exchanges. Manual exchanges are also installed at 16 subdistrict centers. All these are connected to the public network through lines of good or satisfactory quality. 4.02 The users (according to number of DELs and billing) follow the pattern shown by the table below (the figures give the distribution on categories by percent).  - 10 - Based on Based on Subscriber Statistics Billing figures Niamey Rest of Country Niamey Rest of Country Central Administration including military and security 24 45 Parastatals and embassies 10 10 30 51 Commerce and private 57 30 70 49 OPT service lines 9 15 -- TOTAL 100 100 100 100 The registered unsatisfied demand for new telephone subscriber connections was 711 on December 31, 1981 (579 in Niamey and 132 in other cities). The registered demand does not reflect total unsatisfied demand, which both the OPTN management and their consultants estimate to be around 3,000. The reason for the registered figure being lower is due to the fact that it only reflects possible connections not yet effected. Records are not kept for demand that cannot be met with available switching equipment and cables, and this excludes big areas of Niamey and many other cities and towns. The total installed switching capacity in the country is 9,630 lines (end of 1981); the connected lines (6,360) correspond to an exchange fill of only 66 percent. The free capacity is not evenly distributed, however. For example, one of the two exchanges in Niamey and the exchanges in some other cities and towns are fully utilized. Even when account is taken of this condition, the low exchange fill still reflects a relatively poor planning and coordination of installation work. The total number of telex subscribers is 212 with additional demand of 60 that has not been satisfied due to adequate cable pairs not being available. Project's Role 4.03 From 1975 (corresponding to project appraisal) to 1981, the available telephone switching capacity in Niger has been increased by 4,058 lines to a capacity of 9,630 lines. During the same period, 3,317 telephones and 2,610 DELs have been added, corresponding to annual growth rates of 7.4 percent and 9.2 percent respectively. The DEI growth rate in Niamey was 10.2 percent and in the rest of the country 7.1 percent per annum. The telephone density in the country has increased modestly from 0.14 to 0.17 telephones per 100 population, which does not change the situation of Niger being one of the most poorly provided countries in the world in regard to telephone service. While the increase of switching capacity slightly exceeded the project objectives (albeit with about two years delay), the rate of attained subscriber growth (9.2 percent per annum overall) fell short of the appraisal piojections of 12 percent per annum. If the growth had been 12 percent, the telephone density would have reached  almost the figure of 0.20 per 100 population and the exchange fill (paragraph 4.01) wqould have been 75 percent, and more acceptable, considering the relatively small size of the national network. Most recent additions to the long distance ne,twork which are being implemented at the eMid of the extended project period (1979-80) are outside the scope of the project and also financed from bilateral resources. However, the new long distance installations that were included in the project have been completed satisfactorily. Other Factors 4.04 The quality of the long distance service is good at Niamey and other regional centers and at some of the distri,t centers and other towns connected to the network. Similarly, the local service (table below) is adequate at the larger cities, but deficient or non-existent at most towns and rural centers. From paragraph 4.01, it can be seen that the service is very much concentrated in the urban areas. During the project period, the places with telephone access increased from 30 to 52, which is still far from sufficient, especially as about 86 percent of the population of Niger lives in areas outside these 52 places. The staff appraisal report does not contain comparable figures, but it is clear that the quality of both long distance and local service has been significantly improved as a result of the project as indicated by the following table. Quality of Available Local Telephone Service Average for November and December 1981 - Niamey Zinder Maradi No. of Calls completed as % of total attempts 95 about 100 98 % of Attempts Obtaining Tone within 3 Seconds 96 100 100 Average % of lines being Out of Order by end of Working Day 1.5 n.a. n.a. Average delay in Restoring Service on Faulty Line (No. of Working Days) 4.5 n.a. n.a.  - 12 - V. FINANCIAL PERFORMANCE Financial Results 5.01 Comparisons of the forecast and actual financial statements of OPTN are shown in Annexes 3-6. It is not possible to make a meaningful comparison of the financial results for the Telecommunications Department since, except for the income statement, the accounts have yet to be split between telecommunications services and postal and financial services. The actual overall financial performance over the period is summarized below: - - ---- Amounts in CFAF million - - - - - - Year ending December 31 1976 1977 1978 1979 1980 1981 1982 Operating Revenues 1,095 1,480 1,669 2,501 2,733 3,509 4,508 Operating Expenses 87-7 953 1,262 1,835 2,121 2,731 4,078 Operating Income 218 527 407 666 612 778 430 Net Income 183 448 318 438 497 686 149 Operating Ratio (%) 80 64 76 73 78 78 90 Rate of Return on Assets 8 18 12 17 11 11 6 at Book Value Financial Position 5.02 OPTN's balance sheets and appraisal estimates for FY76-82 are given in Annex 4. A summary of the FY82 position is presented below:  - 13 - - FY82-------- Appraisal Actual2 Item CFAF1 % CFAF1 ASSETS Gross plant in service 10,365 78 11,072 72 Less: Accumulated depreciation 2,871 22 3,995 26 Net plant in service 7,494 56 7,077 46 Work in progress 1,829 14 1,371 9 Current assets 3,990 30 6,970 45 Total Assets 13,313 100 15,418 100 LIABILITIES Equity 4,918 37 7,200 47 Long-term debt 5,116 38 2,318 15 Current liabilities 3,279 25 5,900 38 Total Liabilities 13,313 100 15,418 100 1/ In millions. 2/ Provisional accounts. The delay in the project implementation is reflected in the lower value of plant in service as compared with that at appraisal. Accounts Receivable 5.03 The amount of OPTN's outstanding bills for services rendered has increased from CFAF 363 million in 1977 to CFAF 1,400 million in 1982. OPTN does not maintain an accounts receivable ageing list. It is therefore not possible to indicate an accurate breakdown of the main categories of owing customers. However, it is understood that the major debtor is the Government and in particular the Ministry of Information. Furthermore, the Government (Ministry of Information) has not yet complied with the Credit Agreement (Section 4.02) which provided for the sharing of the cost of investment and operation of the common facilities of the Niamey-Zinder microwave route. Financing Plan 5.04 OPTN's funds flow statement and appraisal estimates for FY76-82 are given in Annex 5. A summary in millions of CFAF is presented below  - 14 - ---- 1976 - 1982 - Appraisal Actual Item CFAF % CFAF % SOURCES Internal generation 4,692 39 6,676 54 Borrowings 4,636 38 2,318 19 Government credits 2,848 23 3,474 27 Total Sources 12,176 100 12,468 100 APPLICATIONS Debt Service 2,631 22 2,549 21 Capital expenditure 9,204 75 9,120 73 Increase in working capital 341 3 799 6 Total Applications 12,176 100 12,468 100 The internal cash generation was higher and borrowings lower than expected at appraisal. Financial Covenants 5.05 The beneficiary has not complied with a number o- financial covenants (paragraph 6.05) largely due to lack of sufficient qualified manpower. As a result OPTN still prepares consolidated balance sheets and funds flow statements for all its services; external audit is perennially two years late, and the accounts have not been certified. OPTN needs further assistance to overcome the major shortcomings in the financial management of its operations. Such assistance should focus on: (a) establishing a management information system; (b) bringing the external auditing of OPTN's accounts up to date; and (c) assessing the viability of OPTN's various services. VI. INSTITUTIONAL PERFORMANCE Organization and Management 6.01 The administration of OPTN improved in several aspects during the project execution period; to a great extent this was a result of the  - 15 - technical assistance part of the project focused on improving staff admin- istration, accounting, and commercial activities. However, the efforts to develop the institution, in general, and to increase its efficiency, in particular, were hampered by several factors, among which were: - changes in top management, General Manager, Director Telecommunication, etc.; - shortage of staff with adequate qualifications or with a sufficient educational background for on-the-job training; - difficulty in mobilizing staff because of a rigid r salary system which lacks incentives; and - insufficiency of the technical assistance input. A subsequent effort is being made under bilateral aid to support the assistance to OPTN's telecommunication branch to overcome these deficiencies. Growth 6.02 The technical facilities which have been added to OPTN's network within the framework of the project and, subsequently, on the basis of bilateral loans and credits, have enabled a substantial growth of OPTN's services. The available telephone switching capacity in Niger increased from 5,807 lines in 1975 to 9,630 lines in 1981. During the same period the annual growth rates for telephones and DELs were 7.4 percent and 9.2 percent respectively. Staff and Training 6.03 The number of staff has grown significantly since the time of project appraisal (1975), both as a whole and for the telecommunications branch; recruitment has to a great extent been imposed on OPTN by political decisions. Thus, although the number of telephones and the number of main lines (DEL) have grown by as much as 47 and 62 percent, respectively, the ratios of telecommunications staff per 1,000 telephones and per 1,000 DELs have grown still further, from 87 to 100 and from 145 to 150, respectively between 1975 and 1981. Instead of increasing, these two ratios should have decreased significantly over the period. Unless OPTN can resist future pressure to employ more staff than is needed for its operations, productivity will continue to decline. An extensive training program has been prepared by the consultant and is under implementation. Training for most of the trades is done at the local P&T school. Higher level and specialized training is done by equipment suppliers and at training institutions abroad.  - 16 - Covenants 6.05 The beneficiary's status of compliance of the IDA credit covenants is summarized in the table below: Compliance with Covenants of Development Credit Agreement (DCA) and Project Agreement (PA) DCA 4.01(a) Government settle accounts outstanding on 12.31.76 Compl-ed DCA 4.01(b) Government pay bills within No delay up to amount two months covered by budget DCA 4.02 Cost sharing on Niamey-Zinder Some contributions route received by OPT but arrangement not satisfactory. PA 3.02(a)(i) Staff structure study Implemented PA 3.02(b) Planning system Not yet implemented, consultancy team does planning PA 3.05 Insurance Complied PA 4.01 Accrual accounting Implemented PA 4.01 Separation of accounts for Implemented for income telecommunications and and expenditure postal/financial services accounts, but not for balance sheet accounts PA 4.02 (i) Audit Audit late and auditor not qualified, new auditor is being nominated PA 4.02 (ii) Audit reports to IDA within Not complied with; more six months than a year's delay PA 4.03 Billing and collection Slippage of billing and large arrears; now being remedied PA. 4.04(a) Tariff study and tariff Implemented, but study of adjustments structure of tariff system inadequate PA 4.05 Investment limitation prior to project completion Not complied with PA 4.06 Use of telecommunications funds Pending audit and for other purposes separation of balance sheet accounts PA 4.07 Debt Limitation Pending Government's decision on CCCE credit PA 4,08 Earn interest on liquid funds Complied  - 17 - VII. ECONOMIC REEVALUATION Project Achievements 7.01 The project met its objectives to improve and expand the switch- ing and distribution network installations and to extablish certain trans- mission links, to feed into the long distance networks. Although the project works were completed later than estimated (paragraph 3.03), thereby delaying project benefits, the quality and the operations of the facilities, added under the project, have met expectations. Partly due to the two-year delay in the completion of the local distribution networks, OPTN has not met the planned number of new telephone connections. However, the technical assistance elements, in engineering and in administration, contributed to the development of OPTN as an institution. The effort however, was inadequate to fully meet objectives; this holds particularly for the assistance to accounting, billing and planning. Least Cost Solution 7.02 The project made a contribution to minimizing costs for the technical installation, by an appropriate engineering design and by international competitive bidding. On the latter element the success turned out to be less than had been expected though, due to limited participation by suppliers. Return on Investment 7.03 Operating results, as measured by the rate of return on average book value of net fixed assets in operation, reveal a deteriorating trend since 1979, a year in which the rate of return rose to 17 percent following a 29 percent tariff increase on May 1, 1979. Provisional figures indicate that the rate of return dropped to 11 percent in 1981 and will drop further to 6 percent in 1982. The operating ratio during the same period also shows a deteriorating trend, rising from 73 percent in 1979 to 90 percent in 1982. The rate of return of 11 percent for fiscal year 1980 was above the 8 percent return required by the Project Agreement (Section 4.06) whereas that projected for the fiscal year 1982 (6 percent) is below the 10 percent required by the Project Agreement. This is mainly due to slow connection of new subscribers in Niamey and big investments in the toll network. 7.04 The project was an integral p<art of OPTN's 1976-1981 investment program. Since costs and benefits of all components of the program are interrelated, the return is calculated on the investment in the program as a whole rather than on the investment in the IDA-financed project. On this basis the internal financial rate of return was 16 percent. This compares favourably with the estimated 14 percent at appraisal. The basis for the calculations is given in Annex 7. 7.05 The above financial rate of return understates the benefits which would be derived from the investment program partly because it does not include consumer surplus. It also does not take into account the indirect and external benefits received by nonusers oL the service.  - 18 - 7.06 An estimate of some portion of the consumer surplus can be made by noting that at an average annual inflation rate of about 10 percent, the total inflation over the 1976-1982 was 77 percent. Thus subscribers who were connected in 1976 had demonstrated in real terms that they were willing to pay at least 77 percent more in real terms for a lower quality and more limited telephone service than current subscribers were being asked to pay. 7.07 By tabulating the prices in real terms which existing consumers actually paid when they acquired telephone service, and assuming that new consumers are similar to the average existing consumer, the estimated economic rate of return on the program is 29%. Under the same +-eat of assumptions, the projected economic rate of return at appraisal was 24%. VIII. IDA PERFORMANCE Overall Performance 8.01 The starting up of the project was slow, and could have been improved if hiring of consultants and subsequent project preparation had been started before Board approval. This issue has now been addressed by the initiation of the IDA project preparation facility and this mechanism would certainly have been useful in preparing this project. Apart from the initial slippages and the consequent increase in project cost, the physical execution was smooth. The scope and level of technical assistance as it turned out, should have been much greater than provided for in the pV oject. Supervision 8.02 Supervision of the project amounted to an average of 1-1/2 field missions per year. More frequent or more extensive missions during the initial stages would not have accelerated the start-up process, since the delay was mainly caused by the time it took to engage the consultants and time needed by the consultants to prepare the tender packages. More frequent supervision during the later stages of the project, however, may have helped to enhance OPTN's benefit from the technical assistance component of the project and to press for a more speedy connection of new subscribers. Working Relationship 8.03 The working relationship between IDA staff and Nigerien officials was good. The lack of a mangement information system in OPTN made it difficult to identify and resolve problems, but cooperation was forthcoming and IDA staff advice was always considered.  - 19 - IX. CONCLUSIONS 9.01 The project overall made a contribution to the physical improvement and expansion of the telecommunications services in Niger. The quality of these services is now generally acceptable, although the extent of the services is still very much inadequate. Planning and preparation of the project were insufficient, particularly the schedule of implementation. A PPF advance as initiated in later projects in the Bank group could have been utilized beneficially in this case for the start-up period. The project execution period most realistically could have been estimated at being at least 18 months longer than the estimated 3-1/2 years. Even with better preparation before project commencement, such a short execution period would have been hard to adhere to. As it turned out, the date of completion of physical components required about 5-3/4 years after signing of the Credit Agreement of which the first 18 to 26 months were consumed by engineering and preparation of tender packages. Better account could also have been taken of the fact that the OPTN had a great shortage of sufficiently qualified staff. 9.02 The assistance provided by the project to OPTN's institutional development was relevant and well received. The extent of assistance was, however, inadequate for the needs. OPTN does not have a proper financial management or a management information system; the accounts are not fully separated between the main branches of services; and the tariff study, which was thorough in regard to costs of operations and of capital, did not consider the influence on an optimum structure of marginal benefits and costs. OPTN needs additional assistance to remedy these shortcomings.  - 20 - ANNEX 1 NIGER OFFICE DES POSTES ET TELECOMMUNICATIONS DU NIGER (OPTN) TELECOMMUNICATIONS PROJECT CREDIT 634-NIG Implementation Schedule 1976 1977 1978 1979 1980 1981 1982 I II IIrI- IV III III IV I II III I-V I II III IV I II III I-V I II ILI IV I Exchanges Design Bidding and contract ;______- _ Installation and commissioning _ I_---__ Outside Plant Design Bidding and contract -_l Installation and commissioning Long Distance Design Bidding and contract -v Installation and commissioning , Single line: SAR Double line: Actual  -21 - ANNEX 2 NIGER OFFICE DES POSTES ET TELECOMMUNICATIONS DU NIGER (OPTN) TELECOMMUNICATIONS PROJECT CREDIT 634-NIG Dates of Bids Opening and of Letters of Intent Date of Date of Delivery Time Item Bid opening Letter of Intent Agreed in Contract Switching eq ui pment for Niamey and Maradi, as well as R2 05/03/78 08/19/78 24 months Switching equipment for Dosso, Tahoua, Zinder 05/03/78 06/06/78 26 months Carrier equipment 05/03/78 08/19/78 8 months VHF equipment for Zinder-Tanout, Maradi-Dakoro, Ouallam-Banibangan 05/03/78 08/19/78 12 months HF equipment for Niamey-Agadez, Niamey-Arlit 05/03/78 02/14L/79 17 months Cables and auxiliaries 12/12/78 02/14/79 9 months Telephone poles 12/12/78 02/14/78 4 months Telephone instrunents 12/12/78 02/14/78 6 months Telephone cable ducts 12/12/78 04/25/79 3 and 6 months  NIGER OFFICE DES POSTES ET TELECOMMUNICATIONS DU NIGER (OPTN) CREDIT 634-NIG: FIRST TELECOMMUNlCATIONS PROJECT Income Statement for Total Operations (CFAF million) Year ending December 31: 1976 1977 1978 1979 1980 1981 1982 Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Provisional Appraisal Provisional Forecasst UPERAIING REVENUES Telecommunications Telephone 553 526 900 572 743 621 1,332 844 1,581 1,080 2,021 1,265 2,8101 1,491 Telex/Telegraph 125 121 141 132 281 144 497 191 624 246 700 301 870 378 Miscellaneous 13 18 22 19 195 21 177 23 - 24 63 26 51 29 Subtotal 691 6-5 1,063 723 1,219 786 2,006 1,058 2,205 1,350 2,784 1,-592 3,73T T,-M Postal and Financial Services Postal 5ervices 160 198 172 217 183 228 206 240 245 251 310 264 390 277 Financial Services 170 136 180 149 189 157 210 165 237 173 357 181 327 191 Philately and Others 74 44 65 49 78 51 79 54 46 57 58 59 60 62 Subtotal 404 378 417 415 450 436 495 459 - 528 481 72 5_ 3___ m N53 Tota.l Operating Revenues 1,095 1,043 1,480 1,138 1,669 1,222 2,501 1 J'17 2,733 1,831 3,509 2,096 4,508 2,'+28 OPERATING EXPENSES Salaries and Wages 477 444 544 479 691 522 829 569 1,095 619 1,188 675 1,493 736 Materials 83 81 65 88 84 95 106 122 124 138 217 150 331 162 Other Expenses 194 163 208 180 283 192 629 248 603 283 691 306 884 331 Subtotal 754 688 817 747 1,058 809 1,564 939 1,822 1,040 2,096 1,131 2,708 i:7M9 Depreciation 123 138 136 156 204 177 271 281 299 391 635 428 1,370 469 Total Operating Expenses 877 826 953 903 1,262 986 1,835 1,220 - 2,121 1,431 2,731 1,559 4,078 1,698 OPERATING INCOME 218 217 527 235 407 236 666 297 612 400 778 537 430 730 Less Interest 35 31 79 45 89 58 228 73 115 223 92 276 281 342 Net Income 183 186 448 190 318 178 438 224 - 497 177 686 261 149 388 Average net plant in service 2,635 1,911 2,886 2,066 3,471 2,246 4,034 4,148 5,428 6,042 6,999 6,394 7,116 6,803 Operating Ratio (%) 80 79 64 79 76 81 73 80 78 78 78 74 90 70 Rate of Return (%) 8 11 18 11 12 11 17 7 11 7 11 8 6 11 lx  NIGER OFFICE DES POSTES ET TELECOMMUNICATIONS DU NIGER (OPTN) CREDIT 634-NIG - FIRST TELECOMMUNICATIONS PROJECT Balance Sheet for Total Operations (CFAF million) Year endinig December 31: 1976 1977 1978 1979 1980 - _ 1981_______ ActuaFAppr. tual A,Appr Actual Appr. Actual Appr. Actual A ppr. ProUisional Appr. ProvisionaL Appr. ASSETS Gross fixed assets 3,967 3,239 4,103 3,824 5,475 4,271 5,704 8,031 8,833 8,685 9,779 9,525 11,072 10,365 Less AccumuLated depreciation 1,081 969 1,217 1,125 1,420 1,302 1,691 1,583 1,990 1,974 2,625 2,402 3,995 2,871 Net fixed assets in operation 2,886 2,270 2,886 2,699 4,055 2,969 4,013 6, 448 6,843 6,711 7,154 7,123 7,717 7,494 Work in progress 210 1,201 368 2,395 268 3,339 1,029 624 1,199 871 721 1,344 1,371 1,829 Total Net Fixed Assets 3,096 3,471 3,254 5,094 4,323 6,308 5,042 7,O72 8,042 7,582 7;T 7 8 ,467 -8,48 9,3Z 3 lnventory - 74 58 82 69 91 63 153 65 218 70 240 70 264 Accounts receivables - 400 363 371 748 336 1,201 359 1,203 388 1,288 448 1,400 524 Cash, etc. 2,141 2,406 2,824 2,384 4,453 2,464 3,742 2,564 4,760 2,659 5,000 2,789 5,000 3,042 Other items 415 100 517 110 475 120 290 130 494 140 500 150 500 160 Total Current Assets 2,556 2,980 3,762 2,947 5,745 3,011 5,296 3,206 6,522 3,405 6,858 3,627 6,970 3,99O TOTAL ASSETS 5,652 6,451 7,016 8,041 10,068 9,319 10,338 10,278 14,564 10,987 14,734 12,094 15,418 13,313 LIABILITIES Government credits 2,614 2,750 3,062 3,300 4,065 3,768 4,663 4,092 7,234 4,269 7,200 4,530 7,200 4,918 Borrowings 779 1,023 956 1,937 1,015 2,635 1,473 3,158 2,002 3,589 2,034 4,348 2,318 5,116 Subtotal 3,393 3,773 4,018 5,237 5,080 6,403 6,136 7,250 9,236 7,858 9,234 8,878 9,518 10,034 Public checki.ng accounts 1,544 2,106 1,789 2,170 3,421 2,235 2,786 2,302 4,409 2,371 4,500 2,442 4,O0O 2,515 Correspondents, net 513 390 450 400 1,299 410 1,198 420 740 430 800 440 900 480 Other items 202 182 759 234 268 271 218 306 179 328 200 334 200 284 Total Current Liabilities 2,259 2,678 2,998 2,804 4,988 2,916 4,202 3,028 5,38 3,129 7,50Z -3,721 57U9M 3,279 TOTAL LIABILITIES 5,652 6,451 7,016 8,041 10,068 9,319 10,338 10,278 14,564 11,087 14,734 12,094 15,418 13,313  NIGER OFFICE DES POSTES ET TELECOMMUNICATIONS DU NIGER (OPTN) CREDIT 634-NIG - FIRST TELECOMMUNICATIONS PROJECT Funds Flow Statement for Total Operations (CFAF million) Year ending December 31: 1976 1977 1978 1979 1980 1981 1982 1976 - 1982 Actual Appr. Actual Appr. Actual Appr. Actua.l Appr. Xctual Appr. Prov. Appr. Prov. Appr. ETual. Appr. SOURCES Internal Sources: Net income before interest 218 217 527 235 407 236 666 297 612 400 778 537 430 730 3,639 2,652 Depreciation 123 138 136 156 204 177 271 281 299 391 635 428 1,370 469 3,038 2,040 Internal Cash Generation 341 355 663 391 611 413 937 578 911 791 1,413 965 1,800 1,199 6,676 4,692 Bo.rowings 779 543 177 914 59 698 458 523 529 431 32 759 284 768 2,313 4,636 Government credits 79 - 680 101 550 981 468 447 324 2,418 177 (552) 261 - 388 3,47+ 2,848 TOTAL SOURCES 1,199 1,578 941 1,855 1,651 1,579 1,842 1,425 3,858 1,399 893 1,985 2,084 2,355 12,463 12,176 APPLICATIONS Amortization 144 185 101 234 297 267 287 295 344 209 168 201 289 192 1,630 1,583 Interest 35 31 79 45 89 58 228 73 115 223 92 276 281 342 919 1,048 Capital expenditure 994 1,430 294 1,735 1,272 1,302 990 974 3,299 869 469 1,373 1,802 1,521 9,120 9,204 Increase in working capital 26 (68) 467 (159) (7) (48) 337 83 100 98 164 135 (288) 300 799 341 TOTAL APPLICATIONS 1,199 1,578 941 1,855 1,651 1,579 1,842 1,425 3,858 1,399 893 1,985 2,084 2,355 12,468 12,176  NIGER OFFICE DES POSTES ET TELECOMMUNICATIONS DU NIGER (OPTN) CREDIT 634-NIG: FIRST TELECOMMUNICATIONS PROJECT Cash Flow Statement for Total Operations (CFAF million) Year ending December 31: 1976 1977 1978 1979 1980 1981 1982 1976-1982 Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Operating Re\renuus 1,095 1,043 1,480 1,138 1,669 1,222 2,501 1,517 2,733 1,831 3,509 2,096 4,508 2,428 17,495 11,275 Cash Operating Cost 754 688 817 747 1,058 809 1,564 939 1,822 1,040 2,096 1,131 2,708 1,229 10,819 6,583 Interest 35 31 79 45 89 58 228 73 115 223 92 276 281 342 919 1,048 Amortization 144 185 101 234 297 267 287 295 344 209 168 201 289 192 1,630 1,583 Total 933 904 997 1,026 1,444 1,134 2,079 1,307 2,281 1,472 2,356 1,608 3,278 1,763 13,368 9,214 Net Cash Flow 162 139 483 112 225 88 422 210 452 359 1,153 488 1,230 665 4,127 2,061 Construction 994 1,430 294 1,735 1,272 1,302 990 974 3,299 869 469 1,373 1,802 1,521 9,120 9,204 Internal Cash Generation (%) 16 10 164 6 18 7 43 22 14 41 246 36 68 44 45 22 C'  - 26 - ANNEX 7 NIGER OFFICE DES POSTES ET TELECOMMUNICATIONS DU NIGER (OPTN) Credit 634-NIG: FIRST TELECOMMUNICATIONS PROJECT Return on Investment 1. The benefit period of programe extends from 1976 to 1996, when on average the equipment provided under the program is expected to approach the end of its useful life. 2. The average annual price inflation rate is 10 percent. 3. The standard conversion factor for Niger is 0.85. 4. Capital expenditures are based on actual cost incurred during the investment program and have been adjusted to reflect 1976 values. 5. Incremental operating costs and revenues associated with the investment program have also been deflated to 1976 values. It has been assumed that the telecommunications operations account for 58% of total operating costs. 6. The following is a summary of the program's incremental cost and benefit streams in million of CFA francs at 1976 price levels. Capital Operating Operating Net Year Investment Costs Revenues Benefit 1976 210 - - (210) 1977 267 (6) 222 ( 39) 1978 1,051 70 319 (802) 1979 744 145 585 (304) 1980 2,260 189 617 (1,832) 1981 291 220 818 307 1982 323 552 1,140 465 1983- - 352 1,140 788 1996 7. The internal financial rate of return for the foregoing benefit is 16 percent. 8. Based on the assumption that consumer surplus exists in Niger, the economic rate of return is 29%.