Nepal - Telecommunications Sector Memorandum

Document of The World Bank FILE COPy FOR OFFICIAL USE ONLY CONFIDENTIAL Soqwt N. 1164-NEP REPOR7-N ojsl SECTOR MEMORANDUM NEPAL TELECOMHUNICATIONS January 31, 1977 Central Projects Staff South Asia Regional Office Ihis doeument has a rustrleted distribution and may be used by reciplents only In the performance of their oMetal duties. Its contents may not otherwise be disclosed without World Dank authorsatleo. CURRENCY EQUIVALENTS Currency Unit - Nepalese Rupee (NRa) US$ 1.00 - NRa 12.5 NRe 1.00 - us$ .08 LIST OF ABREVIATIONS AND ACRONMS USED IN THE REPORT HF Radio - High Frequency Radio ICAO - International Civil Aviation Organisation NTB - Nepal Telecommunications Board NTC - Nepal Telecammunications Corporation TELEX - Subscribers Teleprinter Exchange System UMP - United Nations Development Program FISCAL 7EAR Jay 16 - July 15 FOR OFFICIAL USE ONLY CONFIDENTIAL SECTOR MEMORANDUM NEPAL TELECOMMUNICATIONS Table of Contents Page No. 1. BACKGROUND .................................... 1 2. THE TELECOMM UNICATIONS SECTOR ................ 2 Role of Telecormunications in the Econov ..... 2 Access to Service ..........*................... 3 3. SECTOR DEVELOPMENT STRATEGY AND GOALS ......... 4. INVESTMNT PROGRAM AND COST .. . . .. .. .. .. ....... 5. SacToR CoNSTRAINTs ................. o.......... 6 Organisational ............................. 6 Training and Productivity .. ... . .. ....... .... 7 Financial ........ .. ...... ... .... ... . 7 6. BANK GROUP STRATEGY IN THE SECTOR ............. 9 7. ACTION TO BE TAKEN ........................ 10 This report has been prepared by C.R. Dickenson and is based on information relating to the sector collected during appraisal and supervision missions. This is a revision and updating of a previous report dated April 29, 1976. 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 CONFIDENTIAL LIST OF ANNEXURES 1. International Telephone Statistics 2. Existing Facilities and Basic Data 3. Ongoing Work 4. Balance Sheet and Income Statements 5. Performance Indicators 6. Proposed Third Telecommunications Project MAPS IBRD 10154R1 Geophysical 10246R Telephone Network 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. SECTOR MEMORANDUM NEPAL TELECOMMUNICATIONS 1. Background 1.01 Until 1951 Nepal was largely isolated from the rest of the world and had only very limited internal communications. At that time the only telecommunications facility was a single-wire telegraph line from Kathmandu to the Indian border and to two other nearby administrative centers. During the fifties the telegraph line was extended to the central and eastern parts of the country, HF radio communications to India were provided and a 300-line manual telephone exchange was installed in the Kathmandu area. These very limited facilities proved to be completely inadequate, causing Government to give telecommunications greater priority as support for the administration and economic development of the country. Under a USAID project, completed in 1964, a 1000-line automatic exchange was installed at Kathmandu, the small Kathmandu exchange was recovered and installed at Biratnagar and low power HF radio links for telegraph service were provided between Kathmandu and 57 other locations. 1.02 A Telecommunications Department, within the Ministry of Works Transport and Communications, was established in 1959. Concerned essentially with engineering and operational functions, the Department did not operate on a commercial basis with a properly designed organi- zation and adequate tools for efficient management. Little was done to organize satisfactory training and management; hence, performance standards and productivity were low. 1.03 In December 1967 the Nepalese Government requested IDA assistance in developing the telecommunications sector but it was only after the appointment of an ITU adviser in May 1968 and with the cooperation of Bank staff that a suitable project could be developed. This project (Credit 166-NEP for US$1.7 million, signed on November 10, 1969) was undertaken in association with an Indian Aid project. The joint project provided for improved international telecommunications facilities, a long distance telephone system to the east of Nepal, extension of the Kathmandu tele- phone exchange, and provision of telephone facilities at 12 other important centers and telex facilities at Kathmandu. The project is now complete. A second project (Credit 397-NEP for US$5.5 million, signed on June 20, 1973) will further extend the existing exchanges and the long distance telephone network with provision of telephone facilities at nine other important centers. Only preparatory work, some procurement work and one minor installation have thus far been undertaken in connection with the second project, which is now likely to be completed in early 1980, between six and twelve months behind schedule. 1.04 The development thus far undertaken or in hand is still at the earliest stage and only provides basic services at the more important centers. -2- The telephone density of .10% (para. 2.06) is among the lowest in the world and the telephone network is designed to cover only about three- quarters of the area of the Terai and the central valleys of Kathmandu and Pokhara, leaving large areas of the country without adequate communications. 1.05 As a result of the recommendations of the mission which appraised the first IDA project, the Nepal Telecommunications Board (NTB) was created in October 1969 as a semi-autonomous agency with its organi- zation based on the recommendations of consultants financed under the Credit. More recently, on June 15, 1975, the Government passed legislation converting NTB into a Government-owned statutory corporation which will have increased operational and financial autonomy. This legislation creating the Nepal Telecommunications Corporation (NTC) is in very broad terms and is to be supplemented by rules and regulations covering NTC's operations. These implementing rules and regulations have not yet been issued but should be made available to IDA shortly. Although we still await final details and further development of methods and procedures is necessary, a satisfactory framework for sector organization has been established. 1.06 While the first two projects have provided the basic institutional framework, much remains to be done, particularly in evolving a basis for operating within the new framework and developing technical training as well as local management expertise to replace that of expatriate staff. NTC achieved its first positive financial results in FY 1974 and has since shown progressive improvements in rate of return but there is need to further improve financial performance through increased efficiency of operations rather than tariff increases which could be unduly restrictive at this stage of Nepal's economic development. Lending for a third pro- ject is therefore envisaged in the Bank Group's FY 1978 or FY 1979 lending program. This project will, during its initial stages, run parallel with the second project but is urgently needed not only to provide for the growth in demand at existing centers but also to extend communications to the remaining important centers in the country and to continue institutional development. While a fairly clear case exists for the presently envisaged expansion of facilities in relation to both existing and new areas, a study of the economic benefits of extending telecommunication facilities is con- templated in connection with the third project. 2. The Telecommunications Sector Role of Telecommunications in the Economy 2.01 The Kingdom of Nepal, extending as it does from the Terai ?lains in the south through the Siwalik Hills and Mahabharat Mountains to the peaks of the Himalayas, is subject to both topographical and climatic extremes which pose major problems in the development of an integrated economy. -3- 2.02 These geographic features not only have seriously hampered the development of road and rail facilities but have also created pro- blems in providing safe all-weather aircraft landing facilities; hence many areas are isolated from one another insofar as rapid transportation is concerned. One of the problems facing the Government has been how to create a single economy out of many small "mimil" economies which, due to the topography, have had very little interconnection. Another problem has been how to provide employment and subsistence for the people migrating to the more fertile valleys and to the Terai. The lack of adequate surface and air communications underscores the need for a reliable and extensive telecommunications network if effective administration and social services are to be provided and economic development facilitated. 2.03 More than 90% of the Nepalese population depend on agriculture for employment, much of it subsistence agriculture. Nonetheless, there has beencbvelopment of agricultural production for export, mainly jute, rice and lumber from the eastern and central Terai. There has also been some development of industry in Kathmandu and Biratnagar and considerable tourism development in Kathmandu and Pokhara with trekking into the mountain area. Tourism is also facilitating development of a number of secondary industries including food supplies to the hotels, production of artifacts, etc. 2.04 While agricultural production for export is relatively simple in operation, it requires adequate telecommunications in order to coordinate transport, arrange for sales and for fertilizer supplies, facilitate deliveries, etc. Manufacturing involves the coordination of a series of operations which are highly dependent on adequate telecommunications. Tourism growth in the late-1960's was about 30% per annum but has recently been restricted, due to delays in hotel construction, to about 8% per annum. There will however be an increased need as facilities are expanded for rapid telecommunications in order to ensure satisfactory hotel room and aircraft seat occupancies. 2.05 With the country wholly dependent on imported oil supplies and following the oil price increases, the efficient and economical use of the limited transportation facilities is vital and can only be coordinated through satisfactory telecommunication services. Finally, there is the need to provide adequate communications to facilitate administration and provide essential social services, particularly in remote areas. Access to Service 2.06 Starting with a telephone density of .02% at the time of the first project, Nepal now has a density of .10% with a total of about 13,000 telephones (main and extension) in operation. Even so, the development of facilities is at a very early stage as can be seen from the International Telephone Statistics at Annex 1. The telephone density of .08% at January 1975 compares with .10% for Burma and .29% for India. Following completion of the first project, local facilities which are reasonably satisfactory in quality are now available at Kathmandu and 12 other towns. The number of working subscriber lines at these centers is 8,900 with a waiting list of 7,100, e.g., only 59% of total present demand has been satisfied even within these centers. Waiting lists for the rest of the country are not available. While the number of connections has been growing at 18% per annum, which is high, total demand has been growing at 34% per annum. These figures are indicative of the early stage of development and the need for a major expansion of facilities. 2.07 Satisfactory long distance facilities are now available at Kathmandu, Biratnagar, Pokhara and Birgunj and nine small intermediate towns. Limited telex facilities are only available within the Kathmandu Valley. Telegraph facilities operating on a part-time basis are avail- able at 79 centers but due to the vagaries of HF communications and the use of voice transmission, they are not very reliable and are subject to corruption of text. International telephone, telex and telegraph facilities operate via India, Pakistan and Hong Kong and are reasonably satisfactory. The various services in operation with basic data.on the networks are more fully described in Annex 2. 2.08 The ongoing works include the extension in existing areas by some 5,100 lines and provision of new exchanges with a total capacity of 2,750 lines in nine additional towns. The microwave system will be extended into central and part of western Nepal. The works to be under- taken under the second IDA project were recently reviewed and minor adjustments made to meet changing conditions. Details, including revised cost estimates, are given in Annex 3. 3. Sector Development Strategy and Goals 3.01 The strategy followed during the initial stages of development has been to: (a) develop communications in the areas of greatest economic significance; the areas covered under the first and second IDA projects contain 80% of the industry, nearly 70% of the areas under cultivation (including those in which all important cash crops are grown) and the main tourist centers; (b) establish an institutional framework for sector development; (c) gradually develop a financial basis for future expansion. 3.02 The next stages, based on the communications requirements of economic significance and the need to develop sector organization, managerial and technical expertise, are: (a) extension of the existing telephone facilities to meet essential demand in the areas presently served. The waiting list position (para. 2.06) and the 34% annual growth in demand at these centers are a clear indication of the need to extend services. While limited by the physical and financial con- straints, the next project should, it is proposed over the period 1979-82, provide for the connection of 14,000 additional subscribers in existing areas bringing the total (including provisions under the ongoing project) to about 28,000; however, total demand by 1982 would be 105,000 if present trends continue. (b) With only 18 of the country's 78 districts at present having telephone service or to be provided with service under the second project, there is a need to expand the network into new areas. The next project should extend services to the west of the Terai and to the more important centers in the foothills of the mountains; In all about 20 new centers would be connected on the basis of providing full telephone exchange facilities to some 2,000 subscribers,and about 50 centers in rural areas through the provision of subscribers radio tele- phone facilities; (c) provide for the growth in demand for telex facilities both in Kathmandu and at other important centers in the country. About 150 additional subscribers would be added; (d) improve and expand international facilities through the provision of a small satellite ground station; (e) extension of training and.institution building within the framework already established; (f) further improvement in finances and ability to self- finance future expansion. It is expected that by 1982 NTCs internal rate of return will exceed 12% and the Corporation will be able to self-finance the whole of the local cost of development (about 40% of total cost) and start paying dividends on Government equity. 3.03 The number of telephones available by 1982 is not likely to exceed 38,000; this represents a telephone density of .29% which is extremely low by any standard. It is therefore to be expected that NTC will need to undertake additional sizeable projects beyond 1982. While in the initial stages of development and an almost complete absence of facilities it has been a relatively straightforward matter to establish priorities based on demand and the essential needs for administration and social services, the position in the case of future projects will - 6 - become more complex as the size of the network increases and reasonable basic coverage of the country is provided. It will therefore be important to examine in greater detail the benefits and trade-offs of further expansion and the economic priorities which should be established. 4. Investment Program-and Cost 4.01 The ongoing development program over the 1973-79 period will cost NRs 121 (US$11.h) million. Foreign exchange requirements of US$8.3 million are being provided under the IDA credits (US$7.2 million), Indian Aid (US$0.9 million) and Government grants (US$0.2 million). Local expenditures which total NRs 37 million are substantially being met by NTC's internal cash generation now estimated at NRs 33 million, with the balance of the local cost provided under grants from India and a small contribution from Government. 4.02 NTC is now in the initial stages of preparation of the 1979-82 development program, some preliminary data have been prepared, see Annex 6; tentative estimates for the 1979-82 period, with advance expenditures, amount to US$20.0 million with a foreign exchange component of US$12.0 million. On the basis of present estimates, NTC should be able to self- finance about US$5.0 million of the local costs of the program and require an equity contribution from Government of about US$3.0 million during the initial stages of the project. 5. Sector Constraints Organizational 5.01 During its initial period of operation, NTB suffered from the death of its capable first manager and from delay in appointment of a successor and his subsequent suspension following financial irregularities by a member of his staff. The manager has now been exonerated and returned to duty. He is an active and conscientious executive and good progress is now expected. 5.02 To facilitate the initial operation of NTB (and later NTC) it has been necessary to utilize in key executive positions the services of three experts,provided under the Colombo Plan, to assist in setting up an accounting system and business procedures and to strengthen the engineering branch. The services of these experts, originally to be provided for from three to five years, have been extended as a result of difficulty in finding satisfactory counterparts and the promotions of trained staff to senior positions elsewhere. At present the business and engineering experts still remain in Nepal. However, as the present Nepalese counterparts gain the necessary qualifications and experience, it is important that they take over the responsibilities of Chief Engineer and Business Manager. It is anticipated that executive authority will be transferred to the counterparts by mid-1977. 5.03 One problem prevailing in the Nepalese Government Corporation is the limited delegation of authority permitted under existing rules and reg- ulation. The Government has announced its intention to encourage delegation wherever appropriate and to improve the lines of management. In order to provide the physical capability to operate and further develop the tele- communications network, the process of developing NTC's lines of responsi- bility and initiating proper delegation of authority needs to continue and, for the time being, some outside technical assistance is still required. There is every indication that such assistance will be made available through 0DM. Training and Productivity 5.04 The technical competence of the staff employed by NTC, down to and including the assistant engineers, is satisfactory. Due to lack of adequate training, the situation at the lower levels needs improvement. In 1971 application was made for UNDP assistance in setting up a joint NTB/Civil Aviation Telecomnnications Training School. This project ran into difficulties due to the Nepalese Government deciding that all train- ing should come under the control of the university. Neither the UNDP, NTB nor ICAO were happy with this arrangement as they wanted the operating entities to have this training responsibility. To resolve the difficulty, IDA proposed that theoretical training of general application be undertaken through the university, supplemented by in-service vocational training at the NTC School. This was finally accepted but the project then ran into difficulty due to shortage of UNDP funds. A new project agreement has however now been signed and the Project Manager has already arrived in Nepal with further experts expected shortly. Delay in improving and extending technical training could be a major constraint to further rapid development of the sector. However, with the issues affecting the training school now resolved, this problem should progressively be overcome. 5.05 Largely due to the delay in fully implementing the training program, productivity has not improved to quite the extent hoped for at the time of appraisal of the second project. Major improvements have, however, been made and an increase in the size of the telephone network from 1,700 to 8,900 lines (or 423%), together with the provision of long distance and telex facilities, has been accompanied by a staff increase of from 1,200 to 1,400, an increase of 17%. Further improvements can be expected as the network continues to expand. Financial 5.06 A commercial accounting system has been introduced but is not in full operation. NTC have agreed to employ local consultants to fully implement these arrangements and extend internal audit facilities. They are also introducing courses for their accountants. Nepalese auditors have been appointed and are now performing the FY 1976 audit. -8- 5.07 Local telephone charges are based on a measured tariff system and are substantially in line with those operating in India and Pakistan. Long distance telephone tariffs are on the basis of a three-minute charge but as the network is automatized they will be based on a time and zone metering system with cheap night rates. Telegraph tariffs are on a per character or per word basis and are in line with those applying elsewhere in the area. Tariffs were revised in 1974 at IDA's suggestion and again increased in 1975 after a currency devaluation. Long distance tariffs were further adjusted with the introduction of improved service in April 1976. 5.08 Financial results have been poor in the past because of the inefficiencies, the type of network operated and the low tariff levels. But with the network's expansion and structural changes, the increased productivity of NTC's staff and the tariff increases, improvements have already taken place. In 1974, for the first time, NTB had a positive rate of return; results in FY 1975 and 1976 have shown further pro- gressive improvement. The position should continue to improve as the profitable long distance network is extended. Financial results are expected to be satisfactory toward the end of this decade. 5-.09 Actual and forecast financial results for FY 1973-80 are as follows: Actual Forecast Year Ending July 16 1973 1974 1975 1976 1977 1978 1979 1980 Net Income (Loss) (NRs million) (.3) .3 1.1 2.2 1.5 1.9 4.1 7.8 Operating Ratio (%) 98 95 88 73 72 67 61 Rate of Return (5) neg. .8 1.64 4.5 6.8 6.7 8.6 11.4 Balance Sheets and Income Statements are in Annex 4. Although the results and forecasts indicate a continued improvement in financial performance, it will be necessary to improve efficiency rather than increase tariffs if maximum benefits to the economy are to be obtained and NTC is to make a satisfactory contribution to future network development from its cash generation. 5.10 Insofar as local cost financing is concerned, it is estimated that NTC will be able to contribute about 60% of its needs for the next development program leaving Government to provide the balance of 40% amounting to US$3.0 million equivalent. Although Government supports the broad objectives, the program has yet to be finalized and approved by Government and only at the approval stage can it be established that these funds will be available but the Secretary for Communications anticipates there will be no difficulty in obtaining them. - 9 - 5.11 For the foreign exchange cost of the program, it is likely that Government will find it difficult to obtain financing from sources other than IDA. In any case, bilateral funds with high servicing costs would not be appropriate at this stage inNTC's development and equipment costs are likely to be higher if purchase is not made through international competitive bidding. Nonetheless, the use of available foreign exchange resources must be considered in relation to the needs of other sectors and the network's expansion at this stage has to be limited to meeting essential rather than total demand. 6. Bank Group Strategy in the Sector 6.01 Further IDA lending would help to provide at reasonable cost an effective national telecommiunications network serving all important centers. IDA's participation is considered to be an essential factor in bringing the entity to maturity and providing a satisfactory financial basis for further development. NTC continues to need IDA's advice and assistance in all aspects of its operations. The use of short-term financing at this time would seriously affect viability and the possi- bility of continuing with essential development. However with the continued expansion of NTC and the expected improvement in the Corporation's profitability, there are reasonable prospects that it should be possible in the case of a future project to both attract and be able to service a reasonable amount of bilateral finance for the development of facilities. 6.02 Besides financing.development,IDA's role would be to assist as follows: (a) Network Expansion and Development Formulation of projects and review of the need for development of telecommunications facilities on the basis of priorities designed to meet the requirements of administration, social services and economic efficiency as well as the expected growth in demand and traffic. Consideration would also be given to the correct technical solution on a least cost basis, the expected financial and economic rates of return, and the effect of further development on NTC's viability and profitability. NTC will have to continue to rely on IDA for considerable advice and assistance in procurement if funds are to be used to maimum ad- vantage and satisfactory technical standards maintained at a time of major technological change. (b) Institution Building Within the broad framework already established, develop- ment of an efficient operating entity with satisfactory managerial responsibilities for performance, detailed operating procedures and methods, financial and statistical controls, cost analysis, etc. - 10 - (c) Training Review of priorities and the need for development of training facilities following resolution of the major organizational issue (para. 5.04). This review by IDA would be undertaken at the time of appraisal and there- after during supervision and would be related particularly to the needs for the third project. (d) Performance and Productivity The indicators established for the second project (Annex 5) would be extended to provide a record of performance under all main headings. (e) Economic Study An economic study of the costs, benefits and priorities of expanding telecommunications in Nepal, the sociological implications, demand and supply, tariff structures and levels and future plans for development (see para. 3.03). 7. Action Taken or to be Taken 7.01 The phasing of a third telecommunications project and its content have been discussed with NTC's staff and the principal items agreed (Annex 6).The data the mission will require have also been specified and explained. NTC now hope to have their proposals available for appraisal by mid-1977. To offset the effects of delay under the second project and meet essential demand for expanding facilities as quickly as possible (see waiting list position shown in para. 3.03), the proposed credit should be presented to the Board by the first half of calendar year 1978. NTC is taking advance action to provide the buildings for the third project. 7.02 The main switching equipment requirements for the third project have been included as an option in the bidding documents for the second project. NTC will, therefore, be able to take up this option as and when the third IDA credit is approved. This arrangement will not only have the advantages of avoiding future delays and extending standardization but, through increasing the size of the potential order, also make it more attractive to potential bidders. 7.03 The possibility of undertaking an economic study (paras. 1.06 and 6.02) in association with the third project to review the benefits resulting from development of telecommunications facilities in Nepal has been discussed with the Minister of Communications, Chairman of the National Planning Commission, the Secretary for Communications and the Manager of NTC. Arising from these discussions, it appears that there - 11 - is support for undertaking such a study in Nepal, providing it does not throw too heavy a burden on the staff of NTC. The National Planning Commission would be prepared to give some assistance. All parties were anxious to see copies of any reports the Bank might have produced related to the sector in Nepal and/or economic studies undertaken elsewhere. 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Rep. of бг,о4о 5,Эг0 4.о 10,767 зо.25 В.7 1оо.о 7,Вз4 ЧЬ.14 io,933 г4.г6 2Т.4 41.7 6г.б ЬВ.З 5vеаеп В,2оа 5.91о 2.4 5.1Т8 6Э.Эг 8.1 1оо.с 1,г5г 9i.79 3,92Ь 57.4Э 16.6 г4.г 8Э.4 7Ь.8 5�ritzerlma 6,4о0 6,1оо з•о 3,79о 54.22 5.9 ioo.o 1,305 8г.о5 г,4о5 51.о5 z6.8 Э6.5 73•г ЬЗ•5 и.к. 56,1оо З.обо 2.3 2о,34г Зб.гб 7.4 99•9 7.065 5г.о4 1Э,Т17 3г.о4 24.г 34•7 75•0 65.3 u.s.s.н. г5Э.Э00 г.о3о Э.5 15.782 6.гЭ д.9 94.8 4,757 1Т33 ц,бz5 5.оТ 9.5 г6.4 90.5 73.6 ОС£Ан7А �i Auetrnlia 1Э,3оо 4,35о 3•о 5.п� 3Т•49 6.5 95•г Э,477 42.91 1,5гЭ г4•58 бо.9 Ь9-5 39-1 30•5 не� 2еаlапа 9,1оо 3.68о г.0 1,495 48.1г k.5 92.7 746 55.63 749 4г-58 43.3 49.9 ЗЬ.Т 5о.1 souнc�es• м ].. Telephone епд РориlаЕlпп 9tвtlstlсв: Yur1d'е Те1ерl:опе Statlatlca 1у АТ&Т (1975). 2. сиг statlвtlca: Чоr1д ввдй Аt1вв (1975). лсТеS: 1. InPormatl�n 1п respect о£ t4eae соипtгlев 1в [ог January 1у'74. 2, Теlерhлпе [�ne1t, 1s питЕег of telephonee 1mta11ed pet 1о0 populntlon. 3. Тlгеьв вtatlsticв теlвtе Ео сltlев vlth тоге thвn 10,000 telephonee except Рот countrLea 1п Еигире впд North впд Sauth America, а+ьд for Jарвл for иhlch statlвClca ere For сltlав vlth 100,OOG telephoneв. 4. Теlерпопе ciвttstleв гог rnаllвг�г:д аге гат 5ерtетьег 1q/5. п.а, [1ot аvеlйЫ^ Мвгсlг гу, i�.7F ANNEX 2 Page I of 5 pages NEPAL TELECOMMUNICATIONS COITORATION EXISTING FACILITIES AND BASIC DATA The facilities at present in operation are: (a) Local Telephone Services Local telephone networks consist of three modern crossbar automatic telephone exchanges at Kathmandu, Patan and Birgunj having capacities of 5,000, 1,OW and 1,000 lines respectively, and GB manual exchanges at Biratnager, Pokhara, Hitaura, Malangwa, Bhairawa, Nepalganj, Ehainsee, Amlekgmj, Simla, Janakpur- The total numbers of connected subscribers lines are 6,800 automatic and 2,100 manual. The number of telephones in service total about 13, 000 - (b) Long-distance Telf-2hone Service Services consist of the land line route from Kathmandu to Birgunj and the microwave radio systems between Kathmandu, Biratnager, Pokhara, Janakpur, Malangwa, Rajbiraj, Dharan and Bhadrapur- Reasonably high quality HF radio services exist to Bhairawa and Nepalganj. (c) Internal Telegraph Facilities Teleprinter circuits exist between Kathmandu and Birgunj, and Katl du and Biratnager otherwise the network consists mainly of low power HS SSB stations. There are 14 area-control stations including Kathmandu, which also operates as master control, and 65 dependent stations in remote areas which work into the area control stations on a time schedule. The HF radio service is ANNE 2 Page 2 of 5 pages largely used for the transmission of telegrams; however, although facilities are independent of and not connected to the telephone networks, telephone conversations are possible between kiosks provided at the area control locations and Kathmandu. (d) A manual telex concentrator exists at Kathmandu, 34 subscribers are connected. The service is only available for international calls. (e) International Facilities Existing services are primarily routed over the land line to India and via India to other countries. In addition, HF radio telephone and telegraph services operate to Delhi, Bombay, Calcutta, Dacca and Rawlpindi and HF radio telex services to Hong Kong and Bombay. ANNEX 2 Page 3 of 5 pages NEPAL NEPAL TELECOMMUIICATIONS CORPORATION BASIC DATA (I) Local Telephone Capacity Subs Connections Waiting List Kathmandu 5000 A 4561 4146 Patan 1000 A 870 130 Birganj 1000 A 695 228 Pokhara 300 M- 287 350 Bhairawa 200 M 180 100 Nepalgani 200 M 190 150 Hetauda 200 M 195 100 Malangwa 50 M 49 10 Janakpur 200 M 195 200 Rajbiraj 100 M 95 110 Dharan 400 m 374 100 Biratnagar 400 M (1000) 400 (702) 350 Bhadrapur 100 M 98 350 Simra 10 M 10 - Kalaiya 10 M 2 147 Installed Capacity Subscribers Connections 8904 Total 9170 + (1000) Waiting List 7074 Automatic 7000 (8000) Total Demand 15978 Manual 2170 Exchange Fill 88% Unfilled as % of Total Demand x Working as a separate unit (II) Long distance Telephone(Circuits) (a) Land line System Installed Capacity Used for Seivice 1. Kathmandu-Birganj 7 7 2. Kathmandu-Hetauda 3 2 ANNEX 2 -2- Page 4 of 5 pages (b) Microwave System Installed Capacity Used for Serv-ce 1. Kathmandu-Pokhara 11 3 2. Kathmandu-Birganj 23 3 3. Kathmandu-Janakpur .11 1 4. Jankpur-Malangwa 3 1 5. Biratnagar-Rajbiraj 6 1 6. Kathmandu-Biratnagar 23 3 7. Biratnagar-Dharan 24 1 8. Biratnagar-Bhadrapur 6 1 H. F. using Lincompex 1. Kathmandu-Bhairawa 1 1 2. Kathmandu-Nepalganj 1 1 (III) Telegraph and Telex (a) H. F. Radio Stations 78 78 (b) Public teleprinter circuits Capacity In Service 1. Kathmandu-Birganj 6 1 2. Kathmandu-Pokhara 6 - 3. Kathmandu-Bhairawa 1 - 4. Kathmandu-Nepalganj 1 - 5. Kathmandu-Janakpur 6 - 6. Kathmandu-Biratnagar 6 1 7. Biratnagar-Dharan 1 - 8. Biratnagar-Rajbiraj 1 9. Biratnagar-Bhadrapur 1 - (c) Telex exchange 60 34 Line concentrator Cont'd. ANNEX 2 - 3 - Page 5of pague (IV) International Telephone circuits (a) H. F. Radio No. of ccts Operation Hours 1. Kathmandu-Hongkong 1 0700-1000 & (7 drs) 1200-1600 2. Kathmandu-Tokyo 1 1000-1400 (4 hrs) 3. Kathmandu-Rawalpindi 1 1000-1300 (3 h.s) 4. Kathmandu-Dacca 1 1400-1500 (1 hr) 5. Kathmandu-Calcutta 1 1000-1700 (7 hrs) (b) Landline 1. Kathmandu-Patna 2 2. Kathmandu-Bombay 2 3. Kathmandu-Delhi 2 4. Kathmandu-Calcutta 2 Telegraph Circuits (a) H. F. Radio 1. Kathmandu-Tokyo 1 07.40-18.40 2. Kathmandu-Bombay 1 0800-2200 3. Kathmandu-Rawalpindi 1 1000-1300 4. Kathmandu-Dacca 1 1400-1500 (b) Land line Kathmandu-Delhi 2 Telex circuits (a) H. F. Radio 1. Kathmandu-Hongkong 3 24 hrs. 2. Kathmandu-Bombay 1 it Leased Circuits 1 0800-2000 (SITA Hongkong) RSS Biratnagar 1 24 hrs. NET Delhi 1 " ANNME 3 NEPAL NEPAL TELECOMUNICATIONS CORPORATION (NTC) Ongoing Work 1. The first Telecomnunications Credit was the Association's first project in Nepal. In the early stages there was delay in setting up the Nepal Telecommunications Board, later converted into a corporation (NTC), followed by delays in obtaining expert assistance with consequent delay in procurement. There have also been delays in civil engineering work. Satisfactory progress has been made over the last four years in completing the first project and initiating work on the second project. Although the second project is at this stage about two years behind schedule, it is expected that some of the delay can be made up and present estimates allow for completion by early 1980, some six to twelve months behind schedule. 2. In view of the delay in the projects, the fact that some of the economic priorities can now be more reliably established and there has been some increase in prices due to inflation, the contents of the second project have recently been reviewed and certain changes made. Details of the original and revised proposals and the revised cost estimates are shown in Tables 1 and 2. These involve a reduction in local exchange and network provisions from 10,500 to 7,850, a decrease in the telex network from 80 to 60 lines and can- cellation of a proposal to provide an additional high power HF radio transmitter for international services. There has also been some redistribution of facili- ties and an increase in manual as against automatic exchanges related to the delay in providing training facilities. With a reduction in the rate of customs duties to be paid by Government Corporations, it has been possible to provide for construction of buildings required for the third project. NEPAL NEPAL TELECOMMNICATIONS CORPORATION CREDIT 397-NF? Project Works Revision of Proposals, December 1976 1. LOCAL EXCHANGE AND NETWORK IRIGINAL PROPOSALS AT APPRAISAL REVISED PROPOSALS (a) Automatic Exchanges Estimated In- Capacity Estimated Service Dates In-Service Dates Capacity i) New Exchanges Kathmandu Subur.ban December 1977 5,000 iec. 1979 3,000 Bhaktapur March 1978 200 Dec. 179 400 Banepa September 1978 50 - Butwal September 1977 200 Bharatpur December 1977 100 - Total 5, 5O 3,400 ii) Trailer exchanges: Kathmandu Central or Paton December 1974 1,000 - (Later use for Pokhara) Kathmandu Suburban March 1975 (800) -- O Total 1,000 0 En -2- iii) Additional Capacity in Existing Automatic Exchanges Biratnagar December 1978 700 September 1977 700 Dharan September 1978 400 - Kathmandu - - June 1978 1,000 Total 1100 12700 Dharan was provided-under the First Project as a 400 line Manual Exchange. Extension purchases should, it is proposed, be negotiated with the original suppliers. iv) Conversion of existing manual exchanges at the same time providing. additional capacity: Pokhara September 1978 500 Janakpur March 1979 400 Bhairawa September 1978 400 Dharan - - Nepalgunj December 1978 500 Hetaura March 1977 S00 Total 2,300 Nil Total Automatic 9,950 5,100 0 COt -3- (b) Manual Exchanges - Additional exchanges and extensions: Sarkhet September 1977 100 September 1977 200 Dhankta September 1977 100 " " 200 Tansen December 1978 100 December 1978 200 Sirahwa December 1979 10 February 1979 5O Rajbiraj December 1978 100 December 1978 100 Malanguwa "1 1978 50 January 1979 100 Jhapa March 1979 100 Butwal - - January 1979 200 * Bharatpur - - March 1979 200 * Banepa - - May 1979 200 Mahendranager - - JJuly 1979 200 Pokhara - - January 1979 100 Janakpur - - October 1977 200 Hetauda - - September 1978 200 Bhadrapur - - October 1978 100 Bhairawa November 1978. 200 * Nepalgunj November 1978 300 * Total Manual 2 7500 Total Overall 1070 - * Previously scheduled as automatic exchanges + About 900 of these lines will be provided through recoveries IQ CD i under item (a) iv) C (c) Additional cable, wire, fittings and subscribers' apparatus and Phased over program PBX's to connect an additional 8,400 subscribers during the project period and a total of 10,000 stations. 2. LONG DISTANCE Estimated Revised proposals Completion Dates (a) Stand-by equipment on the existing Pul- chowki-Biratnagar and Pulchowki -Birgunj microwave systems March 1975 June 1977 (b) Additional multiplex equipment on the above systems to provide 72 additional cir- cuits of about 5,664 circuit miles total March 1975 Dec. 1979 (c) Twelve additional VF telegraph circuits on the above system March 1975 Dec. 1979 (d) New microwave or VHF systems: Pulchowki - Bhairawa July 1977 Nov. 1979 Bhairawa - Nepalgunj July 1977 Dec. 1979 (e) Multiplex equipment for the above to provide a total of 24 speech circuits of 0 about 2,736 circuit miles and six VF o telegraph channels July 1977 Dec. 1979 M In (f) Four duplex HF links to Yahendranagar, Dhangari Jumla and Okhaldhunga. December 1978 December 1979 (g) Trunk switching equipment to provide the following operator dialing capacities: Total Exchange Terminating Capacity Kathmandu 150 ) Pokhara 12 ) Biratnagar 48 ) Janakpur 12 ) December 1976 December 1979 Bhairawa 12 ) Nepalgunj 12 ) (h) Additional line wire and route material to provide six circuits to rural exchanges having a total distance of about 90 circuit miles, together with h VHF systems and 2 open wire carrier Phased systems providing 48 circuits of about 1,520 circuit over Program miles total 0 o1-3 0',n i -6- 3. TELMRAPHS (a) A manual telex exchange with terminations for December 1976 50 local and 30 long distance subscribers; size now increased to 120 lines (b) Sixty teleprinters for additional telex Various December 1977 subscribers, the public service and leased circuits. 4. INTERNATIONAL (a) Additional Hiltiplex and VF Telegraph Equipment March 1973 July 1979 for international services (24 Speech and 6 Telegraph). (b) A 10 KW ISB Transmitter Associated Receivers, March 1976 Terminals and Lincompex Equipment. Now taken out of program 5. MWSCELLANEOUS Air conditioning, vehicles and training and December 1976 Distributed over program testing equipment 0 O ANNEX 3 TABLE 2 NEPAL NEPAL TELECOMMUNICATIONS CORPORATION CREDIT 397-NEP CHANGES IN PROJECT COSTS Appraisal Estimates Latest Estimate US$ 000 US$ 000 Local Foreign Total Local Foreign Total Local Exchange Equipment 390 1321 i710 500 1800 2300 Distribution Network 336 1200 1536 400 1460 1860 Subscriber Apparatus 51 320 371 60 320 380 Microwave and UHF/VHF systems 177 940 1117 250 1280 1530 HF Radio 81 520 601 20 60 80 Line Circuits 37 60 97 ho 60 100 Long Distance Switching 36 100 136 4o 150 190 Telegraph Telex 19 190 209 10 120 130 Vehicles, Tools, Testing Equipment 17 150 167 20 150 170 Buildings 356 - 356 965 70 1035 Contingencies 93 700 793 20 30 50 1593 5500 7093 2325 5500 7825 Customs Duties 800 - 800 55 - 55 Total 2393 5500 7893 2380 5500 7880 ANNEX 4 TABLE I NEPAL NEPAL TELECOMMUNICATIONS CORPORATION Balance Sheet (NRs thousands) As of July 16: 1975 1976 (Audited) (Unadited) ASSETS Fixed Assets 65,670 80,360 Less: Depreciation 24 270 28 600 Net in Operation ,1,960 Work in Progress 14 730 13 800 Subtotal ,130 ,760 Current Assets Inventories 3,140 4,070 Accounts Receivable 3,140 3,990 Cash 13,620 15,610 Other 4 500 4,940 Subtotal M,210 Total Assets 80,530 EQUITY & LIABILITIES &juity Capital 30,140 30,140 Accumulated Deficit (570) 1,200 Contribution 26 080 341250 Subtotal 65,590 Long-term Debt Net 15,500 20,240 Current Liabilities Accounts Payable 6,270 5,530 Customer Deposits 3 110 3 010 Subtotal 9,3,0 Total Equity & Liabilities 80L530 94L370 ANNEX 4 TABLE 2 NEPAL NEPAL TELECOMMUNICATIONS CORPORATION NTC Income Statements (NRs thousands) Year ending July 16: 1973 1974 1975 1976 (Audited) (Audited) (Audited) (Prelimi- nary) Operating Revenues Telephone - Rentals6,7809 - Local Calls 3,944 5,256 6,975 8,090 - Domestic Trunk 446 1,039 1,235 2,040 - International 563 542 570 850 - Installation 88 125 5 530 Total Telephone 6,962 ,750 11,510 Telex 329 510 870 1,110 Telegraph - Domestic 1,248 1,516 1,830 2,170 - International 862 872 1 250 2 460 Total Telegraph 2,110 2,355 3, Miscellaneous 390 400 10 450 Total Operating Revenues 787 0 10?260 13110 17,700 Operating Expenses Labor 4,010 5,400 6,430 8,290 Materials 1,390 1,720 2,480 2,970 Depreciation 2 770 2 860 3 620 2,0 Operating Income 300) 260 62 2,100 Other Income (Expenses) 730 60 360 120 Net Income Before Interest 430 340 980 2,220 Interest 300 780 920 1,080 Net Income 130 (440) 60 1,140 Rate of Return (%) neg. .8 1.6 4.5 Operating Ratio (%) After Depreciation 102 97 95 88 * Installation charges were wrongly shown under other income but accounts have now been finalized and audited. Minor discrepancies in figures are due to rounding to nearest 10,000 NRs. ANNEX 5 NEPAL NEPAL TELECOMMUNICATIONS CORPORATION (NTC) Performance Indicators As of July 16, 1976 Appraisal Actual Goal % of Target Rate of return 4.5 7.7 58 Operating ratio 88 71 Number of telephone subscribers 8904 9013 99 Telephone subscribers added.during year 1898 1441 132 Telephone revenue per subscriber In NR's 1294 1552 83 In US$ 104 125 83 Debt-equity ratio 24/76 43/57 - Current ratio 3.35 1 .18 Debt service coverage 2.69 2.57 - Number of employees 1407 1375 102 January 4, 1977 NEX 6 NEPAL NEPAL TELECOMMNICATIONS CORPORATION (NTC) Proposed Third Telecommunications Project Cost in US$000 Foreign 1 Local Network Local Exchange Total (a) Automatic Teleohone Exchanges Kathmandu Central (E) 5,000 lines Kathmandu Suburban (E) 2,000 Paton (E) 1,000 " Pokhara (R 300) 1,000 Bhairawa (R 200) 1,000 n Nepalgunj (R 200) 1,000 Janakpur (R 200) 1,000 " Hetauda (R 200) 1,000 " Birgunj (E) 1,000 Dharan (E) 1000 " 15,000 " 660 3,300 3,960 (b) Small Manual Exchanges (1,100 lines provided from recoveries under (a) 2,000 (900)1ines 20 50 70 (c) Cable Network and Subscribers' Annaratus 2,400 3,600 6,000 (d) Subscribers Radio 20 150 170 2. Lona Distance (a) STD 250 1,250 1,500 (b) Microwave, UWP and multiplex 300 600 900 3. Telex (a) Central Exchange (400 line Electronic) 100 400 500 (b) Teleprinters 50 350 h00 4. International (New standard satellite ground station) 600 600 1,200 5. Miscellaneous building, air conditionings etc. 2,000 500 2.500 6. Contingencies 10 1,200 2800 Totals 8,000 12,000 20,000 Note: E - extension R - replacement IBRD - 10154R' 82 8'3° 's' AFGHJSTÅN APRIL 1976 N E PA L PAKISTAN/ GEOPHYSICAL '' EPA I [U1fN 30 ELEVATION IN METERS A N D I A BANGIADESh Above 4,000 ,000 - 4,000 elow 1,000 Ba o seo Bengal A Mountoin peaks - ý Major rivers Internalonal boundories -29° * u2° 02 878 c H I N A (T / B E T ) CHOOYU 2urk 9470m KATHMANDU( lS O -27° \\s ... 27*- 0 2,0 40 6P 8,0 1?o 10 140 16 KItOMETERSE 0 20 40 60 80 100 MILES Te bundanr shown ondthosap do nat - . ply endorpy sent or acptance by the BI' 82 83 84°' 85 orldBank anditsaIlia 8 NEPA L NEPAL TELECOMMUNICATIONS BOARD 0TELEPHONE NETWORK FCILITIES AVAILABLE PRIOR TO ONGOING PROJECT (j '/4 AUTOMATIC TELEPHONE EX<CHANGES * MANUAL TELEPHONE EXCHANGES (HF Connections with India and Pakistan available but not shown) FACILITIES PROVIDED FOR UNDER ONGOING PROJECT (106 NEPI NEW AUTOMATIC EXCHANGES I E T K A R N A \ AUTOMATIC REPLACING MANUAL EXCHANGES Se-l J NEW MANUAL EXCHANGES{Minor exchanges of less then 10 lines are not JUMLA MICROWAVE SYSTEMS ) >LAND LINE ROUTES ' M0-HF RADIO LINKS mAHENDIAGER - OPOSED PROJECT HF NEW AUTOMATIC EXCHANGES SB H E R A L AGIRI AUTOMATIC REPLACING MANUAL EXCHANGES 0 NEW MANUAL EXC-ANGES H SURKHET PUBLIC CALL OFFICE FACILITIES MICROWAVE OR UHF SYSTEMS HF LAND LINE ROUTES HF - HF RADIO LINKS F G ANDÅKI NGp NOTE: THE HF RADIO LINKS PROVIOE FOn COMMUNICATION R0 APT FTO NEPALGANJ AND BHAIRAWA UNDER THE ONGONG H HF F F POKHARA - PROJECT WILL BE UItLLZED TO SEfiVE MAHENDAANAGER 28 NEPALGA AND DHANGARHI UNDER THE SECOND PROJECT 28* HF HF ) U M B l N F .9FANSE- BUTWAt zi HMANDAUR I PA~~~TA * TAPUR )I Jf /vL CHINA (T IBET) N~AR A NT •lN PA PAKISTAN MARATPUR PHULCHOW JýW 'p- ?HETAURA JO- OKHALDUNGA L- K O S l BANGLADESHýL l A /,'AGA RMAHA i NO iA BRGANJ DHAN A BURMA ZONAL BOUNDARtES . R ANGVe INTERNATIONAL BOUNDARIES /A DPRHARAN - B4r OF BENAt l m m- do not S JHAPAd/,BH SRAP . 7 BIRATNAGAR 200 0 20 40 60 Bo 100 JOGSANI RI LA~A KItOMETERS BANGLADESHr EYLAN) 10