Mali - Second Telecommunications Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 3561-MLI STAFF APPRAISAL REPORT MALI SECOND TELECOMMUNICATIONS PROJECT December 4, 1981 Transportation, Water and Telecommunications Department Western Africa Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Mal! Franc (MF) US$ 1.00 = MF 500 MF 100 = US$0.20 MF 1,000,000 = US$2,000 SDR 1.00 = US$1.15118 US$1.00= SDR 0.868675 SDR 1.00 = MF 575.59 FISCAL YEAR Jariuary 1 - December 31 WEIGHTS AND MEASURES All weights and measures are in metrie units  FOR OFFICIAL USE ONLY LIST OF ABBREVIATIONS, ACRONYMS, AND DEFINITIONS USED IN THE REPORT AfDB - African Development Bank Arrondissement - Subdistrict BEPTOM - Bureau des Etudes des Postes et Telecommunications d'Outre Mer (France) CCCE - Caisse Centrale de Cooperation Economique (France) Cercle - District CIDA - Canadian International Development Authority CT3 - International telephone exchange (ITU classification) DELs - Direct exchange lines ECOWAS - Economic Community of Western African States GHz - Billion oscillations per second (frequency measurement unit) HF - High frequency (between 3 and 30 MHz) ICB - International competitive bidding IDA - International Development Association INTELSAT - International Telecommunications Satellite Consortium ITU - International Teilecommunication Union Line-carrier - A system of providing several communications channels over one pair of open wires MDF - Main distribution frame (part of a telephone exchange installation) MHz - Million oscillations per second (frequency measurement unit) NTF - Nigerian Trust Fund OPT - Office des Postes et Telecommunications PANAFTEL - Concept of telecommunications transmission lines between African countries PBX - Private branch exchange PPF - Project Preparation Facility PTT - Posts, Telegraph and Telephone Administration SDR - Special drawing rights (consolidated exchange rate for a "basket" of currencies) SHF/UHF/VHF - Super high radio frequency (3-30 GHz)/Ultra high radto frequency (0.3-3 GHz)/Very high radio frequency (30-300 MHz) SPC - Stored program control TIM - Compagnie des Telecommunications Internationales du Mali UAPT - African Posts and Telecommunications Union UNDP - United Nations Development Programme WIP - Work in progress 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.   MALI OFFICE DES POSTES ET TELECOMMUNICATIONS (OPT) SECOND TELECOMMUNICATIONS PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I. THE TELECOMMUNICATIONS SECTOR ................................. 1 Background and Organization ................................. 1 Access to Service .............. ............................. 1 Usage of Services .. 2 Quality of Service and Existing Facilities . . 3 Demand for Service .. 4 Sector Goals .. 5 Sector Constraints .. 8 Role of World Bank Group .. 9 Il. THE PROGRAM AND THE PROJECT ................................... 10 The Program ................................................. 10 Project Concept ................................ il Project Composition ................... ...................... 12 Project Cost ....................... ......................... 13 Project Financing .................... ....................... 14 Procurement ................................................. 15 Disbursements ............................................... 15 Project Implementation .................. .................... 16 Performance Indicators .................... 17 This report is based on the findings of a Bank appraisal mission which visited Mali in January/February 1981, comprising of Messrs. H. Ruud (Engineer) and C. MacNealy (Financial Analyst, Consultant) as well as findings at brief follow-up visits by Mr. MacNealy in June and Mr. Ruud in September 1981. Mr. D. Lomax (Financial Analyst) has contributed to the financial sections of the report.  (ii) Table of Contents (Cont'd) Page No. Ill. ECONOMIC ANALYSIS ............................................. 17 Telecommunications and Development ....... ................... 17 Distribution of Benefits ........................8............ 1 Tariff Policies ............................................. 19 Least Cost Solution ......................................... 20 Return on Investment ........................................ 21 Risk ............................................... 21 Environmental and Health Aspects ...2......................... 2 IV. THE IMPLEMENTING AGENCY ....................................... 22 Organization ............................................... 22 Management and Control ....................................... 23 Billing and Collection ...................................... 23 Inventory ..............,.,...24 Technical Assistance, Staff and Training .................. .. 24 Audit .. ................., 26 V. FINANCIAL ANALYSIS ..27 Past Financial Performance .................................. 27 Present Financial Position .................................. 29 Valuation of Assets ......................................... 30 Financing Plan for 1981-85 OPT Program ................... ... 30 Future Financial Performance ................................ 31 VI. RECOMMENDATIONS ............................................. 33  (iii) LIST OF ANNEXES AND CHARTS Page No. 1. International Telephone Statisties ............................ 36 2. Telephone Subscriber Distribution ............................. 37 3. Existing Facilities as of December 31, 1980 ................... 38 4. Description of Works in OPT Investment Program (1981-85) ..... 41 5. Program and Project Costs ..................................... 45 6. Schedule of Disbursements ..................................... 46 7. Project Implementation Schedule ............................... 47 8. Performance Indicators ........................................ 48 9. Telecommunications Tariffs and Charges ........................ 49 10. Study of Tariff Structure - Draft Terms of Reference .... ...... 55 11. Return on Investment .......................................... 58 12. Organization Chart (WB 23092) ................................. 59 13. Annual Investment Program ..................................... 60 14. OPT Consolidated Financial Statements ........................ 61 15. Telecommunications Department Financial Statements .... ........ 63 16. Postal/Financial Department Financial Statements .... .......... 66 17. Assumptions for Financial Forecasts of OPT's Telecommunications Department .................................................. 68 18. Assumptions for Postal/Financial Services Forecast .... ........ 69 MAP IBRD 15789   I. THE TELECOMMUNICATIONS SECTOR Background and Organization 1.01 Public telecommunications services in Mali are managed and operated by the Office des Postes et Telecommunications (OPT) under the supervision of Ministry of Information and Telecommunications. OPT, a parastatal enterprise, established by a statute promulgated in 1960 and changed in March 1981, handles the postal and telecommunications monopolies and is responsible for expansion and operation of telecommunications, postal, and public financial services (postal money orders, postal checking accounts, and postal savings accounts). The tariffs for OPT's services are established by decree issued by supervisory minister. 1.02 In principle, OPT licenses all nonmilitary telecommunications installations not owned by the OPT itself. It is common knowledge, however, that many non-OPT installations are operated throughout the country without license. The loss of potential revenue to OPT due to such installations is estimated not to be significant and as they are used for services that OPT's own means are at present insufficient to provide, OPT is not forcefully pursuing the matter, in spite of the fact that they sometimes cause radio interference and that they constitute an uneconomic way of utilizing scarce resources. Common carrier facilities for Mali's international telecommunications are established and operated by Telecommunications Internationales du Mali (TIM), a company jointly owned by Malian Government (65 percent) and the French company, France Cable et Radio (35 percent). TIM is supervised by the Ministry of Information and Telecommunications. No telecommunications manufacturing industry of any significance exists in Mali. Access to Service 1.03 With 4,700 main telephone lines (DELs) in service, the telephone density in the country was 0.06 DEL per 100 population at the end of 1980. This figure is among the lowest in the world. For Africa excluding the Republic of South Africa, the corresponding average figure is 0.4; for Asia, except for Japan and the People's Republic of China, it is 0.9; for Latin America 3.2, and for North Amnerica 32. Telephone density figures for a number of countries are given at Annex 1. Bamako, the capital, with about 55 percent of total DELs has a density of only about 0.4 DEL per 100 inhabitants1. Excluding Bamako and ten other larger cities, the rest of the country, with 89 percent of the population, has a total of only about 780 DELs, which makes 0.01 DEL per 100 inhabitants in these areas. 1.04 Not only are almost all the telephone subscriber connections concentrated in about 50 cities and towns in the southern and western parts of the country, but also the extent of the long distance network is very limited. Of the total population of Mali, only 17 percent live in areas with access to some sort of telephone or telegraph installation, however poor it may be; the figure for the country apart from Bamako is 11 percent. The 1/ The corresponding figures for some other African capitals are Dakar 1.6, Abidjan 1.9, Niamey 1.7, Addis Ababa 2.9, Dar-es-Salaam 1.8.  country is administratively divided into "the District of Bamako" and seven regions. The regions are in turn d