Upper Volta - Second Telecommunications Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4499 PROJECT COMPLETION REPORT UPPER VOLTA: SECOND TELECOMMUNICATIONS PROJECT (CREDIT 431-UV) May 17, 1983 Energy and Industry Staff This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   FOR OFFICIAL USE ONLY UPPER VOLTA OFFICE DES POSTES ET TELECOMMUNICATIONS (OPT) CREDIT 431-UV - SECOND TELECOMMUNICATIONS PROJECT COMPLETION REPORT Table of Contents Page No. PREFACE. . . . . . . . . . . . . . . . . . . . . . BASIC DATA SHEET . . . . . . . . . . . . . . . . . . . . . ii I. I lTRODUCTION .1 II. ih3JECT IDENTIFICATION, PREPARATION AND APPRAISAL . . . . . 1 III. PROJECT IMPLEKENTATION . ............... . .. 5 IV. OPERATING PERFORANCE . . . . . . . . . . . . . . . . ... 11 V. FINANCIAL PERFORMANCE . . . . . . . . . . . . . . . 11 VI. INSTITUTIONAL PERFORMANCE AND DEVELOPMENT . . . . . . . . . 15 VII. PROJECT JUSTIFICATION . . . . . . . . . . . . . . . . . . . 18 VIII. IDA PERFORIIANCE . . . . . . . . . . . . . . . . . . . . . . 19 IX. CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . 20 Annex 1: Physical Achievements (as of Dec. 31, 1978) . . . . 21 Annex 2: Comparison between appraisal targets and actual project data .... . . . . . . . . . .. . 23 Annex 3: Income Statements . . . ; . . . . . . . . . . . 25 Annex 4: Funds Flow Statements . . . . . . . . . .. . . 26 Annex 5: Balance Sheets . . . . . . . . . . . . . . . . . . . 27 Annex 6: Return on Investment . . . . . . . . . 28 Annex 7: Compliance with Cavenants . . . . . .. . . . 29 This report is based on the findings of a Bank mission consisting of Messrs. C. Buttex, Sr. Telecommunications Engineer, and Mr. H. Busz, Financial Analyst, which visited Upper Volta ig December 1980. This d-urnent 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 Worid Bank authorization.   - i - PROJECT COMPLETION REPORT UPPER VOLTA - SECOND TELECOMMUNICATIONS PROJECT (CREDIT 431-UV) PREFACE 1. This report covers the Second Telecommunications Project in Upper Volta supported by Credit 431-UV. The credit for US$4.5 million to the Repulblic of Upper Volta was approved in June 1973, became effective in May 1974, and was closed in October 1979, 16 months after the original closing date. The credit was on-lent to the Executing Agency (Beneficiary): the Office des Postes et Telecommunications (OPT). 2. The Project Completion Report (PCR) was prepared in the Industry Department of The World Bank on the basis of information and data supplied by OPT, information gathered by the IDA project completion mission which visited Upper Volta in December 1980, and discussions with OPT and the Government. Correspondence with the Borrower and the Beneficiary and internal Bank memoranda on the project issues contained in the Bank files have also been consulted. 3. Following normal procedures a draft copy was sent to the Borrower (Government) and the Beneficiary (OPT) for their comments. The PCR has been approved without comment by the Beneficiary. 4. The Project has not been subjected to an audit by the Operations Evaluation Department. 5. The valuable assistance provided by Government, its officials, OPT's management and other individuals met during the preparation of this report is gratefully acknowledged.   - is - PROJECT PERFORMANCE AUDIT REPORT UPPER VOLTA CREDIT 431-UV - SECOND TELECaMMUNICATIONS PROJECT BASIC DATA SHEET KEY PROJECT DATA Appraisal Actual or Actual as % of Estimate Estimated Actual Appraisal Estimate Project Costs (US$ million) 5.6 7.0 125 Credit Amount (US$ million) 4.5 4.5 100 Date Board Approval - 06/21/73 - Date Effectiveness - 05/23/74 - Date Physical Components Completed 06/77 12/78 - Proportion then completed (x) 100 100 - Closing Date 06/30178 10/31/79 - Economic Rate of Return (Z) 20 16 80 CUMULATIVE DISBURSEMENTS FY74 FY75 FY76 FY77 FY78 FY79 FY80 Appraisal Estimate (US$ million) 0.3 1.0 1.8 3.5 4.5 - - Actual (US$ million) - 0.3 1.8 3.5 4.3 4.3 4.5 Actual as %of Estimate - 30 100 100 96 96 100 MISSION DATA Date No. of Mandays Specializations Performance Types of Mission (Mo. Yr.) Persons In Field Represented 1/ Rating 2/ Trend 3/ Problems 4/ Identification 5/ Preparation 5/ Appraisal 12/72 2 10 ab Subtotal - 2 10 ab Supervision 1 11/74 2 11 ab 2 1 F Supervision 2 03/76 2 5 ab 2 2 F/M Supervision 3 02/77 2 5 ab 2 2 F Supervision 4 05/78 2 9 ab 2 1 F/M Supervision 5 04/79 2 6 ab 2 2 F/M Subtotal - 2 42 ab Total - 2 52 ab OTHER PROJECT DATA Borrower Republic of Upper Volta Executing Agency Office des Postes et Telecommunications Fiscal Year January 1, December 31 Name of Currency CFA Franc (CFAF) Currency Exchange Rate: Appraisal Year Average 1972 US$1.00 = CFAF 230 Intervening Years Average: 1974-1978 US$1.00 = CFAF 237 Completion Year Average: 1979 US$1.00 = CFAF 225 Follow-on Project: Name Third Telecommunications Project Credit Number 1235-UV Credit Amount (US$ million) 17.0 (SDR 14.9 million) Date Board Approval 04/27/82 1/ a = telecommunications engineer, b = financial analyst 2/ 1 = problem free or minor problems, 2 - moderate problems and 3 = major problems 3/ 1 = improving, 2 = stationary, 3 = deteriorating 4/ F = financial, M = managerial, T = technical, P = political, and 0 = other 5/ The project has been appraised without prior identification and preappraisal.   - iii - PROJECT COMPLETION REPORT UPPER VOLTA - SECOND TELECOMMUNICATIONS PROJECT (CREDIT 431-UV) HIGHLIGHTS 1. The Second IDA-financed Telecommunications Project in Upper Volta was designed to rehabilitate and modernize the network and expand local and long distance facilities in order to improve standards of service and meet the actual and anticipated demand through 1980. The project objectives also included institutional improvements within OPT in the areas of tariffs, budgeting and staff training. 2. OPT implemented the project without expatriate assistance; physical execution of the project and credit disbursements have proceeded quite close to schedule (para. 9.01, 3.10). Eighty percent of the new facilities were completed five months ahead of schedule (para 3.05). During detailed design and implementation the scope of the project was revised with IDA agreement (para. 3.02), increasing the total installed capacity by 46%. In spite of this change in scope, the total project cost was only about 25% higher than the appraisal estimates. The principal objective of rehabilitating and expanding the main local and long distance facilities in order to improve the quality of service (para 4.01) and meet the anticipated demand has been largely achieved. The project, complemented with the earth satellite station and the telex exchange (para. 3.04) opened up this semi-arid landlocked country to worldwide telecommunications and thus helped it to overcome its isolation and its major communications problems. The capital city and other main centers of economic and administrative activities are now linked by a reliable telecommunications network. The achievements in terms of subscriber connections are 28% above original targets. This represents a national average growth rate of 18% per year during the project period, well above the original forecast of 15% (para. 4.02). The quality of service is relatively good and among the best of the Western Africa region. 3. OPT has been able to meet the 6% covanented rate of return during the period 1974-1978, except for 1975; the rate of return on average net fixed assets in service fluctuated between a low 2.7% in 1975 and a high 13.8% in 1977 following a 25% tariff increase. However, from 1979 a steep decline started in the operating results due to a sharp increase in personnel and depreciation expenses (para. 5.01). The internal financial rate of return for the project is 16.4% which compares with an appraisal estimate of 20%. 4. OPT's satisfactory overall performance and technical competence during project construction was unfortunately not supported by a sound management of the financial and staff resources toward the end of the project period. The causes were: (a) considerable turnover in top management (para. 6.08); (b) an ill-designed and premature reorganization (para. 6.03); (c) over-recruitment (para. 6.10); and (d) lack of financial discipline (paras. 5.05-5.07). Strengthening in these major areas is the subject of a management improvement program included in the third telecommunications project (Credit 1235-UV).   I. INTRODUCTION 1.01 At the time of appraisal of the Second Telecommunications Project in 1972, public telecommunications in Upper Volta were provided by two autonomous organizations. The Office des Postes et Telecommunications (OPT), a public entity wholly owned by the Voltaic Government, provided domestic telecommunications services. A French company, France Cable et Radio (FCR)l, operated the main international facilities. In 1978, OPT took over FCR's operations in Upper Volta and became thus responsible for both domestic and international telephone, telegraph and telex services. In addition it provides postal services, and operates a nationwide public checking account service. 1.02 In February 1969, IDA approved a first credit of US$0.8 million for telecommunications to Upper Volta (Credit 141-UV) to support an urgently needed rehabilitation program and a limited expansion of the telecommunications network. Preparations for the first project started in 1966, during which IDA helped set up OPT as a commercially oriented entity with legal and financial autonomy. The project was satisfactorily completed in 1975. The June 1976 performance audit report for the first project pointed out that, with IDA support, OPT managed to recruit and train competent executives, reducing its dependence on expatriate services, established a satisfactory accounting system and became an efficient organization. 1.03 In June 1973, IDA approved a second credit of US$4.5 million to Upper Volta (Credit 431-UV) with OPT as the beneficiary to support the 1974-1977 telecommunications development program. Project costs were estimated to be US$5.6 million, which represented 86% of the program. The IDA credit of US$4.5 million was to finance 96% of foreign costs, or 80% of total project costs. The remaining foreign and local costs of the project and the costs of the remaining part of the program were to be financed by OPT's internally generated funds. The proceeds of the IDA credit were on-lent to OPT at 7-1/4% interest for twenty years, including a four-year grace period. II. PROJECT IDENTIFICATION, PREPARATION AND APPRAISAL Preparation, Appraisal and Negotiations 2.01 Project preparation was based on OPT's 1974-1977 development program which was drawn up from a selection of project items prepared with the assistance of an expert from the International Telecommunications Union (ITU) in 1970-1971. During the 1972 annual meetings the request from Government for the second telecommunications project was made. The project was appraised in December 1972. Negotiations between IDA and the Government of Upper Volta were concluded in May 1973, and the credit was approved by IDA's Board of Directors on June 21, 1973.  -2- Project Objectives 2.02 The project aimed at replacing worn out and obsolete equipment and rehabilitating and expanding the main local and long distance facilities in order to improve the quality of service and meet the actual and anticipated demand for subscriber connections through 1980. In addition, the project aimed at providing assistance to OPT for reviewing tariffs and improving budget procedures and staff training. Project Description 2.03 The project consisted of the following items: (i) supply and installation of automatic switching equipment for about 4,800 exchange lines in Ouagadougou, the capital city and in four provincial towns; (ii) extension of local cable network and subscriber plant in the five above locations; (iii) construction of transmission links between Ouagadougou and Koudougou and between Bobo Dioulasso and Banfora; (iv) supply and installation of trunk switching equipment in the national and international transit exchange in Ouagadougou and in four small local telephone exchanges; (v) reconstruction of about 800 km of existing long distance overhead lines and construction of about 400 km of new routes between regional centers and communities; (vi) construction of new buildings at Ouagadougou, Banfora and Fada N'Gourma; (vii) supply and installation of power plant in the Ouagadougou technical building, vehicles, miscellaneous technical equipment and materials; (viii) consulting services to cover the detailed engineering and construction supervision of the project, tariff review, and improvement of budgeting procedures; and (ix) training of technical and administrative personnel. Covenants 2.04 The Credit Agreement provides that the Borrower shall:  -3- (i) take all measures and provide, promptly as needed, all funds necessary to ensure that the OPT's postal operations shall be carried out efficiently and that the resources, property or assets necessary to the efficient operation of the OPT's telecommunications facilitiesshall in no way be utilized to support or finance any part of such postal operations (Section 3.02 (a)); and (ii) pay promptly to OPT on a current basis all charges incurred by the Borrower in respect of telecommunications services billed to the Borrower by the Office (Section 3.02 (b)). 2.05 The Project Agreement provides that the OPT shall: (i) employ engineering consultants for the preparation of plans and specifications for the project, bid evaluation and supervision of the construction of the project (Section 2.02); (ii) employ, no later than May 31, 1974, telecommunications tariffs and financial specialists for the purpose of carrying out studies of tariffs and of budgeting and related financial procedures (Section 2.03); (iii) consult with the Association before appointing a Director, Chief Financial Officer or Chief Engineer, and give due consideration to the views expressed by IDA with respect to the qualifications and experience of the persons proposed for such appointments (Section 3.01 (b)); ('iv) take all measures required to institute and maintain adequate telecommunications personnel recruitment and training policies and, in particular, provide funds and facilities necessary for the training of its vocational and higher level personnel (Section 3.01 (c)); (v) establish, by June 30, 1975, and subsequently implement and maintain, a program satisfactory to the Association to increase the productivity of its telecommunications staff (Section 3.01 (d)); (vi) take out and maintain with responsible insurers, or make other provisions satisfactory to the Association for insurance against such risks and in such amounts as shall be consistent with appropriate practice (Section 3.03);  -4- (vii) have its accounts and financial statements for each fiscal year audited by independent auditors acceptable to the Association; and furnish not later than six months after the end of each fiscal year certified copies of its audited financial statements and the audit report (Section 4.03); (viii) review, with the Borrower, its budgeting procedures and establish by January 1, 1975, and thereafter implement new budgeting procedures satisfactory to the Association. Such budgeting procedures shall provide for a separate budget for OPT's telecommunications and postal operations (Section 4.04); (ix) not effect any changes in its telecommunications tariffs without prior consultation with the Association until completion of the report of the telecommunicatins tariffs specialists referred to under Section 2.03 of the Agreement and until an implementation program has been agreed to with the Association on the basis of the recommendations contained in such report (Section 4.05); (x) provide revenue sufficient to produce an annual rate of return on the current value of average net fixed telecommunications assets in service of not less than 6% as from January 1, 1974 through December 31, 1978 and an annual rate of return of not less than 8% as from January 1, 1979 or such other date as shall be agreed by the Association (Section 4.05 (b)); (xi) not make, until completion of the Project, any remittances to the Borrower's Treasury and not use surplus telecommunications funds for other purposes until adequate provision has been made for sufficient funds to meet the operational, debt service, working capital and expansion requirements of OPT's; telecommunications services (Section 4.06 (a)); (xii) not undertake any other telecommunications capital expenditures greater than US$200,000 equivalent in any one year, unless a financing plan therefore has been agreed between the Association and the Borrower (Section 4.07); (xiii) incur no debt for its telecommunications operations during the period of execution of-the Project and during a period of five years following completion of the Project without prior consultation with the Association and unless its net revenues from such operations for the  - 5 - fiscal year next preceding such incurrence or for any later twelve-month period ended prior to such incurrence, whichever revenue is the greater, shall be at least one and one-half times the maximum debt service requirement for any succeeding fiscal year on all debt incurred by the Office for such operations, including the debt to be incurred (Sections 4.08 (a) and (b)); and (xiv) not incur any short-term debt for its telecommunications operations if such debt, together with all other outstanding short-term debt for such operations, would exceed two-months' average operating expenses for such operations during the fiscal year next preceding such incurrence or during a later twelve-month period ended prior to such incurrence, whichever is the greater (Section 4.08 (c)). 2.06 These covenants were designed to strengthen the financial position of OP'T and improve its management. III. PROJECT IMPLEMENTATION Loan Effectiveness and Project Start-up 3.01 Approved in June 1973, the Credit Agreement was signed in September 1973, but the credit became effective only as from May 23, 1974 because of delays experienced in obtaining ratification and in entering into the Subsidiary Loan Agreement. Project implementation started immediately after project appraisal with the preparation of detailed design and bidding documents for the main items. Project Revision 3.02 During the detailed design and implementation of the project, OPT made--with IDA's approval--the following changes in the project: (i) 1,000 additional lines of new local switching equipment were added to the new Ouagadougou telephone exchange instead of providing interface equipment for the existing when, following comparison between prices of the new equipment and quotation from the supplier of the existing equipment, it appeared that this was the least cost solution; (ii) 1,200 additional lines of new local switching equipment and 60 lines of national trunk switching equipment were procured for Bobo Dioulasso (at the same unit prices as  - 6 - obtained under ICB) when it appeared that tlhe supplier of the existing Bobo Dioulasso exchange would not provide the necessary extensions, interface and adaptations to increase a limited traffic capacity and introduce subscriber trunk dialing; (iii) a separate international automatic transit exchange for regional and overseas telephone service was installed instead of combined national and international transit exchange as foreseen at appraisal (see paragraph 3.03); (iv) alternative designs were adapted for the two transmission links Ouagadougou-Koudougou and Bobo Dioulasso-Banfora, using part of the facilities of the existing backbone microwave link when these designs were found to be more economical on the basis of comparing the costs for the independent scheme as appraised with price quotations obtained from the supplier of the existing links; and (v) the program of long distance overhead line construction was reduced in half, from 1,200 km to 657 km (see Annex 1, page 2),when it appeared that OPT would not be able to construct the whole program during the project period. 3.03 Regarding item (iii) above, the solution of a combined national and international transit exchange was advocated ELs least cost solution by IDA who advised OPT to include it as alternative in the bidding documents. OPT objected on the ground that a larger demand of international traffic was expected and that the new exchange building already under construction could not accommodate a combined trunk exchange and IDA finally accepted (paragraph 7.04). Although the two transmission routes, as mentioned in point (iv) above, were appraised as independent systems, the designs adopted were already mentioned as possible alternatives in the appraisal report if found to be the least cost solution. The overhead :Line routes which were dropped from the IDA project were constructed later under Dutch bilateral assistance grant. This additional cost of local and long distance switching equipment of items (i) to (iii) above were financed substantially from savings made under items (iv) and (v). Revision of the Program 3.04 In May 1975, the Government of Upper Volta approached the Association for the financing of a Standard B earth satellite station and a telex exchange. IDA funds being not available OPT reached an agreement with a US bank consortium led by Eximbank for the financing of this project which started in 1976 and was successfully completed in 1978. IDA was consulted on this additional investment in compliance with Section 4.07 of the Project although late, and gave its agreement in March 1977 after  - 7 - reviewing its justification, financing plan, and OPT's revised financial projections for the end of the program period. Commissioning of the satellite earth station in 1978 became the main justification for OPT to take over responsibility for international telecommunications (paragraph 1.01). Implementation Schedule 3.05 The project was originally scheduled to be completed by June 30, 1977. At the time of credit negotiations, 80% of the project bidding documents were already prepared and approved by IDA. In November 1976, i.e., five months ahead of schedule, 7,000 lines of new local switching equipment and domestic trunk switching equipment, two microwave spur routes and overhead carrier equipment were commissioned, enabling subscriber trunk dialing to be included between the major cities. This represented about 80% of the revised project. Due to delays in installation and testing, the international transit exchange was commissioned in August 1978 and the project fully completed by December 1978 with the installation by OPT's staff of the last long distance overhead lines of the reduced program. Reporting 3.06 Only two progress reports were forwarded to IDA both in 1975; they partly met the reporting requirements. However, supervision missions obtained in the field the missing information necessary to monitor the project's physical progress. Financial statements and audit reports were sent to IDA or made available to supervision missions but with delays which exceeded, at times, eight to twelve months the covenanted schedule (Section 4.03). Procurement 3.07 OPT followed the Bank's guidelines for procurement, and did not encounter any difficulties in procurement of equipment. Cost of the Project 3.08 Estimated costs at the time of appraisal and actual costs are summaLrized below:  -8- ----------------- US$ million* ----------------- Appraisal Estimates Actual Local Foreign Total Local Foreign Total Telephone exchanges 0.1 1.2 1.3 0.2 2.8 3.0 Local networks 0.1 0.5 0.6 0.4 0.4 0.8 Transmission equipment 0.1 0.9 1.0 - 0.5 0.5 Overhead lines 0.3 1.0 1.3 0.2 0.5 0.7 Land & buildings 0.2 0.1 0.3 1.0 0.6 1.6 Power plant & misc. - 0.2 0.2 - 0.3 0.3 Consultants & training - 0.2 0.2 - 0.1 0.1 Contingencies 0.1 0.6 0.7 - - - Total 0.9 4.7 5.6 1.8 5.2 7.0 * Exchange rate over 1973: US$1 = CFAF 230. Average disbursement period, 1974-1976: US$1 = CFAF 237. The actual project costs include the changes in quantities of equipment as dLescribed under paragraph 3.02. The 133% cost increase for the telephone switching component was due to: (i) procurement of a separate international transit exchange (cost US$430,000); (ii) a 50% increase in quantities for local and trunk switching equipment; and (iii) an 11% increase in unit price compared to appraisal estimates (US$232 equivalent per line, compared to UJS$208 including price contingencies). The alternative design of the two transmission links (paras. 3.02 and 3.03) resulted in US$500,000 cost saving, and the reduction of the overhead line program made an additional amount of US$600,000 available to compensate for the increase in telephone switching equipment. The actual unit cost per kilometer of long distance overhead line of about US$1,050 was in line with the estimated cost, including price contingencies. The largest unexpected cost overrun occured in the exchange building construction financed by OPT's own resources where the actual costs were five times the original estimates. The cost overrun has been partly caused by the 1974 inflation wave, shortage of cement in Western Africa, and the resulting substantial price increases. On the other hand, to enable larger extensions of equipment in the future, buildings larger than anticipated at appraisal were designed. The unexpected development of demand at the end of the project (paragraph 4.02) proved that OPT made a wise decision. For Banfora and Fada N'Gourma the new buildings are common to Post and Telecommunications services and 50% of the building costs have been charged to the project. :3.09 Compared to telecommunications projects in other Western African countries, OPT obtained relatively fair prices for the equipment and material procured under ICB. This was partly due to the fact that the main contracts were signed before the 1974 inflation wave. The prices were nevertheless above the world prices of equipment procured during the same period; they also reflect the small size of the contracts which do not attract large  international competition and higher cost for equipment installation under conditions of scarcity of technical skills necessitating employment of technicians from abroad. Disbursements 3.10 The estimated and actual disbursements of the IDA credit were as follows: Accumulated Disbursements IDA (US$ thousand) Fiscal Year Appraisal % Appraisal Estimates Actual Estimates FY74 300 - _ FY75 1,080 316 29% FY76 1,800 864 48% FY77 3,500 3,267 93% FY78 4,500 4,226 94% FY79 - 4,490 99% FY80 - 4,500 100% Initial disbursement started immediately after credit effectiveness in May 1974. Once the contracts for IDA financed goods and services were finalized and signed, OPT sent to IDA, without substantial delay, applications for payments directly to the suppliers. Final disbursements were made on October 31, 1979. On June 30, 1978, the expected date for final disbursement as per appraisal, 94% of the credit was disbursed. Credit Allocations 3.11 The original and final allocations of the credit proceeds were as follows:  - 10 - Credit Allocations (US$) Category Original Final I. Local switching and networks. 1,480,000.00 3,104,114.18 II. Microwave links 780,000.00 314,835.55 III. Trunk switching, overhead lines and carrier equipment 1,280,000.00 946,095.23 IV. Power plant, vehicles and miscellaneous 220,000.00 121,471.29 V. Consultants 110,000.00 13,483.75 VI. Training 40,000.00 - VII. Unallocated 590,000.00 Total 4,500,000.00 4,500,000.00 The final allocation reflects the project revision as described in paragraph 3.02. Lower expenses for consulting services are due to employment of ITU experts financed by UNDP (paragraph 3.11). Credit allocations for training were not utilized as they were provided by French and Swiss technical assistance under respective Government financing. Operations 3.12 The equipment was supplied in accordance with specifications and its performance has met the specified requirements. OPT is satisfied with the quality and efficiency of plant obtained through contractors. Operation continues to be satisfactory. Performance of Consultants, Contractors, Suppliers and Beneficiary 3.13 The Project Agreement required the employment of engineering consultants (Section 2.02). For the preparation of bidding documents and evaluation of bids, OPT was assisted by ITU/UNDP experts. Engineering consultants (SOFRECOM, Paris) were employed for the factory tests of equipment and local supervision and quality test of equipment and plant. The Performance of ITU/UNDP experts and engineering consultants was satisfactory. 3.14 The suppliers and contractors performed according to their contractual obligations. 3.15 OPT's overall performance and controL of project execution, as well as technical and managerial competence during construction, installation and commissioning of new equipment and plant were satisfactory. Annex 1 compares the actual physical achievements with appraisal, and Annex 2 compares appraisal targets with actual project data. Although IDA was initially somewhat reluctant, OPT was right in insisting on a program and project revisions (paragraphs 3.02 and 3.03) which helped to better cope with demand.  - 11 - Neverth,eless, because of a lack of skilled technicians, OPT did not extend the urban cable networks in the two main cities, as needed, and thus connect more waiting subscribers to the existing switching capacity. This explains the low exchange fill (44%) although the waiting list, as a percentage of demand, is still substantial. The third telecommunications project under preparation is designed to correct this unbalance. IV. OPERATING PERFORMANCE 4.01 Commissioning the new local and long distance facilities under the project in November 1976 resulted in a substantial improvement of telephone service. Delays in obtaining dial tone have virtually disappeared and long distance connections are clearer and obtained without delay due to the introduction of subscriber trunk dialing between the centers served by the new telecommunications facilities. Traffic samples made during the months before and after the introduction of subscriber trunk dialing on the main trunk route between Ouagadougou and Bobo Dioulasso showed a substantial traffic increase of 177%. This, in particular, demonstrates the hidden traffic potential which surfaces as soon as the quality of service improves. 4.02 The number of connected lines in operation by December 31, 1979(5,368) was 34% above the appraisal target of 4,000. At the completion date of the physical program (December 31, 1978), the number of connected lines was 4,586, or 28% above appraisal target. This represents a national average growth rate of 18% per year during the project implementation period (1972-1979), compared with the original forecast of 15% annual increase. 4.03 OPT's telecommunications operating revenues have steadily increased at an average annual growth of 18% from CFAF 618 million in 1974 to CFAF 876 million in 1976; then, following the commissioning of the major project componenats in 1976 and a 25% tariff increase in May 1977 they jumped to a 40% annual growth between 1976 and 1979 to reach CFAF 2,400 million in 1979. Without a tariff increase, the operating revenues would have grown at an average annual rate of 30% from 1976 to 1979. This compares with the average annual growth of 12% estimated at appraisal time. V. FINANCIAL PERFORMANCE Financial Results 5.01 The financial performance of OPT's Telecommunications operation over the period 1974-1979 has been mixed but, on the whole, results have been adequate. The rate of return on average net fixed assets in service fluctuated between a low of 2.7% in 1975 and a high of 13.8% in 1977 (tariffs were increased by an average of 25% in May 1977). OPT has complied with the  - 12 - revenue covenant under Credit 431-UV during the period 1974-1978, except in 1975. This covenant called for a rate of return on the current value of average net fixed assets in service of 6% during the period 1974-1978 and 8% in 1979 and thereafter. However, in 1979 a steep decline started in the operating results due to a sharp increase in personnel and depreciation expenses. The rate of return on the book value of average net fixed assets in operation in 1979 was 5.7%. Comparisons of the forecast and actual fiLnancial statements of the Telecommunications branch are shown in Annexes 3, 4 and 5. 5.02 The reliability of the year-to-year results is reduced somewhat by the accounting department's improper application of accrual and inventory accounting concepts. This matter has received considerable attention in recent supervision missions and substantial progress has been made with PPF financed technical assistance in connection with a proposed third telecommunications project. 5.03 A stummary of sources and applications of funds during the 1974-1979 project period is shown below. Detailed annual funds flow statements are given in Annex 4:  - 13 - CFAF Mln. US$ Mln. % SOURCES Internal Cash Generation 2,825 12.6 44 Less: Debt Service 1,012 4.3 15 Net Internal Cash Generation 1,813 8.3 29 Borrowings: IDA 431 1,068 4.7 16 Eximbank* 526 2.3 8 PCAS** 2,070 9.2 32 Other loans 471 2.1 7 Sub-Total 4,135 18.3 63 Grants 568 2.4 8 TOTAL SOURCES 6,516 29.0 100 APPLICATIONS Construction Requirements: IDA 431 project 1,659 7.0 25 - Earth Station* 754 3.3 11 * Other 3,663 16.7 57 Sub-Total 6,076 27.0 93 Changes in Working Capital (excluding PCAS) 440 2.0 7 TOTAL APPLICATIONS 6,516 29.0 100 * See paragraph 3.04. ** PCAS: Postal Checking Account System 5.04 During the six-year project period OPT's total applications amounted to US$29 million, as compared to an appraisal forecast of US$7.5 million. Net internal cash generation provided 29% of the sources of funds (40%); borrowings 63% (60%); and grants 8% (0%). Thus, OPT's own contribution to invesments was less favorable than forecast which was due to a 300% increase in investments (US$27.0 million versus US$6.0 million) (paragraph 5.08).  - 14 - Financial Covenants 5.05 Borrowings as a percentage of total applications did not vary significantly as compared to the appraisal forecast. However, about 50% of the borrowings were funds taken from the postal checking account system (PCAS) (paragraph 5.06). These borrowings were originally intended to be short-term and should, under the terms of the EProject Agreement, have been limited to a maximum of two months of operating expenses. However, OPT came to depend more and more on these funds. Thus, OPT did not comply with the s'hort-term debt limitation covenant (Section 4.08.c). It complied with the long-term debt covenant, primarily because it did not incur the debt it would have had to incur were it not for the availability of PCAS funds. IDA frequently advised both OPT and the Government of the danger inherent in this course of action but was not successful in haviLng OPT and the Government take corrective action. This can be explained partially by the fact that accurate financial data were not available at the time and that, therefore, the extent of the use of postal checking accounts funds was underestimated. 5.06 During the project period, deposits in the PCAS by the public and private sectors increased from CFAF 1.1 billion in 1974 to CFAF 6.2 billion in 1979 (US$25.0 million equivalent). Despite repeated IDA request to stop the usage of PCAS funds (paragraph 5.05) OPT utilized through the end of 1980 about CFAF 4.6 billion (US$18.4 million) in PCAS funds of which about CFAF 2.6 billion for the Telecommunications branch and the remainder for the Postal branch, which assumed the character of an interest free long-term debt without repayment schedule. Apart from the threat that this usage constitutes to the soundness of the PCAS itself, the easy availability of free funds has been a major factor in the relaxation of financial discipline within OPT. 5.07 During the period 1974-1979, the Postal branch had a negative net cash flow in each year except in 1975. Net cash flow decreased from minus CFAF 19 million in 1974 to minus CFAF 262 million in 1979. In accordance with the Project Agreement, these deficits were not compensated for by transfer of funds from the Telecommunications branch. However, neither did the Government provide subsidies as it should have done on the basis of Section 3.02 (a) of the Credit Agreement. Instead, the Postal branch, like the Telecommunications branch, used Government funds deposited with the PCAS (paragraph 5.06). 5.08 With the exception of the satellite earth station, the telex exchange (see paragraph 3.04) and the microwave link to Togo financed by CCCE, no prior IDA approval on a financing plan was sought for the other additional investments whose capital expenditures exceeded US$200,000 per year (Section 4.07 of Project Agreement). 5.09 For the review of the telecommunications tariff level and structure OPT should have appointed specialists (Section 2.03). Instead, a tariff study was carried out by the staff of OPT and IDA accepted this arrangement  - 15 - as well as the tariff study and its recommendations. The tariff structure in Upper Volta is similar to that of other francophone countries and was generally acceptable during the project period. Tariffs were increased by an average of 25% in May 1977, following an IDA recommendation to the Government to increase tariffs by 30% as well as to provide equity contributions and other mieasures to increase OPT's cash flow. The latter proposals were not accepted by the Government and this has contributed to the increased utilization of postal checking account funds by OPT (paragraph 5.06). Upper Volta's telecommunications tariffs are presently among the highest in the world. VI. INSTITUTIONAL PERFORMANCE AND DEVELOPMENT Management and Organizational Effectiveness 6.01 From its creation in 1968 until 1976, OPT was a relatively efficient and successful organization; OPT managed to recruit and train competent technicians, thereby reducing its dependence on expatriate services. As a result OPT has been able to technically execute the second project on schedule, without major implementation problems and is now providing one of the best domestic telecommunications services of the Western Africa region. The principal internal factors which have contributed to a successful performance during the first eight years of OPT's existence were an outstanding personal leadership and continuity in senior management. OPT's first general manager was competent and much respected by his staff, he created and motivated a dedicated management team. He left OPT in 1977. 6.02 Unfortunately, between 1977 and 1980 the main issues facing OPT have been excessive political pressure on management. This contributed to a premature reorganization (paragraph 6.03), heavy overstaffing (paragraph 6.10), inadequate and lax financial management, and a deteriorating financial position (paragraphs 5.05-5.07). Morale and motivation of previously effective senior executives decreased leading to low standards of efficiency and discipline. 6.03 OPT was reorganized by Decree of August 29, 1977. This reorganization was ill-designed and facilitated an inflation of senior positions and unnecessary staff increases. It was made against IDA's explicit advice. Among the problems were: too many subordinates (13) reported directly to the Director General and no particular responsibilities were assigned to the Deputy Director General. This poor organizational structure increased the Director General's workload and contributed to coordination and management problems. Moreover, a creation of five Regional P&T Directorates was premature, given the limited level of activity in most of these areas and generated its own recruiting pressure on the already excessive number of OPT staff (paragraph 6.08).  - 16 - 6.04 OPT established a satisfactory accounting system and introduced separation of accounts between the Telecommunications branch and the Postal branch under the first project (Credit 141-UV). However, adherence to established accounting procedures declined considerably starting in 1975 following the departure of the expatriate Chiei- Accountant. As a result, the accounts for the years 1975 through 1978 could not be certified, principally because of the misapplication of accrual and inventory accounting procedures. The advice conta'rned in the external audit reports, formal technical assistance financed under the Bank PPF in connection with the proposed third project, and increasing awareness by OPT's management of the importance of good financial reporting have recently resulted in certification of OPT's 1979 accounts. General:Ly, during the project period there have been long delays in OPT closing its books at the end of each fiscal year and thus in the preparation of.financial statements and external audit reports. With continued technical assistance, including staff training, and renewed emphasis by OPT's managemaent on the importance of accurate and timely financial reporting, it should be entirely feasible to obtain certified accounts within the six months time period covenanted under Section 4.03 of the Project Agreement. 6.05 Under the second project, OPT instituted satisfactory budgeting procedures, providing for separate budgets for telecommunications and postal cperations. In its implementation of the budget, however, OPT has gradually assumed more the character of a Government agen,cy than that of an autonomous public enterprise with a commercial character. This fact has also contributed to the tardiness of financial reporting (paragraph 6.04). 6.06 Commercial insurance was considered for the main exchange in Ouagadougou, but the cost of this sort of insurance was found to be prohibitive. For this reason and in view of the limited risks, it is assumed that the Government would provide the funds to replace damaged major assets, since OPT is a public enterprise. This is the policy in many other countries and is an acceptable practice. 6.07 Although there were ups and downs during the project period, the bi-monthly billing system has generally worked quite well. Collections from the private sector have been satisfactory. Collections from the "semi-official" sector (embassies and international organizations) have been somewhat less satisfactory but not unacceptably so. However, collections from Government have been a major and continuing problem. As a result of 'IDA's repeated representations to Government, the latter settled in 1979 all arrears through 1978 and increased its budget allocation for telecommunications to about 85% of actual usage. Since then, arrears have again been allowed to accumulate to a level equivalent to 14 months of billing (end of 1980). These will need to be substantially settled as a condition of the proposed third telecommunications project. It is expected that internal measures taken by Government and the introduction of central automatic message accounting equipment under the proposed third project will provide better control of Government's telecommunications usage, particularly with regard to international calls.  - 17 - Staff Recruitment, Training and Development 6.03 Since 1977, there was a considerable turnover in top personnel (Deputy Director General, Director of Telecommunications, Director of Planning). This, combined with the 1977 reorganization, disrupted OPT's efficient management team. Another competent and dedicated senior executive left OPT in 1979. Contrary to the provisions of the Project Agreement, IDA was generally not consulted about changes in OPT's top personnel; experience with this kind of covenant in Upper Volta as elsewhere indicates that it is difficult to enforce because the Borrower considers it too much of an intesrference in its internal affairs and IDA is, for the same reason, hes:Ltant to insist too much on a priori consultation. ,6.09 OPT has not paid sufficient attention to the need to recruit and appoint qualified accounting staff at all levels and has not instituted adequate training policies as required under Section 3.01 (a) of the Project Agreement. Since 1977 salary and promotion policies have not been used selectively to encourage initiative and professional development among the relatively few qualified staff members. 6.10 Instead of upgrading the quality of existing staff, OPT has, particularly since 1977, given priority to recruitment of additional staff. This over-recruitment has resulted in crowded facilities and low staff morale and productivity. Total staff increased from 696 in 1974 to 1,644 in 1979, of which 937 for Telecommunications (including 50% of the common services staff of 444). For the Telecommunications branch, this works out to a 1979 figure of 175 staff per 1,000 DEL's in service, which is very high. The Postal branch is similarly overstaffed. Only heightened awareness by OPT's manaLgement that staff quantity is no substitute for quality and an agreement to freeze the total number of staff for a period of time, will gradually act to restore staff morale and productivity and improve operating results. Some progress has been made in this field in 1980, during which year total staff remained virtually constant and telecommunications staff per 1,000 DEL's decreased from 175 in 1979 to 153 in 1980 as a result of the increase in the number of DEL's in service. Expatriates, Management Consultants 6.11 Since the departure, in October 1975, of the expatriate in charge of the accounting department, OPT relies entirely on local staff for manaLgement and operations. 6.12 OPT did not employ management consultants during the project period. However, the continuity of the staff of the external auditing firm (Societe de Controle Fiduciaire) throughout this period has been of substantial benefit to OPT (paragraph 6.04).  - 18 - VII. PROJECT JUSTIF:[CATION Project Achievements 7.01 The principal objective of rehabilitating and expanding the main local and long distance facilities in order to improve the quality of service and meet the anticipated demand has been largely achieved. The project, complemented with the earth satellite station and the telex exchange (paragraph 3.04) opened up this semi-arid landllocked country to worldwide telecommunications and thus helped it to overcome its isolation and its major communications problems. The capital city and other main centers of economic and administrative activities are now linked lby a reliable telecommunications network. The achievements in terms of subscriber cornections, traffic and revenue increases, are far above original targets. The quality of service is relatively good and among the best of the Western Africa region. A backbone telecommunications infrastructure has been put in place, so that relatively smaller incremental investments will be able to support further network expansion. 7.02 Upper Volta's telecommunications tariffs are still among the highest in the world; in 1980 local calls were billed at about US$0.22 equivalent. However, from project appraisal in 1972 to project completion in 1979, the annual rate of inflation in Upper Volta averaged 12%, for a cummulative total of 147% during the seven year period. During the same period, the tariffs have been increased only once by 25% in 1977 which means that, expressed in constant 1972 local currency, the tariffs in force in 1979 were 43.5% below those in force in 1972. On the other hand, taking into account the economies of scale obtained with the telecommunications network existing after project completion, a better result could certainly have been achieved if OPT had increased staff productivity. Unfortunately, this objective was too ambitious, given the cultural and political environment (paragraph 6.10). Project Spin-Off 7.03 The construction of long-distance overhead lines in the rural areas, and the construction of technical buildings and civil works for the expansion of the local networks in the project provided local employment. OPT reported that peasants hired for the construction of telephone lines were particularly proud to be associated to a project which would break their isolation and they organized themselves voluntarily :Ln order to protect the telephone line linking them to the rest of the country against depredation. The project had no negative environmental effect. Least Cost Solution 7.04 Dimensioning of technical facilities and plant, as well as planning and timing of their installation and construction play an important role in telecommunications during the selection process of tlhe least cost solution,  - 19 - which will finally affect the actual design of each particular project component. On the other hand, dimensioning, planning and timing have to be made on the basis of the expected demand whose forecasting is always hazardous in areas where little or no service exists in the early stages of economic development. At appraisal and during the early stages of project implementation, IDA missions were conservative in appreciating the future demand and thus were in favor of lower cost solutions, such as routing the whole international traffic through Abidjan and combining the national and international transit switching facilities (see paragraph 3.02). However, OPT insisted on planning for a higher level of demand and a revision of the project which encompassed technical solutions appropriate to it (paragraph 3.03). IDA was finally supportive and the substantial increase of traffic and subscriber connections experienced at project completion (Chapter IV) demonstrated that OPT made the right decision. The solution finally selected for the Ouagadougou and Bobo Dioulasso telephone exchanges (paragraph 3.02.i and ii) appears to have been the least cost possible solutions, taking into account the constraints imposed by the foreign supplier of existing equipment. Internal Rate of Return 7.05 The internal financial rate of return for the project has been estimated at 16.4% which compares with an appraisal estimate of 20%. The lower rate of return on investment is due to the inclusion of additional lower revenue earning network facilities in the program as against a high concentration of very profitable facilities in the project. Details of the internal financial rate of return calculation are given in Annex 6. However, the economic rate of return should be considerably higher than 16.4% since: (a) no increase in incremental revenues due to project components have been considered as from FY80 onwards despite existing spare capacity on certain facilities installed under the 1974-1979 program; (b) no indirect external benefits such as increased efficiency and better administration in other sectors (transport, health, agricultural, public service, etc.) from expanded and improved telecommunications service have been included; and (c) no increase in consumer surplus has been considered despite a significant increase in waiting lists. VIII. IDA PERFORMANCE 8.01 In general, IDA's role and performance appear to have been satisfactory. IDA has given valuable advice and support in project preparation and implementation, pricing of equipment and plant, as well as procurement of goods under ICB. IDA was supportive in adjusting to the  - 20 - revision of the project and the program, to cost increases and to alternative technical solutions. IDA pursued the questions of budgeting and accounting procedures and auditing arrangements and these efforts are beginning to bear fruit. However, IDA was less successful in the areas of OPT's organization, staffing and financial discipline. In this respect, institutional improvements have not met expectations, possibly because in retrospect they were too ambitious given changes in the political environment. Further IDA involvement in the sector should concentrate more on organization, (financial) management, maintenance and training problems. Supervision 8.02 Five supervision missions were adequate to monitor physical project implementation since the same engineer appraised, supervised and completed the project. However, more staff resources should have been devoted to the other aspects. No less than five financial analysts were consecutively involved in the appraisal and supervision stages and this high Bank staff turnover and the inadequacy of OPT's financial reporting complicated the supervision of OPT's financial performance and compliance with financial covenants. Working Relationship 8.03 The working relationship between IDA, the Government and OPT has always been excellent. Covenants 8.04 A statement spelling out the compliLance with covenants is contained in Annex 7. IX. CONCLUSIONS 9.01 On balance, the project has been successful. OPT implemented the project without expatriate assistance and technical execution has proceeded quite close to schedule. The number of subscriber lines connected to the system and the increase of domestic long distance as well as international traffic have largely exceeded original agreed targets. The level of service is relatively good and among the best of the Western Africa region. However, attempts made during the second phase of the project to keep the sector organization in line with the network expansion were less successful, resulting in management problems. Although many of the problems were caused by the political environment prevailing in the country at the time, it is likely that an early decision by IDA to support the third telecommunicatons project (paragraph 3.04), as requested by the Government in 1975, would have given, at the right time, the necessary incentives to better adjust the sector institutions, its staff requirements and management to the size and complexity of the network they operate, as well as to the needs of the society they serve.  - 21 - ANNEX 1 Page 1 UPPER VOLTA OFFICE DES POSTES ET TELECOMMUNICATIONS Second Telecommunications Project - Physical Achievements (as of December 31, 1978) Appraisal Achievements 1. Local Telephone Switching Equipment (in lines): Exchanges: . Ouagadougou 4,000 5,000 - Banfora 200 200 * Fada N'Gourma 200 200 * Koudougou 200 200 * Ouahigouya 200 200 - Bobo Dioulasso 800 1,800 Total 5,600 7,600 2. Local Networks in the Above Cities: Number of Susbscriber connections added: December 31, 1978 1,900 2,906 * December 31, 1979 - 3,688 3. Long Distance Automatic Telephone circuits: Ouagadougou-Koudougou 7 10 Koudougou-Ouagadougou 11 10 Ouagadougou-Bobo Dioulaso 34 45 Bobo Dioulasso-Ouagadougou 26 30 Ouagadougou-Ouahigouya 3 4 Ouahigouya-Ouagadougou 5 5 Ouagadougou-Fada N'Gourma 5 4 Fada N'Gourma-Ouagadougou 6 5 Ouagadougou-Banfora 4 - Banfora-Ouagadougou 4 - Bobo Dioulasso-Banfora 12 12 Banfora-Bobo Dioulasso 8 12 125 137  - 22 - ANNEX 1 Page 2 Appraisal Achievement 4. International Automatic Telephone Circuits: Abidjan-Ouagadougou 19 10 Ouagadougou-Abidjan 16 10 Paris-Ouagadougou - 4 Paris-Ouagadougou (bidirectional) 4 Ouagadougou-Paris 5 35 ~~~~33 5. Transmission: 5.1 Multiplex on Microwave Channels: * Ouagadougou-Koudougou 24 24 * Bobo Dioulasso-Banfora 24 24 5.2 Carriers on Overhead Lines: * Ouagadougou-Ouahigouyou 12 12 . Ouagadougou-Fada N'Gourma 12 12 Construction of Long Distance Overhead Lines (Km): * Tenkodogo-Ouargaye 55km - * Fada N'Gourma-Bogande 130 130km * Ouahigouya-Thion 31 - - Koudougou-Tenado 26 26* - Koudougou-Kindi 39 * Gaoua-Kampti 107 107 * Ouagadougou-Leo 165 165* * Kaya-Barsalago 52 52 * Tougan-Dian Kassoun 26 - * Diabo-Comin Yonga 46 - * Dori-Gorom Gorom 58 - * Po-Zabre 61 - Po-Tiebele 31 - Ouahigouya-Ticao 44 - Ouahigouya-Djibo 110 - Boromo-Bagani 48 - Kaya-Boulsa 142 142 Kaya-Kongoussi 59 59 Ouagadougou-Ouahigouya - 181 1,230km 862km * dropped from the second project but constructed under bilateral grant.  - 23 - ANNEX 2 Page 1 UPPER VOLTA OFFICE DES POSTES ET TELCOMMUNICATIONS (OPT) SECOND TELECOMMUNICATIONS PROJECT Comparison Between Appraisal Targets and Actual Project Data December 31 1972 1978 Actual Target Actual 1. Local Telephone Service Number of telephone stations 3,850 5,400 8,563 Number of subscriber connections (DEL) 1,680 3,580 4,586 Annual growth in DELs (1968-71) 11.0% - - Annual growth in DELs (1972-78) - 15.0% 18.0% Number of telephone exchanges: . Total 28 37 67 . Automatic 2 7 7 , Manual 26 30 60 Installed capacity: . Total 2,440 7,700 10,396 . Automatic 1,800 7,100 7,600 , Manual 640 600 2,796 Exchange fill 68.0% 60.0% 44.0% Waiting subscribers 220 - 641 Waiting list as a percentage of DELs 13.2% - 14.0% W'aiting list as a percentage of demand 11.7% - 12.2% Ratio of subscribers dialing 78.5% - 72.0% 2. Long Distance Nbr of microwave links 0 3 21/ Nbr of long distance circuits (voice channels) 56 160 200 l'otal circuits (kms) 7,800 35,000 34,000 3. Telegraph and Telex EF radio stations 4 4 6 Public teleprinters domestic circuits 2 10 5 T'elex subscribers 45 80 163 1/ The Ouagadougou-Koudougou and Bobo Dioulasso-Banfora links became spur links of the main route Ouagadougou-Bobo Dioulasso-Ivory Coast (see para. 3.02).  - 24 - ANNEX 2 Page 2 December 31 1972 1978 Actual Target Actual 4.. International Service _/ Intelsat earth station (Standard B) 0 0 1 Telephone circuits 5 2/ 40 36 Telegraph circuits 1 10 16 Lease circuits: . Telephone 0 0 2 . Telex 2 2/ 10 2 5. Staff Telecommunications staff 280 320 849 Staff per 1,000 Dels 168 89 185 Staff per 1,000 telephones 73 59 99 6. Subscriber Lines Connected to the Network Year Targets Achievements + % Total Addition Total Addition 1972 1,680 - 1,680 - 1973 1,905 225 2,169 489 + 17 1974 2,140 235 2,263 94 - 60 1975 2,240 100 2,346 83 - 77 1976 2,720 480 2,587 241 - 50 1977 3,200 340 3,564 977 + 187 1978 3,580 380 4,586 1,022 + 169 1979 - - 5,368 782 - !/ From commissioning of the Intelsat earth station in 1977, OPT took over international services from France Cable and Radio (see para. 1.01). 2/ Only OPT services to neighboring countries (see para. 1.01).  UPPER VOLTA OFFICE DES POSTES ET TELECOMMUNICATIONS (OPT) Income Statements (Telecommunications Branch) (CFAF million) 1974 1975 1976 1977 1978 1979 FY ending Dec. 31 Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actusl OPERATING REVENUES Telephone: Installation 4 17 2 15 7 13 5 12 6 36 6 41 Rental 37 40 40 48 44 56 48 71 53 99 58 125 Domeatic call. 227 271 261 400 *295 362 357 593 397 836 448 1.135 international calls 52 73 57 85 63 110 69 141 75 250 82 500 Sub-Total 320 401 360 548 409 541 479 817 531 1,221 594 1,801 Telex and Telegraph 119 117 129 137 139 165 151 211 163 274 174 288 Otiher 5 100 5 79 5 170 5 172 5 236 6 311 TOTAL 444 618 494 764 553 876 635 1,200 699 1.731 774 2.400 Ol'ERATING EXPENSES Personnel 142 170 153 213 168 300 179 395 191 425 210 689 International Traffic 75 112 82 143 90 108 100 72 108 176 116 422 Otber 35 90 39 182 42 117 47 233 53 518 59 579 Depreciation 104 153 120 187 141 187 180 220 202 255 209 438 TOTAL 356 525 394 725 441 712 506 920 554 1,374 594 2.128 OPERATING INCOME 88 93 100 39 112 164 129 280 145 357 180 272 Plus: Other Income (net) 0 36 0 43 0 45 0 34 0 60 0 132 NET INCOME BEFORE INTEREST 88 129 100 82 112 209 129 314 145 417 180 404 Less: Interest 28 17 38 17 52 42 79 127 97 153 104 136 NEANCOME 60 112 62 65 60 167 50 187 48 264 76 268 Rate of Return (Z)* 7.7 8.3 7.6 2.7 7.2 10.2 6.2 13.8 6.3 10.5 8.1 5.7 Operating Ratio (1) 76 85 76 95 76 81 76 77 76 79 73 89 Ont Lhe book value of average net fixed auseta itn operation.  - 26 - ANNEX 4 UPPER VOLTA OYFCI DES POSTZS ET TELECO10NZCATIONS (OPT) Funds Fla Statements (Telecoumicatioos Branch). (CYAF milliou) 1974 1975 1976 1977 1978 1979 9? ending Oec. 31 Appcaisl Actual Appraigal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual 7r2rEWAL SO5RCZS Net Inco.m gafore I.terast S8 129 100 82 112 209 129 314 145 417 180 404 Depreciation 104 153 120 187 141 187 180 220 202 255 209 438 2 - 13 1 - 32 5 -30 3 -31 4 _16 4 -48 MTAL 194 269 221 237 258 366 312 503 351 656 393 794 O?RA=ONA:L QUIROMETS ChAnga