Morocco - Telecommunications Sector Restructuring Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 17971 IMPLEMENTATION COMPLETION REPORT MOROCCO OFFICE NATIONAL DES POSTES ET TELECOMMUNICATIONS (ONPT) TELECOMMUNICATIONS SECTOR RESTRUCTURING PROJECT (Loan 3557-MOR) June 10, 1998 Infrastructure Development Group Middle East and North Africa Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without WLorld Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Moroccan Dirham (DH.) AVERAGE EXCHANGE RATES (Dirhams per US$) 1992 1993 1994 1995 1996 1997 US$1.00 =DH 8.80 8.52 9.38 8.74 8.92 9.64 WEIGHTS AND MEASURES Metric System US System 1 meter (m) 3.2808 Feet (ft) 1 kilometer (km) 0.6214 mile (mi) 1 square kilometer (km2) 0.38601 square mile (mi2) 1 metric ton (m ton) 0.9842 long ton (Ig ton) 1 kilogram (kg) 2.2046 pounds (lbs) ABBREVIATIONS AND ACRONYMS ADB African Development Bank ANRT Agence Nationale de Reglementation du Secteur des T6lecommunications (new telecom sector regulatory agency) BAM Barid Al-Maghrib (new Moroccan postal authority) CFD Caisse franeaise de Developpement (French Development Finance Agency) CP Contrat de Programme (ONPT's performance contract with GOM) DEL Direct Exchange (main) Line EC European Community EIB European Investment Bank IAM Itissalat Al-Maghrib (new Moroccan telecom corporation) IDB Islamic Development Bank ISDN Integrated Services Digital Network KfW Kreditanstalt fuer Wiederaufbau (Bilateral Development Financing Agency of Germany) MPT Ministry of Post and Telecommunications ONPT Office National des Postes et Telecommunications (National Posts and Telecommunications Authority) P&T Posts and Telecommunications PERL Public Enterprise Rehabilitation Loan TC Telecommunications TSRP Telecommunications Sector Restructuring Project VAT Value-added tax MOROCCO - FISCAL YEAR (FY) January I - December 31 Vice President : Kemal Dervis Director MNCMG : Christian Delvoie Director MNSID : Jean-ClaudeVilliard Task Manager : Hartwin Nickel  FOR OFFICIAL USE ONLY Table of Contents Page Preface Evaluation Summary i PART I: IMPLEMENTATION ASSESSMENT A. Background and Project Objectives I B. Achievement of Objectives 4 C. Major Factors Affecting the Project 10 D. Project Sustainability 12 E. Bank Performance 12 F. Borrower's Performance 13 G. Assessment of Outcome 14 H. Future Operation 14 I. Key Lessons Learned 14 PART II: STATISTICAL TABLES I Summary of Assessment 17 2 Related Bank Loans/Credits 18 3 Project Timetable 18 4 Loan Disbursements: Cumulative Estimated and Actual 19 5(A) Key Indicators for Project Implementation, Technical Performance 20 5(B) Key Indicators for Project Implementation, Financial Performance 21 6 Key Indicators for Project Operation, Technical and Financial Performance 22 7 Studies Included in the Project 23 8(A) Summary of Project Costs 26 8(B) Project Financing 27 9 Economic Costs and Benefits 28 10 Status of Legal Covenants 29 11 Compliance with Operational Manual Statements 30 12 Bank Resources: Staff Inputs 30 13 Bank Resources: Missions 31 APPENDICES A. SPN/ICR Mission Aide Memoire 32 B. Borrower's Contribution to the ICR 46 Map: IBRD No. 24480 Thiis document has a restricted distribution and may be used by recipients only in the perfornance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  IMPLEMENTATION COMPLETION REPORT MOROCCO OFFICE NATIONAL DES POSTES ET TELECOMMUNICATIONS (ONPT) TELECOMMUNICATIONS SECTOR RESTRUCTURING PROJECT (LOAN NO. 3557-MOR) PREFACE This is the Implementation Completion Report (ICR) for the Telecommunications Sector Restructuring Project in Morocco, for which Loan 3557-MOR in the amount of US$ 100 million was made to the Moroccan telecom and postal authority ONPT. The loan was approved on February 2, 1993 and made effective on October 20, 1993. It was closed on December 31, 1997, the original closing date. At the borrower's request, due to project cost savings and some components being implemented under a separate development program, an amount of US$ 11.0 million was canceled in August 1997. Disbursements under the loan totaled US$ 61.2 million equivalent. The last disbursement took place on January 8, 1998. The undisbursed balance of US$ 27.8 million was canceled, at ONPT's request, on February 8, 1998. Cofinancing for the foreign exchange costs was provided by IBRD Loan 2798-MOR which was still ongoing at the time of project start-up, the multilateral development banks for Africa (ADB) and Islamic countries (IDB), the bilateral development finance agencies of France (CFD) and Germany (KfW), and commercial credits. Local costs were financed from ONPT's internal resources and local credits. The ICR was prepared by Marcel Scoffier (Consultant), and Hartwin Nickel (Task Manager) of the Infrastructure Development Group (MNSID) of the Middle East and North Africa Region. It was reviewed by Mmes./Messrs. M. Fernandez-Palacios, Projects Adviser, Maghreb Department (MNCMG), J.-C. Villiard, Director, A. Al-Khafaji, Lead Operations Specialist, and Z. Ladhibi-Belk, Sector Leader (MNSID), whose comments were included in the ICR. Preparation was begun during the Bank's final supervision/completion mission to Morocco, in December 1997. The borrower contributed by providing information and views reflected in the mission's Aide-Memoire (Appendix A), and a comprehensive project implementation report (Appendix B), with some of its tables incorporated into Part II of the ICR. The borrower's report was prepared in December 1997 and contains, for the year 1997, technical and financial estimates, while the ICR includes actual 1997 figures.  IMPLEMENTATION COMPLETION REPORT MOROCCO OFFICE NATIONAL DES POSTES ET TELECOMMUNICATIONS (OPNT) (LOAN NO. 3557-MOR) EVALUATION SUMMARY Background (i) Until the mid-1980's the Moroccan Government (GOM) had given low priority to telecommunications (TC) services. They were provided together with postal services by the then Ministry of Posts, Telegraph and Telephone (PTT). The telecom sector lacked financial resources and institutional capacity. In the early 1980s', the country's authorities realized that the obsolete telecom facilities had to be modernized and largely expanded, and the sector organization had to be strengthened and restructured. (ii) In early 1984, in line with the findings from a sector review, GOM created ONPT as a legally and financially autonomous public authority, under MPT's responsibility, to provide the telecom and postal services. GOM requested Bank assistance in setting up and organizing the new entity, as well as in financing the telecom investment program. The Bank responded with two successive loans: (a) Loan 2798-MOR of US$125 million for the First Telecom Project, which was implemented from 1987 to 1994, and (b) Loan 3557-MOR of US$100 million for the Telecom Sector Restructuring (TSR) Project, which is the subject of this ICR and was implemented from 1993 to 1997. The large investment programs of both projects were co- financed from various sources. (iii) The two loans were made with the continued development objectives of assisting (a) in modernizing and expanding ONPT's telecom services, with some support to the postal/financial services as well, and (b) in ONPT's transition from a monopolistic Government utility toward two autonomous commercial entities for posts and telecoms, creation of a separate regulatory function and gradual opening of the telecoms sector to private participation. (iv) The first project was successfully implemented; several of the physical and institutional objectives were exceeded. Before its completion, GOM requested the Bank to continue its support to the sector. The Telecom Sector Restructuring Project was prepared and appraised in 1992. The loan (no. 3557-MOR) to ONPT, guaranteed by GOM, was approved on February 2, 1993 and became effective on October 20, 1993. Project Objectives and Description (v) The objectives of the project were to assist ONPT in: (a) the continued improvement and strengthening of its organizational and operational capabilities to enable efficient commercial operation and effective development of the network; (b) preparing and promoting, simultaneously, in-depth sector restructuring leading to its liberalization and opening to competition, consistent with both current world-wide trends and with the country's overall public  ii sector reform; and (c) increasing rapidly and cost-effectively the quantity and quality of TC services under the 1992-94 second phase of ONPT's investment program for development and modernization of the TC network, thus meeting the growing demand for these services and supporting the country's economic goals. The latter program would be pursued under ONPT's subsequent Performance Contract with Government for the period 1993-97. (vi) Two main components were included in the project: (i) an institutional component consisting of: (a) training to further enhance ONPT institutional capacity which started under the First Project; (b) acquisition of computer systems for ONPT; (c) consultancy services to strengthen MPT's capacity, including its regulatory functions and the preparation of sector reform; and (d) computerized systems for MPT to control the radio frequency spectrum; and (ii) a physical component mainly consisting of: (a) about 500,000 digitalized lines of local switching and subscriber equipment; related switching equipment for domestic trunk (60,000 new circuits) and international gateway exchanges (22,300 new circuits); (b) associated local networks and subscriber outside plant for connection of about 420,000 new subscriber lines; (c) transmission installations for digital microwaves and optical fiber links and equipment to digitize 8 coaxial long distance cables; and (d) facilities for automatic services in about 780 rural areas for specialized services such as mobile/maritime radio and data transmission, and for MPT's radio frequency spectrum control center. (vii) The technical objectives of this second project were supported by a digitization strategy, network planning and traffic engineering arrangements, and the design of centralized operation and maintenance systems prepared under the first project. With regard to the institutional objectives, the first project, together with Bank and trust funds, also had prepared: (i) the new institutional framework; (ii) a Statement of Sectorial Policy (adopted in 1992) and a performance contract between ONPT and the government for the period 1993-1997; (iii) separation of postal services and telecommunications; (iv) the organization of the regulatory function; (v) a long-term telecommunications strategic plan; and (vi) a detailed diagnostic of ONPT's postal/financial branch and a program for the required technical assistance. Based on this, an action plan for the development and restructuring of the sector including performance indicators was agreed during negotiations and outlined in a side letter to the Loan Agreement. Achievement of Objectives (viii) The TSR Project was implemented on schedule from 1993 to 1997. Its major targets of supporting sector reform and institutional strengthening, and a large physical expansion of the telecom network to satisfy demand and improve service quality were reached or exceeded. The key accomplishments from the project were: (a) the telecom network was modernized and substantially extended; (b) ONPT was thoroughly restructured, with telecom and postal services separated and their technical and commercial operations computerized; and (c) a law on Posts and Telecommunications (Law No. 24/96) was adopted in August 1997, reforming the sector's institutional framework by creating two separate commercial entities for telecommunications and postal/financial services, and providing for opening of the sector to competition and private sector participation, thereby ending the telecoms monopoly, with possible future privatization of the existing telecommunications under a new regulatory set-up.  iii Bank and Borrower Performance (ix) Both the borrower's and the Bank's performance were satisfactory under the project. ONPT's and GOM's relationships with the Bank were good and fruitful throughout the preparation and implementation phases, as under the first project. All covenants under the Loan and Guarantee Agreements were complied with. Project Sustainability and Assessment of Outcome (x) Sustainability. Demand for telecommunications and information services in Morocco is expected to continue its rapid growth. The capacity provided by the 1992-97 investment program and cofinanced by this loan will continue to be fully utilized and to support the expanding economy. ONPT has been thoroughly restructured and has strengthened its operations under this and the previous project. From this basis, the successor entities IAM and BAM will have the capacity to further develop and operate satisfactorily the telecom and postal services on a commercial basis, in the competitive environment envisaged by the new sector law. Technical and financial indicators are expected to remain satisfactory into the future (see Table 6), with the teledensity growing to about 9 lines per hundred inhabitants by the year 2002, and pre-tax rates of return continuing to exceed 20%. (xi) Assessment of Outcome. The project outcome is highly satisfactory. All physical, operational, and organizational targets were achieved. In the institutional domain, a decisive step was taken toward sector restructuring with the enactment, in August 1997, of law 24/96 on Posts and Telecommunications. In the financial area, performance was very satisfactory as well. ONPT was able to finance 51% of its investments and simultaneously to make substantial contributions to the Government budget. The estimated financial rate of return of the project is a favorable 20%. (xii) Outlook: Law 24/96 on Posts and Telecommunications of August 1997 will further deepen sector reform. Implementation will need substantial external assistance for which the Government and the two new corporations may seek further assistance from the Bank, given its experience in this field. Key Lessons Learned (xiii) Key lessons learned from the project are the following: (a) The Bank's commitment and support to a sector over an extended period of time and through several operations is usually needed to achieve major progress in sector performance and restructuring. In the case of the Moroccan posts and telecommunications sector, most of the strategies - transforming the public telecom and postal authority into two independent commercial entities and a new regulation opening the telecom sector to private participation and competition - were prepared under the first project and further elaborated under the second, with the needed legislative and Government decisions coming at the end of the second project, after some fifteen years of Bank assistance.  iv (b) Telecom sectors are presently among the most dynamic growth industries and therefore important factors of economic development. In Morocco, demand for telecom services has been increasing continuously, in line with economic expansion and stimulated by new technologies. Addressing this demand, ONPT's telecom operations have achieved high growth, substantial economic returns and robust financial performance, and made large contributions to the Government's finances. Also, while improving productivity, ONPT was able to protect and even increase employment. (c) Dedication and competence of the borrower's management team, and the Government's commitment to the agreed development objectives are fundamental for a project's success. The TSR Project has been successful due to the excellent performance of ONPT's management and staff, and to GOM's determination to modernize the P & T sector, which - in consultation with the Bank - has eventually resulted in a new legal framework for a commercialized operation open to private competition. (d) In the telecom sector, technology progress is one of the most important factors driving modernization and expansion. Results of the TSR Project were greatly enhanced by taking optimal advantage of the new digital technology, introducing state of the art systems for network operation and maintenance, and benefitting from decreasing costs of equipment. (e) A lesson in the financial area is that, in order to control Government arrears, a performance indicator in a side letter to the Loan Agreement may not be a strong enough tool. Government receivables have again increased to about ten months of annual billings, since compensation of arrears in 1993. Although difficult to negotiate, a covenant in the Guarantee Agreement with GOM might have been more successful in keeping these arrears at an acceptable level.  IMPLEMENTATION COMPLETION REPORT MOROCCO OFFICE NATIONAL DES POSTES ET TELECOMMUNICATIONS (ONPT) TELECOMMUNICATIONS SECTOR RESTRUCTURING PROJECT (LOAN NO. 3557-MOR) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. Background and Statement/Evaluation of Project Objectives Background 1. The Telecommunications Sector Restructuring Project (TSRP) in Morocco, which was supported by the $100.0 million Bank Loan 3557-MOR, was implemented from 1993 to 1997 by the office National des Postes et Telecommunications (ONPT), the National Posts and Telecommunications Authority, as Borrower, under the Guarantee of the Kingdom of Morocco. ONPT was created in 1984 as a state-owned semi-autonomous entity, under the policy guidance and overall tutelage of the Ministry of Posts and Telecommunications (MPT), to provide the country's postal and telecommunications services, establishing and operating them as monopolies under a 1924 Posts and Telecommunications (P&T) Law. ONPT has managerial, operational and financial autonomy and its own budget. As a public enterprise, it is subject to control by the Ministry of Finance. 2. Until the mid-1980s, prior to the establishment of ONPT the telecommunications (TC) sector in Morocco was severely constrained, lacking both the financial resources and institutional capacity adequate to develop and operate the systems and to provide satisfactory services to the public and the economy. MPT was directly responsible for providing P & T services. The sector was characterized by chronic under-investment, resulting in slow development growth, low and unbalanced telephone penetration, large unsatisfied expressed demand (under half of demand met), traffic congestion and reduced service. 3. In the early 1980s, the country's authorities realized that an efficient and reliable TC system was a pre-requisite for economic growth and sustainable socio-economic development and activities. The country's telecommunications facilities had to be modernized and greatly expanded, and the sector organization and operation had to be restructured. In 1981, the Government asked the Bank for its assistance in reviewing the situation requirements of the sector and in recommending ways and means to make the needed improvements and changes in management, operations and sector development. The Bank could eventually continue to support sector improvement and structural reform under the upcoming programs.  2 Previous Bank Involvement and Experience in the Sector 4. The 1981-82 sector review essentially emphasized that the TC sector required in depth organizational and structural reform to commercialize its operations and improve its approach to development. The Postal and TC operations and management would have to be separated in order to operate on sound commercial practices. Outside assistance would be required to strengthen development planning and implementation capabilities and build up readiness for efficient operation and management of the modernized and expanded systems. Some of the construction activities for the local networks and terminal installations could be entrusted to the private sector, through appropriate contractual or agreement procedures. The very large network expansion and modernization plans being then considered for the installation, in total, of about 800,000 new exchange lines and associated networks would also have to be feasibly phased in rhythm with the TC operator's increasing financial resources and developmental capabilities. 5. In line with the recommendations from the sector review, the GOM created the ONPT, which inherited the responsibility for the public P&T monopolistic services transferred from MPT, pursuant to Law no. 1-84-8 and Decree no. 2.84.20 of January 10 and 11, 1984. ONPT is a financially and legally autonomous public authority under the MPT. It has operational and financial autonomy and its own budget. The Ministry retained the policy-setting and regulatory functions, including responsibility for the radio-frequency spectrum management and control. In parallel, GOM then requested Bank assistance to support setting-up and organizing the new entity, as well as sector development under the long ranging investments program put together by the National Planning Authorities and ONPT. Said program aimed at expanding the total installed telephone exchange capacity to satisfy most of the demand and to modernize the system. 6. The Bank responded with the First Telecommunications project. Loan 2798-MOR of US$ 125 million was approved in April 1987 and became effective that November. The main objectives of the project, implemented from 1987 to 1994, were to: (a) provide extensive technical assistance to relieve the organizational, management, financial and development planning and implementation constraints existing with the newly created ONPT and strengthen its capacities; and (b) contribute to the expansion and modernization of major facilities under a first phase (Phase I for about 350,000 installed new lines from 1988 to 92) for about half of ONPT's long term investment program. The project concept was still in line with the traditional public utilities approach. The project was prepared in 1984, not long after AT&T divestiture in the USA. At that time, the worldwide debate on telecommunications policy and trends toward in-depth reform of the TC sector and its opening to competition was only in its infancy. The loan, completed on time in December 1994, was fully disbursed, with the exception of $ 9.0 million which were canceled in 1988 in agreement between the Bank and ONPT. Implementation was highly satisfactory and the project met its objectives, even somewhat exceeding those of the physical component (ICR no. 14684 of June 23, 1995). 7. During implementation of the First Project, the Bank and the Moroccan Sector Authorities pursued a constructive dialogue on sector restructuring and reform beyond the initial project objectives of strengthening ONPT's internal organization. The period coincided with the implementation of the Morocco Public Enterprise Rehabilitation Loan (PERL), whose lessons were taken into account for the evolving public TC sector. It also was at a time when overall policies for the establishment of a Common Market for Telecommunications and Services in the  3 European Community (EC's Green Paper, 1987) and an implementation program for Europe- wide TC sector reform were being prepared. 8. To assist MPT and ONPT in this field, experts financed by the first project, Bank and trust funds were provided to study and prepare : (i) the design and evaluation of alternative institutional frameworks; (ii) preparation, in consultation with MPT and the concerned government authorities of a Statement of Sectorial Policy (adopted in 1992) and of a "Contrat de Programme" (CP, Performance Contract) between ONPT and the government (this represented a major milestone in the process of providing ONPT with corporate autonomy and accountability under the sectorial policy and was adopted for the period 1993-1997); (iii) separation of Postal Services and Telecommunications; (iv) organization and strengthening of the regulatory functions; (v) a long-term TC strategy plan; and (vi) a detailed diagnostic of ONPT's postal/financial branch and a related medium-term program of the required technical assistance. Implementation of these measures remained to be programmed and funded at completion of the first project in 1993. 9. In 1992, GOM requested the Bank for its continued support. The TSR Project, subject of this ICR, was appraised in 1992, and covered Phase II of ONPT's program including about 500,000 telephone exchange lines and related network facilities and a major sector restructuring and strengthening component. Both projects are to be considered as a continuous operation, the operational! organizational phase of the first project sustaining the development and restructuring phase of the TSR project. Statement and Evaluation of Objectives 10. Government's Strategy for the Telecommunications Sector. The government's strategy for the TC sector evolved from the implementation of the first TC project (para. 6 and 7) and aimed at: (i) improving ONPT's organizational and operational capabilities to enable efficient commercial operation and effective development of the network; (ii) preparing and promoting, simultaneously, in-depth sector restructuring leading to its liberalization and opening to competition, consistent with both current world-wide trends and with the country's overall public sector reform; and (iii) increasing rapidly and cost-effectively the quantity and quality of TC services to meet the growing demand for these services and thus support the country's economic goals. 11. Project Development Objectives and Summary Description. In line with the above strategy, the principal development objectives of the TSR Project were: (a) to assist the government in improving its institutional capacity and in preparing the groundwork for sector liberalization through the provision of specialized expert advice and consulting services, training and human resource development programs, monitoring equipment and introduction of modern facilities for efficient operations, maintenance and management of the network; and (b) to further expand and modernize Morocco's basic telecommunications network through partial funding of the second phase of ONPT's investment program for construction from 1992 to 1994. The project was designed to meet the above objectives through: (a) an institution building and sector restructuring component to provide substantial technical assistance and consultancy services to both ONPT and MPT; and (b) a physical component in support of ONPT's 1992-1994 investment program for development and modernization of TC facilities.  4 12. The Institution Building and Sector Restructuring Component. This included: (a) consultancy services to assist in strengthening of MPT's institutional capacity, including its regulatory functions; (b) computerized systems and equipment for MPT to be able to control efficiently the radio frequency spectrum; ( c) consultancy services and training to further enhance ONPT institutional capacity which started under the First Project, for both the TC and, to a lesser extent, the postal/financial services; and (d) acquisition of computer equipment and development of related management systems for implementation of ONPT's data processing master plan and accounting for its two branches of activities, based on the designs and recommendations from studies included in the Bank's First Project. 13. The Physical Component. This component supported the expansion of ONPT's network under Phase II Investment program for construction 1992-1994, which works were continued under the Performance Contract adopted in 1993 for the period 1993-97 (para. 10) and included: (a) about 500,000 digitalized lines of local switching and subscriber equipment to expand exchange capacity by about 420,000 lines and replace about 82,000 old analog lines; and the related switching equipment for domestic trunk exchanges (60,000 new circuits); (b) associated local networks and subscriber outside plant for connection of about 430,000 new subscriber lines; (c) 54 digital microwaves links, 22 optical fiber trunks, and equipment to digitize 8 coaxial long distance cables; (d) equipment to expand the two international switching gateway capacity (22,300 new circuits) and the two earth stations capacity (360 circuits); (e) equipment to connect the domestic network to the two new international optical fiber submarine cables; (f) facilities for automatic services in about 780 rural areas; and (g) specialized services such as mobile/maritime radio and data transmission. 14. Evaluation of Objectives. There was real continuity between the two projects and loans for telecommunications in Morocco, the strategy being to assist the country and the main TC operating entity in modernizing and developing the systems under two successive phases of a large development program for the period 1987-92 and 1992-94 respectively, and to simultaneously establish the transition process to evolve from government type operation of a monopolistic utility toward autonomous and commercially efficient operations of the services. The phasing in of operational and developmental changes, together with the institutional studies which were made under the first project, created the basis for the TC sector transition and restructuring under the second. 15. The objectives and components of the second project were relevant and feasible, taking into consideration the lessons and experience from the first; i.e., of the efforts needed to implement and sustain the large investment program underway, the needed evolution of the organizational status of ONPT's varied services, and the GOM's targeted reform of its public enterprise rationalization program, with a view to liberalize productive sectors, opening them progressively to competition and private sector participation. With regard to the TC sector, one may note at the time of inception of the TSR project, the world-wide trend toward opening it to competition and private participation in operation, under appropriate regulatory set-up, was only just beginning, in particular in Europe , Asia and the former Eastern bloc countries (paras. 6 and 7). B. Achievement of Objectives 16. The project met its objectives and was implemented in a timely fashion from 1993 to 1997. The key accomplishments from the project were: (a) the planned expansion and  5 modernization of the TC network was fully realized on time, both in its initial phase 1992-94 financed by the loan and in ONPT's subsequent 1993-97 Performance Contract with the Government; (b) ONPT was thoroughly reorganized and restructured, modern computerized management tools were introduced putting its technical and business operation on a commercial basis, and its postal and [C services were fully separated; and (c) the law on Posts aid Telecommunications (Law nc,. 24/96) was prepared and enacted in August 1997, thoroughly reforming the sector's institutional framework, terminating the monopolies for the P & T services and opening them to competition and private participation under a new regulatory set- up. The new P & T law was the result of the sectorial studies under the First and the TSR projects and of the government's program initiated in 1994 to gradually privatize the country's public enterprises (paras 7, 9 and 10). 17. The project's achievements and the ways and means of its implementation under the various developmental, technical, organizational, financial and institutional aspects are summarized in paras 18 to 39 below. Relevant detailed information and statistical data are provided in Part II of this report and its Appendices A - Aide-memoire of the Dec. 97 completion mission and B - ONPT's Project Completion Report. Network Expansion and Improvement of Quality of Service 18. Growth Objectives of the Network. The primary sector objective of expanding and modernizing of the network as set-up by ONPT and the government planning authorities was fully met and even somewhat exceeded during the 1992-1997 implementation period (Part II, Table 5(A)). When the TSR project was prepared, the first TC project was still underway and the new loan took over financing of the final tranche (1992-94) of ONPT's (1988-94) program. This program was continued under ONPT's subsequent 1993-97 Performance Contract (CP) agreed with the Government in 1993, consolidating the growth forecast for the whole 1992-97 project implementation period. 19. As a whole, network expansion achievements reached initial targets (Tables 5(A), in Part 1I). Telephone exchange capacity rose over the course of the project from 858,000 lines at the end of 1992 to 1,683,000 lines at the end of 1997, close to the planned objective of 1,700,000 lines. The total number of main lines connected increased from 657,000 at the end of 1992 to 1,375,000 at the end of 1997 (an exchange capacity utilization rate of 82%) compared with the objective under the program contract of 1,560,000 lines, for an implementation rate of 88%. These accomplishments represent a doubling of both the exchange capacity and the number of main working lines during the 6 year project period. Also, between 1994 and 1997, connection of subscribers proceeded at a high annual pace of 40% due to: (a) the replacement of about 90,000 lines of old electro-mechanical exchange equipment with digital installations; and (b) ONPT's strict approach to the recovery of pending arrears and service cut-offs which resulted, in 1996-1997, in a very high number of service cancellations (about 120,000 each year on average), with new applicants being substituted for the previous subscribers. Both occurrences caused important local line network re-distribution and construction works in the concerned areas. This represents a major network growth and improvement performance under the project on the part of ONPT. 20. Digitization of the Network. The construction of new exchanges and the replacement of old ones resulted in a very high digitization rate of the switching installations which was 99.3% at the end of 1997, and favorably compares with networks of similar size in developed countries  6 with higher telephone penetration. This means that subscribers in Morocco now receive detailed billing and have access to enhanced services such as speed calling, wake-up service, call waiting, tracing and recording, and other new value-added services. On the transmission side, digitization of existing coaxial cables and installation of new microwave radio and fiber optical links have brought the digitization rate of the long distance network to 98% in 1997, compared to 89.4% in 1992. At the same time computerized network maintenance, operation and management tools were introduced at all levels of the network, which enhanced the efficiency and productivity of its operation. 21. Rural Telecommunications, Public Telephones and access to Value-added Services. The provision of service in remote unserved areas and public access to the networks were largely expanded under ONPT's program and the project. The objective of providing service to all rural communities was almost 90% fulfilled by end 1997: of the 1,297 rural communities, 1,172 had services of which 81.5% were automated. Work continues and all communities are expected to be automated in 1998. In parallel, the stock of public telephones has been highly expanded and modernized. The operating licenses made available for the resale of telephone and telecopy services in "teleboutiques and telekiosques", greatly attracted private initiative. More than 5,000 resale points were in operation at project completion. The number of public telephones increased from 2,262 in 1992 to 26,649 at the end of 1997. All of these facilities are heavily used. Also, the provision to subscribers of value-added services using ONPT's network, such as access to Internet and voice information, was expanded through authorization agreements with specialized private servers. The number of data users was 4,427 at the end of 1997, compared to less than 1,000 in 1995, the services being delivered by 31 competitive commercial and 52 government agencies. 22. Quality of Service. The quality of services provided by the Moroccan TC network was rather poor and insufficient prior to implementing the two projects. Significant improvements resulted in both quality of service and efficiency of operation from the expansion and modernization of the facilities under the whole program, see table 5(A) in Part II for details on the improvements achieved during the 1992-97 project period. 23. StaffProductivity. ONPT's telecom staff was 11,500 at the end of 1992 and increased to 14,700 at the end of 1997. Meanwhile, staff productivity improved; the number of employees per 1000 connected lines decreased from 17.5 in 1992 to 10.3 in 1997, exceeding the original objective of 12. The above performances are expected to further improve in future operations as shown in Table 6 of Part II. 24. Cost of the Project. As outlined in para. 21 above, the TSR project financed the final tranche 1992-94 of ONPT's 1990-94 investment program of which Phase I was supported by the first project. Continuation of this program was planned, at project start up under ONPT's performance contract for the period 1993-97. With regard to development program cost, it is appropriate to consider the related investments for the entire period 1992-97. At the time the project was appraised, the total investment cost for that period was estimated at $2.07 billion exclusive of VAT for an expansion of 1,076,000 lines, or $1,950 per line. Project implementation actually resulted in a total of 1,085,000 lines for only $1.3 billion exclusive of VAT, or a cost per line of $1,194, which is 40% below the cost assumed in the appraisal. When customs duties are deducted, the average cost is about $1,000 per line, which is comparable to international averages situated between $900 and $1200 over the same period. This reflects both the sharp drop in world prices for telecommunications equipment and the deft way ONPT took  7 maximum advantage of competition, among other things, by appropriately using diversified suppliers and alternative financing, as it was available. 25. Procurement. At the time of project appraisal, it was expected that roughly a hundred contracts would be financed under the loan, including thirty for civil engineering works on the local networks. In the end, the number of contracts financed was 168, including 84 for civil works. This increase was due to the ONPT's decision to reduce the size of the contracts put to tenders for construction of the local networks, in order to encourage participation by small-scale local businesses. Although contracting procedures have improved as a result of the experience acquired from two Bank projects, they continued to suffer delays throughout the project, due to delayed planning of some of the facilities such as the network management systems, and due to the combination of procedures for the Bank's ICB and the public contract award rules and controls that applied to ONPT. 26. Disbursements. The cumulative estimates and actual disbursements from the loan during the 1993-1997 project period are detailed in Part II, Table 4. ONPT used US$ 61.2 million from the original loan amount of US$ 100.0 million. An amount of US$ 11.0 million was canceled in August 1997, at ONPT's request resulting from project cost savings and related adjustments in the composition and financing of its construction program. The disbursement categories of the loan were revised to reflect the usage of funds for the Bank financed items under the program at this stage. A final unutilized amount of US$ 27.8 million was canceled at loan closing, also at ONPT's request, due to lower equipment cost and customs duties reduced from 40% to about 20%, and to ONPT's improved financial situation. No particular difficulties and no delays were encountered in the disbursement process. There were 92 withdrawal transactions in total. The direct payment procedure was largely used to reduce payment delays, for 73 transactions and a total amount of US$ 29.6 million, or about 48% of all paid withdrawals. The special account was replenished 7 times for a total of US$ 29.8 million. The collaboration between the Bank and the ONPT in the procurement/disbursement processes was effective and satisfactory under the project. Sector Institutional Improvement and Strengthening Objectives. 27. Technical Assistance and Telecommunications Management Logistics. The project provided technical assistance (TA) and substantial consultancy services to assist in improving and strengthening ONPT's managerial and institutional capacities and its cooperation with MPT. The studies of the requirements and their applications were mainly in the fields of commercial, marketing plan and business network aspects of TC services, management accounting system, internal auditing, human resources and sectorial strategy planning. The assistance included the development and introduction of related logistics and procedures with ONPT and MPT, as appropriate. A list of the studies and TA from the project is given in Table 7 and further details in Appendices A and B of Part II. The outcome from these activities is summarized below. 28. CommercialAspects. The upgrading of ONPT's commercial operations involved two main sub-projects: (i) four regional subscriber billing and accounting centers using common computerized facilities and software, their coverage gradually extending to the whole country; (ii) the development of a commercial network for telecommunications by introducing a marketing plan and establishing a commercial information system and subscriber commercial agencies for the current and potential users, also providing advisory services to clients in managing and planning their communications needs. The main business office was created in  8 Casablanca in tandem with two branch offices in Rabat and Marrakech supported by some sixty TC commercial agencies being established through out the country. This is a scheme with major impact prospects at a time when demand is close to saturation and new services are being expanded. 29. Accounting, Data Processing and Management Information System. This project has introduced cost accounting system, decentralizing financial accounting, new inventory and procurement procedures and new data processing and information systems for ONPT's two branches of activity. Most computerized facilities were installed and are operational in particular with regard to accounting services. Some software for the data processing of activities such as Human Resources Management, two regional accounting and the postal checking centers are still being tested and will become operational in 1998. 30. Human Resources. The staff training program initiated in the First Project was expanded, to cover all technical and managerial disciplines. The number of trained staff over the 1993-97 project period was double from the number during the first project (about 5,400 versus 2,600). Also, procedures for employment, enhancement of productivity, employee planning, and related HR records and information systems were developed. 31. Strategic Planning. The recognized need for a strategic planning (SP) approach led, with the assistance of consultants, to the creation of a central SP unit for telecommunications within MPT, working closely with the development planning departments of the TC and postal services. The methodology for SP was developed, a team of staff planners was trained and a computerized information system was set-up, in consideration of the upcoming sector reform (para. 37 to 39). Financial Objectives 32. Financial Indicators. ONPT's telecom financial indicators have been satisfactory for the period 1992-97 compared to the appraisal forecasts and those in ONPT's program-contract, as shown in Table 5 (B) of Part II. Throughout the period, the self-financing rate surpassed the covenanted 40%. The rate of return, before taxes, on partially revalued telecom net fixed assets in operation was 26% in 1996 and 30% in 1997, compared to forecasts ranging from 15% to 20% for the period. The debt service coverage, projected at about 2.3, was 2.3 in 1996 and 2.2 in 1997. The current ratio has remained sufficient for the period, between 1.1 and 2.3. The operating ratio (the ratio of operating costs to revenues) was 75% for 1997. The debt-to-equity ratio has been favorable: it was 46/54 at the end of 1997, suggesting that the future corporate operator Itissalat Al-Maghrib (IAM) will start out with a solid financial structure. Billings per subscriber, excluding VAT, decreased from DH 5,805 in 1992 to DH 4,660 in 1997, in current DH. This decline of 20%, which was even more pronounced in constant DH (34%, with an average annual inflation of 4.3%) was to be expected in light of the tariff reductions which took place in 1993 and 1997 and of the substantial growth in subscribers (from 657,000 to 1,375,000, or 210 %) and progress in meeting the demand for connections (only 48,000 applications pending in 1996, and 29,000 in 1997, or less than 2 months volume of new connections), which usually results in an increasing percentage of low-traffic subscribers. 33. Private Subscribers and Government Agencies Receivables. The volume of receivables from private telecommunications customers was DH 1,943 m, or 28.5% of annual billings at the end of 1997, compared with 28% in 1992. This acceptable level is due to ONPT's strict approach to collection and service cut-offs. On the other hand, the volume of receivables from  9 government agencies (MD 660 million at the end of 1997) has been the equivalent of about six to ten months of annual billings each year since 1995. In late 1993, the arrears of the Government had been cleared in accordance with one of the effectiveness conditions of the Loan. The telecom budgets of government agencies have been usually inadequate since then, and ONPT does not have the same leverage to interrupt service to ministries as it has regarding private lines. Repeated warnings of tougher cut-off enforcement have remained ineffective so far. The public sector arrears issue should be settled when ONPT's assets and liabilities will be transferred to IAM, the new corporate telecom operator. 34. External Audits of ONPT's Financial Statements. ONPT has been regularly and timely audited by external auditors as covenanted under the Loan. Prior to 1994 the financial statements could not be certified. However, over several years during the early 1990s, ONPT undertook major efforts to transform its old accounting systems inherited from the Government at inception of the Office, into a modern commercial accounting system. Over time and with the help of several technical assistance contracts financed by this and the previous project (see above) ONPT has been able to upgrade its accounting systems and to address the auditors' concerns. Since 1994, ONPT's statements have been certified with a declining number of qualifications, leaving only minor issues by the end of 1996. 35. Fiscal Levies and Taxes. The contribution of ONPT's TC business to the government budget, in terms of fiscal levies and taxes paid, has increased from 1.55 billion DH (41% of billings) in 1992 to 2.33 billion (35% of billings) in 1997. The percentage has declined because custom duties have been cut in half, more than offsetting the increase in the VAT rate. 36. Economic Rate of Return. As the Bank loan has contributed to the financing of ONPT's overall 1992 - 1997 investment program the project's financial and economic rates of return have been calculated on the whole program. The economic rate of return (ERR) is calculated in Table 9, of Part II. The calculation is in constant 1992 Moroccan Dirham, taking into consideration as costs ONPT's investment 1992-1997 (US$ 1,300 million in current terms) and recurrent operating expenses (other than depreciation, interest expenses and taxes), and as revenues those generated by the additional subscribers connected from mid 1992 to 1997, i.e. 810,000 lines. The resulting rate is 20.6 % which is very favorable for public utilities, though lower than both the financial rate of 29% and the ERR of 36% estimated at appraisal. These were based on actual 1992 tariffs which were already then asserted as possibly too high. In fact, telecom tariffs were restructured twice during the project resulting in significant average reductions. Also, existing demand for new lines at prevailing tariffs has been largely satisfied, and the subscriber base now includes more lines for users with less traffic than in earlier years. 37. The mentioned ERR does not take into account all benefits associated with the use of telecommunications. For most subscribers, the consumer surplus and the willingness to pay for telecommunication services can be assumed to be higher than the present tariffs. Institutional and Management Improvement Objectives 38. Computerization of ONPT's Postal and MPT's Frequency Control Services. Together with the computerization of ONPT's telecommunications branch (para. 29), the project included systems to: (i) computerize the postal money order center and upgrade the systems of the postal checking center; and (ii) strengthen MPT's ability to efficiently manage and control the radio frequency spectrum. These objectives were partially met at loan closing. Installations of new  10 systems for the money order center had been completed, but the software package for the postal checking center had yet to be introduced. Also, equipment for the radio frequency control center had yet to be installed in a building of which construction had been delayed. ONPT decided to finance the remaining works from its own funds, rather than extending the closing date of the loan. They are expected to be completed in 1998. The related amounts, totaling about US$ 12.8 million equivalent, were part of the US$27.8 million of undisbursed funds which were canceled at loan closing. 39. Preparation of Sector Institutional Reform. In depth reform of the sector was one of the objectives of the project. During project preparation, a high-level government commission worked out a Statement of Telecommunications Sectoral Policy in consultation with the Bank. The statement was adopted by government in 1992, at time of project appraisal. Following the path taken worldwide at that time toward restructuring and institutional reform in the TC sector, the revised institutional framework was based on key elements including: (i) the separation of posts and Telecommunications into distinct legal entities; (ii) the setting-up of a regulatory structure outside of ONPT; (iii) the elimination of ONPT's monopoly on value added services, and terminal installations to be rapidly liberalized; and (iv) the corporatization of ONPT (and its successor-enterprises) within the framework of performance contracts. A time bound implementation programme is in a side-letter to the Loan Agreement. At this point in time, the strategy did not yet envisage outright privatization of ONPT. 40. Law No. 24/96 on Posts and Telecommunications. During the project period, Morocco accelerated the process of privatizating public enterprises. TC sector was concerned and the Bank encouraged and supported the new approach. A new Law was prepared for thE P. & T. sector, and the draft document was discussed with Bank staff. Law no. 24/96 on Posts and Telecommunications was adopted by Parliament on June 29, 1997 and promulgated on August 7. This Law is the result of continued consultation between the Bank and Morocco, since 1987 under two projects, regarding the institutional reform of the telecom sector. 41. The Law is based on the key principles of separating regulatory and operational functions in the sector, fully separating Postal and TC activities and corporatizing the operating agencies, terminating their current monopolies over the services and promoting competition and private participation. It creates the National Telecommunications Regulatory Agency (ANRT), issuing regulations, enforcing the regulations, and supervising adherence to licenses. The Law creates Itissalat al-Maghrib (IAM), a corporation which will initially be the main operator of telecommunications services and whose capital structure will be open to private partners, and another public authority, Barid al-Maghrib (BAM), that will initially be the main operator of postal and financial services. Some twenty implementation texts have been or are being prepared. The decrees creating ANRT, IAM and BAM were issued in early 1998 and their governing bodies were appointed. Thorough implementation of the law will be a complex task expected to take place over the next two years (1998-99). Government may seek further Bank assistance to this process. C. Major Factors Affecting the Project Factors Not Generally Subject to Government's Control 42. Technological Progress. The rapid introduction of digital switching and transmission equipment; led to the falling costs of equipment, particularly for large capacity installations  I1 under the project. Also, digital technology provides enhanced and more reliable services and requires less maintenance. State of the art network management facilities were introduced to this effect under the project which has a positive impact on staff productivity. The resulting benefits from these factors with regard to greater expansion at lower investment and operating costs are outlined in paras 23 and 24 above and Table 5 (B), the latter showing a steady decrease of the average operating cost per connected line during the project period, more than 35 % in total from DHs 5,300 in 1992 to DHs 3,484 in 1997. Factors Generally Subject to Government's Control 43. During the project, the Government consistently adopted measures, aiming at making the country more open through macro-economic adjustment and less encumbered by central controls. These were very supportive of the commercialization of ONPT, the reorganization and strengthening of its operation and the introduction of a business management structure. The statement of policy for the TC sector which was adopted in 1994, at the start of the project, was also highly supportive of ONPT's institutional changes and reform. The consideration of further steps for liberalizing the TC sector beyond its opening to competition for terminal installations and provision of value added services, was however somewhat delayed by discussions on the opportunity for private sector participation in this field. The rapidly evolving situation worldwide on this and, in particular, the progresses made toward thorough privatization of the TC sector in all the countries of the European Union (paras 6, 7 and 14), overcame the hesitant approach and law no. 24/96 on Posts and Telecommunication was adopted and promulgated in 1997 (paras 37 to 39). Implementation of the law and pursuit of the reform efforts will require major actions to be undertaken with continued government support in the near future. 44. Among the steps taken by government for macroeconomic adjustment and structural reforms, some measures of fiscal policy were useful and beneficial to ONPT's finances during the project. These include, among others, reduction by half of customs duties, with low minimum rate of 2,5% for most imported goods; reduction of the corporate tax from 40% of income in 1992 to 36% in 1996 and 35% in 1997; and exemption of VAT under simplified procedure for imported capital goods. Factors Generally Subject to ONPT's Control 45. ONPT successfully managed to overcome the difficulties in the complex and intricate tasks it was confronted with, adequately planning and implementing a very large expansion of its network, and, simultaneously, establishing and strengthening its improved organizational structure and managerial set-up as a commercial and business/corporate like operation. This took place within the framework of Performance Contracts (P.C.) with government which proved very effective and useful. Integrated new digital technology was extensively used to modernize and expand the facilities and upgrade to international standards the quality of service and the operational efficiency (para. 20). A productive commercial marketing approach was also introduced in the relationship with the users. All this took place on the basis of the best use of: (i) the experience and lessons from the first Bank financed project; (ii) the technical assistance, studies and training from the first and the current Bank projects; and (iii) the fruitful dialogue, exchange of view and advice, sharing of experience on approaches, methodology and, possible schemes and actions with staff from the Bank and other co-financiers (EIB, ADB, IDB and several bilateral development agencies).  12 46. Some slowness in the procurement process as per Bank guidelines continued to be observed during the project, as under the first, partially caused by the bureaucratic procedures in public contracting applicable to ONPT. This should improve under ONPT's future corporate statute. Largely due to ONPT's dedication and growing capabilities, the results and benefits from the project were highly favorable in particular with regard to the exchange line capacity which in 1997 was double the 1992 capacity, all existing applications for service being virtually satisfied. However, with a teledensity of 5.6 main lines per hundred inhabitants, Morocco is still below the average density of 10 lines per 100 inhabitants in lower middle income countries. ONPT's efforts in rapidly expanding and improving the network and its operation will have to be sustained for several years under its new organization. D. Project Sustainability 47. Project Benefits. The project benefits are significant and higher than expected in several aspects. They include: (i) a dramatic increase in both coverage and quality of telecommunications services and modernization of the installation now operated as an entirely digitalized network; (ii) a substantial improvement of the efficiency of the services through the establishment of effective operation and maintenance systems for the network; (iii) the strengthening of ONPT's institutional capacity and organization in its two main postal and telecom activities, fully separating the organization of each branch and establishing their operation on efficient commercial and business like bases; and (iv) the preparation of an in- depth sector reform and the adoption of a new sectoral Law to implement it. The objectives and scope of the Law are detailed in paras 40 and 41. At loan closing, the regulatory agency for telecoms, ANRT, and the two initial main operators, - IAM the telecom corporation to be opened later to private partners, and BAM, a public authority for postal services - had been created. This is the most significant long-term economic and social benefit from this and the previous project. 48. Project Sustainability. All the physical, organizational, financial, and institutional objectives of the project have been achieved (paras 16 to 41). The capacity provided by the 1992-97 investment program and cofinanced by this loan will continue to be fully utilized and to support the expanding economy. The project results enhance the capacity of the newly created operators, IAM and BAM, to sustain operation and development of the basic telecommunications network and postal services in Morocco, in the regulatory competitive environment introduced by the new sectoral Law. Project results are sustainable also because: (i) an advanced technology (digitalization) is used to cope with sustained demand growth; (ii) the new regulatory framework enhances sector performance and development; and (iii) the telecom operation has a robust financial viability. E. Bank Performance 49. Overall Bank Performance has been highly satisfactory under the Project. The long bank participation in the Moroccan TC sector and its associated postal branch, - from the first through the TSR project loans (1987-1997) also taking into account the long preparatory phase of the first project initiated in 1982 with the TC sector study, - has been instrumental to the sector's significant development and institutional reform. 50. With regard to physical development, the two projects were a continuous operation supporting ONPT's investment program from 1988 to 1997. The TSR project took over in 1993 some remaining works from the first project which covered Phase 1 (1988-92) of ONPT's initial  13 program. During project preparation enough resources including qualified staff in appropriate number was made available to discuss the intricated issued related to combined sector development and reform. The development took place with the assistance of other important co- lenders. Given the availability of external financing to ONPT, the amounts of the two bank loans were tailored to finance project components less attractive for bilateral and commercial financing. For the whole 1988-97 ten year period of the two projects, the Bank's actual contribution represents US$ 177.2 million of the US$ 2.22 billion investment cost, or only 8% of the overall investment outlay compared to about 35% from other external sources. This indicates the favorable trusting and catalytic effect of Bank lending for development, which also stimulates the actions to be taken in the field of institutional strengthening and restructuring. 51. With regard to institutional development, the GOM adopted, at the Bank's suggestion and insistence, a Statement for Sector Policy outlining the orientations and the related transitional steps for further pursuing the institutional reform process (para. 37). The TSR project included the required technical assistance and a plan of implementation, which had been agreed upon during negotiations. The Bank carefully supervised this component and provided advice, recommendations and support. At project completion, the reform objectives had been commendably met, though with some delay, through the adoption and enacting in August 1997 of Law 24/96. 52. Regular supervision took place twice a year, on average, during the project implementation period to discuss and advise on the issues to be resolved, in particular with regard to procurement, consultancy services and progress on institutional reform. As shown in Table 13 of Part II, twelve missions went to Morocco from project preparation in May 1991 to its final supervision/completion, review in 1997, spending a total of 120 days in the field. About one third of the missions were combined with supervision of the First Project. In the evaluation of their experience from the project, the borrower and MPT expressed their appreciation of the effective cooperation and support from the Bank to the development and improvement of the P & T sector in Morocco (Appendix B, to Part II). F. Borrower's Performance 53. The borrower's performance was highly satisfactory, notwithstanding the above- mentioned implementation delays regarding certain complex components. MPT's and ONPT's relationship with the Bank has been good and fruitful throughout the preparation and implementation of the project. Drawing upon the lessons of the first project, ONPT and MPT managed the rapid expansion of the sector, simultaneously initiating its in-depth reform. Advice and recommendations from Bank staff and from the outside experts involved were duly considered and taken into account. 54. ONPT was able to take maximum advantage of the current progress and competition in the international market of TC equipment. With regard to the preparation of the law to reform the P & T public services, some halts were observed during the project. This was related to complexity of the financial, legal, administrative, economic and public service impacts of such legislation which had to be prepared in close liaison and cooperation with several other government departments. 55. Compliance with Loan and Guarantee Agreements Covenants. The status of compliance to legal covenants is detailed in Table 10 of Part II. ONPT (the Borrower) is in compliance with  14 all loan covenants and the government (the Guarantor) is in compliance with all guarantee agreement covenants. G. Assessment of Outcome 56. The project outcome is highly satisfactory. The project achieved all of its physical, operational, and institutional improvement objectives. A decisive step was taken toward sector restructuring with the enactment, in August 1997, of law 24/96 on Posts and Telecommunications. Implementation of the law began at project completion. - Regarding the financial area, a management accounting and data processing master plan, and a new system for customer base management improving billing and collection and relationships with subscribers was implemented. Financial management and results were satisfactory over the project period (paras 28, 29 and 32). The estimated financial rate of return from the project of 21% is very favorable, showing the high level of resources the sector can generate and also reflecting the importance of telecommunications in the country's economic development (paras 35, 46 and 47). - A summary of assessments is given in Table I of Part II. H. Future Operation 57. The key indicators on future operation of the provided infrastructure for its development from 1998 to 2002, are presented in Table 6 of Part II. The data are ICR estimates on the basis of ONPT's forecasts for the next five years period. Growth rate of basic telephone facilities are assumed to be sustained at about 8 % per year, slightly less than during recent years but with the view to respond to economic growth and to satisfy an additional demand that would result from proposed further tariff adjustments. By 2002, Morocco's teledensity per hundred inhabitants would be about 9 % close to the average level of lower middle income countries. Annual investments of the order of US$ 200 million would be maintained during the next years. Network usage under adjusted tariffs, quality and efficiency of service would be maintained resulting in continued good financial performance. At this early stage of establishment of IAM, the new main operator successor to ONPT, no prospective "Contract de Programme" or business plan are yet available for the company. However, the project's satisfactory outcome and the indicators outlined above are good prospects for its beneficial future operation. 58. Outlook: Law 24/96 on Posts and Telecommunications of August 1997 will further deepen sector reform. Implementation of the new sectorial set-up including its liberalization and privatization, will be a complex and delicate task. Substantial external assistance will be needed. The Government and the two new corporations may seek further Bank assistance for implementation of the new sector framework, given the Bank's experience in this field. I. Key Lessons Learned 59. The key lessons learned from the project are as follows: (a) The Bank's commitment and support to a sector over an extended period of time and through several operations is usually needed to achieve major progress in sector performance and restructuring. In the case of the Moroccan posts and telecommunications sector, most of the strategies - transforming the public telecom and postal authority into two independent commercial entities, i.e. the telecom corporation IAM, later to open to private participation, and BAM, a public authority for the postal and financial services, and introducing a new regulation  15 opening the telecom sector to private participation and competition - were prepared under the first project and further elaborated under the second, with the needed legislative and Government decisions coming at the end of the second project, after some fifteen years of Bank assistance. (b) Telecom sectors are presently among the most dynamic growth industries and therefore important factors of economic development. In Morocco, demand for telecom services has been increasing continuously, in line with economic expansion and stimulated by new technologies. Addressing this demand, ONPT's telecom operations have achieved high growth, substantial economic returns and robust financial performance, and made large contributions to the Government's finances. Also, while improving productivity, ONPT was able to protect and even increase employment. (c) Dedication and competence of the borrower's management team, and the Government's commitment to the agreed development objectives are fundamental for a project's success. The TSR Project has been successful due to the excellent performance of ONPT's management and staff, and to GOM's determination to modernize the P & T sector, which - in consultation with the Bank - has eventually resulted in a new legal framework for a commercialized operation open to private competition. (d) In the telecom sector, technology progress is one of the most important factors driving modernization and expansion. Results of the TSR Project were greatly enhanced by taking optimal advantage of the new digital technology, introducing state of the art systems for network operation and maintenance, and benefitting from decreasing costs of equipment. (e) A lesson in the financial area is that, in order to control Government arrears, a performance indicator in a side letter to the Loan Agreement may not be a strong enough tool. Government receivables have again increased to about 10 months of annual billings, since compensation of the end 1992 arrears in 1993. Such arrears are not an isolated case in the public utilities sector. Although difficult to negotiate, a covenant in the Guarantee Agreement with GOM might have been more successful in keeping these arrears at an acceptable level.  16 IMPLEMENTATION COMPLETION REPORT MOROCCO OFFICE NATIONAL DES POSTES ET TELECOMMUNICATIONS (ONPI) TELECOMMUNICATIONS SECTOR RESTRUCTURING PROJECT (LOAN NO. 3557-MOR) Part I: Statistical Tables  17 Table 1: Summary of Assessments A. Achievement of Objectives Substantial Partial Negligible Not applicable Macro policies (/) Sector policies (/) Financial objectives (/) Institutional development (/) Physical objectives (/) Poverty reduction (/) Gender issues (/) Other social objectives (/) Environmental objectives (v) Public sector management (/) Private sector development (i) Other (specify) (i) B. Project Sustainability Likely Unlikely Uncertain (/) H:ighly Satisfactory Satisfactory Deficient C. Bank Performance Identification (i) Preparation assistance (if) Appraisal (if) Supervision (a/) D. Borrower Performance Preparation (i) Implementation (i) Covenant compliance (.) Operation (if applicable) (if E. Assessment of Outcome (if  18 Table 2: Related Bank Loans Title Purpose Year of Loan Amount Status Approval (US$M) Loan 2798 - MOR To expand, improve and 1987 125 Was highly satisfactory. First Telecom Project modernize Morocco's Completed in Dec, 1994, the telecommunications original project completion/loan infrastructure, with primary closing date. US$ 116 million of emphasis on institutional the loan was disbursed, an development to strengthen amount of US$ 9 million having implementation and sector been canceled in 1988 following operation capacity a joint Bank/ONPT decision on the financing by ONPT (not by the loan) of a large contract for local cables. The ICR was distributed on June 23, 1995 (Report No. 14684). Table 3: Project Timetable Steps in Project Cycle Date Planned Date Actual/ I_________________________________ Latest Estimate Identification/Preparation a) FY 91-92 FY 91-92 Executive Project Summary February 1992 February 1992 Appraisal/Post-Appraisal March 1992 March 9-20/Oct.25-31, 1992 Negotiations November 1992 November 19-25, 1992 Board presentation/approval February 2, 1993 February 2, 1993 Signing April 29, 1993 April 29, 1993 Effectiveness July 29, 1993 October 20, 1993 b/ Project completion December 1997 December 1997 Loan closing December 31, 1997 December 31, 1997 a/ Project identification and preparation were combined during FY 91 and 92 with supervision of the ongoing First Telecommunications Project (Loan 2798-MOR). b/ Extension of the initial date of effectiveness was required to enable fulfillment of the Loan Agreement condition in Section 6.01, namely, that the Guarantor shall have paid to the Borrower the balance of the 1992 outstanding telecommunications bills.  19 Table 4: Loan Disbursements: Cumulative Estimated and Actual (US$ millions) FY 93 FY94 FY95 FY96 FY97 FY98 Appraisal Estimate 3.0 34.0 62.0 82.0 94.0 100.0 Revised a) 3.0 34.0 62.0 82.0 94.0 89.0 Actual b) 0.0 7.0 14.5 36.0 57.4 61.2 Actual as % of Revised 0.0 % 20.6% 23.4% 43.9% 61.1% 68.8% Estimate Date of Last Disbursement January 8, 1998 An amount of US$ 11.0 million was canceled from the initial loan amount of US$ 100 million, in August 1997, at Borrower's request resulting from project cost savings. At loan account closing, in February 1998, an undisbursed balance of US $ 27.8 million was also cauceled at ONPT's request, due to substantial cost savings at project completion and ONPT having decided to finance some remaining project items from its own funding resources.  Table 5 (A): Key Indicators for Project Implementation, Technical Performance r______________ _ 1992 1993 1994 1995 1996 1997 WB Actual % WB Actual % WB Actual % CP Actual % CP Acrual % CP Actual % TECHNICAL INDICATORS Est. Est. Est. Telephonee "cange hpacity(fixed d mobile)(000) 920 858 93 1019 970 95 1086 1167 107 1310 1365 104 1520 1604 106 1700 1683 99 of which fixed 838 950 1135 1317 1504 1563 mobile 20 20 32 48 100 120 No. of telephone subscrbers (fixed and mobile((000) 640 657 103 780 827 106 930 1007 109 1200 1158 97 1380 1251 91 1560 1375 88 Exchangecapacity utilization ate(%) 70 76 92 77 87 89 85 89 96 92 88 105 91 80 114 92 81.6 89 No. of automatic networks 390 285 73 500 433 87 600 665 III 700 966 138 800 1210 ISI 900 1590 177 No. of public telephones 2660 2662 100 4000 4520 113 5000 7916 158 6000 15960 266 8000 21867 273 10000 26649 266 (ONPT and privately operated) Average connection time (months) 12 8.9 135 l l 6.50 169 10 5.60 179 8 5.1 157 6.0 2.5 240 5.0 1.8 278 Outstanding applications 13500 10800 10400 93000 48000 29000 Outstanding applicatios as % 20 21 95 19 13 146 14 10 140 12 8 150 10 4 250 5 2 250 Fault per annum per hundred lines 83 84.0 99 68.0 67.5 lot 50.0 63.0 79 70.0 49.6 141 60.0 54.5 Ito 50.0 42.0 119 TR2(') 78 72.9 93 79.0 83.0 105 80.0 82.9 104 82.0 89.4 109 84.0 87.3 104 86.0 88.3 103 Tf3 (') 97 96.4 99 98.0 99.0 101 99.0 99.8 101 100 99.8 100 100 99.4 99 100 96.6 97 Installed capacity at telex exchanges (lines) 12000 10971 91 12000 14397 120 12000 10891 91 11870 10471 88 11870 10471 88 11870 10471 88 No. of telex subscribers 9100 8637 95 9300 7676 83 9400 7685 72 8900 5913 66 8900 4849 54 8900 4000 45 No. of employes per 1000 lines IS 17.5 86 14 14.3 92 13 13.3 98 13 12.6 103 13 11.8 110 12 10.3 116 Average call completion rates: Local calls 53 53 100 56 57 102 62 58 94 65 60 92 68 61 90 70 62 89 Long distance calls 40 38 95 46 44 96 52 49 94 53 50 94 55 54 98 57 55 96 Intemational calls (outgoing) 32 32 100 40 40 100 43 46 107 45 46 102 46 46 100 47 49 104 (*) TR: Faultrepairtime, in days. As of August 1995, TR7 was replaced by TR5 and as of January 1997 TR5 was replaced by TR3 Est. WB = World Bank estimate CP = Program Contract  Table 5 (B): Key Indicators for Project Implementation, Financial Performance 1992 1993 1994 1995 1996 1997 Indicators Loan Loan Loan Loan Loan Loan Indicators________________________ Agreement Achieved Agreement Achieved Agreement Achieved Agreement Achieved Agreement Achieved Agreement Achieved 1. Self-financing rate (%) 37 57 40 67 47 48 40 52 40 97 40 132 2. Debt service coverage 2.3 2.8 2.6 2.2 2.4 2.2 2.4 2.1 2.3 2.3 2.0 2.2 3. Rate of return (%/o, before taxes) 25 22.2 27 22.1 26 21.7 23 26.3 20 25.9 18 30.4 4 Operating ratio (%) 65 60 63 66 64 70 67 64 70 65 73 75 5. Debt-to-equity ratio (%) 51 40 54 46 58 47 58 54 60 50 61 46 6. Current ratio 2.0 2.4 1.5 2.1 1.6 2.3 1.6 1.1 1.7 1.4 1.7 1.2 7. Private accounts receivable (in 1084 1654 1506 1400 1666 1943 millions of DH) 8. Credit to private customers as % of 33 28 25 37 25 32 25 22 25 27 25 28.5 billings 9. Government accounts receivable 587.0 84.0 172.0 499.7 391.0 659 (in millions of DH) 10. Credit to public agencies as % of 42 81 33 12 25 21 25 64 25 51 25 83.3 N billings 11. Total accounts receivable (DHm) 1671 1738 1678 1900 2057 2602 12. Average revenues/ DEL 5804 5625 5028 4864 4846 4660 13. Operating costs / DEL 5303 4574 4880 4180 4088 3484 14. Investments (DHm) 2415 2201 3019 1614 3601 2465 3516 2534 3727 1624 3951 1362 of which IBRD (DHm) 387 387 308 180 236 188 257 146 184 168 110 165 PRODUCTIVITY: 15. Number of workers per 1,000 lines 19.5 17.5 16.8 15.3 14.9 13.3 13.6 12.6 12.7 11.8 12.0 10.3  Table 6: Key Indicators for Project Operation, Technical and Financial Performance 1998 1999 2000 2001 2002 INDICATORS Estimated Estimated Estimated Estimated Estimated A: Technical Performance Telephone exchange capacity (lines) x(1000) 1.740 1.891 2.090 2.240 2.390 Main telephone lines connected (LP) x (1000) 1.548 1.698 1852 2002 2142 Mobile subscribers x (1000) 118 158 200 268 328 Maintenance objectives: Faults reported per year per 100 DEL 31 28 24 20 17 % of faults cleared in 48 hours 98 99 100 100 100 % of faults cleared in 3 days 100 100 100 100 100 Average call completion rate at peak hours Local calls 65 66 68 68 70 Long-distance calls 55 56 59 59 60 International calls 50 50 54 54 56 B: Financial Performance: 1. Self-financing ratio (%) 83 91 79 125 2. Debt service coverage 2,6 2,8 3,3 4,7 3. Rate of return (%) 22,3 25,66 24,6 24,6 4. Operating ratio (%) 68 63 63 63 5. Debt-to-equity ratio (%) 44 38 31 21 6. Current ratio 2,4 1,18 1,19 1,23  Table 7: Studies Included in the Project 1: Contract No. 211-8-1-235 / Coopers & Lybrand (France) STUDY GOAL AS DEFINED AT APPRAISAL STATE OF PROGRESS IMPACT OF STUDY Management Accounting System - Operational introduction of a system Project in final phase n DECENTRALIZED FINANCIAL ACCOutNTiNG 1996 for decentralized financial accounting . Provisional separation of balance sheet by activity, IAM/BAM at 31/12/1995 and cost accounting Conducted needs convergence study re GL software * Developed functional and technical parameters -Operational introduction of new Project began October 2, 1995. * Trained users in tol aid proteurate procurement/ inventory procedures Expected completion by mid-1998. Production Deployed in DRT and INPT. It. INTEGRATED ACCOUTNTING 1997 . Defined crost accounting model using ABC Activity Based Costing * Established target functional architecture for production costs, profit centers and services * Drafted operating procedures and modes * Production and operation at pilot site (Rahat DRT, mobile and international) - Start-up June 16 1997 - Received July 25 1997 GTraining in module and procedures for DRT final users * General deployment at other DRT. August 25 1997 III. SPECIFIC OPERATIONS I. FIXED ASSETS * Labeling, numbering and valuation of fixed assets * Introduced ABEL IMMO fixed asset management software 2 SUPPLIER ACCOUNTS * Defined functional needs and targeted functional architecture * Convergence study and prototype preparation T Training on module and procedures for DRT final users * General deployment at DRTs, August 25 1997 IV PURCIIASING/INVENTORIES 1. PS EXPERT MODULES- PURCHASING * Defined functional needs * Prepared prototype and tested test sets nPrepared procedures and user manual * Trained users Deployed as of Augustm25 1997 2 IN EXPERT MODULE - INVENTORIES * Defined functional needs * Prepared prototype and tested test sets Prepared procedures and user manual * Deployed us of Sept 15 1997 * Prepared guide to IF statements V INFORMATics * Installed extenision of IBM imachine * Installed integrated DBS software in test environment (GL, AP, PS, IN. FC, IE) * Connected various sites via X.25 with centr-al site * Technical training * Installed network microcomputers to access Expert range (GL., AP, PS, IN, IE) using 3270 emulation  2: Contract No. 211-1-675 ISOGROUP (Canada) STUDY GOAL AS DEFINED AT APPRAISAL STATE OF PROGRESS IMPACT OF STl UDY Introduce strategic planning - Create and develop a strategic planning Project implemented 100%. - Creation of a strategic planning unit for telecommunications within environment in ONPT: unit. Starting date: April 1996 the Central Directorate for Strategy and Development and several Telecommunications Branch - Technical assistance to develop a Completion: October 1997 strategic planning committees, including: computerized strategic planning system * description of duties for all positions in this central unit * description of interface with strategic planing unit and various operational and/or logistics planning groups within ONPT - Develop tools and methodologies for strategic planning. - Set up information system as an aid to strategic decision making. - Developed an implementation program for ONPT reform. 3: Contract No. 211-1-1446/ Coopers & Lybrand (France) STUDY GOAL AS DEFINED IN APPRAISAL STATE OF PROGRESS IMPACT OF STUDY Assistance in introducing and I. Definition (diagnosis, audit chart, Project underway - Diagnosis of work performed by Audit Division and risk analysis developing internal auditing organizational evolution) Starting date: June 1997 - Preparation of an audit chart within ONPT 2. Annual program and mission Expected completion in 1998 - Training waiver (memo for Intemal Audit) organization - Training for auditors in conduct of missions - 3. Training modules 4. Mission preparation and briefing 5. Annual activities report 4: Contract No. 211-1-15 / SOFRECOM (France) STUDY GOAL AS DEFINED IN APPRAISAL STATE OF PROGRESS IMPACT OF STUDY Introduce marketing plan and - Improve the business network Project completed 100% - Opening of first Business Office at Casablanca April 1, 1996 business network - Prepare a marketing plan - Support to Multi-market Office at Marrakech-Menara, opened - Business information system Start up: September 5 1995 October 30, 1995 - Design and preparation of a performance chart for business offices Duration: 6 months, completed in March - Preparation of an operational marketing plan using product fact 1996 sheets, with a single document covering all ONPT telecom services - Design and prepare 10 business training modules.  5: Contract No. 211-1-484 / Coopers & Lybrand and SOFRECOM STUDY GOAL AS DEFINED IN APPRAISAL STATE OF PROGRESS IMPACT OF STUDY Human resources management - Set up new procedures for human Project implemented 100% IN 1995-96 Employment management and organization: system resource management J Iob description method adopted * Census sheet prepared and validated * lob catalogue prepared with over 100 job descriptions covering nearly all CDT activities. * Study and organization of employment structure of management unit * Reliable information system and documentation on employment organization and management Employee planning and management: * RH2 statement prepared * Mobility system examined * Proposal for an employment monitoring office Identification of sensitive jobs or job groups * Preparation of age profiles * Outline of multi-year telecommunications development program Information system and HR performance chart * Specifications drawn up for purchase of a turnkey integrated HR management system . Preparation of a computerized performance chart for DRH . Working groups set up for each information system functionality * Information day organized for suppliers, and others for - study of the "hiring" functionality - analysis of existing HR management, approach and tools 6: Contract No. 211-1-254 / DETECON STUDY GOAL AS DEFINED IN APPRAISAL STATE OF PROGRESS IMPACT OF STUDY German consultine firm: Quality Improvement Plan (QIP) aimed Implemented 100%, in 1996-97 Implementation ofthe Quality Improvement Plan has had the following impacts 1. INTRODUCTION OF QIP DETECON -Deutsche Telepost at defining an overall strategy for - Recommendations have been classed according to their timing, Consulting GmbH enhancing the quality of the A coordinator and a central group have been appointed Oualitv Improvement Plan telecommunications network The units concerned by the study have been identified, as to *Implementation modalities Team composition Actions to be performed Planning of meetings 11 IMMEDIATE ACTIONS a) Set up a quality control unit within CPECT, independent of all maintenance and operations units b) Prepare a refresher training plan in switching,, transmission and local network areas. c) Rehabilitate the network- DRT are to prepare a rehabilitation program d) Awareness campaign for subscribers about internal facilities, to reduce user-caused disruptions. e) Awareness campaign among CPECT directors about need for reliable data for indicators f) Prepare statistics on causes and locations of faults in the transmission systems. III ACTIONS REQUIRING STUDIES, RESOURCES, DECISIONS a) Restructuring the Operations Directorate. - Connect switching support centers to the DAL -Connect the Switching Supply Center to the DAL - ''ransfer operational tusks to the ORT b) Restructuring the DRTs. - Create technical capabilities in the DRTs for the three technical services (Switching, transmission and Local Nerworks) and a Business Service - Connect the operating centers to these services c) Create local network maintenance centers in the DRTs d) Introduce a management system for the telecommunications network. e) Provide maintenance teams with mobile communications equipment f) Prepare a transmission plan g) Introduce an operating procedures management system h) Equip subscriber lines with passive test devices i) Prepare job descriptions and working procedures j) Update indicators and redefine fatilt causes and locations k) Create Principal LGD Centers (See attacb_ed is ote)  Table 8 (A): Summary of Project Costs 1992-1997 in US$ millions Components SAR and Program Contract Estimate ( Actual costs/recent estimates (1,089,000 lines) (Project for 1,076,000 lines) Local costs For. Ex. Costs Total Local costs For. Ex. Costs Total 1. Switching 286,7 461,4 748,1 135,8 221,5 357,3 2. Long distance transmissions 199,8 332,3 532,1 77,2 126,0 203,2 3. Local networks 234,6 289,3 523,9 209,8 246,2 456,0 4. Rural telecommunications 68,5 121,3 189,8 19,7 59,1 78,8 5. Technical assistance, training and studies 3,1 11,1 14,2 5,1 7,9 13,0 6. Data processing equipment 11,2 8,4 19,6 30,3 0,0 30,3 7. Miscellaneous 66,4 0,0 66,4 16,1 145,2 161,4 8. Technical assistance and control center 1,3 1,6 2,9 0,0 0,0 0,0 Total Base Cost (excluding taxes) 871,6 1.225,4 2.097,0 494,0 806,0 1.300,0 (*) Cumulative SAR (487,000 new exchange lines) and ONPT's Program Contract (589,000 new lines) estimates for the 1992-94 and 1995-97 time slices, respectively csN  Table 8 (B): Project Financing 1992-1997 Project Period (in US $ millions, excl. taxes) Sources SAR Estimate and Program Contract ( CP) Estimates (*) Actual costs/Financing (1,089,000) (1,076,000 Lines) Local costs For. Ex. Costs Total Local costs For. Ex. Costs Total (1).Appraisal (1992-94, for 487 000 lines)= IBRD 54.4 45.6 100.0 27.0 34.2 61.2 Commercial credits 154.7 154.7 25.9 146.6 172.5 Official Credits 113.6 113.6 8.5 47.9 56.4 EIB 80.0 80.0 36.1 49.8 85.9 IDB 12.7 12.7 5.3 7.3 12.6 AfDB 11.0 11.0 7.7 10.7 18.4 Local credits 74.1 - 74.1 82.6 0 82.6 Existing loans, 162.1 162.1 66.1 84.2 150.3 (of which, First WB loan) (74.8) (74.8) Borrowing (1) 128.5 579.7 708.2 ONPT (1) 495.5 - 495.5 Sub-Total (1) 624.0 579.7 1.203.7 (2) PC Estimate (1995-97, for 589,000 lines) Borrowings (2.) 81.0 645.7 726.7 ................. .ON PT (2.) 166.6 - 166.6 ................. .Sub-Total (2) 247.6 645.7 893.3 Total Estimates/versus actual sources Borrowings 209.5 1.225.4 1.434.9 259.2 380.8 639.9 ONPT 662.1 662.1 234.8 425.7 660.5 TOTAL 871.6 1,225.4 2.097.0 494.0 806.5 1300.4 (*) SAR:: World Bank Staff Appraisal Report; CP: ONPT's Program Contract (1993-97 time slice)  28 Table 9: Economic Costs and Benefits This table identifies the major costs and benefits of ONPT's 1992 - 1997 investment program and re-estimates the internal rate-of-return. F Years No .of addit. No of addit. Investment Operating Increm. Net Revenue Lines Lines Cost Cost Revenue Stream cumul. DH m DH m DH m DH m 1992 80,000 80,000 2,201 223 464 -1,960 1993 170,000 250,000 1,535 572 1,337 -769 1994 180,000 430,000 2,229 998 1,955 -1,272 1995 151,000 581,000 2,160 1,088 2,408 -840 1996 93,000 674,000 1,344 1,199 2,703 160 1997 136,000 810,000 1,108 1,194 3,167 864 1998 810,000 1,194 3,167 1,973 1999 810,000 1,194 3,167 1,973 2000 810,000 1,194 3,167 1,973 2001 810,000 1,194 3,167 1,973 2002 810,000 1,194 3,167 1,973 2003 810,000 1,194 3,167 1,973 2004 810,000 1,194 3,167 1,973 2005 810,000 1,194 3,167 1,973 2006 810,000 1,194 3,167 1,973 2007 810,000 1,194 3,167 1,973 2008 810,000 1,194 3,167 1,973 2009 810,000 1,194 3,167 1,973 2010 810,000 1,194 3,167 1,973 2011 810,000 1,194 3,167 1,973 2012 810,000 1,194 3,167 1,973 Total 810,000 10,576 IRR: 20.6%  Table 10: Status of Legal Covenants COUNTRY: MOROCCO PROJECT CODE: MAPA5438 PROJECT NAME: TELECOMMUNICATIONS SECTOR RESTRUCURING Overall Project Rating: S Original Revised Agreement Section Covenant Status fulfillment fulfillment Description of Comments class date date covenant Agreement: ONPT Loan Number: IBRD - 35570 Text reference 4.02(c) 05 C 06/30/94 Furnish to the Bank a report on the Complied with throughout the achievement of operational and financial project period. targets. Text reference 4.07(a) 02 C 12/31/93 ONPT will achieve net internal cash Complied with throughout the generation of at least 40%, and present project period. such a forecast for the following fiscal year. Text reference 4.07(b) 02 C 06/30/95 Qualified external auditors acceptable to Complied with throughout the the Bank will audit ONPT. Audit reports project period. will be sent to Bank within 6 months after end of FY. Status: Covenant Class: C - Complied with I - Account/audit CD - Compliance after Delay 2 - Financial performance/generate revenuefrom beneficiaries NC -Not complied with 3 - Flow and utilization of Project funds SOON - Compliance Expected in Reasonably Short Time 4 - Counterpart funding CP - Complied with Partially 5 - Management aspects of the Project or of its executing agency NYD - Not Yet Due 6 - Environmental covenants 7 - Involuntary resettlement 8 - Monitoring, review and reporting 10- Implementation 11- Sectoral or cross-sectoral budgetary or other resource allocation 12- Sectoral or Cross -sectoral regulatory/insitutional action 13- other  30 Table 11: Compliance with Operational Manual Statements No significant deviation from applicable Bank Operational Manual Statements (OD or OP/BP) was observed under the project. Temporary issues, e.g. regarding procurement procedures, were adequately corrected during supervision. Statement number and title TDescribe and comment on lack of compliance Not Applicable. Table 12: Bank Resources: Staff Inputs Stage of Planned Actual project cycle l Weeks US$ a/ Weeks b/ US$ c/ Through appraisal 25 74,000 25 94,750 Appraisal-Board 25 74,000 27 102,330 Board effectiveness 10 29,500 10 37,900 Supervision /d 140 414,500 136 515,440 Completion 30 88,800 30 113,700 TOTAL 230 680,800 228 864,120 a/ Estimated at FY92 (appraisal time) average staff-week cost of US$ 2,960 (including field costs). b/ Actual at project completion/loan closing, end of December 1997, on the basis of available project supervision forms 590. c/ At FY 98 (project completion time) average staff-week cost of US$ 3,790 (including field costs). d/ During FYs 93 to 95, supervision of the TSR project also included supervision of the First Telecommunications Project (Ln.2798-MOR).  Table 13: Bank Resources: Missions Performance Rating /b Month/ No. of Days Specialized Implementation/ Development Stage of Project Cycle Year Persons in Staff Skills Overall Status Impact Types of Problems Field Represented /a Through Anpraisal - Identification/c 1/91 1 5 Mngt . - Sector policy/overall organization separation of P & T activities. - Preparation I / 5/91 3 10 Eng., Fin. A. Econ. - Investment program scheduling and - Preparation, Pre-appraisal/_ 11/91 3 10 Eng., Fin. A. financing. - Appraisal 1/_ 3/92 4 12 Eng., Fin. A., Proct., Mngt Appraisal through Board Approval - Appraisal Update 10/92 2 5 Eng. Mngt. Sector reform, TA for mngt /operations improvement. - Negotiations 11/19-25/92 - - Procurement procedures, Govemment arrears. - Board approval 02/02/93 - Loan closing 04/29/93 - Delay in fulfilling effectiveness condition on - Loan effectiveness 10/20/93 - - govemment arrears. Supervision Completion Supervision I (project start-up) Le 5/93 2 12 Eng., Fin. A. 2 - Procurement schedule ,TA start up, Adjustment of investment financing plan. - Supervision 2 /_c 5/94 2 12 Eng., Fin. A. S/d S/d - Supervision 3 /IS 10/94 3 10 Eng., Fin. A. S/d S/d - Satisfactory completion of the first project under loan 2798-MOR. - Supervision 4 6/95 2 10 Eng., Mngt. S S - Progress in sector reform and restructuring. - Supervision 5 4/96 4 8 Eng., Fin. A, Mngt.. and TM S S S low progress in procurement. Reallocation of loan amount within categories. - Supervision 6 11/96 3 6 Eng., Fin. A., Mngt. S S - Need to finalize new telecoms law. - Supervision 7 6/97 3 6 Eng., Fin. A. and TM S S - Cancellation of $ 11 million due to cost savings in investment program. - Supervision 8 /Completion 12/97 3 10 Eng., Fin. A, Eco S S - Project completed, satisfactory. Telecoms law promulgated in 8/97. Additional cost savings and adjustments in some program items and financing led to further cancellation of undisbursed amount of US$ 28.2 million. /a Abbreviations: Eng.: Engineer; Fin.A., Financial Analyst; Econ. Economist; Mngt./Proct, Management/Procurement Specialist; TM-Task Manager; TA: Technical Assistance /b Keys to overall performance rating: (before FY 94) = I - problem free; 2 - moderate; 3 - major problems: Implementation/development impact status: (from FY94 on) = HS - highly satisfactory; S = satisfactory; U = unsatisfactory; HU = highly /c Combined missions for supervision of the first project (Loan 2798-MOR implemented 6/87 to 12/94) and supervision of the TSR project. /d New project performance rating is introduced (revised Form 590) see /b above  32 APPENDIX A SPN/ICR MISSION AIDE MEMOIRE  33 FINAL SUPERVISION/COMPLETION MISSION (From December 11 to 18, 1997) AIDE-MEMOIRE The Project Supervision Mission for the posts and telecommunications restructuring project (loan No. 3557-MOR), composed of Messrs. Svetoslav Tintchev (mission leader), Marcel Scoffier (telecommunications engineer) and Jean Boutan (financial analyst) visited Rabat between December 11 and 18, 1997. Its objective was to finalize the last phase of project execution with the Ministry of Telecommunications and the National Office of Posts and Telecommunications (ONPT) before the closing date of December 31, 1997, and to gather the necessary information to write the implementation completion report. The mission met with the Minister of Telecommunications, and with officials of the Ministry and of the ONPT. Mr. Emmanuel Forestier, Manager of IENTL, took part in the wrap-up meeting for the mission, which was held with the Ministry of P&T on December 18, 1997. The mission is grateful to all those with whom it met, for their kind welcome and for the valuable assistance they provided. The recommendations presented by the mission in this memorandum are subject to confirmation at Bank headquarters, after the mission's return to Washington. Project implementation The mission found that implementation of the project has been quite satisfactory, and that its physical, logistical, financial and institutional objectives have for the most part been met, as explained below. The two sides recognized the need for continued close cooperation between the Moroccan executing authorities and the Bank to ensure the project's success. The mission is grateful to the ONPT for making available, as agreed, the first draft of its contribution to the project implementation completion report, which was of great assistance in the performance of the mission's task. Three documents of particular relevance to this completion report are found in the annex: they cover the major technical and financial performance indicators, the various stages of the telecommunications sector reform, and the list of documents provided to the mission. (Annexes 1, 2, 3). In addition to the $11 million that the ONPT canceled from the $100 million loan, on August 15, 1997, by agreement with the Bank, the Office has indicated that an additional amount of about $25 million will not be disbursed before April 30, 1998, and will also have to be canceled. The ONPT has explained this situation on the grounds that the cost of equipment has fallen considerably over the course of the loan period, in the context of a highly competitive market for a rapidly changing technology, and that, with customs duties reduced from 40% to about 20%, it has been possible to achieve or exceed the project's physical goals with fewer resources. In addition, the ONPT's financial situation has improved, thanks to sound management and the effective use it has made of its equipment, and this has allowed it to finance a portion of the project investments with its own, internally-generated funds.  34 Telecommunications activity. Expanding the network by adding lines. The objective for expansion of the number of installed lines in the telephone exchanges was slightly exceeded: telephone capacity (fixed and mobile) rose over the course of the project from 858,000 lines (including 20,000 mobile) at the end of 1992 to 1,721,000 lines (including 120,000 mobile) at the end of 1997 (exceeding the loan objective of 1,700,000 by 1.2%). Telephone connections. The total number of main lines connected (fixed and mobile) will have grown from 657,000 at the end of 1992 to 1,387,000 at the end of 1997 (for an exchange capacity utilization rate of 81%), compared with the objective under the program contract of 1,560,000 lines, for an implementation rate of 89%. This represents a major effort on the part of the ONPT between 1993 and 1997, during which connections proceeded at an annual rate of 225,000: the net number of subscribers has not grown at the same rate, however, because of the strict policy for recovery of arrears, which led to the disconnection of many subscribers (see below). The pace has slowed over the last two years, as well, in reflection of the fact that the number of pending applications for lines has fallen by 74% between 1992 and 1997, and the waiting time for a connection has been reduced to 1.8 months, from the 5 months anticipated in the program- contract, and 18.2 months at the end of 1991. The demand satisfaction ratio improved over the same period from 74% to 97%, and telephone density has jumped from 2.03 telephones per 100 people to 5.09. Digitization of the network. Digitization of the exchanges was of 99.3% completed by the end of 1997, meaning that subscribers now receive a detailed billing, and have access to speed calling, automatic wake-up service, call waiting, call tracing, and new value-added services. On the transmission side, digitization of existing coaxial cables and installation of new microwave radio and fiber optical links have brought the digitization rate of circuits in service to 98.5% in 1997, compared with 77% in 1992. At the same time, computerized management tools have been introduced at all levels of the network, and this has enhanced its productivity and efficiency of operation. Rural telecommunications. The project objective, which was to provide service to all rural communities, will be more than 88% fulfilled by the end of 1997: of the 1,300 rural communities in the kingdom, 1,150 will have services, and 80% of these services will be automated. The objective is to automate all communities by 1998. Only areas far removed from the municipal centers will still have to wait to be connected. Public telephones. The stock of public telephones has been expanded and modernized. The availability of operating licenses for "teleboutiques" and "telekiosques" has attracted private initiative. The number of public telephones will rise from 2,225 at the beginning of 1992 to 26,500 by the end of 1997. By the end of the project, 4,620 teleboutiques and 540 telekiosques will be in service. All of them are heavily used. Service quality objectives. The work of upgrading the networks and making them more reliable has greatly improved the quality of service offered to customers. The annual rate of faults reported dropped from 100% of lines in 1991 to 42% in 1997, compared with an objective of 47%. The rates for fault clearance currently stand at 88% in 48 hours and 97% in three days, against 60% and 92% respectively in 1991, and the project objectives of 86% and 100%. In terms of traffic flow, overall commercial efficiency was found to be 55%, and technical efficiency 97%, the gap being attributable to improper usage by subscribers, among other things.  35 Project costs. The current Bank loan has in effect replaced the earlier loan, by taking over financing of the final tranche (1992-1994) of the 1990-94 investment program. It is appropriate therefore to consider the investment program for the entire period 1992-1997. At the time the project was appraised, the total investment cost for that period was estimated at $2.097 billion exclusive of VAT for an expansion of 1,076,000 lines, or $1,950 per line. Project implementation actually resulted in a total of 1,089,000 lines for only $1.300 billion exclusive of VAT, or a cost per line of $1,194, which is 40% below the cost assumed in the appraisal. When customs duties are deducted, the average cost is about $1,000 per line, which is comparable to international costs over the same period, and reflects the sharp drop in world prices for telecommunications equipment. Procurement. At the time of project appraisal, it was expected that roughly a hundred contracts would be financed under the loan, including thirty for civil engineering works on the local networks. In the end, the number of contracts financed was 168, including 84 for civil works. This increase was due to the ONPT's decision to reduce the size of the contracts put to tenders, in order to encourage participation by small-scale local businesses. The allocation of funds to the particular categories concemed was increased during the project. Although contracting procedures have improved as a result of the experience acquired, they continued to suffer delays throughout the life of the project. Telecommunications logistics financed by the project. Commercial aspects. The upgrading of ONPT's commercial operations involves two principal aspects. First, telephone service accounting work is to be divided among four regional centers, using ISIJAM software, an updated version of the GIRAFE program. These centers are located at Rabat, where security in the handling of information has already improved, quality has been made more consistent, procedures have been simplified, and customer service has been enhanced (billing periods, which are about three weeks, will be shortened closer to two weeks), and at Casablanca, Fes and Marrakech, where personnel training will be completed before the end of 1998. The commercial network is being upgraded by setting up a one-stop business office in Casablanca, which will provide advisory services to major clients in managing their communications needs (new services, traffic handling, permanent contact with their computer services), and this will be followed by others at Marrakech and Rabat. As well, some sixty multi-market business offices will be set up; a marketing plan is being developed; and ten business training modules are being designed and developed, to prepare for the planned intensive marketing campaign for new services. As the competitive launching of Itissalat al-Maghrib draws closer, the ONPT has shifted its efforts from the development of physical infrastructure towards strengthening its marketing and business structure, given the saturation of demand. Management accounting. The introduction of financial accounting, which has already been regionalized under seven departments (DRTs) and integrated with cost accounting, was completed in 1997, with the inclusion of subsidiary accounting for suppliers, for purchases and for stocks, and with the computerization of fixed asset records (the next stage will be integration of the payroll and human resources, once the software is in place, followed by project monitoring). By the end of 1998, cost accounting will represent a powerful management tool, subdivided into 15 profit centers and 12 cost centers, grouping together 230 cost items supplied by a detailed and reliable data input system (with 16 parameters). The use of profit centers will help, among other things, to improve budget preparation and control, and will provide a clearer appreciation of the profitability of the various services offered,  36 and of areas that must be made more competitive. Cost accounting will also make it possible to calculate product costs (connections, subscriptions, local traffic, long-distance traffic, international traffic), for purposes of indicative comparison against tariff levels. Human resources. Consultants have been very active in providing services in this area, in terms of analyzing hiring procedures, developing job descriptions, detailing the staffing complement by age and qualifications, preparing organization charts for service and management structures, adjusting staffing levels to positions, with respect both to quality and quantity, and suggesting ways to enhance productivity. It remains to computerize human resource administration and management, using the appropriate software, and to promote career planning, from the viewpoint both of efficiency and personnel motivation. Strategic planning. The recognized need for a strategic planning approach led to creation of a central department, endowed with a team of planners and planning tools, based on a computerized information system and methodology. Through several interviews with staff members and group discussion meetings organized by a consultant, a number of recommendations were developed, that should lead to a structural overhaul of the former Office of Telecommunications. Financial aspects of telecommunications. Financial indicators. A comparison of the behavior of the major financial indicators for the ONPT with the forecasts in the Bank's staff appraisal report and those in the program-contract shows satisfactory results for the period 1992-1997. Throughout the period, the self-financing rate surpassed the minimum rate of 40% called for in the loan agreement, reaching 97% at the end of 1996 and 132% at the end of 1997, years that saw a sharp drop in investment costs. The rate of return on capital assets, forecast at 20% for the telecommunications sector, was 26% in 1996 and is likely to be 30% in 1997. The debt service coverage ratio, planned at 2.3, stood exactly at 2.3 in 1996, and will be 2.6 in 1997. The current ratio has remained satisfactory for the period, except for a dip to 1.1 in 1995, and it will rise to 1.9 in 1997. The operating ratio (the ratio of operating costs to revenues) will drop to 62% in 1997, a sign of healthy operating productivity, stemming from the reduction in the number of employees per 1,000 lines from 17.5 in 1992 to 10.6 (estimated) in 1997. The debt-to-equity ratio is relatively low: it will stand at 47% for 1997, suggesting that Itissalat al-Maghrib will be in a solid position to face up to the competition. Billings per subscriber, excluding VAT, has fallen from DH 5,805 in 1992 to 4,778 in 1997, in current DH. This decline of 18%, which is even more pronounced in constant DH (34%, with an average annual inflation of 4.3%) was to be expected in light of the substantial growth in subscribers (from 657,000 to 1,387,000, or 111%) and progress in meeting the demand for connections (48,000 applications pending in 1996, and 35,000 in 1997): it suggests that the percentage of low-traffic subscribers has risen sharply. Private subscriber receivables. The volume of receivables from private telecommunications customers will be 23% of billings as of 31 December 1997, compared with 28% in 1992. Taking account of the billing time, this represents 1.3 months of consumption, which is a very satisfactory performance. It reflects the ONPT's strict approach to recoveries and service cut- offs. The number of lines installed (fixed and mobile) was 214,000 in 1996, and will be about the same in 1997, while the number of disconnections was 121,000 in 1996, and will be at a similar level in 1997: the net number of new subscribers is thus less than the number of disconnections. This suggests that a portion of the low-income population has begun to be reconnected.  37 Receivables from government agencies. The volume of outstanding receivables from government agencies, on the other hand, remains at a high level: despite the practice of "vignettes", it will stand at 68% of billings for 1997, or, given the billing time, the equivalent of 5.9 months of consumption. This is even more noticeable given that, in late 1993, when the new loan was under negotiation, the arrears of such agencies had been cleared up. The causes of the deterioration are well known: the telecommunications budgets of government agencies have been regularly inadequate, and the ONPT's sister agencies have tended to regard these debts as "within the family", and hence of less urgency to be settled. Nor does the ONPT have the same leeway to interrupt service to ministries as it does with private lines. Repeated warnings of tougher cut-off enforcement and calls for greater discipline on the part of the agencies have had little effect. It is true that the ONPT can offset agency arrears against taxes owing, but - quite apart from the economic folly this implies - the fact remains that the finance ministry will be short the 533 million DH that it should have received. The question of which agency will cover these losses is still unresolved. External auditing of accounts. The accounts of the ONPT fpr 1997 will no doubt be given unqualified certification by Price Waterhouse, as were those for the three years 1994 to 1996. Fiscal levies and taxes. The contribution of the ONPT's telecommunications business to the financing of government activity, in terms of fiscal levies and taxes paid, will rise from 1.55 billion DH (41% of billings) in 1992 to 2.33 billion (35% of billings) in 1997. The percentage has declined because custom duties have been cut in half, more than offsetting the increase in the VAT rate. Postal and financial services. Computerization of the postal money order control center has been completed, as has the study phase for the refurbishing of the information system for the postal checking center. The software package for this application has yet to be introduced: it will cost about 8 million DH, which will not be disbursed before the closure of the loan, and so will have to be financed from the ONPT's own funds. The mission was highly impressed by the improved marketing of these services, the modernization of their management, and the introduction of new services, such as "cyber-post", which the mission visited with great interest. The postal sector has been paving the way for its incorporation into the public enterprise Barid al-Maghrib by becoming slightly profitable in 1996, thanks to the heavy retrenchment in expenses, better human resource management, higher postal rates, and a modest increase (of 0.5 %) in the interest paid on checking account balances. The postal rate increases called for in the program-contract for 1997 were to become effective in January 1998. Ministry of Telecommunications. Of the two contracts that are still not completed, one has been more than 80% disbursed, and the other involves the supply of electronic equipment for radio frequency control, to be installed in a building which is not yet above ground and to which there is as yet no access road. Amounts not disbursed before the project is closed will be taken over by the ONPT.  38 Restructuring the Sector Law No. 24/96 on Posts and Telecommunications. Reform of this sector was one of the objectives of the project, and the Bank had proposed a (perhaps unrealistic) schedule for readying the Law. The law was finally adopted by the Chamber of Representatives on June 29, 1997, and promulgated on August 7. It creates a statutory public authority, the National Telecommunications Regulatory Agency (ANRT), which is responsible for conducting studies and issuing regulations relating to the telecommunications sector, controlling enforcement of the regulations, and supervising adherence to the general operating conditions of licenses (Article 27 ff). The law strips the ONPT of its monopoly over telecommunications and postal services, and turns it into a corporation to be known as Itissalat al-Maghrib (IAM), which will initially be the main operator of telecommunications services, and whose capital structure will be open to private partners (article 39 ff), and another public authority, Barid al-Maghrib (BAM), that will initially be the main operator of postal and financial services (Article 46 ff). Some twenty implementation texts are in the course of preparation. The ANRT and BAM will be created by decree, once the texts giving effect to the law have been promulgated and their governing bodies have been appointed, while the IAM will be created by depositing its statutes with the office of the court. The law will then be put into effect, i.e. the ANRT will first have to be structured and then start to issue licenses for telecommunications services. Separation ofpostal and telecommunications services. The separation of these two service areas is in effect virtually complete. To legitimize it, a juridical committee will need to give its blessing to the division of ONPT's assets and liabilities (which has already taken place), and IAM and BAM will be have to endowed with working funds and their own capital. Visit to value-added services. The mission was able to appreciate at first hand the dynamism of two businesses that use the ONPT network to provide value-added services to their subscribers, one of them offering Internet service (where it is in competition with some 25 other servers that are already operational), and the other offering voice services (the latter is a very lively business, but with more limited scope). The Future The mission met with the Director General of Posts to discuss the possible ways in which the Bank might help to strengthen the business positioning of the postal services, in the new competitive environment. He hoped to have some suggestions to put to the Bank for consideration in the near future. For its part, the Bank offered to help in any way it could to support the telecommunications sector, along lines to be worked out. The ONPT has asked that the closing date of the loan remain unchanged. The mission pointed out that the Bank would have to be notified of the amount of the credit that the Office intended to cancel, before the closing date. The Bank will draft a first version of the project implementation completion report, and send it to ONPT-IAM around mid-March, 1998, asking the latter to submit its comments and to send, by mid-April, its own version of the report, using the outline that the mission provided.  39 ANNEX 1 TECHNICAL AND FINANCIAL PERFORMANCE INDICATORS - Telecommunications Branch: See Tables 5(A) and 5(B) in Part II - Postal and Financial Services Branch: Table Attached (1p.)  Technical Indicators (1992-1997) Postal and Financial Services Branch 1993 1994 1995 _ 1996 1997 Forecast 92 - 97 Indicators (Value as of 31/12) 1992 Fore- Act- % Fore- Act- % Fore- Act-ual % Fore- Act-ual % Achi- Fore- % case ual Achi case ual Achi- ease Achi- case eved case Achi- -eved . . eyed eved meed 1, Teshnisal data on Postal Service ILNumberofentities createdofwhich post offices 27 47 24 51 46 54 117 46 25 54 46 27 59 46 27 59 231 157 6S 2.Number ofdistribution routes created 27 39 43 110 40 59 148 42 37 88 43 38 88 45 72 160 209 249 119 3.Number of mail items delivered (in millions) 183 187 202 108 195 206 106 200 205 103 210 208 99 220 () - . . 4.Number ofterminals installed 142 190 159 84 201 168 84 212 172 81 223 184 83 234 195 83 92 53 58 S.Number of CCP accounts opened 18348 23000 20380 89 25000 21664 87 26000 22733 87 28000 30643 109 30000 20254 68 132000 115674 88 6.Value of CCP deposits (in millions of DH) 4789 16001 4436 99 4800 4147 86 5200 4299 83 5600 4267 76 6100 4414 72 1311 -375 -29 I 7.Number of CEN accounts opened 46613 15800 49168 107 47600 57270 120 49500 67132 136 51500 92770 180 53500 77271 144 247900 343611 139 8Value of CEN deposits (in millions of DH) 2150 2662 2341 92 2960 2754 93 3434 3292 96 3983 3866 97 4620 4395 95 2470 2245 91 9.Number of money orders issued and poid (in millions) 9123 9296 9070 98 9779 8820 90 10288 9332 91 10825 9197 85 11388 7131 63 51575 43550 84 tO.Value of money orders issued and paid (in 40653 69310 39802 67 75096 37408 50 95170 36488 38 120761 36194 30 153399 36178 24 t12746 -4475 -4 millions) I .Average mail delivery time (d+t)- % 82 80,00 90,07 113 79,00 88,00 lIt 80,00 88,00 110 80,00 82,52 103 79,00 80,51 102 - - - 12.Number of registered mail claims (per 1000 mailings 0,047 0,008 0,054 670 0,008 0,066 820 0,007 0,071 1019 0,007 0,064 919 0,0007 (0) .- - 13.Number of moey order cdims 12463 13614 13005 96 14362 1t260 78 14757 10211 69 1496t 11470 77 15111 7949 53 72805 53895 135 11. Management and Training I. Management-staff ratio () tO (') I l (I ) I II () - 12 (0) - 12 8,89 74 - . 2. Number of days of training 20427 20000 19901 100 20000 24979 125 20000 19919 100 21000 19079 9t 22000 12816 58 103000 96694 94 * Data not available  41 ANNEX II Summary of main stages in the telecommunications sector reform Year Event Remarks 1913 Creation of the Office of Posts, Telephone and Telegraph Services 1956 Creation of the A decree dated September 2, 1964, determined its Ministry of Posts, organization which, besides the Minister's office, included a Telephone and central administration (1 administrative division, 1 postal Telegraph Services and financial services division, and I telecommunications division), and external services. A decree dated April 8, 1977, determined the powers and organization of the Ministry, including besides the Minister's office, the central administration and external services. The central administration includes: - the General Secretariat - the Directorate of Corporate Affairs (1 personnel division, I professional training and social affairs division, I budget and equipment division, and 1 buildings, material and transport division) - the Directorate of Telecommunications (1 switching division, 1 transmission division, 1 subscribers and networks division) - the Postal and Financial Services Directorate (1 postal services division, 1 financial services division) - the Informatics Division - the Office of the Inspector of Posts and Telecommunications - the International and Public Relations Service - the National Posts and Telecommunications Institute. 1981 First sectoral mission World Bank mission to assess the telecommunications of the World Bank sector (November 1981) 1982 Reorganization of the A decree dated April 16, 1982, supplements that of 1977 services of the Ministry and creates the Office of the Inspector General of Posts and of Posts and Telecommunications, within the Ministry of Posts and telecommunications Telecommunications  42 1984 Creation of the National The National Office is a financially and legally Office of Posts and autonomous public authority under the Ministry of Posts Telecommunications and Telecommunications. The ONPT structure includes the central service entities inherited from the Ministry of Posts and Telecommunications and is intended primarily to effect the transformation in the P&T's status from a state agency to a public industrial and commercial entity 1987 First World Bank loan Signature of the first World Bank loan, for US$ 120 million, for telecommunications development, with an execution period stretching from 1/1/1987 to 31/12/1992 1988 - Reorganization of the A decree dated 17/10/1988 determined the powers and Ministry of Posts and organization of the Ministry of Posts and Telecommunications telecommunications (see attached organization chart). The Office's reorganization, undertaken in 1988, was - reorganization of the intended to expand telecommunications operating National Office of Posts capacity, rationalize the Office's operations, and allow and Telecommunications it to develop telecommunications under the strategic plan (1988-1992) and make telecommunications a priority sector for investment. On the basis of consultants' recommendations and internal studies, the ONPT prepared a master - Creation of 4 DRT and 4 organizational plan for the Central Directorate of CCL Telecommunications and began to decentralize telecommunications activity, creating 4 Regional Directorates which in time would cover the country's 7 economic regions. These 4 Regional Telecommunications Directorates have their headquarters at Rabat, Casablanca, Marrakech and Fes, and each has a Lines Construction Center (CCL) 1989 Creation of an ACTEL - Beginning of computerization of subscriber files - Opening of the Telecommunications Business Office (ACTEL) in Rabat  43 1990 Creation of 2 DRT and 2 - Creation of the Regional Telecommunications Directorates at Oujda CCL and Settat and their CCLs, bringing the number of Regional Directorates to 6, and of CCLs to 6 as well; - Creation of 2 Business Offices at Casablanca (ACTELs) - Beginning of studies to improve management of human resources, materials and finance, with a view to setting up a management information system based on 5 features: 1. Procurement, Supplies and Stocks 2. Finance 3. Human Resources 4. Computerization plan and schedule 5. Commercial area 1991 Creation of - Completion of decentralization with creation of a 7m Regional - I DRT Telecommunications Directorate at Agadir, and a second CCL at - I CCL Casablanca, and 2 additional Telecommunications Business Offices - 3 ACTEL (2 at (ACTELs) at Casablanca, bringing their number to 4 in that city, and the Casablanca, 1 at Rabat) total to 5, including Rabat. - Decentralization of the capital budget 1992 - Separation of - Statement of telecommunications sectoral policy Telecommunications, - Separation of Telecommunications and Postal and Financial Services, from Postal and Financial with creation of two Central Directorates, one for Telecommunications, Services the other for Postal and Financial Services, and offices for human - Creation of DCT and resources, financial and logistics management within each Central CDP Directorate. - Creation of I CCL - Creation of a CCL at Agadir - Creation of 3 ACTELs - Creation of an ACTEL at Casablanca bringing the number of business offices to 5 in that city; an ACTEL at Agadir, and another at Oujda, bringing the total number of ACTELs to 8; -Creation of the Regional Centers for maintenance and upkeep of power and air conditioning; -Creation of a National Center and Regional Centers for supervising public telephones - Completion of the first World Bank project and negotiation of the second loan; - Decentralization of the operating budget 1993 Creation of 8 ACTELs - Signature of a program contract between ONPT and the State covering the period 1993-1997 - Signature of a second World Bank loan for US$ 100 million, with an implementation period from 1/1/1993 to 31/12/1997; -Creation of 8 ACTELs (5 at Casablanca, 1 at Sale, 1 at Settat, I at _ ______________________ Tangiers), bringing the total of ACTELs to 16.  44 1994 Creation of 16 ACTELs - Creation of 16 additional ACTELs - Introduction of computerized capital assets files - Auditing of ONPT accounts 1995 Reorganization of postal A new org. chart issued for the Central Directorate of Postal and and financial services Financial Services, amending the structure of postal services (Mail Division, Operating Division), and creating the Personnel Benefits Management Division. 1996 Reorganization of the -reorganization of ONPT services (see org. chart attached) with National Office of Posts creation of: and Telecommunications * Directorate of International, Mobile and Multimedia Telecommunications, attached to the Central Telecommunications Directorate * Telecommunications Inspection Directorate attached to the Central Telecommunications Directorate * Central Directorate of Strategy and Development, with a Studies and Regulations Division and a Strategic Planning and International Affairs Division * Division of Corporate Affairs, attached to the General Directorate * Audit Division attached to the General Directorate * Division of Postal Inspections attached to the Central Directorate of Postal and Financial Services * National Savings Bank Division attached to the Directorate of Financial Services - Completion of accounts audit; - Unqualified certification of accounts; - Beginning of decentralized financial accounting; - Design of cost accounting 1997 - New law on - Promulgation of law 24-96 on telecommunications; telecommunications - Approval of decrees creating the National Telecommunications - Creation of ANRT and Regulatory Agency (ANRT) and the Barid Al-Maghrib (for Postal BAM and Financial Services); - Preparation of other decrees to implement this law; - Completion of introduction of cost accounting; - Introduction of new commercial management and new billing system (INSUAM); - Separation of capital and personnel structure shard by posts and telecommunications.  45 ANNEX 3 LIST OF DOCUMENTS - Law on the reform of the Posts and Telecommunications Sector No. 24/96; - List of documents giving effect to that law; - Project implementation completion report and statistical documents; - Financial statements (1992-1997); - Disbursement status at 30/11/1997; Procurement status at 30/11/1997; - Project data sheets - Loan agreement implementation summary for the Postal and Financial Services; - Summary of main stages of the Telecommunications sector reform  46 APPENDIX B BORROWER CONTRIBUTION TO THE ICR The Borrower provided its contribution to the Bank in December 1997. A translation of the text of this contribution is attached. The tables are not included, having been incorporated in Part II of the ICR, (see Tables 5(A), 5(B), 6, 7, 8(A) and 8(B)). A copy of the draft ICR was sent to the Borrower on May 27, 1998. Comments were received from ONPT on June 3, 1998 and have been incorporated in the ICR.  47 PROJECT IMPLEMENTATION COMPLETION REPORT LOAN No. 3557-MOR Draft, December 18. 1997  48 TABLE OF CONTENTS I. Data on the project implementation environment A. Fiscal policy B. Budgetary policy C. Monetary and financial policy D. Privatization E. Social policy F. Institutional reforms II. Relations between the Bank and ONPT A. Contract negotiations B. Loan disbursements II. Management Indicators (1993-1997) A. Financial indicators B. Technical indicators IV. Studies and Technical Assistance A. Management Accounting Project B. Human Resources C. Commercial aspects D. Strategic Planning V. Assessment of Project Outcome VI. Annexes: 1. Table 5 (a): Operational objectives 2. Table 5 (b): Financial objectives 3. Table 6 (a): Forecasts for operational objectives 4. Table 6 (b): Forecasts for financial objectives 5. Table 7: Studies included in the project 6. Table 8 (a): Project costs 7. Table 8 (b): Project financing Note: The above seven table are not attached, they have been incorporated in Part II of the ICR under same numbering.  49 PREAMBLE This document contains the evaluation of the second IBRD Loan No. 3557- MOR for the period 1992-1997. It focuses on four aspects: ]:. The economic, financial, social and institutional environment in which the IBRD loan was implemented. II. The relations between the Bank and the ONPT (from loan negotiation to disbursement) ][II. Technical and financial performance during the loan period. These data measuring the ONPT's effort are compared to projections prepared by the Bank and/or those in the Program Contract. ][V. Technical assistance for major projects executed during the period. ][. Data on the Project Implementation Environment As part of its institutional reform drive, and against a background of increasing globalization internationally, Morocco adopted a new approach to macroeconomic policy iin 1993, aimed at: redressing imbalances in the public finances by rectifying the budgetary situation; preparing for implementation of the GATT (WTO) accords and those with the European Union; pursuing a policy of liberalization and accelerating the process of privatizing public enterprises. This new economic approach has been put into effect through a series of complementary imeasures undertaken on the fiscal, budgetary, monetary, social and institutional fronts. A. Fiscal policy: 'The major fiscal measures dealt with reform to the customs code and tariffs structure.  50 The number of tariff rates was reduced from 13 to 6, and a minimum duty of 2.5% was established for most imported goods, while the maximum rate remained fixed at 45%. The corporate tax rate was reduced as of January 1996 from 36% to 35%. In the case of the VAT, the transitional finance law 1996-1997 simplified VAT exemption procedures for imported capital goods recorded as fixed assets. To round out these fiscal measures and provide greater transparency, the Finance Law 1997-1998 provides for public enterprises to update their balance sheets through a declaration rectifying their position with respect to the IS, the IGR and the VAT in their 1996 financial statements. B. Budgetary policy: The measures undertaken succeeded in bringing the budget deficit down to 3% of GDP in 1996, compared with 5.3% in 1995 and 3.2% in 1994. C. Monetary and Financial policy: A foreign exchange market was formally instituted in June, 1996. This no longer makes it necessary to turn over foreign currency receipts to the Bank Al-Maghrib: they can now be deposited with the commercial banks. During the course of 1996, reform continued with liberalization of interest rates on lending. On the financial front, a number of steps have been taken to modernize the stock market. One such measure was to introduce the first organismes de placement collectifdes valeurs mobilieres (OPCVM), security investment funds, over the period 1993-1997. Externally, the current account deficit in the balance of payments showed a sharp drop, from 2.4% of GDP in 1994 to 1.8% in 1996. D. Privatization: Morocco launched its privatization program in 1993. To date, 34 public corporations and 18 publicly-owned hotels have been affected. E. Social policy: The government succeeded in working out an accord with business and labor groups, signed on August 1, 1996, to institute a process of social dialogue. One result of this process was to raise the legal minimum wage by 10% as of July 1, 1996.  51 At the same time, the monthly family allowance rate, which was 100 DH for the first three children, has been raised by half, while the National Social Security Fund has set a rnonthly floor of DH 500 for disability and old-age pensions. J. Institutional reforms: The implementation phase of the second loan has coincided with parliamentary adoption, orn June 29, 1997, of law no. 24-96 reforming the posts and telecommunications sector. The new institutional and regulatory framework is based on the following principles: * Separation of regulatory and operational supervisory functions; * Institutional and regulatory separation between postal and telecommunications activities; a Introduction of legislation to promote competition. T ]he new law provides, in particular, for: L. Creation of a new corporation, known as Itissalat Al-Maghrib, to manage and develop the telecommunications network. 2. Creation of a public authority, known as Barid Al-Maghrib, to manage and develop the mail and postal financial services. 3. Creation, under the Prime Minister, of a National Telecommnunications Regulatory Agency (ANRT), as a legally and financial autonomous public authority. On the operational front, the ONPT established two new directorates in 1996: * the Central Directorate of Strategy and Development; * the Directorate of International, Mobile and Multimedia Telecommunications. In addition, as part of its financial and accounting reorganization, the Office has umdertaken a number of activities since 1993, including a first-ever inventory and eiialuation of capital assets, and a far-reaching operation to rectify the accounts of the Office, dating back to its inception. As a result, the ONPT's auditors have certified its accounts without reservation. The end of 1995 also saw the introduction of a cost accounting system, which became fiully operational in 1997. In the commercial area, a new business and technical management system for subscribers (INSIJAM) has been put in place.  52 Finally, tariffs for mobile and international telephone service have been reduced during 1997. II. Relations between the Bank and ONPT A. Contract negotiation Under the loan, 166 contracts have been signed. They were awarded on the basis of domestic and international bidding that attracted wide competitive interest. The high quality of the specifications and the technical and commercial evaluations meant that satisfactory price-quality ratios were the norm in these contracts for goods and services. It should be noted, however, that the telecommunications environment underwent a significant evolution between the time the loan was negotiated and the time it was actually used. A number of reallocations among categories were made within the loan to reflect the major changes in Morocco's system. A status analysis of the projects financed shows that in some cases there were serious delays in negotiating the contracts and putting them into effect. Close cooperation between the Bank and the ONPT, however, was able to reduce these delays considerably. Generally speaking, the financing goals of the second tranche were exceeded, and the number of operations under it was greater as the contracts were implemented.than initially planned, because costs declined B. Disbursements Cooperation between the Bank and the ONPT during implementation of the second project was satisfactory, thanks to strict observance of disbursement procedures and permanent contact with the Bank departments involved. All requests for direct payments, for special commitments and for special account replenishments were met within a reasonable time. Under the direct payment procedure, which speeded up payments to suppliers while reducing the number of transactions through the special account, US$ 29, 623,236.86 was paid out, accounting for 33.28% of the line of credit and 49.84% of total withdrawals, in 73 disbursements. Funding through the special account totaled US$ 29,811,306.96, or 33.5% of the line of credit and 50.16% of overall withdrawals, in seven replenishments.  53 The ONPT nevertheless reduced the overall line of credit from US$ 100,000,000 to US$ 89,000,000, and undertook a second reallocation among categories. 'T'he decision to reduce the amount of the line of credit was taken in light of the Office's financial needs and the reduction of costs that emerged as a result of technological changes and the effects of competition. Credits were re-assigned among categories in order to optimize their use. T'he 166 contracts financed under the loan were distributed by category as follows: Category I: Transmission supplies, associated installations and training: 3 contracts; Category II: Cables, poles and associated material for local networks: 32 contracts; Category III: Civil works for local networks: 84 contracts; Category IV: Turnkey contracts and supply and install contracts for local networks: 28 contracts; Category V: Data processing equipment: 6 contracts; Category VI: Consultants' services and training: 11 contracts; Categories VIII: Radio frequency control equipment: 2 contracts. Actual financing provided, as a proportion of the eligible portions of the projects, averaged 83% to 30/11/97: Category I: 93% Category II: 91% (Category III: 95% Category IV: 87% Category V: 59% C ategory VI: 63% Category VIII: 55%. IHL. Management Indictors (1992-1997) A. Financial indicators. During the period 1992-1997, investment in telecommunications infrastructure grew at a steady pace, totaling DH 11,952 million. This investment resulted in a doubling of exchange capacity, which rose from 858,000 lines in 1992 to 1,721,000 lines in 1997, thereby exceeding the objective of 1,671,000 called for under the loan agreement.  54 By taking full advantage of competition on the telecommunications equipment market, the Office was able to realize savings of 40% on its investments, while exceeding the exchange capacity expansion goal by 3%. This expansion was accompanied by steady growth in billings, which rose by 22% between 1993 and 1995, reaching DH 6,062 million in 1996, and rising by a further 7% to DH 6,469 million in 1997. At the same time, costs were kept under control, thanks to the Office's policy of rationalization. The operating ratio went from 60% in 1992 to 62% in 1997, and net earnings improved markedly over the period, tripling to DH 985 million by 1997. This performance allowed the Office not only to realize a greater return on its investments (the rate of return rose by 8 percentage points over the period to 30% in 1997), but also to enhance its self-financing capacity and reduce its need for external funding. After deducting repayments of principal, the cash flow generated by its telecommunications business covered 72% of investment outlays on average, and the self-financing rate rose from 57% in 1992 to 132% in 1997. The Office's loan repayment capacity has also improved slightly, as is apparent in the evolution of its debt service coverage ratio, which stood at 2.6 in 1997, compared with 2.7% in 1992. It should be noted, finally, that the Office's policy of building down its debt has begun to show concrete results. Its debt-to-equity ratio went from 44% in 1992 to 54% in 1995, and then sank to 47% by 1997. In terms of recovering arrears, the Office has made a major effort over the period to reduce outstanding receivables with its customers. Private subscriber receivables, expressed as a percentage of billings, retreated during the period from 28% in 1992 to 23% in 1997. On the other hand, public agency receivables continued to pile up, despite the efforts made in 1993 to settle accounts. These receivables, which represented only 12% of billings in 1993, soared to 64% in 1995, and stood at 68% by 1997. B. Technical indicators The project goals for the period 1992-1997 were more than achieved overall. 1. Telephone connections The physical capacity of the telephone system (fixed and mobile) will stand at 1,721,000 lines as of 31/12/1997, compared with 695,000 lines at 31/12/1991, for an increase of 148%, and an achievement rate of 101.2% of the project objective. This expansion has  55 cut the waiting time for connections to 1.8 months from the 5 months planned, and the 18.2 months that prevailed at 31/12/1991. 'rhe effort devoted to connections has meant that the backlog of outstanding applications has shrunk by 80%, and stood at 35,000 at the end of 1997. The demand satisfaction rate rose by 23.4 percentage points, from 74.1% in 1991 to 97.5% at the end of 1997. 'rhe number of subscribers (fixed and mobile) will reach 1,387,000 as of 31/12/1997, against a target of 1,560,000, for an achievement rate of 89%. Telephone density has risen from about 2.03 telephones per 100 inhabitants in 1991 to 5.09 in 1997. 2. Digitization of the network. The digitization rate will be 99.3% at the end of 1997, which means that subscribers will now be able to take advantage of services that were previously unavailable to them: detailed billings, speed dialing, automatic wake-up, call waiting, etc. Moreover, the national transmission network has been expanded by 403,000 new circuits, bringing the total of domestic transmission circuits to 482,000 at the end of 1997. Digitization of existing coaxial cables (42%), the installation of new, digitized microwave radio links (25%) and fiber optical links (57%) have brought the digitalization rate to 98.5% at the end of 1997, compared with 77.7% in 1992. This was made possible by the ambitious program of laying domestic fiber optical cables along the major highways: during its first phase, 4,000 km of fiber optical cable has been installed. 3. International relations International telephone service had 5,057 direct circuits in 1997, compared with 3,565 in 1992, and 228 automatic relays at the end of 1997, versus 117 in 1991, following the installation of new fiber optical cables, undersea to France, Spain and Portugal and by land to Algeria. 4. Mobile radiotelephone and data transmission Mobile radiotelephone service (NMT 450 MHZ) was opened to the public in 1987. Parallel to this service, in 1994 a new GSM digitized mobile radiotelephone network was installed with capacity for 100,000 subscribers. The number of mobile subscribers will reach 78,000 by the end of 1997. 5. Rural telecommunications To meet the demands of the rural development policy, and to reduce the isolation of remote areas, telecommunications facilities have been automated for 1,335 localities as of  56 31/10/1997, a figure that will rise to 1,590 by 31/12/1997, compared with only 216 at 31/12/1991, for an implementation rate of 458%. This performance has far outstripped the project objective of 900 localities, for an implementation rate of 177%. 6. Public telephones Access to public telephones has been greatly increased by the expansion and modernization of existing facilities. This has been made possible by enlisting private enterprise through the granting of operating licenses for "teleboutiques" and "telekiosques". The number of public telephones rose from 2,225 in 31/12/1991 to 26,500 at the end of 1997, and 21,900 of these are operated by private interests. At the end of October 1997, 4,619 teleboutiques and 539 telekiosques were in operation. 7. Quality of service The efforts made to modernize the telecommunications infrastructure and make it more reliable are reflected in steadily improving indicators of service quality, both with respect to the waiting time for a dial tone and the flow of traffic, and to the number of fault reports and the speed with which they are cleared. The fault reports indicator dropped from 108% in 1991 to 42% in 1997. Faults are now cleared at a rate of 88% within 48 hours, and 96% within three days, compared with 60% and 92% respectively in 1991. While these indicators are better than expected, the fault reports indicator is expected to be somewhat further improved as of 1995 [sic], thanks to efforts to rehabilitate the network, upgrade the quality of materials used, and provide continuous training for personnel. This is noteworthy, since service quality in other rapidly growing countries has not always improved at the same pace. With respect to traffic flow, the overall commercial efficiency recorded is currently 55%, while technical efficiency has risen to 97%. The difference can be explained primarily by the careless dialing habits of users, as well as the frequency of busy signals and no- answer. Traffic losses from improper use and line tie-ups could be reduced by an awareness campaign among subscribers and heavy business users. 8. Productivity The efforts at physical expansion of the network, on one hand, and the limitations on hiring, on the other, have led directly to an improvement in productivity. In fact productivity as measured by the number of employees per 1,000 main lines in service improved from 17.5 in 1992 to 10.6 in 1997, exceeding the target ratio of 12. Total  57 telecommunications staffing will stand at 14,690 at the end of 1997, compared with 1 1,484 in 1992. IV. Studies and Technical Assistance A. Managing accounting project This project was focused on three broad areas that were the subject of a contract with Coopers & Lybrand consultants. It involves installing an operational cost accounting system, decentralization of financial accounting, and introduction of new inventory and procurement procedures. During work on the project, however, a number of supplementary tasks were identified as necessary for overall implementation of a proper accounting system. The additional tasks iincluded related to: Supplier invoice accounts; Purchasing management; ' Capital assets inventory and management. B. Human resources Over the period 1993-1997, the continuous training program was adapted in an effort to cover all relevant disciplines and to provide maximum benefit to employees, through diversification in the manner and content of training. The number of employees receiving training doubled between 1993 and 1997, from 2,700 to 5,400. The implementation rate of this portion of the project was 100%. C. Commercial aspects Two major projects were undertaken during the period 1992-1997: L. "Marketing Plan and Business Network" This project had three objectives: * Improvement of the business network Preparation of a marketing plan * Commercial information system, it involved the following activities: * Opening of the first Business Office in Casablanca. This office has been operational since April 1996;  58 * Support for the Multi-market office in Marrakech-Menara. This office was opened to the public on October 30, 1995; * Reconfiguration of the Rabat-Center Multi-Market Office, and development of a modular structure for use in other business offices; * Design and preparation of a tableau de bord [performance chart] for the business offices. This performance chart was tested at four offices, and then introduced generally; * Proposed improvements in the performance charts for other commercial services; * Preparation of an operational marketing plan; * Study of certain business procedures and proposals to improve them; * Design and preparation of 10 business training modules. 2. Introduction of 4 regional billing systems The objective of this project was to set up an integrated system encompassing the major customer relation management tools. Operation of the system at the Rabat CPECT has produced the following advantages: * Automation of information flows: speed and security in transferring information; * Consistency of information: all services now use the same information; * Simplification of procedures. In the commercial area, the project has helped to improve the quality of customer service. In the technical area, the project has helped to optimize the use of resources. In the financial area, the project has helped to reduce billing times and improve the monitoring of arrears. This project is still under implementation. D. Strategic Planning The contract for this project was signed with the consultant company ISOGROUP of Canada. The objectives of the strategic planning projects are of two kinds: * Creation and development of a strategic planning unit; * Technical assistance to develop a computerized system for strategic planning. The final products are:  59 Creation of a strategic planning unit for telecommunications within the Central Directorate of Strategy and Development, and a number of strategic planning committees. Development of strategic planning tools and methodologies (strategic planning manual: the bases and tools of strategic planning) Introduction of an information system as an aid to strategic decision making (pilot project for financial dimensioning of the Telecommunications Branch). Development of a program for implementing the ONPT reforms. V. Assessment of Project Outcome ]Execution of the loan during the period 1993-1997 enabled the ONPT to carry out an ambitious program of physical expansion. The outcome has been very positive, not only iin terms of the physical execution of the projects, but also on the technical, financial and commercial fronts, as a continuation of the activities undertaken through the first loan. The objectives set out in the loan agreement and the program contract were exceeded by a wide margin, and at a savings of 40% below the initially anticipated cost. Moreover, during the period 1993-1997, modem management tools and methods were put in place with respect to finance, accounting, human resources, operations, production and commercial management of subscribers. At the end of the period, law no. 24-96 on reform of the posts and telecommunications sector was adopted by parliament. ][mplementation of the first and second loans has allowed the ONPT to acquire expertise iin formulating projects, putting them to tender, assessing them and making disbursements, using the Bank's procurement techniques and procedures. ]However, technological change and shifting priorities in the equipment program meant ithat the loan funds had to be reallocated between categories. As to the quality of the Bank's performance, this was satisfactory. Contract approval and lisbursement times were reduced by comparison with those for the first loan. Dverall, the Bank's involvement in the development program contributed greatly to the imodernization and restructuring of Morocco's telecommunications sector.  IBRD 24480 MO ROCCO PORTUGAL \o Este n,n, . Perpi,ignan (FRANCE) TELECOMMUNICATION PROJ ECT POTmaTANG eouan (FRANCE) OPTICAL FIBER CABLES 565/MBs PROJECT \ouen OPTICAL FIBER CABLES 140/565 MBs K ri Taounate IN IMPLEMENTATION > d\ ANALOG SUBMARINE CABLE KENITRA CABLE TO BE DIGITALIZED Boulemace MICROWAVES 140 MBs PROJECT CASABLANC Missour DAKAR MICROWAVES 140 MBs IN IMPLEMENTATION ElJadida \ issoufra MICROWAVES 34 MBs IN IMPLEMENTATION TTAT M B Figuig EXISTING: Y/ssoufi BENI-MELLAL ch o - - - _____MICROWAVES 140MBs SAFI ( Ouaouizart h dia _____MICROWAVES 34 MBs Azilal /MARRKEC1^ - Dmnate ~ EfuQ - -- ANALOG MICROWAVES 960 CHANNELS Essaouira ------ TROPOSPHERIC MICROWAVES 120 CHANNELS zm OPTICAL FIBER CABLES 140 MBs DIGITALIZE COAX CABLES A Agdznt AGADIR- 4 Taroudannte ts E DOMESTIC SATELLITE NETWORK lghrem 01 ARABSAT EARTH STATION coute - ata , -20 Tiznit ~ ~ ~~~~~~~~0 100 200 300 INTELSAT EARTH STATION Ifni'RO /' Akka e KILOMETERS SPACE SEGMENT DIGITALIZATION \ Guelmim Bouizakarne 'Thi; -op ho-e - prepoccd h The Wo-d BoAo', sftff e-icu,sioey for NATIONAL CAPITAL --- r denc ot -cc of lieh W'oct INTERNATIONAL BOUNDARIES I m do -t imply, the po,t f The World Bo,k G-op, -oy j,6go-o, Tan-Tan - IhZ ~~~~~~~~~~~~~~odr,gotlo cfo,-y t-c,'r-y ..d~~c ... ocpto--e f - - - INTERNATIONAL BOUNDARY (Approximote) Tan-Tan ooc - BOohlegalso DECEMBER 1992