Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 12444

PROJECT COMPLETION REPORT

TANZANIA

SECOND TnELCOMMUNICATIONS PROJECT(CREDIT 1810-TA)

NOVEMBER 2, 1993

MICROGRAPHICS

Report No: 12444Type: PCR

Public and Private Enterprise DivisionCountry Department IIAfrica Regional Office

This document has a restdcted ds oibutim and may be used by redplena only in the pertfonanae oftheir ,fficd duties Its contents my nt oterwise be diosed w_t Wodd Bank suthulaton.

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CURRENCY AND EOUIVALENTS

Currency Unit = Tanzanian Shilling (Tsh)Tsh 1 = US$ 83.72 (1987)

= US$ 125.00 (1988)= US$ 192.30 (1989)= US$ 196.60 (1990)= US$ 233.90 (1991)= US$ 325.00 (1992)

ABBREVIATIONS AND ACRONYMS

DEL Direct Exchange LineEAC East African CommunityERP Economic Recovery Program - 1986ESAP Economic and Social Action - 1989-1992GOT Government of the United Republic of TanzaniaIDA International Development AssociationMTC Ministry of Transport and CommunicationsPPF Project Preparation FacilitySAP Structural Adjustment Program - 1982TDP Total Demand PotentialTPTC Tanzania Posts and Telecommunications CorporationTRP Telecoms Recovery Program

FISCAL YEAR

January 1 to December 31

FOR OFFICIAL USE ONLY

THE VORLD BANKWasIlngton, D.C. 20433

U.SA

Office of Director-GeneralOperations Evaluation

November 2, 1993

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND TUE PRESIDENT

SUBJECT: Project Completion Report on TanzaniaSecond Telecommunications Proiect (Credit 1810-TA)

Attached is the "Project Completion Report on Tanzania - SecondTelecommunications Project (Credit 1810-TA) prepared by the Africa RegionalOffice, with Part II prepared by the Borrower.

The project's physical components were completed without major costoverrun but suffered delays due to procurement problems and turnover in projectmanagement. Modernization of billing and accounting was only partially completeddue to design problems (incompatibility of computer hardware and software). Mostsignificantly, the project failed to keep TPTC (Tanzania's PTT agency) on a soundfinancial footing. By 1988, TPTC had gone technically bankrupt. The Bank wvsslow to respond, did not invoke remedies and, indeed, waited until 1989 to haltprocessing a third project. Subsequent to the completion of the Second Project,the Government did agree on a Plan of Action to restructure TPTC's finances,under the Third Telecommunication Credit (No. 2486-TA), approved in April 1993.

On balance, the project's overall outcome is rated as unsatisfactory,given TPTC's dismal financial situation throughout project implementation (anunusual occurrence in telecommunications projects). The institutional impact israted as partial, and sustainability uncertain as it depends on the eventualc4nsolidation of TPTC's financial rehabilitation. The PCR could have been morethorough in its coverage of, intoe alia, the evolution of key operationalperformance indicators, most recent financial results, and the evaluation of theBank's supervision performance.

No audit is planned.

Attachment

I This docwmsnt has a nestricted distribution and may be used by recipients only in the performance of|their official duties. Its contents may not otherwise be disclosed without World Bank authorization.|

FOR OmCI4L USE ONLY

EM12 mmtnLfro=

Prefac .STrable gf C"ontents

Preface ................................. *.................. 14.

Evaluation Summary ........................................... ii

Part I ................................ 1

1. Project Identity ................................. 1

2. Backgrund .................................. 1

3. Project Objectives and Description ............................... 2Sector Development Objecdves .............................. 2Project Objectives ....................................... 2Project Description ...................................... 2

Part A. - Rehabilitation ... . ... ............... 2Part B.- Technical Assistance and Training. ............. 3

4. Project Design and Organization ................................ 4

5. Project Implementation .................................. 4Credit Effectiveness and Project Start-up ............ ............. 4Implementation Schedule .... S........ ,Disbursements ........................ SCredit Allocation .S......... ....................... S

6. Project Results ....................... , . , , 6Physical Results ...................... 6Financial Results ...................... 6Human Resource Development. ..................... 9

7. Project Susinabiity ......................... 9

8. Bank's Performance .................... 9

9. Bornower's Performance .................. 10

10. Project Relaonships .................. 10

11. Consulting Serices ..................... . 10

12. Project Doumetat ndDa ....D.............. 10

This document has a restricted distribution and may be used by recipients only in the performanceof their oMcial duties. Its contents may not otherwise be disclosed without World Bank authorization.

TABLE OF CONTENTS (Cont.d)

13. Rate of Retun ........................ 11

14. Lesson Learned From Experience 1.... ........................... I I

Part ............................ !. 12

Partt I .......................... 36

1. Related Bank Loans and/or Credits ..

2. Project Tinetable. 37

3. Credit Disbursements .38

4. Project Implementation. .......... 39

5. Project Costs (US$miilion). 4

5A. Credit Allocation ............... 4l

6. Project Results ............... 42

7. Status of Covenans ............... 43

8. Missions ............... 44

AnneL.

1. Financial Statements 4.

Second Telecommunicadons ProlectCredit 1810 TA

Projlet Comtion Report

1. This report covers the Second Telecomnmunications Project in Tanzania, supported byCredit 1810-TA. The Credit for SDR 17.9 million to the United Republic of Tanzania on-lent to Tanzania Posts and Teleconmmunications Corporation (TPTC) was signed on June 16,1987, became effective on August 12, 1987 and was closed on December 31, 1992.

2. Parts I and HI were prepared by Bank staff based on information available in theproject files and information supplied by TPTC.

3. Part II has been prepared by the Borrower to give its perspective of the design,iplementation and the development impact of the project.

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Ta-nznaa

Second Telecom,muncaions Project

Proiect Compleffon Rewrt

EvqluW9_n Summslr

Backrou_nd

1. Public telecommunications services in Tanzania are provided by the Tanzania Postsand Telecommunications Corporation (TPTC). TPTC is a monopolistic g3vernment ownedinstitution responsible for operating, plannming, managing and developing of domestic an,international public teleconmnunications and postal services. Tanzania has notelecommunications manufacturing industry. The Corporation is administered by an eight-member Board of Directors, whose Chairman and Director General are appointad by thePresident of Tanzania. The other six members are appointed by the Minister ofCommunications.

World Bank Involvement

2. The World Bank Group has been associated with the telecommunications sector inTanania since 1966, first through the East African Community (EAC) and then directly withTanzania. The Bank approved 3 loans to EAC Telecommunications Corporation; a US$13million loan in 1967 (Ln 483-EA), a US$10.4 million loan in 1970 (Ln 675-EA) and a thirdloan of US$32.5 million in 1973 (Ln 914-EA). These were completed satisfactorily. Thefirst credit to Tanzania, following the breakup of EAC in 1977, was approved *n July 1982(Credit 1173-TA) for SDR 22.1 million (US$27 million equivalent). The credit supported anessentWial part of TPTC's 1980-86 investment program, focussing on service expansion to ruralareas and expansion of the network to unserved or underserved areas at the time, both urbanand nual. It also had a broad institutional objective of developing TPTC, mainly throughexpandin training facilities. The second project (Credit 1810-TA) for SDR 17.9 million wasapproved in June 1987. The Third project has been approved by the Board on April 27,1993.

project Obiectives and Descrinton

3. The project was designed to (a) addres the key institutional constraints of the sectorby strengthening TPTC's management, organization, financial and engineering systems tomaintain and operate the existing network, to undertake furither rehabilitation and to plan forexpansion; and (b) rehabilitate key parts of the network, removing bottlenecks and imbalancesto maximize capacity utilization of existing installations.

4. The project was designed in line with the TPTC's 1986-90 Investment Program withinthe framework of the country's Economic Recovery Program. The project's goals were to

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overcome the key constraints of the sector namely, (i) lack of management skills, systems,and trained manpower; and (ii) lack of foreign exchange for essential maintenance and sparesand to provide for rehabilitation and expansion.

Proect Implementation

5. The project start-up was smooth and on scheduie. TPTC, by undertaking advanceprocurement action, avoided all initial delays. Both conditions of effectiveness namely, (i)appointment of a project coordinator and (ii) signing of the Subsidiary Agreemnent; werefulfilled on time and the Credit was made effective on August 12. 1987. Progress during theflrst two years of implementation was reasonable, with about 90% of the IDA credit beingcommitted by the end of 1988. Since 1989, the project implementation activities started tolag behind schedule and continued to do so throughout the span of the project. The mainproblem with the implementation has been the inability of TPTC to rneet commitments inrespect of tariff increases and capital restructuring. This eventually led to deterioration inrelations between IDA and TPTC. In addition, delays due to renegotiation and re-bidding ofcontracts previously approved led to the postponement of the project completion by one and ahalf years. The closing date was first extended to June 30, 1992 and subsequently toDecember 31, 1992.

Project Results

6. Physical results: The implementation of the physical components of the project eventhough delayed was as per expectations. Due to small modifications in the project in 1990,there was a reallocation of fumds (Annex SA) from some rehabilitation components (outsideplant) to spares and technical assistance and training. Computerization of billing and of thefinancial departnent was not completed due to selection of unsuitable hardware andincompatible software.

7. Financial results: Between 1987-1989 even though TPTC was operationally sound, asa result of losses due to currency devaluation, the financial performance of the organizationhas been poor in terms of profitability and liquidity. Since 1988, the organization wasvirtually bankrupt, as highlighted by its negative equity position. The primary reasons for thedismal performance of the entity were (i) unusually high non-operating expenses likeprovisions and reserves in 1988; (ii) lack of appropriate tariff increases which led to declinein revenues in real terms while operating costs continued to rise with inflation; (iii) high levelof outstanding bills receivable arising from inadequate collections and delays in issuing bills;and (iv) devaluation of the Tanzanian Shilling. TPITC had to bear the foreign losses on itsloans which were mostly foreign currency denominated. In an effort to rectify the situationthe Govermnent took over US$34 million equivalent of TPTC's loans in 1990-91.

Proiect Sustainability

8. A reliable telecommunications sector is crucial to the sustained economic recovery ofTanzania. The main linkages between telecommunications and economic recovery are (i)information requirements of business and government; (ii) the cost to the economy of anunreliable telecommunications network including net external trade; (iii) the fiscal implicationsof an efficient telecommunications operation; and (iv) the sector's inportance as a foreign

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exchange earner. Investment in the telecommunications sector therefore has to be acontinuous process though not necessarily through a public sector monopoly withdemonstrated inefficiency. The need for further improvement and expansion is evident andIDA jointly with ADB, EEC, Denmark, Japan and Sweden, has undertaken to finance a thirdtelecommunications project in 1993. The Government and TPIC have taken the first stepstowards restructuring TPTC and the sector. A management performance contract has beensigned between TPTC and Governmnent, tariffs have been increased as per IDA'srecommendations, a Fixed Assets revaluation exercise has been effectively completed in 1992,a Statement of Affairs has been prepared and the Govermnent has agreed to invest a portionof IDA's credit as equity to TPTC.

Bank's Perforanc

9. Overall Bank performance has been broadly satisfactory under adverse circumstances.The Bank has mnade a positive impact on the physical and institutional development of theorganization. In the design of the project, the Ba. k could not foresee the institutionaldifficulties that would arise in implementing tariff increases, billing ard collection and otheressental programs like capital restructuring. P' taking a firm stand in 1991 regarding thepreparation of the third project the Bank succeeded in convincing TPTC and Government toinitiate tariff adjustments, necessary policy and institutional improvements to overhaul thetelecommunications sector. Bank's support for this has also attracted cofinancing to supportTPTC.

Borrower's Performnce

10. During the implementation stage there were several major lapses on the part of TPTCin achieving performance indicators presented in the Stauf Appraisal Report. The most criticallapse has been in financial management rather than operational performance primarily in theareas of billing and collections and delays in increasing ta in line with inflation and latesubmission of unaudited and audited fnancial statements. Since the Government had theauthority to increase tariffs, that tariffs were not increased as required, was not entirelyTPTC's fault, however, even when TPTC was empowered to raise tariffs they did not do soeffectively. Other problems included inability to complete on time action plans andimplementation of capital restructuring and manpower planning. During the project period,TPITC's net profits went from Tsh 435 million to a negative TSh 10.3 million.

Proiect Relationships

11. Bank relationship with the Govermment and TPTC were initially good but haddeteriorated in the light of TPTC's poor performance. The relationship has now beenrestored as it has become clear that IDA's concerns were essentially in the company's bestinterests.

Project Documentation and Data

12. The credit and project agreements 1810-TA were adequate and appropriate forachieving project objectives in the key organizational and financial areas. The Appraisal

Report of the project provided a useful framework for the Bank and TPTC to reviewimplementation. TP1TC provided regular progress reports on implementation during 1987-1990 after which time they were delayed and infrequent.

Lesson Learned From Experience

13. The most important lesson that has been learned from this project is that unless PublicEnterptises are held to strict operational and financial target. 4 .y will have little incentive totake the often painful managerial measures to achieve efficieiu;y and profitability. In thisproject most of the components of the project were committed within the first two years, andthe borrower had almost no incentive subsequently to fulfill conditionalities. In fact, it wasonly because IDA took a firm stand to suspend processing the third project that many of thecritical elements like capital restructuring and tariff increases have been achieved. Inaddition, for improved efficiency there is a need for increased financial and managerialautonomy for the operating entity.

Ta~nznia

Second Tel-conuunicatons Prolc

Credit 1810 TA

fpiect Comnlilon Renort

1. Project Identi_y

1.01 Title Second Telecommunications ProjectCredit No 1810 - TARVP Unit AFRCountry TanzaniaSector AF2PESubsector Telecommunications

2. * Bk a Mk

2.01 Public telecommunications services in Tanzania are provided by the Tanzania Postsand Telecomnumications Corporation (TPTC). TPTC was established by the Tanzan Postsand Teleomunications Corporation Act of December 2, 1977, following the break-up of theEast African Community. TPC is a monopolistc government owned insutution responsiblefor operating, plaming, managing and developing domestic and inttional publictelecommunications and postal serices. In addition to the public telecommunicationsservices, dedicated networks exist to meet the specialized requiements of the police, military,rai'ways, and civil aviation. Other private users also operate radio call services in areasinadequately served by public networks. Tanzania has no telecommunicatons manufacuringindustry. The Corporation is administered by an eight-member Board of Directors, whoseChairman and Director General are appointed by the President of Tanania. The other sixmembers are appointed by the Minister of Communications. The current organizationalstructure is attached as Annex 1.

2.02 The World Bank Group has been associated with the telecommunications sector inTanzania since 1966, first through the East African Community (EAC) and then directly withTanzania. The Bank approved 3 loans to EAC Telecomnmnications Corporation; a US$13million loan in 1967 (Ln 483-EA), a US$10.4 million loan in 1970 (Ln 675-EA) and a thirdloan of US$32.5 milion in 1973 (Ln 914-EA). These were crompleted satisfactorily. Thefirst credit to Tanzania, following the breakup of EAC in 1977, was approved in July 1982(Credit 1173-TA) for SDR 22.1 million (US$27 million equivalent). The credit supported anessental part of TPITC's 1980-86 invesment program, focussing on service expansion to ruralareas and expansion of the network to unserved or undereved areas at the time, both urbanand rral. It also had a broad institutional objective of developing TPTC, mainly through

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expanding training facilities. This project was closed on June 1987. 18 months behindschedule (PCR dated May 17, 1990 Report No. 8662). The second project (Credit 1810-TA)for SDR 17.9 million was approved in June 1987. The Third project has been approved bythe Board on April 27, 1993.

3. Project Objectives and Description

3.01 Sector Development ObJectives: Having realized the crucial importance of theteleconununications sector to the Government of Tanzania's (GOT) overall EconomicRecovery Program, and in particular, to achieve the targeted growth in exports and increasedefficiencies in all sectors, the main telecommunications sector goais were to:

(a) increase operational efficiency and quality of service through networkrehabilitation, introduction of an effective maintenance program and improvedmanagement systems, and staff development.

(b) ensure that revenues cover operating costs and contribute significantly toinvestments;

(c) generate revenues for the Government; and

(d) extend service to the rural areas.

3.02 Proiect Objecives

The project was designed to address the constraints of the sector by:

(a) Sw,ngthening TPTC's mnangement, organization, financial and engineeringsystems to maintain and operate the existing network, to underake furtherrehabilitation and to plan for expansion; and

(b) rehabilitating key parts of the network, removing bottlenecks and imbalance tomaximize capacity utilization of existing installations.

3.03 oect esariimiDn

The project comprised of the following components:

Part A. - Rehabilitation:

(a) Provision of equipment for rehabilitation of local cable networkm andsubscriber facilities;

(b) replacement of worn out or obsolete switching and transmission equipment,including marginal expansion where justified by subsntial excess demand;

(c) installation of new transit exchanges for local and interational traffic and asatellite earth station for international services;

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(d) upgrading of maintenance facilities by providing tool and test equipment.spare parts and specialized vehicles, training equipment. upgrading the stores and therepair facilities in workshops; and

(e) upgrading the computer facilities for: (i) introduction of managementinformation systems; and (ii) automation of local cable and subscriber data to ensureoptimum utilization of existing resources.

Part B. - Technical Assistance and Training:

(a) strengthening TPTC's organizational structure and management systems;

(b) strengthening TPTC's training programs; and

(c) overseas training for about 40 staff;

3.04 The project had been conceived to (a) rehabilitate the country-wide long distancenetworks (46% of the total Project costs); (b) rehabilitate local networks (35%); (c) improveinternational facilities (12%); and (d) enhance TPTC's management capabilities (7%).

3.05 The total cost of the program was estimated at Tsh 3,575 million (US$65 million)with a foreign exchange component of Tsh 2,860 million (US$ 52 million). The sources offinancing are summarized in Table 3.1 below. The project's foreign exchange costs ofUS$49.0 million would be financed by ADF, Italian Aid, Japan and Swedish Govermnent Aidand the IDA credit. Local currency financing, estimated at US$11.0 million equivalent wouldbe financed by TPTC through internally generated funds.

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Table 3.1 - Project Financing (USS millions)

Local Foreign Total % of Total

IDA - 23 23 39ADF - 5 5 8Italy - t0 10 17Sweden - 11 11 18TPTC 11 - - 18

Total 11 49 60 100

4. Projiect Design and Organization

4.01 The project was designed in line with TPTC's 1986-90 Investment Program within theframework of the Economic Recovery Program and consistent with the sector goals. Theproject rehabilitation and implementation of works were a continuation of the FirstTelecomnications Project. The project was designed to address and overcome the keyconstraints of the sector namely:

(i) Lack of Magemem skills. svstems and trained manpower throughout theorganization. Particular weaknesses were identified in manpower planning, budgetingand cost control, maintenance, customer services and data processing capabilites.Under a PPF of US$581,000 approved in November 1986, consultants were employedto do a comprehensive review of the organization and management in theadministrative, technical and financial disciplines and remmend correctve measures.Based on the consultants recommendations technical assistance amounting to 140 man-months was provided under the project for implemention according to the actionplan agreed during negotiations. It was agreed that TPTC with the assistance of theconsultants, prepare an action plan by December 1987 and commence implementationof the recommended measures through (a) resmtrcring of its organizaton structureand management procedures: (b) establishing profit centers; and (c) contracting outthose activities which can be handled more efficiently by other external agencies.

(ii) Lack of forejan exchan,e: TPTC's limited access to foreign exchange had resultedin severe shortages of essentWa spare parts and routine operational requiements. As aresult, the quality of service had continued to decline in most areas. The project wasdesigned. to provide foreign exchange to meet the urgent reqments of services,equipment and matials for rehabilitation and maintenance and to establish sufficientstock levels for project implementation and to achieve a minium inventory level ofsix months by the project completion targeted to be December 31, 1990.

5. Project Inplementation

5.01 Credit Effectiveness and Proiect Start-up: To minimize possible delays, advanceprocurement activity had been unetaken by TPTC, including IDA's review of all

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procurement packages it would finance. By April 30. 1987. TPTC had finalized andsubmitted to IDA for review and clearance. bid documents for 50% (by value) pf IDAfinanced items. The two conditions of effectiveness for the project were: (a) TPTC and theGovernment to sign a subsidiary loan agreement acceptable to IDA, whereby US$23 millionequivalent of the proceeds of tic IDA credit would be onlent to TPTC at 7.92% for 20 yearswith TPTC bearing the foreign exchange risks and including 4 years of grace; and (b) aproject coordinator to be appointed under the terms of reference and conditions of service tobe agreed between TPTC and IDA. Given (i) the early progress made with procurementarrangement and (ii) the experience gained in the sector under the First project, the projectwas expected to be completed by December 31, 1990.

5.02 The Project Coordinator was appointed in May 1987 and the Subsidiary Agreementbetween GOT and TPTC was signed in August 1987. Both conditions being fulfilled withoutdelays, the credit was made effective on August 12, 1987 as per schedule.

5.03 Implementation Schedule: Progress during the first year of implementation was verygood. 60% of the IDA credit was conmmitted by June 1988 with tenders being anmounced foranother 30%. Since 1989, the project implementation activities started to lag behind scheduleand continued to do so throughout the span of the project. Delays due to renegotiation andre-bidding of contracts previously approved led to the postponement of the project compledonby one and a half years. According to Para 2.03 of the Development Credit Agreement theProject Closing date was determined to be June 30, 1991. On April 10, 1991 the closing datewas extended to June 30, 1992 upon the request of the Government of Tanzania. On June 26,1992, in order to facilitate the execution of committed contracts, the closing date was furtherextended to December 31, 1992. The main reasons for the lag in project implementationwere: (i) The Project Coordinator left TPTC 18 months after the project commenced; (ii)even though about 90% of the physical components were committed and cleared by IDA,TPTC's Board of Directors, decided to renegotiate a number of such contracts and in somecases re-bid; and (iii) the Board did not approve any tariff increases between March 1990 andOctober 1991. Issues (ii) and (iii) finally led to the deterioration of relations between TPTCand IDA in 1991. One problem that TPTC and the Bank supervision mission faced throughthe implementation period of the project was that the Minister of Communications wasreplaced five times and therefore a stable relationship with him could not be built up.

5.04 12isbureme: Disbursement had been as per schedule during the first two years ofthe Project. Progress on procurement, disbursement and tariff increases during this periodallowed a rating of 1. Since 1990, disbursements have been constantly lagging and because ofdelays in processing procuremen documentation, the project completion date had to beextended twice. The project rating was dropped to 3 during 1990-92. Although the appraisalreport stated that disburement would be made through FY95 based on standard disbursementschedules for Tanzania, during negotiations it was agreed that the project would be completedby June 1991, by which time disburement would be conpleted.

5.05 Credit All : The original and revised allocation and the actual disbursement bycategories for Credit 1810-TA are shown in Part m. The original allocation was revised onNovember 10, 1988 to reflect the changes in increased financing for equipment and sparesand consultants and training.

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6. Proiect Results

6.01 Physical Results: Even though physical implementation of the project has beenaccording to expectation. the execution became slow and in some cases unproductive. ForexampJe. the Wang computer installud for improving the financial data processing wasineffective because of the obsolescence of its tectmology by the time it was installed. Inaddition, the software that was installed was not totally compatible. As a result, the computeris being discarded and a new system is being reconumended under the IDA-111 project. Thefollowing progress had been made under the project:

(i, Cables and accessories for rehabilitation of the outside plant for which US$4million had been allocated initially and subsequently changed to US$2.1 million hasbeen disbursed and implemented; spares were procured for switches, microwavesystems., power and air-conditioning equipment;

(ii) 1,000 line digital exchanges were installed in Mtwara and Singida in 1992-93;

(iii) New digital exchanges have been installed in Tanga and Moshi and additionaltrunk lines installed in other regions.

(iv) Terminal equipment consisting of 19,000 sets, 420 telex terminals, 140payphones and 315 switchboards were installed in 1990-92;

(v) Call logging equipment (the "tiger" system) were installed in the internationalexchanges;

6.02 Financial Results: During the period between FY85-91 the financial performance ofTPTC was poor both in terms of cash flows and net profitability. TPTC's dramaticdeterioration in performance is highlighted by the change in earnings during this period.From a net profit of Tsh 435 million in 1985, profitability declined to a net loss of Tsh10,295 million in 1989. The financial statements of TPTC are attached as Annex 2. Duringthe period 1987-89 the operational performance was up to expectations but due to foreignexchange losses and interest on loans, the net profitability declined. Some financial indicatorsare presented in the following table:

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Income Statements(Tshs Million)

198S 1986 1987 1988 1989 1990 1991

Telephone 1,148 1.343 2.420 3,536 4.909 8.098 9.457Telex 170 276 560 1.019 1.934 2.680 2,445Telegraph 27 87 53 77 78 78 99Other Revenue 8 301 101 224 227 250 403Telecoms Opera Revenue 1,353 2,007 3,134 4.855 7,148 11.106 12.404

Tdecoms Operating Expesem 631 1,624 2,453 3.701 5,173 8,630 14,600

Net Telecoms Operadng Income 7r2 383 681 1.155 1,975 2,476 (2.196)

Net Postal Operating Income (Loss) 26 (34) 7 10 (37) (254) (412)

Less: Interest on Loans 14 56 309 255 3,615 1.456 795

Foreign Exchange Gain (Loss) (48) (2,328) (3,705) (2,650) (5.269) (494) (358)

Net Profit (Loss) 435 (2,146) (4,666) (6,272)(10.295) (228) (3,761)

6.03 The main reasons for the dismal performance of TPTC were:

(a) The lack of appropriate tariff adjustment measures from 1990 onwards toovercome the high rate of inflation and the devaluation of the Tanzanian Shilling.Whereas inflation over the 6 year period 1985-91 was around 1,000% and whereasthe Tanzanian Shilling devalued from an exchange rate of Tsh 16,50 = US$1 in 1985to Tsh 225 = US$1 in 1991, tariff increases amounted to only 300% over the sameperiod. As a result of the imbalance between increases in costs and revenues,operaton and maintenance expenses increased from 14% of gross operating revenues(GOR) in 1985 to around 76% in 1991.

(b) High level of bills receivables continue to be a major bottleneck to theliquidity position of the organization. In 1987, bills receivables amounted to theequivalent of 569 days of revenues, resulting in a negative internal cash generation ofTsh 3,064 million. The shortage of liquidity and short term financing led to negativeworking capital during the period 1988-91, which has in turn impeded maintenanceand routine operations. The shortfall in worldng capital is reflected by the decliingcurren ratio from 2.3 in 1985 to 0.6 in 1991. The high level of receivables is theresult of (i) poor collections policy and (ii) delays in billing. A major objective of theIDA II project was to institute an effective billing and collections system. IDAsupervision missions had during 1987-89 made regular 80/20 analyses to implement aincentive based collections procedure for the higher-revenue yielding 20% of thecustomers. Consultants had made various recommendatons, however therecommendations were never effectively incorporated over any reasonable period. In1990, a collections policy was in effect and efforts were made to visit customers(including visits by supervision missions) with substanial oustandings and adisconnecton policy was approved but never stricdy enforced. By early 1991 sincethe measures were not consistently implemented the collections policy did not achieve

expected results. During 1990-92 the billing system deteriorated further to the extentthat the amount of outstanding debts to TPTC could not be ascertained with any levelof accuracy. The issue was highlighted in the Auditors Report of 199f. Under theIDA III project, a study is underway to determine accurately the level of outstandingbills receivables.

(c) In addition to poor collections and delays in billing, there is a high level ofnon-billing present in the sector. It appears that at least 30% of the traffic goesunbilled. This problem had been highlighted in IDA supervision reports andrecommendations to improve the situation were made in 1990. Under the IDA IIproject, funding was made available to finance the "Tiger" systern, which had beeneffectively used in many countries to overcome the problem. Even though thesystem was installed in 1991, its impact was not up to expectations. It is apparentthat non-billing continues to be a major hinderance to the profitability of theorganization. As one of the objectives of the proposed IDA III project, technicalassistance will be provided to institute stringent controls on the billing and collectionsprocess.

(d) The continual devaluation of the Tanzanian Shilling has probably been themost binding external constraint to the financial deterioration of the entity. Sectorssuch as telecommunications, where the foreign currency component of capitalexpenditure is almost 80% of the investment program, have been most seriouslyimpacted. In TPTC, foreign exchange losses as a result of currency devaluationincreased from Tsh 48 million in 1985 to a staggering Tsh 5,269 million in 1989.The problem had been exacerbated by the refusal of the Treasury to accept TPTC'srequest to make debt service payments to the Treasury in local currency. If acceptedthis would have produced a completely different performance scenaro for the entity.The issue of carrency had been addressed in the IDA U project from the appraisalstage. TPTC was required to present to IDA a proposal for restructuring byDecember 31, 1988. However, no proposals were prepared until 1990 when the Banktook a position to discontinue processing the IDA m credit unless a restructuringproposal was presented. Only the organization's debt has been restrctred. As partof the restructuring process the Govermnent assumed US$34 million equivalent ofTPTC's debt. This considerably improved the financial situation, reducing foreignlosses from Tsh 5,269 million in 1989 to Tsh 494 million in 1990 and Tsh 358 in1991. TPTC will be completely restructred under the IDA m project to maintain aDebt Equity ratio of 1.5 from the dtird year of effectiveness.

6.04 It is worth noting that although operating expenses increased, expenses on salaries andwages actally declined from 19% of GOR In 1985 to 13.3% in 1989. The failure to increasestaff compensation in the face of hyperinfiation led to a demoralized work-force and thereforesubstantal inefficiencies crept into the organization which further affected the organiztion'sperformance. Under the IDA II project, TPTC was required to institute an incentive schemeto improve performance. The scheme was introduced in 1990 on an experimental basis incertain regions for a short period. The scheme did not prove successful becuse of theinability to meas=ue performance for the operational/engineering staff and therefore wasabandoned shortly thereafter. In 1992 an incetive scheme has been introduced which appears

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to be successful. Approximately 30% of the staff have received bonuses during the first 2months of the program.

6.05 The financial situation of TPTC reached its lowest ebb in 1989, when it wastechnically bankrupt. The Organization had a net negative equity of Tsh 19.456 millioncomprised primarily of accumulated losses amounting to Tsh 22,734 million.

6.06 Throughout most of the project period it was never possible to take any correctiveaction based on the rate of return and self financing indicators as all financial and accountingdata or information was always too late. This constraint, highlighted during the completionreport of the First IDA project, was addressed during the first year of inplementation of theIDA II project through employrnent of consultants. The Rate of Return on Fixed Assets (of ateast 12%) as defincd by IDA, covenanted in the Project Agreement was complied with. Itmust be mentioned that this rate of return as calculated umder IDA's prescription does not takeinto account interest on loans and more importantly, foreign exchange losses. Since 1990,financial statements have been consistently delayed and inaccurate (as reported by the externalAuditors).

6.07 Human Resource Developmen: The project by supporting the telecommunicationstraining institutions in Tanzania and through various fellowships and tramining programsoverseas contributed to considerable strengthening of the human resource support of TPTC.Under the IDA II project about 28 officials have been provided overseas training and about120 staff-months of consultants have been funded to provide training in Tanzania. Also,about 17 fellowships were offered courses in management of training functions and about 4fellowships in post graduate studies in telecoms technology and management. Hardware andsoftware for PC trainng system have been installed. Training equipment for satellitecomnmnications was procured but has not yet been installed.

7. Project Sustainabilitv

7.01 A reliable telecommunications sector is crucial to the sustained economic recovery ofTanzania, The main linkages between telecommunications and economic recovery are (i)information requirements of business and government; (ii) the cost to the economy of anunreliable telecommunications network; (iii) the fiscal implications of an efficienttelecommunications opertion; and (iv) the sector's importance as a foreign exchange earner.Investment in the telecommunications sector therefore has to be continuous process.

8. Bank's Perfonnance

8.01 Despite the Bank's best efforts the Borrower's financial performance deteriorated andit went into bankruptcy over the project period. The Bank has made a positive impact on thephysical and instiutonal development of organizaion. In the design of the project, the Bankcould not have foreseen the insttutional difficulties that arose in implementing tariff increasesand other essential program like capital restucring, however, by taking a firm stand in 1991to suspend processing the third project wi61 the backing of major donors, it was able toinstitute the necessary policies and agreement through conditionalities requisite for thepreparation of the third project. Bank's support for this has also attracted cofinancig tosupport the IDA II and HI projects.

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9. Borrower's Performance

9.01 There have been several major lapses on the part of TPTC in achieving performanceindicators presented in the Staff Appraisai Report. During the project period, TPTC's netprofits went from Tsh 435 million to a negative TSh 10.3 million. Annex 3 contains thereview of TPTC's performance in comparison to the performance indicators mentioned inAnnex 12 of the SAR. The most critical lapse has been in financial management rather thanoperational performance primarily in the area of billing and collections and delays inincreasing tariffs in line with inflation and late submission of unaudited and audited financialstatements. Since only the Government had the authority to increase tariffs, it was notentirely TPTC's fault that tariffs were not increased as required, however, even when TPTCwas empowered to raise tariffs they did not do so effectively. Oth'er problems includedinability to complete on time, action plans and implementation of capital restructuring andmanpower planning.

10. Proiect Relationships

Bank relationship with the Government and TPTC were initially good but had deteriorated inthe light of TPITC's poor perfonnance. The relationship has now been restored as it hasbecome clear that IDA's concerns were essentially in the company's best interests.

11. Consulting Servic

11.01 Consultancy services and technical assistance comprised about 13% of the IDA credit.Consultants were initially employed under the PPF to undertake a comprehensive review ofthe organization and management in the adnministrative, technical and financial disciplines,identifying weaknesses, and have recommended corrective measures. The assignment wascompleted in 1987 and formed the basis for an institutional restructuring, manpower andtraining program for the project. During the implementation of the Project, consultants wereemployed to provide assistance for engineering activities, namely project planning, MaterialsManagement and data processing capabilities. The assignment covered transfer of managerialexpertise to TPTC. The consultants' performance in the implementation of billing andfinancial systems had been less than acceptable. This was because of the lack of coordinationbetween the consultants and TPTC. As a result, the financial and billing systems were noteffectively established and has been earmarked for re-implementation under the THird Credit.Consultants were effectively employed in performiing Fixed Assets revaluation which wascompleted in 1992.

12. Proiect Documentation and Data

12.01 The credit and project agreements 1810-TA were appropriate for achieving projectobjectives in the key organizational and financial areas. The Appraisal Report of the projectprovided a useful framework for the Bank and TPTC to review implementation. TPTCprovided regular progress reports on implementation during 1987-1990 after which time theywere delayed and infrequent.

13. Rate of Return

13.01 The rate of return for the project is as follows:

1987 1988 1989 l92Q

Rate of Return on Revalued Fixed Assets 11% 11% 12% 16%

The calculations are based on expected revalued cost of assets at US$1,500 perconnected Direct Exchange Line. The rate of return is in compliance with IDA's expectedrate of return of 12%.

14. Lesson Learned From Experience

14.01 The most important lesson that has been learned from this project is that unless PublicEnterprises are held to meeting strict operational and financial targets, they will have littleincentive to take the often painful managerial measures to achieve efficiency and profitability.In this project since most of the components of the project were committed within the firsttwo years, the borrower had almost no incentive to fulfill conditionalities. In fact, it was onlybecause IDA took a firm stand to suspend processing the third project that many of the criticalelements like capital restructuring and tariff increases have been achieved. This project alsoprovides evidence of problems that may arise in fast disbursing projects. Another importantlesson that is learned from the project is the importance of regular tariff adjustments in linewith inflation for the sustained financial viability of the telecommunications sector.

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TANZANIA

SECOND TELECOMMUNICATIONS PROJECT(Credit 1810-TA)

PROJECT COMPLETION REPORT

PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE

1. PREFAC PA RT 1

- This Project-Completion -Report. (PCR) presents a review ofCredit 1810 - TA of SDR 17.9 Million (USS 23.0 millionequivalent) for the Second Telecommunications Project of theTanzania Posts and Telecommunications Corporation (TPTC) fortelecommunication development. Credit 1810 - TA was approvedand was declared effective in August 1987 and was closed inDecember 1992, 12 months behind schedule.

The PCR is based. interalia, on the Staff Appraisal Report;the Credit, Guarantee, and Project Agreements. supervisionreports; correspondence between the Bank and the Borrower

2. EVALUAT&IQp SMABX

2.1 OB ECTIVUS

The current deteriorated state of the Tanzaniantelecommunications network and consequent poor quality of alltelecommunications services are severe constraints onTanzanian economic development, particularly of theagricultural and other productive sectors which play a keyrole in the Tanzanian economy. The project aimed at reducingthese constraints through rehabilitation, building up thesupply of spares, and limited expansion of physical facilitiesto improve overall performance and to ensure that the now andrehabilitated assets were maint;ined.

A further objective is the institutional development of TPTC,with special emphasis on utilisation of financial andtechnical tools to improve management performance andefficiency.

2.2 JIumemntatlon Exoerience

Substantial delays in loan effectiveness were caused initiallyby loan disbursement process/procedure to Tanzania. This washowever later streamlined, by greation of special A-c'bynt inDeutsche Bank, New York, Branch. The project: was

.. -~--'--j b* in December, 1992 about a year behindthe original appraisal schedule. Delays in civil worht andlack of cables for Moshi and Tanga delayed the completion ofoutside plant works. In this case, the local cable ne,tworksa substantial part of cables and accessories under the projectwere utilised for rehabilitation, operation and maintenancedue to lack of foreign exchange for this purpose.

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Despite these factors, TPTC's efforts in successfullyprocessing procurement and in the executing the projectcomponents resulted in timely implementation of the project.

2.3 Besult

The projects physical targets were achieved as planned. Thefinancial perform4nce of TPTC over the project period (1987 -92) was satisfactory. The tariff raise and TPTC's subsequentaction incorporating a trigger mechanism linking internationaltariffs, to currency devaluation has helped TPTC's financialperformance.

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THE PJROET_

1. BBGON

TPTC was established by the Tanzani3 Posts andTelecommunications Corporation Act of December 2. 1977,-following the break-up of the East African Community. TPTC isan autonomous government - owned public corporationresponsible for all domestic and international postal andtelecommunications services in Tanzania. It commencedoperations on February 3, 1978. In addition to the publictelecommunications network operated by TPTC, dedicatednetworks exist to meet the specialized requirements of thepolice, military, railway and civil aviation services.Private users are licenses to operate radio link services inareas inadeqgately served by the public network. Tanzania hasno telecommunications manufacturing industry. TPTC isresponsible for the establishment expansion' operation andmaintenance of all local, national and internationaltelecommunication services. The national development plansgive priority to rural development and dispersal of thedevelopment efforts. In accordance with national objectives,TPTC directs its yearly investment programes towardsimproving the poor quality of existing services and addressingthe heavy demand for new telephone connections to provideaccess to the Telecommunications network.

2. PIIQJT OJETIVESf AND DESCRI

2.1 Proiect obiectives

The current deteriorated state of the Tanzaniantelecommunications netw7rk and consequent poor quality of alltelecommunications services are severe constraints onTanzanian economic development, particularly of theagricultural and productive sectors which play a key role inthe Tanzanian economy. The project aims at reducing theseconstraints through rehabilitation, building up the supply ofspares, and limited expansion of physical facilities toimprove overall performance and to ensure that the new Andrehabilitated assets are maintained. A further objective isthe institutional development of TPTC, with special emphasison utilisation of financial and technical tools to improvemanagement perfomance and efficiency.

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2.3 Prolect Description

The prolect comorises:

a) Rehabilitation of cables and subscriber dist ributionnetworks and provision of equipment to relieve trafficcongestion to improve quality of service;

b) Upgrading of maintenance by:

i) strengthening maintenance units;ii) upgrading stores, garage and workshops;iii) providing tools, instruments, spare parts and

specialised vehicles.iv) partial financing of recurrent maintenance costs;

c) Provision of ancillary equipment, power andairconditioning; computer hardware and software, civilworks materials and training equipment.

d) Provision of fellowships and staff training.

e) Provision of consultant services to enhance TPTC'scapabilities in project planning, monitoring and control;equipment installation, operational and maintenance;finance and accounting; stores and material management.

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3. S?AFP A31? AND PEMSC= FINANCIN

The World Bank Staff Appraisal Report No.6728 - TA of 5th May,1987 is the blueprint of the project. The size of the projectand the cost by category is a shown below:-

. ~ MILLION USiITEN

LOCAL FOREIGN TOTALCOST COST

1. Local cable Network 2.0 6.3 8.3

2. Switching equipment cost 0.4 13.7 14.1components and spares

3. Radio and Transmission 0.4 5.5 5.9Equipment, Components andspares

4. Tolephones, Teleprinters 0.6 3.2 3.8and switchboards

S. Earth Station 0.4 9.2 9.6

6. Vehicles, Power Plants.Airconditioning, Repair 3.S 3.2 6.7Centre, Workshop equipment,training equipment, Civilworks, Materials and . _ .spares.

7. Technical Assistance and 0.3 3.4 3.7TraininS

8. Physical Continsencies 0.4 2.2 2.6

9. Price Contingencies 0.3 2.3 5.3

TOTAL PROJECTS COST. 11.0 49.0 40.0

In conceiving the Second Telecommunications Project, the Worid BankStaff Appraisal Report looked at the total network requtrementfirst. Projects which could attract bilateral aid/loan wereidentified and IDA undertook to finance the remaining projectswhich although could not a-.ract bilateral aid/loan are ndcessaryprojects for efficient performance of the total network.

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The project financing is distributed as follows:-

MILLION USSSOURCE __________

LOCAL FOREIGN TOTAL % TOTAL

IDA _ 23.0 23.0 39

AfDB _ 5.0 5.0 8

ITALY - 10.0 10.0 17

SWEDEN - 11.0 11.0 18

TPTC 11.0 - 11.0 18

TOTAL 11.0 49.0 60.0 100

The project foreign costs of USS 49.0 million equivalent wouldbe financed by AfDB, Italian Aid, Swedish Government Aid andthe IDA Credit. Local currency financing, estimated at USS11.0 million equivalent, would be provided by TPTC throughinternally generated funds.

The IDA Credit of USS 23.0 million equivalent would be on lentto TPTC at 7.92% interes for 20 years including a 4 yearsgrace period. The grants from SIDA and Italy will be on lentto TPTC under the same concessionary terms as to the-Government. The loan from AfDB will be on lent to TPTC on thesame terms as the IDA Credit.

TPTC would bear the foreign exchange risks. The execution ofthe subsidiary loan agreement between the Government and TPTC,acceptable to rDA is a condition of credit effectiveness. TheIDA financed segment of the program comprises high prioritycreditical elements, particularly for spare parts, maintenanceand institutional development and can stand on its own, crosseffectiveness conditions are thorefore not required.M reover, the parallel financing AfDB, SIDA and the Italian-aSwernment is largely confirmed.

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4. STATUS OF FIJNANCXXQ OF VARIOUS PQIECTS BY OTHER DONORFIfNCIER IX THE SECOND TELECONUN ICATION PROJQC.

4.1 AIML LOAN:i

USS 4,550,000 have been made available by AfDB for theprocurement of two 4,000 lines each digital exchanges forKigoma and Bukoba and for the purchase of microwave radioequipment to link Tanzania with other countries in KBO region.These are lines across the borders to Rwanda, Burundi asUganda. KB0 was the executing agency for the Project.Fujitsu represented by Marubeni and Siemens have been thecontractors for the supply of switching equipment and radioequipment respectively. The exchanges and .;adio systems havebeen commissioned.

4.2 ITALIAN FINANCING:

Bilateral Aid

Italy made available 11,270 million Liras for the supply andinstallation of a Standard A Earth Station, including powerplant. Factory Training to six TPTC staff has been provided.The Standard A Earth Station has been commissioned. TPTCfinanced and constructed civil works. Also, made availablefunds, USS 3,766,870 for the supply and installation of Nwanza- Musoma 34mb/s digital microwave system. The equipment hasbeen installed and it will be commissioned shortly. Also,factory training to TPTC staff has been provided.

4.3 SIDA ASSISTANCE TO TPTC

During this period SIDA's assistance comprises of thefollowing elements:-

a) Consultancy contract including reimbursables related tothe services as specified in the Specific Agreement.

b) Pellowships/training for TPTC staff which had a directrelation to the programme.

c) Import support Funds for 0,e Implementation of theSIDA/TPTC projects.

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Funds gbtained:

The SIDA/TPTC Specific Agreement in cooperation amounted toMSEK 45 for training and comprised item(a) 41MSEK for Importsupport and item(b) 4 MSEK for consultancy. The portion ofSIDA Import Support Funds to TPTC was annually agreed uponbetween the Treasury and SIDA. thus the amount couldincrease/decrease over the (four years) period of paramountimpor.tance was of course TPTC's request to Treasury for suchfunds. The Import Support Funds was used by TPTC a follows:-

a) Rehabilitation of part of Dar es Salaam Network andcommissioning of Operation and Maintenance Centre (OMCI.

b) Rehabilitation of Singida. Dodoma and Zanzibar networks.

c) Updating of tne TPTC Development Programme - i.e. MasterPlan for Telecommunications Development -Tanzania and TRP- TelecommuAications Recovery Programme.

d) Importation of various telecommunication spares andupgrading the Staff College.

4.4 JAPAN:

Japan has provided USS 10,0 million for the following:-

i) Rehabilitation of the Dar es Salaam cable network inOysterbay, Upanga, Government offices and President'soffice areas. (Phase 1)

ii) Provision and installation of:-

a) Container type (3000L) digital telephone exchangewith standby engine at Oysterbay and a junctioncable between Oysterbay and Dar es Salaam Central.

b) Container type digital telephone exchanges withstandby engine (7000L) at Pugu Road, (3000L) atWageni, (1000L) at Tabata.

4.5 BDI&IDh

Belgium has prov.ided (USS 6.4 million +,for the following:-

i) Provision and installation of 2000 trunks IntetnationalTelephone Exchange (ITE)

ii) Provision and installation of 1000 line digital exchangeand 34 Mbit radio link to Kigambon'i.

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4.6 6 M:

CANADA through CIDA has provided Canadian $9.7 million forproviding the following:-

Automatic Number Identification (ANI) equipment (exchanges toallow for International Subscriber Dialling (ISD).

a) Dar-es-Salaam - 2000Lb) Pugu Road - 5001 --

c) Wageni - SOOLd) Kurasini - 2000Le) Songea - IOOOLf) Iringa - IOOOLa) Dodoma - IOOOLh) Tabora - IOOOLi) Mwanza - IOOOLJ) Musoma - IOOOLK) -Lindi i - IOOOL1) Kijitonyama - 1000Lm) Ubungo - IOOOLn) Msasani - 1000La) Arusha - 1000L

4.7 FRANCE:

France has provided a soft loan of 12,450,000 FF for thesupply and installation of a 2000 Trunks Dodoma digital telexexchange. Training to TPTC staff has been provided andcommissioning of the system is in due course.

4.8 ITU:

Through ITU assistance programme, TPTC has received 29 telefaxmachines, and 42 PBXs.

4.9 TPTC/BANK OF TANZANIA:

JYen 149,906,000 was made available for provision of a140/Mbit radio link between Dar es salaam ( Central- PuguRoad - Wageni).

4.10 IDA - CREDIT:

The second IDA Credit amounting to US 23,000,000 equivalent toSDR 17,900,000 was obtained in August, 1987.

Two agreement associated with the credit. namely DevelopmentCredit Agreement (DCA) and Project Agreement (PA) were signedon 16th June, 1987 and became effective on 17th August.1987.The credit was reallocated and used as follows:-

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SECOND TELECOMMUNICATIONS PROJECT

STATUS OF CIEDIT ALLOCATION AS AT 31/12/1990

COST IN U.S.*

DETAILED CATEGORY ORIOINAL AMOUNT UTILISEDS5NO. DESCRIPTION ALLQ=ION RE-ALLOCATION AS AT31/12/1992

1. Cables andAccessories 4000000 2f897P00 3851311.06a) Wooden poles 803539.00b) Drop-wire 375534.71c) Open wire and joining sleeves 319497.14d) Cables & Accessories 948952.15e) Tools and-other

cable accessories 4000000 2897000 1413288.Q§

3,8S I? 11. 06

2. Tanga and moshi DigitalExchanges. Additionalexchange Trunks,Local Call Timing 5p0001 000 500;000 3724598.97and ANII

3. Teleprinter New terminalsand spares. 15000 81p00O 763028.31

4. Telephones and coins Boxes:=* -ordinary Telephone

sets 960.000 600,000 573783.41-secretarial Telephonesets 7S4000 500900 417124.98

-Coins Boxes 1S9000 17;000 16475l.89

S. soL3cbboards s50QOOo 340O000 1,477165.21

6. R'MOSflitation ofMSNarw and SingidaCrossbar Exchanges 3SF00 309000. 104 288.69(New Rich)

7. Nicroware and UHF ,009000 10000Equipment

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COST IN U.S55

DETAILED CATEGORY ORIGINAL AMOUNT UTILISEDALM. DRSCRIPTgm AkCION RE-ALLOCAION AS ATSI12121992

8. Rural line carrierEquipment 500000 5,000

9. Multiplex,VHF andHF including RadioCall Equp. 1000000 1,800/000 469496.70

10. Rehabilitation ofinternational 300000 270p00 271,586.50Telex Exchange -

11. Spares for TelecommEquipment 2500000 390§ooo 4,216,482.45

a)Teleprinters 94750.84b)Switchboards 1476815.02c)Switching Equipment

633290.99d)AirconditioninS Equipment 371732.61e)Power Plant 818156.40f)Automanual BoardsS)Multiplexa and Radio 90885.Q1h)Earth stations 158051.81i)Computer Terminals 41815.00j)External line plantklOther equipment 2500000 24900P)00 S3983.00

12. Motor vehicle and 900000 800000 84 P01.90motor ajiles

13. Computer Terminals - 600000 508286.69and software.

14. Power Equipment andAir condition 500000 800.oo0 1,104033.57Equipment.

15. Consultancy servicesand Training:-Technical Assistance 1900000 2600,000 2p90.166.68-Fellowships - 750000 844,644.62

16. Refund of projectAdvance - 580000-4, 581178.00

17. Unallocated(contingency) 190000 303000 . 61240.82

TOTAL 23000000 23000000 , 23944270.45====e=========s======z2===s====z=2=z$=S-s====- =S=

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S . 0 ,PIJ:.I T o

5.1 Performance f nsultantJ:

Three Consultancy missions have been undertaken in Tanzaniafollowing 2nd Telecommunication. Project IDA Credit 1810 - TA.namely:

- Project Preparation Facility (PPp)- - Implementation of the plan for corrective action of

Institutional Development of Tanzania Posts andTelecommunications Corporation this included thefollowing scope of services:-

- Strategic planning- Planning, Monitoring and Control of Outside Plant

Works in the regions- Operational and maintenance practice- Financial Management planning- Data processing capabilities

- Telecommunication tariff review- Telecommunications fixed assets revaluation.

The consultacy work was perfomed by M/S M.G. Associates ofU.K.

The overall performance was La4w.Aa .4- io 'er

5.2 Suonliers Performance:

Generally the performance of most of the suppliers has beenfair and reasonable. There has been no serious defaults tothe extent of the determination of the contract.

S.3 PERFORMANCE OQ MAIN PROJECT COMSPNENTS

4) Tanaa and poihi Erch anes

The NEAX 61 Digital Telephone exchanges of 6000 lineseach have been performing well *and the contractorcooperated to solve a few problems which have arisen.

ii4*11twara and Sinaida Exchantes:

The FETEX 150 Digital Telephone exchanges of 1000 linesi*ch have been installed and cut-over of the exchanges isexpected shortly.

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Most of the teleprinters purchased under the 2nd IDACredit were OKITEX 500 manufactured by OKI of Japan andsupplied by Mitsubishi Corporation of Japan. Themachines are performing well. 1

iv) Te le0."Os

The telephones purchased under IDA - 2 were automatic andmagneto. Also secretarial sets. The telephones are cperforming well.

v) FtDhongs:

The payphones purchased were supplied by M/S ON ofDenmark. These are still performing well.

vi) Veshicles.

The Suzuki vehicles are generally performing well.Spares are readly available for replacement the partswhich go faulty.

The I8uzu Trooper and Mitsubish maintenance vans aregenerally performing well and spares are also readlyavailable.

The Lancer staff cars have deteriorated very fast. Thereis an indication that these vehicles are incapable ofsustaining the rough conditions of the roads in thecountry. Spares are also difficult to get.

vii) Comptuer:

The computer software packages purchased and installedare functionins well.

5.4 TBAZNIN.:

A total of 25 courses were sponsored ditectly by IDA under theSecond Telecommun% tions Project2S staff attended thesecourses at a totaMbf USS489,917.

A part from the courses which wereodirectly sponsored by IDA,a total of .4 AL...... courses were sponsored under thecontracts with equipment manufacturers/suppliers jidconsultancy services.

I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~'

-25-

S people attended a course in NEAX 61 exchange by NEC /MitsubishilO people attended a course in OKITEX500 teleprinterby mttsubish, 8 people attended a course in FETEX 500exchanges by marubeni corporation in all,a total of 48 membersof TPTC staff were trained under the second IDA - credit.

5.5 OPERATING PERFORMANCE

5.5. 1 TELEPHONE GRJnwF: -

i) - Lines: -

Year Capacity Connected lines

1987 77347 589191988 81214 660581989 82298 730111990 104658 733691991 109054 813071992

(Also see annex ........... for additional data onoperational performance

ii) Existing Facilities:

Telephones: End 198? End 1992

CaPAcity ofTelephone Exchanges 77,347 109054

Automatic lines 60,900 67509Manual lines 16,447 13798No.of TelephoneExchangeAutomatic 31 34Manual 136 163

Number of subscriberconnections (DEL) 58,919 81307

Number of telephones(total) 122,600 150678 -'

Number of waitig list 74,460-4. 134336

Number of Radio-CallService subscriber 258 P

Number of Radio CallControl Centres 3 ; 3

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Telegram and telex

Number of telegram offices 100

Number of telex offices 3

Number of telex connections 14251816

Number of telex waiters 20893926

Financial:

Average Revenue per subscriber:- Telephone 24500- Telex 224000Rate of return on revalued sets 21%Operating Ratio (%) 32%Debt service .coverage(tiiiis)- 12-Accounts receivable days 4S

6.0 PROJECT ACEIEVENENTS

6.1 Project Preparation Facility - PPF:

MG Associates Ltd was a consultant under PPF. Theconsultancy diagnosed weaknesses in TPTC's fuctions andproposed remedial measures. This technical assistance waswell perfomed. and is the basis of the out goingrestructuring activities.

6.2 Consultant servicesand Training:

6.2.1 Consultant Services:

MO Associates was contracted to provided assistance forengineering and finance activities, namely projectsplanning, monitoring and control, operations- andmaintenance for finance management and planning,materialsmanagement and data processing capabilities.Tbeassignment also covered transfer of management knowledgeto TPTC. This assistance was Snot well performed toTPTC's satisfaction.

6.2.2 Fellowships:

Overseas training programme was well implemented as 25TPTC staff benefitted from the fellowship programme.

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6.3 PKOCCRBNEVT6. 3~~~~~~~~

A number of tenders were floated, evaluated and awarded.All equipment ordered had been delivered and installed.Procurement detail for each category are contained inAppendix 2.

6.4 TELECOMMS UNICATIONS OPERATIONS:

6.4.1 - Performance indicators

- Time to answer (secs)

The world Bank target for automanual boards and manualboards of spares to seconds has been achieved,due tofitting of spares to operator positions.

- Call Completion Rate:.....Call Completion Rate (X) for long distance:.....

6.4.2 Operator to Operator Direct Circuits:

All regions with exception of lindi have been providedwith direct rinS down circuits to Dar es salaam and otherdestinations with high traffic streams.

Direct Dialing circuits between the regions and Dar essalaam have also been provided to ease the problem ofcongestion.

6.4.3 Monltoring of operators:

Fenograph machine have been bought and fitted to majortelephone group centres to monitor operator performance(malpractice) These are Mwanza, Arusha, Dar es salaam,Tanga, Dodoma, Mbeya, Zanzibar and Tabora.

1992 PSRFORNANCI TARGETS REALISATION

X N<l. ' EST TARGETS JAN. 1992 TARGET ACTUAL X WORK I TARGET I E M A R K S1992 END OF DEC PERF. J<EALISAT.

jtMA PANT CAPCITY -

;1 L I .-J_ Paiu CA

i I .1 i)ar es Salaam 5801ti 68320 65288 12.5 961. ;; i:'thers 88010 9406Q 91927 4.5 98

j I .3 'Ivota.l 146026 162370 157215 7.7 97^ .. ~. ._ . ._ _ , _ ._ _. _ ....... S:CARC(E AVA I LABI -

I :: . | ew. . 11 ITY OFl Hh~~~~~~~~~~~~~~~~~~~~MTEltI ALS

,; . xchange Capacity

| ' 1 i)ar es Salaami * 37190 47800 42430 14.1 89.; . I . 8 ')t.lers 67468 80600 72340 7.2 90-1 . Ei'fotal 1104668 28400 114770 9. 689

* 3 C.rnnelted DRIss(Year l(nd)

|2.:~J .. i r es Salaam 32486 36930 34036 4. tl 92II;.. .2, others 43883 50070 47270 7.7 94(: :2 .3 'ITotal . 76369 87000 81306 6.b 94I. -. .-- , _.________ _.. -~

l .3 lxExchange Fill (X) L,ACK O'F EXCII.i IrXVANa.7;IIN DUE TO

:.:I. Is . t ar es; S;alaam 87 77 80 8. .: 96 (NAVA1ILABILITYj ; 3. UL : ther. 65 62 65 0.5 W5 OF MATERIALSl; 33.3 Tot.al 73 68 71 2.9 96

i .. .. ..~~~~~__ _ __ __ _ __ __ ___ .. .. ........_ a .... ............... .__... .. ___ _._

199* PERFOR9AKCS TARGETS RIALISATIOt

No. SET TARGETS JAN. 1992 TARGET ACTUAL X WLR9 Z. TARLET fR E M A R K S1992 END OF DEC IPERF. REALISAT.[1 .__ _ _ _ _ _ _ _ ___.__

Z . 4 Working DELs

^.4.1 Dar es Salaam 32221 26950 33676 4.5 1251... 4.2 Others 43591 37052 47021 7.9 127 SLIGHT FALL IN2 . 4 . i Total 75812 64002 90697 6.4 126 PERFORMIANCE BLUT

--- 1 . .. ._.STILL VERY 11UCH_.:. 5 ' Lines Working ABOVE TARGET

,.Z).i Dar es Salaam 99.2 73 98.9 1362 .5.. . Uthers 99.3 74 99.5 134 '0

Total 99.3 74 99. 135

2.6 Average Number ofFau1ts/DEL/ ear

.. 6 2.7 2.5 2.7 2.6 91.52. . Dares es' ailaam 3 2 3.9 29.9 51.8

MANY VEHICLES2.7 Z of Faults Cleared OFF THE ROAD DUE

(National) TO OLD AOERESULTING IN

.7i .; Within 24 hours 41 60 33 55 LESS FAULTS., _ Wl Within 48 hours 54 70 52 74 CLEARED

Within 30 Days 86 85 89 104

1992 PERFORMANCE TARGETS REALISATION

I' No. bET TARGETS JAN. 1992 TARGET ACTUAL X WORK % TARGET B E M A R K S1992 END OF DEC PERF. REALISAT.

j ".bt No. of STD Circuits *4. o S Cir(Nauonal) 1347 6430 1542 14.5 24. _._ .__.._..___..

.9 1 n lernational KxobangeCapacily 2000 2000 2000 0 100

V: V tial Tosne X within.8IJ ;Second:s

|ii .Tn % uiNainal 74 80 74 ( ) 92. T1 U. . IJav es Salaam 75 85 80. 6.7 94.1

i l)l~~~~~~~~~~~~~~~~~~~~IJE To BSAD1- --- ._ ._ .. -- NETWORK

I .opletion Rate

Intltrnational Outg6ing 59 65 64 8.5 !8. 5:. 11 .:;;I nternational Incoming 21 25 21 0 84

I * 11- 3 1 H4atiunal (ST1) 25 40 25 I51-:.11.4 Jlational (Maanual) 68 75 77 13.2 1I2.7I :i. 1I . 1 4) National (Local) 71 75 71 U) 94.71;-.J.6 i.ocal - DSM 60 65 61 1.7 93.8

I .!. . .. _ . _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . _ _ _ _ _ _ _ _ _ _

1992 PERFORMANCE TARGETS REALISATION

; ..ET TARGET' JAN. 1992 TARGET ACTUAL % WORK % TARGET R E N A R K 81992 END OF DEC PERF. REALISAT. I

.i2. Av. Op. Answer Timei within 10 Second$

!; :.12 .1 1t-rnational B0 85 87 8.8 1U2.4:; . 1}.2 Iniand , 54 55 56 3.7 101.8

i * ' Js:.l)4Ing.@Aau 2350 4350 4350 85.1 100

3. 3 .1 :;ubscriber Lines 1809 3760 1816 0.4 48.3 DUE TO HIGHERI ::i.2Z2 kxd ange Fill X 77 86 42 -45.8 48.3 TARIFF MANY

TLXs CEASEDTHOUGH A FEWMORE CONNECTED

1992 PERFORMANCE TARGETS REALISATION

1h. SEI' TARGETS JAN. i992 TARGET ACTUAL X Wlkh V ; TARlGET h E M A R K S1992 END OF DEC OR1F. 1RIEALl:AT.

_..4 ;Working DELs

. :;* Il)ar es salaam 32221 26950 33676 *I.!. 1:;!b| * '4 -;- ; (0liers 43591 37052 47021 '/. j 1!7 3L1UGHl' FALL IN

;; 4.:. j TT l.a1 15~~~~~5812 64002D 80697 6.{ X 1;X6 VEFlDF';){ANC8 BUTI... - Working -- -___ _ _._ . _ -~. _-' 'TILL VERY MUCHto " X Lsines Working . ............. AB3UVE TARGET

1r,.t es Salaatm 9. 73 98.u -1).;"" 13.4:8.:. U | t t.-hrs 99.3 74 99.5 0.14 I14

Tv t.a1 (J9.3 74 99.3 - .'; 135

Averaae Number ofjau I tas/DsI./Year

*i Ne t iona I .. j 2.7 - fj Y 1.;. . *- .K. . es Salaam 3 2 3.9 29. 5 1 . #

MANY VEHIICLES.:' If Faults Cleared (lJii; TIIE OAD DUE

(Ns l.ioni) . TO OLLD AGERE.;U[LTI Nl IN

WI 0.1in 24 hours 41 60 33 -19. '. Sb FAULTSWI t.,hj1n 48 hours 54 70 52 - 4. 1 74 CLEAHRED)! ; ; Witin 30 Days 86 85 89 104

i_.,i t___ . _ .. . _ ._ _ __ _ _ _ __ _ - . ._ _ _ . .... ....

-33 -

6.5 performance of radio and transmission Systems:

6.5.1 The performance indicators in the Radio and Transmissionplants is based on the systems availability and quality.The system availability is calculated from the totalnumber of time the system has been downaguinst the totalavailable time. The system quality is determined bytelling measurements of the noise performance. Thefollowing transmission system exist:

i) HF Systemsii) VHF single channel systemsiii) UHF Systemsiv) Microwave systemsv) Earth Satellite Stationsvi) Overhead openwire line systems

6.5.2 S

HP system was ordered and installed- The system hasthree control stations in Dat es Salaam, Arusha and?wanza. The Dar es Salaam control station is functioningwell, while the Mwanza and Arusha control stations havea problem of which is being sorted out with thecontractor, M/S Codan of Australia.

6.5.3 Single Channel VHF Systems:

The systems are performing satisfactorily after receivingspares from M/S Motorola, Israel.

6.5.4 UHF Systems:

The UHF Radio systems have been operating with a goodsystem reliability and quality. There has beenoccasional degredation of system availability caused bypower failures and equipment failures caused by lightningstrikes especially in Lake and Southern Highlands Zones.

6.S.S Microwave Systems:

These systems have been operating with a good systemreliability and qualitv.

6.S.6 E^sHieEae_f

The two stations. Std k-and Std B have been operatingwith a good system reliability and quality despite powershades Dar es Salaam $6using the standby engines tooperate fully.

-34 -

6.5.7 Overhead open wire line systems:

-The open wire line systems have been operatingsatisfactorily. Major overhauls have made to most of thetrunk routes.

6.5.8 Exchange:

- International Exchange

The 2000 trunk digital telephone exchangecommissioned in 1991 has been operating well. Theexchange has enabled subscriber to haveinternational access after the introduction of GX-5000 exchange and NEAX 61 exchanges.

6.5.9 Other Exchanges:

Most of the automatic digital, crossbar and step by stepexchanges have been operating satisfactorily afterrehabilitation. Also, manual exchanges are operatingsatisfactorily after rehabilitation. Using IDA funds,Mtwara, Singida, Tanga, and Moshi exchanges have beeninstalled. Zanzibar exchanre has been extended by 1000lines.

6.5.10 External line plant:

The external line plant has been rehabilitated and newpairs ( ........ .... . ) have been provided.

.6.5.11 Power plant:

.86 diesel engine generators for various stations havebeen rehabilitated. Also rectifiers for-various stationsplant at Mbeya, Zanzibar and Mwanza have beenrehabilitated. .

New generator sets have been installed at Morogoro,Tabora, Nkoani, Wete, Tanga, Moshi, Kigoma, Kijitonyama,Bukoba and Dar es salaam G.OP, Solar power Generatorshave been installed at 10 stations.

6.5.12 Subscrib terdinals:

i) Telephane and secretarial Sets:

26847 telephone connections have beenmade for theperiod,;987 - 92. 1408 secretarial sets have beenprovide. 90 payphones were installed and arefunctibning.

- 35 -

ii) Telex:

S8S telex installations have been achieved for the-. period 1987/92.

6.5.13 Spares for telecommunication equipment,cables and cable accessories

Some of the cables and accessories were used forrehabilitation and expansion of the localtelecommunication network and installation of newexchange.

Due to availability of materials and spares purchasedunder 2nd IDA and other Donor funds there has beensignificant improvement in the performance of thetelecommunications network. From 1987 - 1992, telephoneexchange connections have grown at an average-of about4475 per year.Total working lines (DELS)bav6 ntureasedfrom 59013 in 1987 to 81,307 in 1992. Telex connectionshave also increased from 1425 in 1987 to...............in 1992. Other performance indicators have shown progressdurins the project period.

7.0 OTHER ACHIEVEMENTS:

Other benefits from the second Telecommunications projectare the additional revenue to TPTC and the non -quantified economic benefits to the country as a whole.Such benefits are reduction in fuel costs, improvement inefficiency in transport etc. The economic benefits by fatexceeds the direct benefits to users and TPTC.

- 36 -

farJlj

1. Related Bank Loans and/or Credits

Loan/Credit Title Purpose Year StatusApproved

1. Loan 483-EAj/ To help finance 1967 Completed in Early 1974local and longdistance facilities

2. Loan 675-EA1/ To fiuther extend 1970 Completed in June 1975telecommunicationsservices

3. Loan 914-EA1/ To further extend 1973 Tanzanian portion completed intelecommunications in 19812/serces

4. Credit 1173-TA Extension of Services 1981 Completed in June 1987and institutionaldevelopment

[1 Prior to 1977 the tel ons services in East Africa Commmity (Tanzania,Keya and Uganda) were managed by the East Africa Pots and TelcommuncationsCorporation (EAPTC). These Loans were extended to EAPTC.

2/Due to problems in the East African Communhy leading to its breakup the works to beundertaken on te Third Projec were generally delayed.

- 37 -

2. Project Timetable

Item Date plamed Date Revised Actual Date

Preparation November 1986 November 1986 December 1986Appraisal March 1987 March 1987 March 1987Negotiations May 1987 May 1987 April 1987Board Approval June 1987 June 1987 June 1987Credit Effectiveness October 1987 October 1987 August 1987Project Completion June 1991 June 1992 December 1992

- 38 -

3. Credit Disbursenents

Accumulated Disbursements (in USS millions)

IDA FY and Actual Appraisal Actual as a %Six month period US$ Estimates3/ of Appraisal

Estimates

1988July - Dec 1987 2.37 0.2 100Jan-Jun 1988 2.95 0.7 100

1989July - Dec 1988 5.56 2.1 100Jan -Jun 1989 9.18 3.5 100

1990July - Dec 1989 13.20 5.3 100Jan-Jun 1990 15.00 7.4 100

1991July - Dec 1990 19.25 9.4 100Jan-Jun 1991 20.11 11.5 100

1922July- Dec 1991 20.81 14.0 100Jan - Jun 1992 22.08 15.5 100

1993July - Dec 1992 22.66 17.0 100Jan - Jun 1993 23.00 18.5 100

1994July - Dec 1993 23.00 20.0 100Jan - Jun 1994 23.00 22.0 100

1995July - Dec 1994 23.00 22.5 100Jan - Jun 1995 23.00 23.0 100

3/Even though the Appraisal estimates were not officially revised it was expected that theproject would be completed by June 1991 by which time the credit would be completelydisbursed. In this respect, conrary to what is shown in the above table, disbrh avebeen consistently delayed from the third year of the project (1989).

- 39 -

4. Pro2ect Impleunentation

Completion Dates

CATEGORY DESCRIPTION Completion Dates

Appraisal Actual

1. Cables & Accessories June 1990 December 19922. Tanga and Moshi Digital June 1990 August 1991

exchanges. Additionalexchange trunks, localcall timing and ANI

3. Teleprinter New Terminals March 1990 December 1992and Spares

4. Telephones and Coins Boxes: June 1990 June 19925. Switchboards June 1990 July 19916. Rehabilitation of Mtwara June 1990 July 1990

& Singida Crossbar Exchanges(New Exchange)

7. Microwave and UHF Equipment June 1990 June 19908. International Telex December 1989 July 199113. Computer Terninals and June 1989 Incomplete

Software14. Power Equipment and Air March 1990 Incomplete

Conditioning EquipmentiS. Consultancy Services

& Training:- Technical Assistance December 1990 December 1990- Fellowships December 1990 December 1992

- 40 -

5. frlset Cost (USSmillion)IDA Financed Components

ITEMS Appraisal Estimate PCR Estimates

I. Cables & Accessories 4.000.000 2.897,0002. Tanga and Moshi Digital 5.000.000 5.000,000

exchanges. Additionalexchage tnmks. ocalcall timing and ANI

3. Teleprinter New Terminals 1.500.000 815,000and Spares

4. Telephones and Coins Boxes:- Ordinary Telephone Sets 960,000 600,000- Secetrial Telephone Sets 750.000 500.000- Coin Boxes 150,000 170.000

5. Switchboards 1.500.000 1,400.0006. Rehabilitadon of Mtwara 350.000 300.000

& Singida Crossbar Exchanges(New Exchange)

7. Microwave and UHF Equipment 1,000.000 10.0008. Rural Line Carrier Equipment 500.000 5.0009. Multiplex. VHF and HF 1.000.000 1.903.000

including Radio CallEquipment

10. Rehabilitation of 300,000 370,000International TelexExchange

11. Spares for Telecoms 2.500,000 2,900,000Equipmt includingtelephones. switchboards.swiching equipment,air-conditioning, powerplant automanuat boards.workshops. vehicles,computer terminals.

12. Motor Vehicles 900.000 900.00013. Computer Terminals and 600,000

Software14. Power Equipment and Air 500.000 800,000

Conditioning Equipment15. Consultancy Services

& Training:- Technical Assiste 1,900,000 2.500,000- Fellowships - 750,00=

16. Refumn of Prject - 580,000Prepation Advance

17. Unallocated (contingency) 190,000

TOTAL 23M 23000.000

- 41 -

SA. C A

Catetories Oriatnl Allocation Revised Allocation

1. Cables & Accessories 4,000.000 2.897.0002. Tango and Moshi Digital 5.000.000 5,000.000

exchanges. Additionalexchange trunks, localcall timing and ANI

3. Teleprinter New Terminals 1,500,000 815.000and Spares

4. Telqhotnes and Coins Boxes:- Ordinazy Telephone Sets 960,000 600,000- Secrerial Telephone Sets 750.000 500,000- Coin Boxes 150,000 170,000

5. Switchboards 1.500,000 1,400,0006. Rehabilitation of Mtwara 350.000 30,.000

& Singida Crossbar Exchanges(New Exchange)

7. Microwave and UHF Equipment 1,000,000 10,0008. Rural Line Carre Equipmet 500000 5.0009. Multiplex. VHF and HF 1,000,000 1,800,000

including Radio CallEquipmt

10. Rehabiliaton of 300.000 270,000interatioa TelexExdB-

ii. Spares for Telecms 2,500,000 2,900.000Equi includingtelphones, swithrs.switching equips,aircondktlong powerplan automanual boards.workshop, vehicles,computer temnals.

12. Motor Vehicles 900.000 800.00013. Computer Terminals and 600,000

Software14. Power Equipment and Air 500.000 800.000

Coniioing EquipmentIS. Consultancy Sevices

& Training:- Technical Assace 1,900,000 2,500,000- Fellowships 750,000

1i. Refimd of Prjcct 580,000Prepation Advance

17. Unallocated (contingency) 190.000 303,000

TOTAL 2000.000 23. 0

- 42 -

6.

1. Cash flows for the rate of return are based on actual operating results for theoperation of TPTC for the 1987 to 1990.

2. Incremental costs and benefit flows in constant terms are as below:

(Tsh millions)

1987 1988 1989 1990-2001

Incrmental Revenues 1,127 1,721 2,293 3,959

Incremental Costs 635 1,333 1,424 1,994Capital Costs 623 588 718 1,716

Net Benefits (130) (200) 151 248in constant terms (130) (129) 67 79

nernal Rate of Retum 2S%

3. The Project has an estimated fincial rate of return of about 25% based on actalaresults during 1987-90 and a revenue stream to 2001 based on 1990's results. The Rate ofReturn is in line with expectations indicated during appraisal.

- 43 -

7. St of Covenants

Development CreditAgreement(DCAj or ProjectAgreement (PA) Section Condition Remarks

DCA 4.01 Submission of Tariff Policy CompliedAgmement of Tariff Policy by June '88 Not Complied

DCA 6.02 Signing of the Subsidiary Agreement CompliedPA 2.07 Submission of Staff Incentive Scheme by

Jan '88 and implement it by June '88 Complied with delaysPA 2.08 Plan of Action to reduce Receivables

by January '88 CompliedPA 2.08 Submit Debtors aging list every 6 months Not CompliedPA 3.03 Insurance for IDA financed goods CompliedPA 4.01 Timely furnishing of Financial statements

and audited accounts Complied for 1989PA 4.02 Reflect revalued assets and liabilities in

financial statements from FY 1987 CompliedPA 4.03 Provide at least 50% of the funding for investment

requirements from internal sources Not CompliedPA 4.03 Submit before October 1, anmnal requirements

for the year and the next fiscal year andwhether the requirement would be met Complied

PA 4.04 Rate of Return (12%) CompliedPA 4.04 Review adequacy of Tariffs and make

recommendations to the Govermnent Not CompliedPA 4.05 Submit Resource Transfer Policy by June '88

and start implementation by end '88 Not CompliedPA Schedule I Procurement and Consultants'

services nrles CompliedPA Schedule II Appointment of Project Coordinator Complied

Review Manpower plan Complied in partPA Schedule I Institutional restrucuin, establishment

of cost centers Complied in partPA Schedule II Establishment of Computerized Fixed Assets

Register Not fully complied

- 44 -

TANZANIASECOND TELECOMMUNICATIONS PROJECT

PROJECT COMPLETION REPORT

8. MISSIONS

STAGE OF PROJECT MONTH/ NO. OF DAYS IN SPECIALIZATION PERFORMANCE TYPES OFCYCLE YEAR PERSONS FIELD REPRESENTED RATING STATUS PROBLEMS

Ibrough Appisal 1/86 1 2 Engineering11/86 2 10 Finance+Engineering

Appraisal throughBoard Approval 3187 3 10 Finance+Eng. +Postal

Board Approvaldhrough Effectiveness -

Supervision 12/87 2 8 Finance+Engineering

4/88 1 14 Finane 1

9/88 2 16 Finance+Engineering 1

5/89 1 7 Finance 1

12/89 2 7 Finan+ce.Engineering 1

a 7/90 1 6 Finance 3 No tariff inceasesand finacial resncring

*)3191 2 15 Finame

*)11l91 3 5 Finazwe+Engizwetrng

) 6/92 2 12 Financ+EngWneug

*)10192 2 10 Finamce+Enginering

NOTE: j) oint minam for do second W ro pdoject (supevisiont) and d i UItd ponwiect (pznc pr4ppawu amdapais).

-45- ANNEX IPage l of 2

TAMZAIA POSTS & TELE ICATIOfS CW. ......................................... ................................................. ..

Itm Stat_mts.................

(TM atllt on)

TIUI9 WmSA 19 166 196 116 119 1990 199.............................. .... ..... .... ..... .... ..... .... .. ..... ..... ..

Tetuwo 1.145 10348 2.42 3.536 4.99 6.09 9.,3tebs 1T0 276 s0 1.019 1.9, 2,4W 4.0To1q.ea 7 a n 53 77 7 a

,o4 ....... ....... ..... ...... ....... ....... .. .....

Gross Teeosm _rs:qI tevws 1,345 1, 3.034 ..6 6., 10.7 13,43Ot9e GM S 301 101 2 w 2 la

, ........... ....... .......... ..... ........... ..... .......... ...... ........ ...............

Tel, i _ aprainflo m l-_ Oas 3.134 4,M Tm %0 107 13,0"

........ *.................

11stloes 25 356 476 MS 6 1.434 I.mi Nfald toniflS@ 110 801 1.32 2,.5 2.819 3,9 4.1

Others 148 236 301 573 1.09 1.4 1'WOa5?ole1ton 39 1s5 34 2 306 373 or

,......... ...... ......... ..... ......... ..... ......... ..... ......... ..... ........... ...

Total qeottq buwas 63 1.6 2,453 3,1 5is 73 8,8Ado to Pav fair I. (47?)

NI TELEu 01MATIG WOOi 723 33 "5 1,155 1,97 3.,83 4,51

Net Paost Opeative tmm (Los 26 (34) 7 10 (37) (5) (416)

LaS: Interst On Loam 14 56 309 2 3,615 1,456 1,"4Not t-Operatif "its (Lou) (I11) (93) (4,25) (249) 33Foreign l ew Gin S) (48) (,32.) (3,M0) (2,450) (5,20) (1.924) (1O152)

....... ........ ....... ....... ....... ...... .......

NIt I (LOP) 66 (2,146) (4,1) (5,909) (9.M7 ) m I.501

staff 2iontt aYu 251 0 405 6 50 soSo 67

0. . 0.. .... . 0... .......

Nat Profit (LS") 435 (2,16) (4, U) (6.272) (10.2) (3) 1- - ma- -mi

-46- AziexIPage 2 of 2

TANANIA POTSr TELICGMICATIOS CORP. TAN?

lelaw.e shsts

(Tab Will)

AM$ 195 196 1Sn? 195 19 1f90 191.... .... .... .... . ...

Gre 11s Asset 93n 5,30 6.056 6.40 69,0 ?.W7 11.28Acamalsted 0eprat1un "4 21,S59 2.9W 3.23 3.a1 4.*, 5.02X

Total 11usd Assets 491 3 o. 3 3X,2 6.244

Wwk in Prrep 770 602 1,040 1,202 1,4 2.2S 0Iwnstmns 236 567 619 m 616 93 936

Current Aseuts:-Cah am Ink 0 its 192 315 362 530 549 54 2466Accowa It c.seMlose 1,031 2.159 " 14? 2.055 3.4, 6,054 6,514Las PM. for Doatfut Aects. (MY7)

-foreign Aministration 5.US5 9.40? 1.97 2.469-*tbw ctas1le1 154 174 714 446 101 1.3a*Ihoefte" 191 227 4u 51? 916 1.094 1.343

5 ~~~~~~.. .* ... ....... ... .... ..... .-..... ***** ... ... *. ... ..... ....... .

Total Current Asset 1,.414 2,554, S,22 9.661 14.79 9.?" 14.10

MAL AUlT 2,911 7,314 1O.SS2 14.3 20,361 16,756 21,352mn mu _a mm - _ a m