World Bank Documentdocuments.worldbank.org/curated/pt/184081468025497891/pdf/multi...docut lent of the world bank for official use only rqpo no. 5689-rg staff appraisal port republic

Docut lent of

The World Bank

FOR OFFICIAL USE ONLY

Rqpo No. 5689-Rg

STAFF APPRAISAL PORT

REPUBLIC OF COTE D'IVOIRE

SECOND TELECOMMIJCATIONS PROJECT

April 4, 1986

Industry DepartmentEnergy & Industry Staff

This document bas a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bink authorization.

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CU1RRENCY EQUIVALENTS

Currency Unit = CFA Franc (CFAF)11$1.0 = CFAF 3852/CFAF 1 million = $2,597

FISCAL YEAR

Governuent, ONT and ENSPT: January 1-December 31

ABBREVIATIONS AND ACRONYMS

BOAD - Banque Ouest Africaine de DeveloppementCAISSFAB - Caisse de Stabilisation et de Soutien des Prix

des Productions AgricolesCAA - Caisse Autonome dtAmortissementCCCE - Caisse Centrale de Cooperation EconomiqueDEL - Direct Exchange LineEFF - Extended Fund FacilityEIB - European Investment BankENSPT - Ecole Nationale Superieure des Postes et

Te lecommunicat ionsICB - International Competitive BiddingINF - International Monetary FundINTELCI - Societe drEtat des Telecommunications Internationales

de la Cote d'IvoireITU - International Telecommunication UnionLCB - Local Competitive BiddingLIB - Limited International BiddingKEF - Ministere de l'Economie et des FinancesMPT - Ministere des Postes et TelecommunicationsKTPCPT - Ministere des Travaux Publics, Construction, Postes

et TelecommunicationsONP - Office National des PostesONT - Office National des TelecommunicationsOPT - Office des Postes et TelecommunicationsPCO - Public Call OfficeRCI - Republic of Cote d'IvoireSAL - Structural Adjustment LoanUNDP - United Nations Development Programme

1/ The CFA Franc is tied to the French franc at the rate of 1 FF toCFAF 50. The French franc is currently floating.

2/ As of February 1986.

FOIL OFFICIL USE ONLY


OFFICE NATIONAL DES TEIECOMUNICATIONS (ONT)

SECOND TELECOMMUNICATIONS PROJECT

Table of Contents

Page No.

LOAN AND PROJECT SUMMARY ............ ............................... i-iii

1. INTRODUCTION ............... *................................ 1

Il. THE TELECOMMUNICATIONS SECTOR ................................ 2

A. Background .................. ............................ 2General ................................................ 2Access to Service ............. *...... 2Usage of Service .......... ................. *...... 2Existing Facilities and Quality of Service ............... 3Demand for Service .................................... 3Manufacturing ......... ................................... 3

B. The Entity--ONT . ....................................... . ... 3Organization and Management . ................ 3Accounting System ......................................... . 5Billing and Collection ................... ........... .... 6Accounts Receivable . .... . ,,,,. 7Financial Restructuring ................................... 7

C. Development ............................................. 8Sector Goals .......................................... 8Sector Development Constraints ........................... 8Bank's Role and Strategy .. ............................... 8

-II. THE PROGRAM AND PROJECT .. ... .. ....................... 9

A. Description .......................................... 9The Program ............................... ........... 9Project Objectives ....................................... 9Project Description ...................................... 10

B. Costs ................................................ 12Project Cost ........................................... 12Contingencies .......................................... 13Project Financing .................. 13

This report is based on the findings of an appraisal mission of Mr. O. Issa(Financial Analyst) and Mr. H. Ruud (Consultant) which visited Coted'Ivoire in October 1984. A post appraisal mission of Mr. O. Issa, Mr. R.Ruud and Ms. S. Pai (Sr. Engineer) visited Cote d'Ivoire in February-March1985.

I Tbidocument hmatistddLdbutnand ybeus by epients ody in the pofonnane jof tek oMflk dutieIts cmtents maynototherwim bcdickosed without woid Bank *thurnuxG>

Table of Contents, Continued

Page No.

C. Procurement, Implementation ................................ 13Procurement ........i.................................... 13Disbursements ...........C.............................. 15Implementation ........................................ 15

Performance Indicators .......................... 15

IV. FINANCIAL MND ECONOMIC ANALYSIS .............................o....... 16

A. Financial Analysis ........................................ 16Past Financial Performance ............................ 16Present Financial Position ..................................... 16Future Firsancial Performance .................................... 17Financing Forecast ...................................... 18

B. Economic Analysis ..................... .... 20Tariffs ............................................... 20Benefits ................................. a............ 20Risks ........................................ ...... 0 21Least Cost Solution ..................................... 21Environmental and Health Aspects ........................ 21

v. AGREEMXNS ....................... a..... .. *.*..........& 21

List of Annexes and Charts

;. Basic Telecommunications Facilities (1979-1984) .............. 242. Investment Program (1986-1992) ............... ................ 253. Telephone and Telex Facilities over the Project

Period (1986-1990) ................... ................ ...... 264. Schedule of Disbursements ... ................................. 285. Implementation Schedule .................. 296. Performance Indicators ............................ . ........ 307. OPT Income Statements (Historic) ................ a........ .... 32

OPT Balance Sheet (Ristoric) ................................. 338. INTELCI Income Statements (Ristoric) ......................... 34

INTELCI Balance Sheet (Ristoric) ............................. 359. Forecast Income Statement ................... . . ................ 3610. Forecast Balance Sheet ................. ..................... 37Il. Forecast Funds Flow ........................ ........... 3812. Notes and Assumptions on the Financial Forecasts ..... ........ 3913. Tariffs ...................................................... ...... 4114. Return on Investments ...... ...... ...................... 4315. Consultants Services: Terœs of Reference .................... 4516. Selected Documents and Data Available in Project File ........ 55

Nap: No. IBRD 19007R-Cote d'Ivoire

REPUBLIC 0F COTE D'IVOIRE

OFFICE NATIONAL DES TELECOeMUNICATIONS (ONT)


LOAN AND PROJECT SUNMARY

Borrover: Goverument of the Republic of Cote d'Ivoire

Beneficiaries: Office National des Teleconmmunications (ONT) and EcoleNationale Superieure des Postes et Telecommumications(ENSPT)

Amount; $24.5 million equivalent

Terms: 20 years, including 5 years of grace, at the standardvariable interest rate.

The Goverument yill: (a) onlend $21.9 million equivalentTerms: of the loan proceeds to ONT under the same terms as the

Bank loan to the Goverrment but with ONT bearing theforeign exchange risk; and (b) give $2.6 millionequivalent to ENSPT as a grant.

Projec. The proposed project is an integral part of ONT's 1986-Description: 1990 development plan. al I; is designed to strengthen

ONT to enable it, by 1990, to manage the sector effici-ently. Through physical, institutional and financialrehabilitation, ONT would improve quality of service,extend services to rural areas to facilitate decentrali-zation of economic and social activities and improve itsfinancial situation.

The project comprises: (a) rehabilitating equipment andcable network and providing switching and transmissionequipment to improve quality of service; (b) upgradingthe maintenance organization by strengthening themaintenance units, establishing an electronics repair andinstrument calibration center, upgrading the stores,garage and workshops and providing tools, instruments,spare parts and specialized vehicles; (c) upgrading threemicrowave links and establishing six UHF links; (d)extending telex services to the interior; (e) upgradingcomputer facilities to handle management systems;

ai Though ONT's rehabilitation program is for the three year period1986-1988, it is expected to be fully implemented only by 1990. It istherefore referred to in this report as the 1986-1990 development plan.

(f) miscellaneous equipment including pover equipment;(g) civil vorks; (h) fellowships, staff training andrelated equipment; and (i) providing consultants'services for project planning and implementation,operational efficiency, manpower development, and forstudies including a reviev of ONT's tariff and corporatestructures.

Project The project is expected to benefit all segments of theBcnefits Ivorian society. More efficient use of theand Risks: transportation system, due to increased use of

telecomminications services would reduce costs,environmental pollution and energy consumption_ Theproject faces no unusual risks. The major risk is thatONT could fail to implement the project on time.Significant delays here could threaten ONT's financialviability. Provisions have been made to mitigate theserisks. Consultants' services are provided to assist inthe institutional development.

Estimated Costs:Local Foreign Total

A. Rehabilitation -$ Millions-

1. Suitching 2.8 5.6 8.42. External plant 2.5 5.0 7.53. Telephone instruments &

teleprinters 1.1 2.4 3.54. Transmission 3.8 7.5 11.35. Telex 0.2 0.5 0.76. Power equipment 0.6 1.1 1.77. Computer equipment 0.8 1.7 2.58. Miscellaneous (vehicles,

tools and instruments) 0.9 1.9 2.89. Repair center 0.2 0.5 0.710. Buildings and civil works 0.6 0.0 0.611. Training and consultancy

services 0.4 1.5 1.9

Subtotal 13.9 27.7 41.6

B. Equipment for the TrainingSchool (ENSPT) 0.0 2.6 2.6

C. Financial restructuring 55.9 8.7 64.6

Physical Contingencies 0.8 1.4 2.2Price Contingencies 1.8 3.9 5.7

Total Project Cost 72.4 44.3 116.7

Taxes 12.3 0.0 12.3

Total Project Cost (net of taxes) 60.1 44.3 104.4_ _-_

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Fiacing plan:Local Foreign Total

$ millions-

IBRD 3.5 21.0 24.5CCCE 2.3 14.9 17.2EIB 0.9 7.8 8.7Government 50.1 0.0 50.1ONT 15.6 0.6 16.2

TOTAL 72.4 44.3 116.7

Estimated Disbursements:Bank FY 1987 1988 1989 1990 1991

- $ million equivalent-Annual 6.0 8.0 5.5 3.5 1.5Cumulative 6.0 14.0 19.5 23.0 24.5

Economic Rate of Return: 30Z

Staff Appraisal Report No.: 5689-IVC dated April 4, 1986

!!p: IBRD No. 19007R-Cote d'Ivoire

REPUEBLIC OF COTE D'IVOIRE

SECOND TELCONKUNICATIONS PROJECr

I. INTRODUCTION

1.01 The Governuent of the Republic of Cote d'Ivoire (RCI) hasreqnested Bank assistance in ffnancing a telecommumications project forrehabilitation over the period 1986-1988. The estimated cost of theproject is $116.7 million equivalent, with a foreign exchange component ofabout $44.3 million equivalent. The project costs include about $64.6million equivalent for financial restructuring of ONT, of uhich about $50.1million equivalent vould be borne by the Governament. Local costs include$12.3 million equivalent for customs daties and taxes. The Bank vouldfinance $24.5 million equivalent of total costs; other financinginstitutions wbich bave confirmed their participation are the CaisseCentrale de Cooperation Economique (CCCE) for an amount of $17.2 millionequivalent and the European Investuent Bank for an amouat of $8.7 millionequivalent (En). The implementing agencies, the Office National desTelecommmications (ONT) and the Ecole Nationale Superieure des Postes etTelecommanications (ENSPT), are expected to finance the remainder ($16.2million equivalent) out of self-generated fonds.

1.02 The objective of the project is to improve the telecommunicationssector in t.e following areas: (a) service quality; (b) access to service;(c) ONT' s financial position, organization, management systems andoperational efficiency; and {d) resource mobilization. The maintenanceorganization would be upgraded by strengtbenlng the mintenance UQitS andestablishing an electronics repair and instrument calibration centre.ONTts computer facilities would be upgraded to iinprove billing, collection,accounting and stores ma=sgement. ONT's capital structure andinstitutional capabilities would also be improved.

1.03 The Bank, CCCE and EIB have played a significant role in designinga project for sector rehabilitation and developuent. The Goverument iscomuitted to es toring ONT's financial viability. The Government basalready made available $24.7 million equivalent touards ths objective;another $19.5 million equivalent vill be made avaîlable by the end of June1986 vith the balance of Goverument's contribution of $5.9 millionequivalent being provided in 1987 and 1988 according to an agreed schedule.

1.04 The project vould take five years to complete. This is based onthe Bank's disbursement profile for telecomtzinications projects vorldwideand reflects curre-t ONT management ability and actions already initiatedin ONT for implementation of the project.

Il. THE TECOMUMNICATIC9S SECTOR

A. Background

General

2.01 Authority for the sertor in the Cote d'Ivoire rests with theMinistere des Travaux Publics, Construction, Postes et Telecommunications(MTPCPT). Under the Ministry, ONT is responsible for all publictelecagmunications services while ENSPT is responsible for training of bothposts and telecommunications staff. The inland services vere, up to July1984, the responsibility of the Office des Postes et Telecommunications(OPT), an entity vithin the then Ministere des Postes et Telecommunications(MPT). The international services vere, until then, bperated by a Stateowned company, the Societe d' Etat des Telecommunications Internationalesde la Cote d'Ivoire (INTELCI), which had more autonomy than OPT. On July1, 1984, the Postal and Telecommunications branches of the OPT vereseparated and the Telecommunications branch merged vith INTELCI to formONT. Simultaneously, the Office National des Postes (ONP) was created.

Access to Service

2.02 The average telephone density, at end 1985, vas 0.56 maintelephone lines (DELs) per 100 inhabitants. Greater Abidjan had a densityof 1.69 and the rest of the country only 0.20. These figures, althoughbetter than those in some African countries, are low compared vith those ofcountries with similar GNPs to the Cote d'Ivoire.l/ Greater Abidjan, with24% of the country's population, had 74% of the DELs. Of the remainingDELs, about 9.0% vere in four principal regional cities and 17.0% in about100 towns all over the country. Ninety f'>ur percent of the DELs wereserved from automatic exchanges, the remaining lines being served fromsmall manual exchanges in 79 rural towns. There vere only 60 coin boxtelephones and public call offices. Automated telex service vas availableto 1,790 subscribers, of whom 1,670 vere in the Abidjan area. Telegraphservice is also available.

Usage of Service

2.03 About 78Z of telephone subscribers (84% in Abidjan and 56Z in thesmaller towns) vere privare and 15Z government (11Z in Abidjan and 29% inthe smaller towns). The rest were ONT service telephones. Current statis-tics do not distinguish between residential and business telephones, nor isthere data on the composition of traffic. The average telephone revenue in1985 was $1,370 per DEL, which is higher than in many African countries.

1/ For example: Tunisia had 8.0 for the capital area and 1.1 for the restof the country, Morocco 3.0 and 0.5, Jamaica 5.6 and 1.2, and Zimbabwe7.7 and 0.5 DELs per 100 inhabitants. Even a country like Kenya, withless than one half of RCI's GNP per capita, bqd 4.7 in the capital areaand 0.3 in the rest of the country.

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Existing Facilities and Quality of Service

2.04 At end 1985, total telephone switching capacity vas 81,560 linesand telex exchange capacity 2,750 lines. Aunex 1 shows statistics on the-development of facilities over the period 1979-1985. Service is poor, vithmany outages and long delays in restoration. Call efficiency is poor with60Z of peak hour traffic and 40% of slack hour traffic lost. The vaitingtIme for a dial tone often exceeds 30 seconds. This situation has arisendue to equipment imbalance and poor maintenance. The problem vill bealleviated through the project [paras 3.03(a) and (b)I.

Demand for Service

2.05 At end 1985, lines in service met 72Z of the expressed demand(vorking lines plus registered applicants) for telephone connection; thefigure vas 68Z in Abidjan, 79% in the four biggest provincial cities and86% in the rest of the country. This does not take account of significantunexpressed demand as potential customers are discouraged from registeringby long vaiting times. In many cases, the vaiting time is longer than ayear. FrGm 1975 to 1985 DELs increased 9.0% per year and demand grev at11.2Z per year (Annex 16, C3). Demand is estimated to grov at 6% per yearover the 1986-90 period. ONT aims to meet 80Z of demand by 1992. About74Z of the demand for telex is currently met; ONT plans to fully meet it by1992. The data on demand, quality of, and access to service are taken fromthe 20 year Telecommunications Master Plan, which vas finalized in Harch1985. The work vas financed by the United Nations Development Programme(UNDP) and executed by the International Telecommunication Union (ITU).

Manufacturing

2.06 No significant telecommunications manufacturing industry existsin the Cote d'Ivoire. A study by the Banque Ouest Africaine deDeveloppement (BOAD) in 1981 concluded that due to the small quantities andtechnological requirements, domestic telecommunications manufacturing vouldnot be economically viable.

B. The Entity-ONT

Organization and Management

2.07 ONT was created in July 1984 by Presidential Decrees by themerger of the Telecommunications branch of OPT and INTELCI (para 2.01).This merger vas initiated by the Government to improve the efficiency ofthe sector. The Governmeue later agreed to establish a planning unit atthe Bank's suggestion. The organizational structure of ONT is shown below.

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ONT-Organization Structure

MinisterI (MTPCPT)

Board of Directors

Director

Internal AuditIOperational Inspection

:| Coordination of Regional Activities Regional Offices

Personnel Management, Remnunera-Personnel Department tion, Training

Finance and Budget Finance and Budget, Accounting,Department Procurement

Engineering and In- Engineering and Installation,stallation Department Studies, Programming, Planning

(Planning Unit)

Support Services Garage and Workshops, StoresDepartment

Regulations and Operations,Operations and International and Inland

Commercial Department Commercial Affairs.

This structure is acceptable and contains the essentials for addressing keyissues. The planning unit was established, and its staff trained by theITU. However, its role needs to be enhanced after it has gained sufficientexperience. The role, functions and status of the planning unit will beexamined under the overall review of ONT's organization structure [paras

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2.10, 5.01 (c) aud (<u1). It vas agreed during negotiations that a specialunit vill be established to ̂ oordinate the implementation of the project.The unit vill report directly to the Director [para 5.01 (a)l. Topmanagerial positions as well as other key posts in ONT are held byex-INTELCI staff. The new management vants to improve operationalefficiency. Rowever, its efforts are hampered by poorly defined jobdescriptions, the current remuneration scheme, and the lack of systematicin-service training [para 2.19(b)]. The project addresses these issuesthrough (a) a manpower planning review and preparation of an action planincluding the development of job descriptions; and (b) requiring ONT tofreeze its maupovez at the February 1986 level (except for a fewspecialized categories) until 1990 [paras 5.01(b) and (c)].

2.08 A key factor for the success of ONT vill be its ability to retainkey ex-INTELCI staff. The remunerations in INTELCI vere at least twicethose in the civil service-ruled ONT and since ex-INTELCI staff membersbave good qualifications, they could find other employment. The loss ofsuch key personnel vould hinder the implementation of the project. It isimportant that arrangements are made to retain these people. However, thegovernment is understandably reluctant to take short-tern measures whichcould result in inequities. ONT has recently proposed a aew remunerationscheme for its staff which is inadequate as it does not address all themaupower planning issues. In preparing a manpower plan, the consultants tobe engaged under the project vould also assist ONT in establishing a soundremuneration scheme [paras 3.04 and 5.01(c)].

2.09 ONT headquarters executes the overall control and supervision,formulates and coordinates policy, and has direct responsibility fornetwork planning, major construction and billing. Regional offices handleday-to-day operations and subscriber relations. Due to the prominence ofAbidjan in ONT's activities, the division of labor between the AbidjanRegion and headquarters needs to be reviewed. Folloving the review ofONT's organizational structure, job descriptions (para 2.07) vill beprepared to reflect the vork load at headquarters and at the regionaloffices [paras 3.04 and 5.01(d)3.

2.10 ONT vill require more autonomy in areas such as financialcontrol, setting tariffs, procurement, staffing and remuneration. Underthe project, a study vill be undertaken to examine the potential ofreorganizing ONT under an autonomous corporate szructure and to review therelationship between ONT and ENSPT. Contracts for the services ofconsultants for the reorganization study vill be signed by October 1, 1986and folloving a review vith the Bank by December 1987, the Government andONT vill implement the agreed recommendations [paras 3.04, 3.06 and5.01(d)].

Accounting System

2.11 Before the establishment of ONT, accounts for both Posts andTelecommunications in OPT vere maintained jointly. Under the firstproject, accounting consultants were engaged and, in 1982, separateaccounts vere established for Posts and Telecommunications. The Agent

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Comptable, who is the defacto Chief Accotatant, is appointed by, andreports directly to, the Treasury. Accounts are maintained on a cashbasis. Inventory management is poor. An internal audit section vascreated when ONT vss established but it lacks definition of levels ofresponsibilities and authority. Consultants wlll be hired under theproject to improve management of the accouating system, inventory controland internal audit [paras 3.04 and 5.01(f)].

2.12 Preparation of accounts in OPT vas very slow. Draft 1981accoutts vere only available in 1983; draft accoants for 1984 are nov beingfinalized. To ensure timely presentation of accounts to the Bank, it wasagreed during negotiations that the folloving timetable vill be compliedvith [para 5.01(e)].

Table 2.1: ONT-TIMETABLE FOR PRESENTATION OF ACCOUNTS TO THE R4NR(in Months After End of Fiscal Year)

Fiscal Year Draft Accounts Audited Accounts

1984 (July-Dec) 15 181985 8 121986 7 101987 6 81988 and thereafter 4 6

Billing and Collection

2.13 ONT billing is through a central computerized systea. From July1984, the billing period vas reduced from quarterly to bimonthly. The timerequired to issue bills after the closing date of each billing period hasgone from 40 days in 1983 to 20 days in 1985. Bills are mailed tosubscribers from the telephone accounting center where subscribers arerequired to set;le thelr accounts in person. There is a shortage ofcomputer terminal units at the center to link up vith the computer andsubscrlbers are subjected to long waiting times at the time of payment.Mezsures to settle arrears are being introduced under the project (paras2.16 and 3.15). Follow up procedures for nonpayment exist but have notbeen adhered to. Under the proposed project, equipment vould be providedand procedures 2 / for bill payment and disconnection for nonpayment vouldbe developed and implemented. This would reduce the time required todisconnect service from about 7 months to about 2 months after the billingdate by the end of 1988 (Annex 6) and accounts receivable vould decreasefrom 12 months' billing at end 1984 to 2-1/2 months by end 1988.

p

2/ Alternatives being considered include settlement of accounts throughcommercial banks.

Consultants vill be engaged under the project to suggest improvements inthe billing and collection systems, including introduction of a monthlybilling system. It was agreed during negotiations that a monthly billingsystem vould be introduced by March 1987 [para 5.01(f)].

Accounts Receivable

2.14 At end 1985, accounts receivable vere about CFAF 31 billion ($80million), equal to 12 months' revenues. The amount due from officialsubscribers (governuent and its agencies) vas CFAF 9 billion ($23 million),while the renainder, CFAF 22 billion, vas due from private subscribers. Asignificant portion of the outstanding amount has been carried forward fora number of years. ONT estimates that CFAF 14 billion (about $36 million)is irrecoverable and has requested Governuent's approval to write offCFAF 12 billion in F786 and CFAF 2 billion in FY87. The financialforecasts have assumed that this amount vould be written off the balancesheet in FY86 aad FY87 (Annex 12).

2.15 ONT is taking some measures to reduce outstanding accounts. Thebilling period has been reduced from three months to two months; collectionrate has increased from CFAF 2.0 billion per month in 1984 to CFAF 3.6billion per month in 1985. Further improvements are expected vith thebilling and collection systems to be implemented under the project [paras3.03(c) and 3.04 (v)].

2.16 The Covernuent has agreed to clear its outstanding accounts byFY87. ONT has engaged three law firms to assist it in collectingreceivables from private subscribers. A phased plan to clear the arrears=.-s agreed during negotiations and this is included as a target to measureONT performance (para 3.15 and Annex 6).

Financial Restructuring

2.17 As a result of ONT's veak operational efficiency and debtincurred from previous investments, the Govern_ent and ONT have agreed torestore ONT's financial viability through a restructuring plan which willcover ONT's total financial requirements estimated at $64.6 millionequivalent. The Government has agreed to contribute $50.1 millionequivalent toward this anount, part of which ($24.7 mlllion equivalent) hasalready been made available, while an amoumt of $19.5 million equivalent isexpected before the end of June, 1986, vith the balance being provided in1987 and 1988 according to an agreed schedule. The remaining portion ofONT's financial requirement ($14.5 million equivalent) vill be financed byCCCE in an amount of $5.7 million equivalent, while $8.8 million equivalentof the proceeds of the proposed Bank loan vill be utilized to finance aportion of the increnental operating costs during the project period. Inorder to alleviate 0NT's debt burden, the Government has agreed to pay theinterest on disbursed funds from the Bank, CCCE and EIB loans during 1987and 1988 and convert the corresponding amount into equity in ONT. Thesemeasures should enable ONT to be financially viable by 1989. As acondition of loan effectiveness, the Government and ONT vill present to theBank a financial restructuring plan for the period 1986-88 [para 5.02(d)].

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C. Developuent

Sector Goals

2.18 The country's goals for the sector are:

(a) to rebabilitate and strengthen ONT to establish aviable and vell managed telecommunications entity;

(b) to provide efficient telecommunications services; and

(c) to extend services to the rural areas to helpdecentralize economic and social activities.

Priority has been accorded to rehabilitating existing plant and improvingONT's financial performance and operations and management systems.

Sector Development Constraints

2.19 The principal constraints are summarized below:

(a) Sector Organization: ONT as a government -office'lacks the effective autonomy of an independent entity;

(b) Staffing: ONT lacks job descriptions for most of itsposts resulting in inefficiency and overstaffing;

(c) Planning: ONT's planning capacity is inadequate. Theoveral; utilization of the network, which should be 75Zto 80% is only 50%; and

(d) Maintenance: ONT lacks an adequate maintenanceorganization with well trained staff. This leads tolosses of revenue due to long and frequent outages,to client frustrations due to poor service quality, tohigh operational costs and to reduced equipment life.

Bank's Role and Strategy

2.20 Experience vith Past Lending. The Bank has been associated viththe telecommunications sector in the Cote d'Ivoire since 1974. The firstproject (Loan 981-IVC), approved in 1974, has been completed. It supportedthe 1974-78 program for expanding inland telecommincation services andincluded institutional development components. The project experiencedprocurement and building construction delays. This reflected the poormanagement of the entity and the unfamiliarity of the Borrower with theBank's procedures. The physical expansion component of the project vascompleted but the institutional improvements were not. However, as aresult of Bank involvement in the sector, some improvements have takenplace. The first 20-year Master Plan for the sector has been prepared in

consultation with the Bank.3/ Also, a planning unit has been established(para 2.07). Improvements bave also been realized in the accounting systemsuch as the separation of postal and telecommunications accounts beginningwith FY82.

2.21 Project Focus. Given the experience under the first project, theproposed project focuses on assisting ONT in designing and implementing aprogram for institutional rehabilitation and development. The Bank'sinvolvement is expected to result in lover prices for equipment and

-services procured through ICB.

III. THE PROGRAM AND PROJECT

A. Description

The Program

3.01 ONT's investment program for the period 1986-1990 comprisesongoing works from the 1981-1985 Development Plan and new vorks under the1986-1990 Development Plan. ONT proposes to complete the 1986-1990Development Plan in two phases. Phase 1, which is covered by the proposedproject and will cover the period from 1986 to 1988, includes institutionalrehabilitation and developuent, financial restructuring and extension vorksof the highest priority which will lead to better utilization of existinginvestuents. Phase II, wl.ich includes expansion vorks to meet about 80% ofdemand for telephone service in both urban and rural areas will only beundertaken after successful completion of Phase 1 including a satisfactoryrehabilitation of ONT's financial situation. The total cost of Phase I ofthe 1986-1990 Development Plan is estimated at $116.7 million equivalent,-ith a foreign exchange component of $44.3 million equivalent. Out of thetotal project cost of $116.7 million equivalent, about $64.6 million(including $8.7 million equivalent in foreign exchange) will be needed toset ONT's capital structure on a sound basis.

Project Objectives

3.02 The project has the following main objectives:

(a) improving quality of telephone service through betternetwork balance, improved maintenance andrehabilitation and replacement of old assets;

(b) improving ONT's institutional capabilities in planning,implementation, procurement, operational efficiency,maintenance procedures, financial management, billingand collection, and training;

3/ TORs for the study vere prepared and team members selected in closeconsultation with the Bank. The work which vas financed by UNDP andexecuted by the ITU, vas finalized in March 1985.

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(c) improving ONT's capital structure; and

(d) providing telex facilities to meet business needs.

Project Description

3.03 Specifically, the project consists of the folloving:

(a) rehabilitating existing equipment and cable network andproviding switching and transmission equipment toeliminate traffic congestion and to improve quality ofservice;

(b) upgrading the maintenance organization by strengtheningthe maintenance units, establishing an electronicsrepair and instrument calibration center, upgrading thestores, garage and vorkshops, and providing tools,instruments, spare parts and specialized vehicles;

(c) providing and installing:

(i) equipment for extending telex service to theinterior;

(i) equipment for upgrading three existing microwavebackbone links and establishing six nev UHF links;

(iii) equipment for upgrading computer facilities tohandle billing, collection and management systems;and

(iv) power equipment;

(d) construction of buildings for 14 microwave repeaterstations and 2 satellite telephone exchanges; and

(e) staff training, and about 100 manmonths of fellowshipsfor overseas training of ONT staff. Assurances vereobtained during negotiations, that by October 1, 1986,ONT vill have selected the training disciplines andforeign administrations for fellowships in consultationwith the Bank [para 5.01(g)].

3.G4 The project provides for 75 manmonths of consultants' servicesfor institutional development. Consultants vill review the areas indicatedbelow and assist ONT in implementing recommendations arising from thereviews (Annex 15). Both the Government and ONT have agreed in principleto implement the findings of the reviews. The technical assistance wouldbe in the folloaing areas:

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(a) reviewing ONT s organization and management,including exmining the potential of reorganizingONT under an autonomous corporate structure and itsrelationship with ENSPT;

(b) manpower planning review, including reviewingstaffing standards, job descriptions, andremneration for ONT staff;

(c) designing and assisting in implementing themaintenance organization and the organization ofthe repair and calibration center in Abidjan;

(d) improving procedures for connecting subscribers;

(e) improving the billing and collection systems;

(f) reviewing tariff structure and levels; and

(g) developing a system for managing the radiofrequency spectrum.

3.05 ONT staff has inadequate experience for preparing technicalspecifications and bid documents for international competitive bidding.Consultants will be engaged to assist ONT in this and in the acceptancetesting of equipment. Forty five manmonths uould be required for:

(a) planning the expansion of external plant, power plant,air conditioning plant, switching and transmission;

(b) preparing bid documents and evaluation of offers; and

(c) acceptance testing of equipment.

3.06 Establishing a main.- snce organization, introducing an effectivebilling and collection system, improving procedures for subscriberconnections, and reviewing tariff structures are key components of theproject. ONT would sign all contracts for consultant services not laterthan October 1, 1986. Consultants for the study on ONT's reorganization(including the possibility of establishing an autonomous corporatestructure) vill report to the Goverument by July 1987. The Government andONT will review the conclusions and recommendations with the Bank and, byDecember 1987, agree on a timetable for implementing the agreedrecommendations [para 5.01(d)]. Terms of reference (TORs) for allconsultants' services are in Annex 15. A list of six consultanting firmsas well as the TORs for all consulting services were agreed upon duringnegotiations [para 5.01(h)].

3.07 Annex 3 shows the anticipated growth of telecommunications facil-ities over the project period. Map IBRD 19007R-Cote d'Ivoire shows plannedtelecommunications development in Cote d'Ivoire under the proposed project.

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B. Costs

Project Cost

3.08 The total cost of the project in estimated at CFAF 44.9 billlion($116.7 million equivalent) vith a foreign exchange component of CFAF 17.0billion ($44.3 million equivalent). Project base coft estimates reflectestluated early 1986 prices, and are based on experience with contracteunder the first telecoumunications project and on experience in other coun-tries. The local cost component includes CFAF 4.7 billion ($12.3 millionequivalent) for customa duties and tares. ONT ls liable for customs dutiesat average rates of 40Z for telecoumunication equipment and SOZ forvehicles. The value added tax on local vorks and purchases is 25Z.Anmer 2 gives details of project costs and is summarized lu Table 3.1.

Table 3.1: ESTDfATED PROJECT COST SUMHARY a/

- CFAF Millions - - $ Millions -Local Foreign Total Local Foreign Total

1. Switching 1,085 2,160 3,245 2.8 5.6 8.42. External plant 975 1,930 2,905 2.5 5.0 7.53. Telephone instruments &

teleprinters 435 915 1,350 1.1 2.4 3.54. Transmission 1,465 2,900 4,365 3.8 7.5 11.35. Telex 95 190 285 0.2 0.5 0.76. Pover equipment 210 435 645 0.6 1.1 1.77. Coe',uter equipment 290 645 935 0.8 1.7 2.58. Miscellaneous (vehicles,

iast.) 345 720 1,065 0.9 1.9 2.89. Repair center 95 180 275 0.2 0.5 0.710. Buildings and civil works 200 0 200 0.6 0.0 0.6Il. Training and consultancy

services 140 1570 1,710 0.4 4.1 4.5 bD

Total base cost 5,335 11,645 16,980 13.9 30.3 44.2

Physical Contingencies 320 532 852 0.8 1.4 2.2Price Contingencies 702 1,502 2,204 1.8 3.9 5.7

Sub-total 6,357 13,679 20,036 16.5 35.6 52.1

Financial restructuring 21,521 3,350 24,871 55.9 8.7 64.6

Total Project Cost 27,878 17.029 44,907 72.4 44.3 116.7

a/ Includes $12.3 million customs duties and taxes.

b/ Includes $2.6 million for ENSPT.

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Contingencies

3.09 Physical contingencies are 5% on local and foreign costs forequipment, 10% on local and foreign costs for services and 10X on civilworks. Price contingencies are based on local and foreign cost increasesof 7.2% in 1986, 6.8% in 1987 and 1988, 7.0% in 1989 and 7.1% in 1990.

Project Financing

3.10 Besides the Bank, CCCE and EIB have agreed to finance theproject. It is proposed to finance the project as follows:

Table 3.2 PROJECT F1IIUNCING(Millions)

Z of TotalSource CFAF $ Project Cost

Bank loan 9,423 24.5 21CCCE 6,600 17.2 15EIB 3,350 8.7 7Government 19,287 50.1 43ONT's internal cashgeneration 6,247 16.2 14

Total 44,907 116.7 100

$21.9 million equivalent of the proceeds of the Bank loan would be onlentto ONT. About $2.6 million of the Bank loan would be passed on to ENSPT inthe form of a grant. The CCCE loan to the Government would be at 8.22%p.a. with repayment over a 15 year period, including five years ofgrace4/. The EIB loan to the Government would be at 5.5% p.a. (8.5% lessan interest subsidy of 3.0% in accordance with the Lome Convention) withrepayment over 17 years, including five years of grace. The proceeds ofthe Bank, CCCE and EIB loans vould be onlent to ONT under the same termsbut with ONT bearing the foreign exchange risk. During negotiations, ONTreconfirm ed the aggregate size of the three-year investuent program andvill consult with the Bank before making any changes to the investmentprogram [para 5.01(j)]. The execution of a subsidiary loan agreementbetween the Government and ONT and of a grant agreement between theGovernment and ENSPT, acceptable to the Bank and reflecting the above,vould be conditions of the loan effectiveness [paras 5.02(a) and (b)].Conditions for effectiveness of agreements with CCCE and EIB will befulfilled prior to the effectiveness of the proposed Bank loan [para5.02(e)].

C. Procurement, Implementation

Procurement

3.11 Procurement arrangements are summarized below.

4/ FCFA 3.65 billion through the first window at 5.0% p.a. and FCFA2.95 billion through the second vindow at 12.1% p.a..

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Tab]e 3.3: CNT - PRDlRhMI AIENS1X2EM($ nWlliens) a/

Iten ICB Purcbase LBb/ otdrs Total

1. &trddng 7.0 7.0(-)2. Emternal plant 6.3(6.3) 6.3(6.3)3. Telxphnoe instruments

and talepinters 2.7(2.7) 0.2(0.2) 2.9(2.9)4. TrcXdssf 2.0 6.9 8.9-)5. Télex 0.6(0.6) 0.6(0.6)6. Power equipmet 1.4 1.4(-)7. Cbmputer equipment 1.8 1.8H-)8. fiso neusm 1.3(1.3) 1.0(1.0) 2.3(2.3)9. Rapair 0t.r 0.6 0.6(-)

10. T:fnfrg ail !i;ltmyservices 1.5(1.0C/) L5(LO)

Il. Stores, spare parts, fuel 8.8(8.8) 8.8(8.8)

Total 10.3(10.3) 9.8(0.8) 1.0(1.0) 21.0(9.8) 42.1(21.9)- -_

Percent 25 23 2 50 100erceetre of Ba ILmmn 47 4 4 45 100

Note: Figures in parentbeses represe2t t1e amxunts flnmnoed by the proposid Baik lo.

a/ rixuin neg e; exrludes $2.6 lUlec for EREW and $5.7 mdllice agdrat theOCE Jiœ for finamyal resrcrlng

W iLtaited intefrtfroel htdd1x-.s/ Badc Qildene for the use of Cmltamts.

3.12 Equipment for $10.3 million (including contingencies) financed bythe Bank would be procured by ICB in accordance with the Bank'sguidelines. Negotiations with existing suppliers would be used to procure$0.8 million of spares to be financed by the Bank. Limited internationalbidding (LIB) would be used to procure $1.0 million of measuring equipmentand tools. LIB has been selected for these packages as the amountsinvolved are either small or there are only a limited nuaber of suppliers.LIB would also be used to procure $2.6 million of equipment and someservices for ENSPT. Items falling under the description of incrementaloperating costs (stores, fuel, spare parts, etc.) vorth $8.8 millionequivalent will be procured under limited competitive bidding eitherlocally or internationally. Bank-financed contracts costing $1.0 millionequivalent or more will be subject to prior Bank review of procurementdocumentation and will cover about 85% of the total value of such contractsfor telecommunication equipment. Other Bank financed contracts will besubject to post award review. Selection of Bank-financed consultants

- 15 -

(about $1.0 million equivalent) vould be ln accordance vith Bankguidelines. Procurement under cofinancing vould be in accordance vith theguidelines of the respective iastitution.

Disbursements

3.13 Disbursements against CCOE and EIB loans would be in accordancevith the requirements of these institutions. Except for payment againstcoatracts of less than $20,000 equivalent, ihich will be disbursed againststatements of expenditure, the proposed Bank loan of $24.5 million would bedisbursed against full standard documentation for: (a) 100Z of foreignexpenditures for goods, (b) 100% of total expenditures for consultants, (c)OOZ of foreign expenditures and 80Z of local expenditures for ONT's

incremental operating costs, and (d) 100% of foreign expenditures and 80%of local expenditures for the ENSPT comiponent. Tvo Special Accounts of$3.1 million equivalent for ONT and $0.3 million equivalent for ENSPT villbe established in the Caisse Autonome d'Amortissement (CAA). These figuresrepreseat three months estimated disbursements during the peak disbursementperiod of 1987 to 1988. The Special Accounts for the Bank loan would bereplenishable and vould be used for disbursements against allexpenditures. Applications for replenishment vill be submitted on abimonthly basis. To provide for local coumterpart funds, replenishableProject Accounts for ONT and ENSPT vill be opened. Opening of the ProjectAccounts for ONT and ENSPT vith initial deposits satisfactory to the Bank-_ll be a condition of loan effectiveness [para 5.02(c)]. The estimatedschedule of Bank loan disbtrsements for the three-year rehabilitationproject is presented in Annex 4. This is based on the Bankvidedisbursement profile for 40 telecommunications projects during 1972-1983and reflects current ONT management ability and actions already initiatedin ONT for implementation of the project. The bureaucratic procurementprocedures lin Cote d'Ivoire up to contract notification May affect thedisbursement schedule. Rovever, the revision of such procedures initiatedunder Bank prompting, is expected to lead to a reduction of suchdelays.5/ The loan is expected to be closed on June 30, 1991.

Implementation

3.14 Based on the experience it gained under the FirstTelecomimmications Project and, with the assistance, vhere necessary, ofconsultants specifically recruited for the purpose, ONT vould implement theproject, except that installations vill be done by contractors under ONT'ssupervision. To minimize implementation delays, technical assistance hasbeen included and frequent Bank supervision missions vill be scheduledduring 1986 and 1987 (para 4.10). The proposed implementation schedule forthe major components is presented in Annex 5. The project is expected tobe completed by December 31, 1990.

Performance Indicators

3.15 Performance indicators to monitor ONT's implementation,operational and financial performance are given in Annex 6. The targetsfor 1986 and 1987 vere agreed during negotiations, as representing

5/ New procurement procedures are analyzed in -Circuits d' Achat desEntreprises Publiques: January 1985. Annex 16, A14.

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desirable and feasible levels. ONT will report progress against thephysical indicators in the quarterly project reports and progress againstthe financial indicators will be reported in annual financial statements.The targets for subsequent years will be agreed to by the Bank and ONTduring the preceding year together vith any necessary corrective measures[para 5.01(k)].

IV. FINANCIAL AND ECONOMIC ANALYSIS

A. Financial Analysis

Past Financial Performance

4.01 The past financial performance of INTELCI vas acceptable whereasthat of OPT was poor. The historical accounts for FY82 through FY85 aregiven in Annexes 7 and 8. Table 4.1 below summarizes ONT's financialperformance since it vas established in 1984.

Table 4.1: ONT-SUMfMARY OF PAST FINANCIAL RESULTS a/(in CFAF millions)

Fiscal Year: 1984 1985

Operating Revenues 35,469 37,107Operating Costs 25,343 26,085

Operating Income 10,126 11,022

Rate of return on book value (Z) 13 14Current ratio 1.7 1.5Accounts Receivable 29,000 31,000

a/ Estimates.

Present Financial Position

4.02 ONT's balance sheet at December 31, 1985 is given in Table 4.2below:

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Table 4.2: ONT-BALANCE SHEET AS AT DECEMBER 31, 1985 a/

CFAFMillions Percent

AssetsNet fixed assets 74,672 68Work in progress 4,480 4Current assets 31,402 28

Total Assets 110,554 100

LiabilitiesEtuity 26,584 24Long-term debt 62,341 56Current liabilities 21,629 20

Total Liabilities 110,554 100

a/ Estimates.

Net fixed assets comprise CFAF 57 billion from OPT and CFAF 17 billion fromINTELCI. The long-term debt includes amounts oued to foreign and localbanks, the French Posts and Telecommunications administration, the Treasuryand ONP. ONT's debt service for the 1986-1988 period is estimated at CFAF52,682 million (about $137 million). The current ratio at 1.5 isartificially high since current assets include about CFAF 12 billion ofaccounts receivable which are not likely to be recovered (para 2.14).Adjusting for this factor, the current ratio drops to about 0.9.

Future Financial Performance

4.03 Revenues for 1985 have been estimated at CFAF 37.1 billion.Forecast financial statements for 1986-1990 are in Annexes 9 to 12. Asummary of ONT's future financial performance is given below.

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Table 4.3: ONT-SUMHARY OF FINANCIAL PROJECTIONS(in current CFAF billions)

FY ending December 31: 1986 1987 1988 1989 1990

Opera:ing revenues 40.2 45.0 49.6 54.2 59.8Operating expenses 28.4 30.9 33.9 37.5 41.2Operating income 11.8 14.1 15.8 16.7 18.6

Interest expense 7.4 7.4 6.8 6.1 6.2

Net income 4.4 6.7 9.0 10.6 12.4

Rate of return (%)a/ 12 13 14 13 13Current ratio 1.6 1.8 2.1 2.3 2.9Debt/equity ratio (Z) 82/18 71/29 64/36 58/42 54/46Debt service coverage (times) 1.1 1.0 1.3 1.4 1.9

ai On revalued assets.

4.04 ONT's projected financial performance over the project period isgood. However, 1986-87 will be critical witth regard to ONT's cash flow.This vill be helped through measures proposed under the project includingthe rem»oval of physical bottlenecks in the network which should result inadditional revenues, billing GNP for lines it has in service, emphasis oncollection of arrears, long-term borroving and equity contribution by theGovernment (para 2.17).

Financing Forecast

4.05 The funds flow forecast (Annex 11) is based upon theimplementation of the proposed project. The following suimarizes thefinancing plan for 1986-90.

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Table 4.4: ONT-FORECAST SOURCES AND APPLICATIONS 0F FUNDS1986-1990

CFAF millions $ millions Percent

SourcesNet income 76,927 200 -Depreciation 31,096 81 -Internal cas.ï. generation 108,023 281 -less: debt service 82,969 216 -

Net cash generation 25,054 65Borrovings 47,108 122 58Equity a/ 8,892 23 il

Total Sources 81,054 210 100

ApplicationsOngoing vorks 11,870 31 15Proposed project 19,036 49 23Future works 22,740 59 28Investment program 53,646 139 66Vorking capital 27,408 71 34

Total 81,054 210 100

a/ Excluding the Governments' equity contribution in December 1985of CFAF 3,200 million; includes interest payments by Governuentestimated at 4 billion in 1987 and 1988.

ONT's net cash generation would finance the equivalent of about 47Z of thetotal program cost over 1986-90. The average debt service coverage overthe period is forecast at 1.3. Sufficient provisions have been included inthe project to ensure that ONT's financial performance vould besatisfactory. During negotiations, it vas agreed that:

(a) ONT and the Governinent shall prepare a three year rollingfinancial restructuring plan, starting with the period1986-1988, satisfactory to the Bank, and that such plansshall be reviewed with the Bank not later than October ofeach year [paras 5.01 (1) and 5.02(d)];

(b) ONT's cash flow in any year shall not be less than thelocal fund requirement of ONT's approved investmentprogram in the following fiscal year [para 5.01(m)];

(c) ONT's rate of return on average net revalued fixedassets in operation vould not be less than llZ [para5.01(n)]; and

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(d) ONT shall not incur any new debt, if after the incurrenceof such debt, the debt-equity ratio shall be greater than75/25 ln FY87, 70/30 in FY88, 65/35 in FY89 and 60/40 inFY9O [para 5.01 (o)].

B. Economic Analysis

Tariffs

4.06 The average revenue per DEL in 1985 Was $1,370 which is highcompared to many African countries. Tariffs increased by 11% in July 1981and by 16% in October 1982. The initial connection charge for a telephoneis about $120 (Annex 13). Local calls are untimed while long distancecalls are. ONT has agreed to introduce local call timing during theproject implementation period. Tariffs in Cote d'Ivoire have not beenrevieued for several years. Consultants vill be engaged under the projectto review tariff structure and levels. Results of the revieu will bediscussed between ONT and the Bank and agreement reached not later thanNarch 31, 1987 on an action plan for the implementation of the revisedtariff structure and levels [paras 3.04 and 5.01(p)].

Benefits

4.07 The eronomic analysis relates to ONT's 1986-90 investmentprogram. The proposed project has been designed to support theGoverument's economic plan. As outlined in paragraph 2.05, there is alarge unsatisfied demand for telecommunications services and the investmentprogram is expected to meet only part of this. All segments of the1pflpulation should benefit from the distribution of benefits of the proposedinvestment program through communication-related increases in Governzentand business efficiency and the resulting lower costs for goods andservices.

4.08 Sector rehabilitation and priority investnents vill enable ONT tohave a wider impact on other sectors than is apparent from telephonestatistics. For example, the transfer of funds to and from Goverument overthe 1986-90 period results in a net surplus in favor of Goverument of about$28.9 million. These funds vould be available to Government for investmentin other sectors.

4.09 The internal financial rate of return on the proposed project isestirated a- 17%. This understates the benefits which vould be derivedfrom the investnà.rt program. It does not take into account all indirectand external benefits received by non-users of the services. On the basisof estimates of consumer surplus, adjusting for customs duties snd taxes,and the application of a standard conversion factor of 0.90 to local costsand revenues, the quantifiable estimate of the project's minimum economicrate of return is 30% (Annex 14).

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Risks

4.10 Significant delays in implementation of the project could threatenONT's financLal viability. To minimize this risk and bearing in mind theexperience of the first project (para 2.20), technical assistance has beenincluded and the project will be supervised closely during 1986 and 1987.Conditionalities on project implementation will also reduce this risk(paras 3.14 and 3.15). Poor incentives and low remuneration leading to theloss of key personnel would also adversely affect implementation. Amanpower plan to be prepared by consultants appointed under the projectwill address this issue (para 3.04).

4.11 The growth rates used in projecting revenues (Annex 12) have beendiscussed at length vith Government and ONT officials as vell as with theother cofinanciers. The rates are conservative and are expected to beattained.

4.12 A sensitivity aralysis has been carried out. A 20Z increase incapital and operating costs, combined with a 20Z decrease in benefits,would reduce the quantifiable economic rate of return from 30% to 11%. Atwo-year delay in all benefits with no postponement of costs, which ishighly unlikely, vould reduce the economic rate of return to 16% (Annex14).

Least Cost Solution

4.13 The investment program (para 3.01) is the least cost solution forproviding the service levels planned, within the constraincs imposed by theexisting configuration and technology of the telecommunications network.The timing and dimensioning of various elements in the system are based onaccepted engineering practice for selection of techniques and equipmLnt.

Environment and Health Aspects

4.14 The project is expected to have no adverse environmental orhealth impacts. Improved telecommunications services improve the deliverysystem for routine and emergency health services. Increased use of tele-communication services produces more efficient use of the transportationsystem, reduces costs, environmental pollution and energy consumption.

AGREEMENTS

5.01 During negotiations, agreements were reached on the following:

(a) a special project management unit shall be createddirectly under the Director to oversee the implementationof the project (para 2.07);

(b) except for few specialized categories, ONT shall freezerecruitment for the period 1986-1990 (para 2.07);

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(c) signing of contracts with consultants by October 1, 1986to review ONT's organization including the possibility ofreorganizing ONT under an autonomous corporate structure,to review the relationship between ONT and ENSPT, toprepare job descriptions for all posts, to establishstaffing standards, and to propose reuzneration for ONTstaff (paras 2.07, 2.08, 2.10 and 3.04);

(d) consultants appointed for the reorganization study willreport to the Government by July 1987. The Goverumentand ONT uill review the conclusions and recommendationswith the Bank and, by December 1987, agree on a timetablefor implementing the agreed recommendations (paras 2.10and 3.06);

(e) to ensure timely presentation of accounts to the Bank,draft accounts for FY85 will be presented 8 months afterthe end of the fiscal year with the audited accounts 12»onths after the end of the fiscal year. This vill bereduced to 7 and 10 months for FY86, to 6 and 8 monthsfor FY87 and to 4 asd 6 months for FY88 and thereafter(para 2.12);

(f) completing the studies to computerize inventory controland to improve the accounting system, the billing sndcollection systems and the introduction of a monthlybilling system by March 1987 (paras 2.11, 2.13 and 3.04);

(g) ONT will select by October 1, 1986, in consultation viththe Bank, the training disciplines asd foreignAdministrations for fellowsbips [para 3.03 (e)|;

(h) terms of reference for all consultant reviews including alist of six consulting firms (para 3.06);

(i) a financing plan (para 3.10);

(j) ONT reconfirmed the aggregate size of the three-yearinvestment program (1986-1988) and ill consult with theBank before maklng changes to the said investment program(para 3.10);

(k) performance targets representing desirable and feasiblelevels for 1986 and 1987 vere agreed upon. Targets foreach subsequent year will be agreed to jointly by theBank and ONT during the preceding year together with anynecessary corrective measures (para 3.15);

(1) ONT and the Governuent would prepare a three year rollingfinancial restructuring plan for ONT satisfactory to theBank and would review it with the Bank by October in eachyear [para 4.05 (a)];

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(a) ONT's net cash flow during any given year shall be notlesa than the local fund requirement of ONT's approvedinvestment program for the folloving fiscal year [para4.05(b)I;

(n) ONT would apply measures to ensure that its annual rateof return on the average net revalued fixed assets inoperation is not less than 11Z [para 4.05(c)];

(o) ONT shall not incur any neo debt, if after the incurrenceof such debt, the debt-equity ratio shall be greater than75/25 in FY87, 70/30 in FY88, 65/35 in FY89 and 60/40 inFY90 [para 4.05(d)]; and

(p) completing a review of the tariff structure and levels,the results of vhich vould be discussed with the Bank andagreement reached not later than March 31, 1987 on anaction plan for the implementation of revised tariffstructure and levels (para 4.06).

5.02 Conditions of loan effectiveness are:

(a) ONT and the Government had signed a subsidiary loanagreement acceptable to the Bank, whereby the proceeds ofthe Bank loan vould be oulent to ONT at The Bank'svariable interest rate plus 2Z per annua for a period of20 years including a five year grace period (para 3.10);

(b) execution of the ENSPT grant agreement vith terms andconditions satisfactory to the Bank (para 3.10);

(c) opening of Project Accounts for ONT and ENSPT to providefor local counterpart funds vith initial depositssatisfactory to the Bank (para 3.13);

(d) presentation to the Bank of the three year financialrestructuring plan for ONT for the period 1986-88 (para2.17); and

(e) the conditions precedent to the effectiveness of theloass from CCCE and EIB are fulfilled (para 3.10).

5.03 Provided the above conditions are met, the proposed project is asuitable basis for a Bank loan to the Goverumwnt of the Republic of Coted'Ivoire, of $24.5 million for a term of 20 years including 5 years grace,at the standard variable interest rate.

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REFIBLIC 0F CIE D'IVOIRE

OFOEI NATIONAL DES (ONT(N)1IA1INS CoiT)

SE-D DC PRECT

Basic Telecoemunicatioes Facilities (1979-1985)

As on December 31 1979 1980 1981 1982 1983 1984 1985

1. Telepbone Service

Number of exchanges 87 91 99 106 112 112 112Equipped capacity (lins) 58,650 64,210 67,260 67,810 78,820 81,220 81,560Nimber of m-in linpe 31,731 37,465 44,432 46,826 50,959 53,367 57,088(DELs) in serviceExcbarnge fifl (Z) 54.1 58.3 66.1 69.1 64.7 65.7 70.0

2. Telez Servioe

Nfmber of exchanges 1 2 2 2 2 2 2Equipped capacity 960 2,750 2,750 2,750 2,750 2,750 2,750Number of telex subscribers na 1,219 1,235 na 1,588 1,693 1,790Echange f111 (Z) - 44.3 44.9 - 60.1 61.6 65.0

3. Staff

Number of employees 3,120 3,167 3,204 na 4,087 4,400* 4,400Emnployees per 1000 DELs 99 84 72 _ 81 83 76

*Figure include ex-INTELCI staff, about 300 persons.

RJIMC 0F CMe D'ITIREOffice latiol da Telcmmicatil (C)

8eoi Talecoemicatio Projectinveetu Prapai (1986-1990)

$ 1hiuada a/

1986 1987 1988 1989 1990 1986-1990

loa foreip total locl foreLz total local foruipi total local forelp total local foreip total lmAL NW UL

aoivg dorku 2727 10753 13481 3299 7636 10935 1766 3558 5325 364 727 1091 O O O 8156 22675 301

Project

1. Oitchib 273 494 766 1351 2597 3948 1065 2182 3247 130 338 468 0 0 0 28 5610 84292. taernl Plant 0 0 0 1195 2260 3455 9W9 1844 2753 429 909 1338 0 0 0 2532 5013 75453. Telelxm elItnrut 0 0 0 1039 230 3169 91 247 338 0 0 0 0 0 0 1130 2377 35064. Tranaub1iou 234 312 545 1909 3117 5026 1506 3636 5143 156 468 623 0 0 0 3805 7532 1133 5. Telex, facaiile, data 182 364 545 65 130 195 0 0 0 0 0 0 0 0 0 247 494 740 ;6. Poen EqSult 117 208 325 377 805 1182 52 117 169 0 0 0 0 0 0 545 1130 16757. COmutaerEquIput 636 831 1468 117 844 961 0 0 0 0 0 0 0 0 0 753 1675 24298. sellan (sprea, etc.) 442 377 818 299 779 1078 130 610 740 26 104 130 0 0 0 896 1870 27669. ainteoo Cesters, etc. 0 0 0 52 78 130 182 325 5C6 13 65 78 0 0 0 247 468 71410. uildtLa and CivilVorks 519 0 519 0 0 0 0 0 0 0 0 0 0 0 0 519 0 51911, Traienf 6 Coeuultq Serviceo 312 935 1247 52 545 597 0 0 0 0 0 0 0 0 0 364 1481 1844

ame Coct 2714 3519 6234 6455 13286 19740 3935 8961 12896 753 1883 2636 0 0 0 13857 27649 41506

Physical Coetingency 163 176 339 387 664 1052 236 448 684 45 94 139 0 0 0 83I13M 2214Price ctùrufcy 104 133 237 742 1513 2255 767 1730 2496 212 525 737 0 0 0 1824 3901 5725

Total Pro3ect Cowt 2981 3828 6809 7584 15463 23047 4938 11139 16077 1010 2502 3513 0 ô ô 16513 32532 49445

Future 1otka 0 0 0 0 0 0 0 0 0 8442 10649 19091 17896 22078 39974 26338 32727 59065 IITL UM « 5708 14583 2029v 10883 23099 33982 6704 14697 21401 9816 13879 23695 17895 22078 39974 51006 8035 139341

a/ Ecludes $2.6 million for E2 and $64.6 million for fErwocâl rutnctuwix of W.

- 26 -ANNEX 3Page 1 of 2


OFFICE NATIONAL DES TELECOMMUNICATIONS (ONT)

SECOND TELECOMIUNICATIONS PROJECTS

Telephone and Telex Facilities over the Project Period (1986-1990)

Plant and Facilities Actual Forecastin Service as on Dec 31 1985 1986 1988 1990

I Local Telephone Network(a) Number of exchanges 112 112 113 114(b) Equipped capacity

(i) Greater Abidjan 55,180 55,180 65,180 73,180(ii) Four main prov. touasl/ 7,000 7,000 7,000 7,000(iii) Rest of Cote D' Ivoire 19,380 19,380 19,380 19,380

Total 81,560 81,560 91,560 99,560

(c) Direct exchange Unes (DELs)(1) Greater Abidjan 42,093 45,500 55,100 64,400(ii) Four main prov. towns 4,488 5,000 5,500 6,200(iii) Rest of Cote D' Ivoire 10,507 11,000 12,000 13,600

Total 57,088 61,500 72,600 84,200

(d) DELs per 100 population(1) Greater Abidjan 1.69 1.79 1.85 1.90(ii) Four main prov. toams 0.33 0.35 0.35 0.32(iii) Rest of Cote D' Ivoire 0.13 0.13 0.16 0.19

Average 0.56 0.58 0.63 0.67

(e) Demand satisfaction (Z) 71.6 72.1 75.4 76.5(f) Average exchange fill (Z) 70.0 75.4 79.3 84.6(g) Automatization factor (Z) 94.1 94.1 94.8 95.2(h) Public call offices 60 60 160 260

1/ Bouake, Daloa, Man and Yamoussoukro.

- 27 -

ANNEX 3Page 2 of 2

Actual Forecast1984 1986 1988 1990

II Long Distance Network (Domestic)(a) Number of Ixterurbaa exchaage 22/ 2 2 2(b) Total termfnatioas on iaterurbas

exchauges 2449 2449 2449 2449(c) Total number of available long

distance channels 3/ 1578 1800 2180 2640

IrI Telex Service(a) Number of telex exchaages 24/ 2 2 2(b) Equipped capacity 2,750 2,750 2,750 2,750(c) Number of subscribers 1,790 1,840 2,060 2,360

IV Ilternatioual ServiceTelephoe

(a) Number of iaternationalautomatic exchanges 1 2 2 2

(b) Total terminations oninteruatiomal exchanges 1,535 3,535 3,535 3,535

(c) Total aumber of internationaltelephone circuits 466 570 780 940

Telex(d) Total auimber of International

telex circuits 405 445 460 485

2/ IR addition, there are transit exchanges at the 7 regional centers tocoflect the traffic of the corresponding secondary area.

31 Includes those terminiating on the regional transit exchamges.4/ Oae of the exchanges also serves as the international transit exchange.

- 28 -

ANNEX 4




Schedule of Disbursemeats(S millions)

Bank's ProfilesIBRD Fiscal Year Cumulative I/ For all Telecomand Semester Disbursement through Sectors Sector

Endiug Ia Semester Semester West Africa World Wide

FY '87Dec '86 3.4 3.4 0.2 0.2June '87 2.6 6.0 1.2 0.7

FY '88Dec '87 3.5 9.5 2.7 1.7June '88 4.5 14.0 4.4 3.4

FY '89Dec '88 3.0 17.0 6.4 5.4June '89 2.5 19.5 8.6 7.8

FY '90Dec '89 2.0 21.5 10.8 10.3June '90 1.5 23.0 13.0 12.7

FY '91Dec '90 1.0 24.0 15.2 15.2June '91 0.5 24.5 17.2 17.2

FY '92Dec '91 - 24.5 18.9 19.1June '92 - 24.5 20.3 20.6

FY '93Dec '92 - 24.5 21.6 21.8Juae '93 - 24.5 22.8 22.8

FY '94Dec '93 - 24.5 23.5 23.8June '94 - 24.5 24.2 24.2FY '95Dec '94 - 24.5 24.5 24.5

1/ Bankwide telecomaxmications disbursement profile modified to reflect newmanagement ia ONT and actions already initiated in ONT for implementation ofproject.

REPUBLIC OF COTE D'IVOIREOFFICE NATIONAL DES TELECOMMUNICATIONS (ONT)

SECOND TELECOMMUNICATIONS PROJECTImplementation Schedule

CALENDAR YEAR 1986 1987 1988 1989 1990 1991

QUARTER 1 2 341233123 4

A Consultants _ _ _…_

B Swilchinfg _ _ _ _ _ _ _ _ _ T *

C ltnwsmson * _*L _ _ I I ID ExternaliPtani * M m. .

1 Public Call Oflfcos _ _ _ _ _ _

lencui AinimolcomenlConItacl Awcrj

q Stoît ol iristallulior* r_omplrotiout vol tilverv cf Assignneît Woitcd Bonk - 21461

I9lji

REPUBLIC OF COTE DIIVOIRE



Performance Indicators

A set of indicators which will assist lu monitori.g ONT's performance durii'g the projectperlod has been established. ONT will report on the actual achievement as well as projected/budgetedestimates relatiag to the performance indicators,

ComparatorYear endlng Dec. 31 1985 1986 1987 1988 1989 1990

Io Implementational

(a) Telephone exchangecapacity (l<nes) 81,560 81,560 81,560 91,560 99,560 99,560

(b) Main telephone lihes (DEL) wconnected 57,088 61,500 66,000 72,600 79,900 84,200

(c) Telex subscribers 1,790 1,840 1,910 2,060 2,210 2,360

(d) Maintenance targetsi) Faults reported per

annum per DEL 1.2 1.0 0.8 0.7 0.6 0.5

ii) Pefcent of faultscleared within 24 hours 45 50 60 65 70 75

iii) Percent of faultspendiag more than48 hours. 35 30 20 10 5 5

(e) Average call completion orate (during busy hour)

- Local calls (automatic) 45 50 55 60 70 75- Long distance calls (STD) 25 30 40 45 50 60

ComparatorYear endinR Dec. 31 1985 1986 1987 1988 1989 1990

(f) vehicles in garage forservice or repair(average vehicle-calendardays per year counted overthe total vehicle fleet) 40 30 25 20 10 10

(g) staff ratio(employees per 1000 DELs) 76 72 67 hl 55 52

II. Financial

(a) Rate of return onrevalued assets (X) - il 12 12 12 12

(h) Deht/equity ratio (X) 80 gO 75 70 65 60

(c) Accounts receivah1e as apercentage of revenuesin same FY 100 50 30 20 20 20

(d) Billing perlod (monthe) 2 2 1 1 1 1

(e) Time required to disconnectdefaulting subscriber and reallocatethe line (days counted from billing date) 200 120 90 60 60 60

(f) Presentation of draft accountsto Bank (in months after endof FY) 8 7 6 4 4 4

(g) Operating revenues per DEL (CFAF'OOO) 520 550 550 580 580 580

(h) Operating cost/DELat cnnatant price (CFAF'0O0) 380 380 360 340 320 300

Poo

- 32 -

ANNEX 7Page 1 of 2



SECOND TELECOMMDNICATIONS PROJECT

OPT Income Statements (Ristoric)(Current CFAF Millions)

Fiscal Year ending Dec. 31 1982 1983 1984 3/ 1985 3J

Operating Revenues

Telephone 27,394 26,397 28,133 29,279Telix 3,406 3,386 3,570 3,828Telegraph 821 918 950 1,000Others - 3,037 4,388 2,816 3,000

TOTAL REVENUES 34.658 35,089 35,469 37,107

Operating Expenses

Personnel 6,360 6,493 8,967 9,196Materials and Transport 4,425 4,897 7,763 7,978Depreciation 3,343 3,658 5,120 5,170International 9,307 9,322 ) 3,493 ) 3,741Others2 l 6,908 7,156 ) )

TOTAL EXPENSES 30,343 31,526 25,343 26,085

Operating Income 4,315 3,563 10,126 11,022Less: Interest 2,109 2,513 2,600 2,686NET INCOME 2,206 1,050 7,526 8,336

Rate of return on book value (Z) 8 7 13 14Operating ratio (%) 88 90 71 70

1/ Includes doubtful accounts.

2/ Telecommunications services only.

3/ Estimates for ONT for fiscal years ending December 31.



OFFICE NATIONAL DES TELECOMMDNICATIONS (ONT)


OPT Balance Sheetl' (Ristoric)(Current CFAF Millions)

Fiscal Year ending Dec. 31 1982 1983 1984 2/ 1985 4/

ASSETS

Net fixed assets 50,945 53,740 79,514 3/ 79,152 3/

Current assets 25,122 36,293 29,386 31,402

TOTAL ASSETS 76,067 90,033 108,900 110,554=~~~~~~~~~~~~~~~~~

LIABILITIES

Equity 12,350 13,132 24,000 26,584 5/Long term debt 28,508 23,993 67,900 62,341Current Liabilities 35,209 53,008 17,000 21,629

TOTAL LIABILITIES 76,067 90,033 108,900 110,554

Current ratio (times) 0.7 0.7 1.7 1.5 5/Debt/Equity (Z) 84/16 85/15 78/22 76/24

1/ Telecommunications services only.

2/ Estimates for ONT as of July 1, 1984 (opening balance sheet).

3/ Includes vork in progress.

4/ Estimates for ONT as of December 31, 1985.

5/ Writing off of estimaated bad debts of about CFAF 12 billion will reduce the equityproportion and increase the debt/equity ratio to 85/15.

- 34 -

Annez 8Page 1 of 2




INTELCI Income Statements (Historie)(Cur-ent CFAF Millions)

Fiscal Year ending Sept. 30 1982 1983 1984 1| 1985

Operating Revenues

Telephone 10,418 10,233 28,133 29,279Telex 2,472 2,433 3,570 3,828Telegraph 545 497 950 1,000Computer Services 767 993 ) 2,816 ) 3,000Others 619 586 ) )

TOTAL REVENUES 14,821 14,742 35,469 37,107

Operating Expenses

Personnel 1,562 1,700 8,967 9,196Materials and Transport 1,322 1,187 7,763 7,978Depreciation 1,100 1,277 5,120 5,170International 7,662 7,660 ) 3,493 ) 3,741Others 842 928 ) )

TOTAL EXPENSES 12,488 12,752 25.343 26.085

Operating Income 2,333 1,990 10,126 11,022Less: Interest 946 942 2,600 2,686NET INCOME 1,387 1,048 7,526 8,336

Rate of return on book value (Z) 13 il 13 14Operating ratio (Z) 84 87 71 70

1/ Estimates for ONT for fiscal years ending December 31.

- 35 -

ANNEX 8Page 2 of 2




!NTELCI Balance Sheet (Historic)(Current CFAF Millions)

Fiscal Year ending Sept 30 1982 1983 1984 1/ 1985 3/

ASSETS

Net fixed assets 17,911 16,656 79,514 2/ 79,152 2/Current assets 12,869 18,053 29,386 31,402

TOTAL ASSETS 30,780 34,709 108,900 110,554

~~~~~ =

LIABILITIEES

Equity 11,489 14,029 24,000 26,584 4,Long term debt 10,308 8,047 67,900 62,341Current Liabilities 8,983 12,633 17,000 21,629

TOTAL LIABILITlES 30,780 34,709 108,900 110,554

Current ratio (times) 1.4 1.4 1.7 1.5Debt/Equity (Z) 63/37 60/40 78/22 76/24 4/

1/ Estimates for ONT as of July 1, 1984 (opening balance sheet).

2/ Includes work in progress.

3/ Estimates for ONT as of December 31, 1985.

4/ Writing off of estimated bad debts of about CFAF 12 billion will reducethe equity proportion and increase the debt/equity ratio to 85/15.

- 36 -

AUM 9

REiiu F CM D'MM

aOE D:CKIIAL 18S D (O N! T)

(CFAF Milles)

1986 1981 1988 1989 1990

Teleplxe 32019 36338 40194 44225 4912Tolet 3993 4313 4963 5338 5713TeIeraEv1 1000 l000 1000 1000 lDOO

tber Servies 3150 3308 3473 3647 389

IAL lE5 40162 44958 49629 54209 59771

Personnel 10135 11149 12264 13516 14910!kterials & ransport 9154 10499 12180 14331 16513Depreciation 5453 5717 6129 6657 7140Pesie oetribution1 663 683 703 725 746Otber Fpoers 535 571 610 653 699Write.offs 2410 2248 1985 1626 1195

1TOML EPERS 28350 30867 33872 37508 41205

oEUACCE IR?ME 11812 14091 15757 16701 18566Ies: Interest 7422 7398 6849 6103 6189

.w 1Im 4390 6692 8908 10598 12378

C Ott Revaloed Assets (Z) 11.7 13.3Z 13.7% 13.2% 13.7Z

tÉ~ Ig i : t X,Xl .I|I| [EI fL h

gi~ RF 18 t rX !Mo! 1118i Sg i 111-il | |~ I { ÉloBl| E l W|

N. l! je ' .N g nEuMiE§ SIR

'a 'a F3~~~~~ I..'1

- 38 -

~l11

RRAW:OF MEr Dmm

Nt TIo e DS FUE _ (O NT)

1986 1987 1988 1989 1990 1986-199 B

met Before Mnterest 11812 14091 15757 16701 18566 76927 471~g~eciation 5453 5717 6129 6657 7140 31096 19

internai Cts Ceneration 17265 19907 21886 23358 50 108024 66Boeroeings 14114 1293 7058 533 O0 47108 29Goeerment 2500 3067 3325 0 0 89 5

w :9 SU3C 33879 34968 3229 2701D 34D7 164024 100

AMiP-

Debt Service: - Interest 7422 7398 6849 6103 6189 33961 21- pricipal 8614 12802 10535 10021 7036 49009 30

- Total 16036 200 1384 16124 13225 82969 51invetmos 7812 1308I 39 9122 15390 53646 33

ImmL AEfrAT 23848 33283 252 246 28615 16615 83

au MFAS (ISREA 10031 1684 6646 3455 5m2 27409 17

Debt rvie Cezage 1.1 1.0 1.3 1.4 1,9 1.3




SECOND TEECOMMUNICATIONS PROJECT

Notes and Assumptions on the Financial Forecasts 1985-1990

Income Statements

1. Annual increases ln number of vorking DELs are as per programimplementation schedule.

2. Average revenue per DEL to grow at Z% per annum with the largestannual increase of 6% occurring in 1987.

3. Average revenue per telex subscriber to grov at 4Z per annumbetween 1985 and 1988 and to remain constant at CFAF 2.5 million per annumthereafter.

4. Telegraph revenues have been assumed to remain constant at CFAF 1billion per annum.

5. Other revenues (computer services, private lines, etc.) have beenassumed to grow at an average of 5Z per annum, from a toral of about CFAF 3billion in 1985 to a total of CFAF 3.8 billion in 1990.

6. Wages and salaries have been assumed to remain at the 1985average vage per employee. An increase of 3Z per annum has been assumed tocater for promotion and possible premiums.

7. The nuiber of staff per average 1,000 DEL in operation to declinefrom 76 in 1985 to 52 in 1990. This assumes ONT vill freeze the totalnmber of staff at 4,400.

8. Maintenance and transportation costs per DEL have been assumed toremain at the 1985 level. This is based on the assumption that a bettermaintenance organization vill result in increased efficiency.

9. Operating costs have been inflated at rates similar to theprojected inflation rate in Cote D'Ivoire.

10. Depreciation has been calculated at 5% per annum of the averagegross plant in service in the year.

11. Interest on new foreign loans has been assumed at 10% per annum onthe average outstanding loans over a 15 year period including 5 years of grace.Interest on new local loans has been assumed at 15% per annum on the averageoutstanding loans over a 12 year period including 3 years of grace.

- 40 -

ANNEX 12Page 2 of 2

12. ONT is not liable for corporate (income) tax.

13. The level of doubtful accounts as a proportion of gross revenuesvould decline from 7% in 1985 to 6Z in 1986, 5Z in 1987, 4Z in 1988, 3% in1989 and would remain at 2% thereafter.

Balance Sheets

14. Increase in gross fixed assets is related to transfer from worksin progress as assets become revenue-producing. Vork in progress onaverage is transferred to fixed assets equally over the two succeedingyears.

15. Accounts receivable as a percentage of gross revenues would be50% in 1986, 30% in 1987 and remain constant at 20% thereafter.

16. Inventory as a percentage of gross fixed assets to increase from6% in 1986 to 10% in 1987 and to remain constant at 10% thereafter.

17. Advances, prepayments and other carrent assets to remnain at about25Z of cash operating costs.

18. Accounts payable as a portion of work in progress and cashoperating costs would be about 35Z.

19. Long term debt represents existing cozmit-ments and proposedborrowings from CAA, CCCE, EIB, and IBRD. Withdravals are based on thedisburseuent profile.

20. Of the estimated CFAF 14 billion irrecoverable accountsreceivable, CFAF 12 billionwould be written off in 1986 and CFAF 2 billionin 1987.

21. For determining the rate of return on revalued average net fixedassets in operatiork, assets vere revalued at 20Z in 1986 and at 5Z perannum in each subsequent year.

22. The Goverument will be responsible for paynents of interestdue on foreign loans (Bank, CCCE and EIB) in 1987 and 1988. The amountswould be converted to Government equity in ONT in those years.

- 1:1 -ANNEX 13Page 1 of 2

REPUBLIC OF COTE D' IVOIRE



Tariffs(as of JaRuary 1986)

Telephone CFAF

ConmectioR charges (maiÀ or extension) 46,400Trausfer line or exteusiou 23,200Anuual rental (main li e) 23,200A-inual rental (exteusioz) 11,600Detailed billiug, anmual 11,600Credit card for telephoze usage 11,600Recoumectioa charges 5,800Suspeasiozi 1,160

Deposit 40,000

Local call (uatimed) 58Long distaace calis (3 minutes):

- 50 km 11651 - 80 23281 -120 348121-180 435181-270 580271-450 696over 450 km 870

Mobile Telephoae

Counectiozi charges 580,000Aaaual reutal (including mainitenance) 232,000Deposit 200,000

Telex

Coanectiou charges 46,400Aniual reutal 69,600Maiuteuance of telepri.nter (aumual) 417,600Trausfer charges 23,200Deposit 500,000Communication in sanie zozie (3 minutes) 116Communications in different zones (3 miautes) 348Credit card 11,990

Telegram

Ordinary - per word (minimum 10 words; 40Urgent - ( - 10 ) 80

- 42 -

iNNEX 13Page 2 of 2

Iternational Telephone Cails

Selected Countries

3 minute call*Country CFAF

Argentina 6,960Australia 6,960Belgium 4,170Burundi 6,960Indonesia 6,960Malaysia 6,960Sweden 4,170Tauzania 6,960USA 5,565

Preferential rates

Algeria 2,985Cameroon 1,605Ethiopia 2,985France 2,985Guinea 1,605Nigeria 2,325Rwanda 1,605Tumisia 2,325

* Special rates apply for hotels, restaurants and transit cenrters. on average thecharges are about 69% higher.

- 43 -

ANNEX 14Page 1 of 2


OFFICE NATIONAL DES TELECOMNUNICATIONS (ONT)

SECONID TElECOMUICATIONS PROJECT

Return on Investments

1. ONT's investment program for the period 1986-1990, of which theBank-financed project is an integral part, also includes ongoing and otherworks. The close relationship between project and nonproject investmentsmakes any attempt at separation arbitrary. Therefore, the rate of returncalculation is made on the basis of ONT's entire telecommunicationsinvestment program.

2. The benefit period of the program extends from 1986-2006, when onaverage the equipment provided under the program is expected to havecompleted its useful life. Account has been taken of investments madeprior to 1986 but yielding benefits during the program period.

3. As from 1991 on, operating costs and revenues related to theprogram are assumed to remain constant. Incremental revenues are based onexpected additional telephone and telex subscribers and on traffic broughtabout by the program. Opera.ing costs are based on additional costsgenerated by the increases in costs and traffic; they are net ofdepreciation and interest. Annual capital replacement costs of about CFAF5 billion bave been included for the period 1991-2006. No residual valuesof fixed assets have been taken into account as the present value of thesein real terms weuld be minimal.

4. A sumuary of the program's incremental cost and benefit streamsis given below in CFAF billions. All revenues aad costs have been deflatedto bring them to their comparable 1986 price levels.

ONT Incremental Costs and Benefits of the Program(CFAF billions)

Program Operating Net_Y costs costs Benefits Benefits

1986 12.8 - - (12.8)1987 14.6 0.6 4.5 (10.7)1988 7.2 1.4 8.3 (0.3)1989 7.5 2.4 11.5 (1.6)1990 11.7 3.1 15.0 0.2

1991-2006 5.0 4.0 16.0 7.0

- 44 -

ANNEX 14Page 2 of 2

The internal fimancial rate of return for the above net benefit stream is16.5%.

5. The above calculation understates the benefits to be derived fromthe telecommunications investment program. It does not take into accountconsumer surplus aad Indirect and external benefits received by noa usersof the telecommunications services. A portion of the consumer surplus wasestimated by assumiu.g (a) that new consumers are similar to the averageexisting consumer a-d (b) that existimg and mew e-ubscribers vill be villingto pay for telecommunications services the same prices ia real terms asthey pay today. Based on these assumptions, adjustimg for taxes andduties, and on applying a standard coaversation factor of 0.90 (to localcosts and revenues), a minimum estimate of the economic rate of return forthe program is 29.6%.

6. A sensitivity amalysis vas made on the economic rate of returnvith the following results:

ONT - Seusitivity Analysis On Rates Of Return

EconomicComponent Change Rate of Retura

a) Program Costs +20% 23-20% 40

b) Operating Costs +20% 28-20% 31

c) Benefits +20% 39-20% 19

d) Combinatioa - All Costs +20% ) i1- Benefits -20Z )

e) Combination - All Costs -20% ) 53- Benefits +20% )

f) Program benefits 1 year delay 212 years delay 16

- 45 -

ANNEX 15Page 1 of 10




Consulting Services for Institutional Development

TERNS OF REFERENCE (TOR)

General

1. The Government of Cote D'Ivoire has applied for loans from IBRDand other financial institutions for the rehabilitation and modernizationof thetelecommunications sector in Cote D'ivoire to be implemented by ONT.In order that ONT's organization and management be equipped for effectiveand efficient management, operation and maintenance of the services andfacilities, the institutional development component of the project providesfor a review of present practices and assistance with implementation ofagreed changes related to ONT's organization and management, and itsadministrative and management practices and procedures.

Scope of Work

2. To meet the above objective, a Telecommunications ManagementConsultancy firm(s) is/are to be appointed to undertake broadly thefollowing:

(a) review ONT administrative and management practices andprocedures, including relationship with the parentministry and other Government ministries and agencies;

(b) recommend changes in ONT's organization and management,and in operational, administrative and financialpractices and procedures; and

(c) assist ONT in implementation of the acceptedrecommendations.

3. It is of note that ONT vas created on July 1, 1984 througha merger of the telecommunications branch of the Office National des Posteset Telecomnmmications (OPT) and the Societe d'Etat des TelecommunicationsInternationales de la Cote d'Ivoire (INTELCI).

4. The changes proposed by consultants in ONT's organization andmanagement, procedures and practices shall, in general, be adequate to

- 46 -

AUNDE 15Page 2 of 10

cover anticipated expansion and operation of telecommmnications facilitiesand services in Cote d'Ivoire up to the year 2005.1/ The consultantsshall propose a phased implementation program and assist ONT inimplementation of the first phase, the duration of which would be about twoyears.

5. The total scope of work required of the consultants is dividedinto nine tasks as detailed below. Consultants shall make detailedproposals in respect of each of these tasks including vork program,personnel to be employed, total manmonths, etc., and their costs. Inmaking their recommendations, the consultants should keep in view thegeneral local conditions in Cote d'Ivoire, the size of the entity, thelocal availability of staff with required qualifications and theimplications of the cost of implementation of their recommendations onONT's finances. The consultants should specifically indicate in theirproposals the financial implications of their recommendations, withparticular reference to the first phase (para 4).

Task I: Autonomous Corporate Structure

6. Objective: To establish an autonomous corporate structure forONT.

7. Main Elements:

(a) review ONT's relationship with Government ministries andagencies, the rules and regulations governing suchrelationship, and the effect of these rules andregulations on the efficiency and effectiveness ofoperation and management of ONT;

(b) review the possibility to create an autonomous entitywith a Board of Directors, its composition, role,functions, and control over ONT, and the procedures andcriteria for selection and appointment of members of theBoard;

(c) review administrative and financial powers of ONT'sBoard of Directors and their delegation to ONT'smanagement; and

(e) review and propose, vithin the recommended neworganizational structure, the organization and staffingnecessary for establishment of a fundamental planningunit (FPU) with detailed terms of reference for the FPUin general and units vithin the FPU in particular.

i/ A 20 year Master Plan for the sector for the period 1986-2005, preparedby ITU in 1983/84 and finalized in March 1985, will form the basis.

- 47 -


(f) review the relations between ONT and the Ecole NationaleSuperieure des Postes et Telecomm¨nications (ENSPT).

(g) make proposals in respect of each.of the above items,suggest measures for their implementation and assist inimplementation of the agreed proposals vithin ONT.

Task II: Organization and Management

8. Objective: To provide ONT with an organization and managementstructure, and introduce management practices and procedures, suitable foran efficient and effective telecommunications entity.

9. Main Elements:

(a) review ONT's current organizational structure both atthe headquarters and in the field, its suitability inlight of the planned expansion of telecommunicationsfacilities and services, and propose a neuorganizational and management structure;

(b) review current managerial, administrative andoperational procedures and practices, delegation ofauthority (administrative and financial), division ofresponsibilities between headquarters and field units,decentralization, and propose new procedures;

(c) propose and design a Management System to cover allaspects-administrative, technical and financial-ofONTts operations including management of stores, garageand vorkshops; and

(d) assist ONT in implementation of the agreed proposals.

Task III: Human Resource Development

10. Objective: To introduce a proper human resource developmentprogram in ONT.

11. Main Elements:

(a) review ONT's current manpower strategy and preparedetailed strategy and plans for managerial,administrative, operational, and finance and accountsstaff for human resource development at all levels;

(b) review current norms for staff and propose revisednorms, especially for any new categories of staff thatmay be required in light of the adoption of newtechnology;

- 48 -


(c) prepare job descriptions for all staff categories;

(d) review current recruitment procedures and qualificationrequirements for all staff categories, and proposenecessary changes.

(e) review current prograus, schedules, courses andfacilities for training of administrative, technical andfinancial staff at all levels (including in-service andrefresher trainaing), propose changes if necessary and,after approval, prepare detailed training programs,schedules and course materials in each of the majortechnical disciplines (switching, transmission, externalplant, power), and assist in preparation ofspecifications for training aids and equipment;

(f) review current staff emoluments and benefits, theirrelationship vith othe- public sector enterprises andcurrent government regulations in this regard, andpropose changes necessary to enable ONT to attract andretain qualified personnel; and

(g) assist in implementation of agreed proposals.

Task IV: Establishment of a Repair and Calibration Centre at Abidjan

12. Objective: To improve current maintenance and operationalorganization, practices and procedures, and establish a repair centre atAbidjan. Consultants vill bear in mind previous studies which haverecommended the establishment of three maintenance centers at Abidjan,Bouake and Daloa.

13. Main Elements:

(a) review current maintenance and fault clearanceorganization, practices and procedures for exchangeequipment, underground cables, outside plant, subscriberfacilities, domestic long distance and internationaltransmission facilities (earth station, microwave radio,UHF/VHF radio, open wire lines), vehicles and proposechanges necessary, particularly in light of newtechnology and modern maintenance techniques;

(b) review current facilities and procedures foroperator-controlled services (local cnd long distancemanual services, special services in major towns) andpropose revised procedures;

- 49 --


(c) propose the organization and staffing necessary forestablishment of a repair and calibratlon centre atAbidjan;

(d) assist in preparation of bid documents for the equipmentof the repair and calibration centre and assist intraining the necessary staff.

Task V: Begistration and Connection of New Lines

14. Objective: To quicken the pace of connection of nev subscriberlines.

15. Main Elements:

(a) review current administrative, business, commercial andtechnical procedures from the stage of registration ofaplicantu for new telephone connections to theconnection of nev lines and, if necessary, propose newprocedures including possible use of private contractorsfor house viring of subscriber premises;

(b) assist in implementation of agreed procedures.

Task VI: Billing and Revenue Collection

16. Objective: To ilmprove ONT's current billing, revenue collectionund accouuting procedures and introduce measures to reduce accountsreceivable for subscribers in general and governument subscribers inparticular.

17. Main Elements:

(a) review current billing procedures for local, domesticlong distance and international telephone and telexservices, use of the computer facilities for billpreparation, bill format, procedures for distribution ofbills to subscribers, and propose r.ecessary changes;

(b) review current procedures for paynent of bills bysubscribers, ONT's revenue collections points, andpropose necessary changes;

(c) review current procedures for menitoring and accountingof payments by subscribers, disconnection of defaulters,and propose necessary changes; and

(d) assist ONT in implementation of agreed proposals.

- 50 -


Task VII: Tariff Study

18. Objective - to develop principles and procedures toguide the foru¨lation and implementation of appropriatestructure and levels of tariffs for telecommunicationsservices in Cote D'Ivoire, apply these principles tothe present structure and levels, and recommend anynecessary changes.

19. Main Elements

a) Demand Assessment - assess the characteristics ofdemand for each of the services offered, and thesensitivity of demand to the prices which might becharged, vith a view to determining the cost toconsumers of doing vithout a service where demandcannot be fully met and the consumers whose demandis the least price elastic. The work wouldrequire a review of existing records of serviceapplications, service quality, to be supplementedby appropriately designed sample surveys;

b) Usage - carry out a complete revieu of usage dataincluding, inter alia, the business (includingGovernment) and residential usage patterns,traffic and traffic congestion analyses, call rateaunalyses and local, long distance andinternational revenue analyses. Particularemphasis should be placed upon peak call use.International traffic pattern should be enalyzed;

c) National Development and Social Considerations - adiscussion and analysis linking national economicdevelopment plans and the interactive role oftariffs should be made. In particular theseshould foeus upon tariff policies as they relateto long distance charges. Consultants shouldassess basis for charging various groups ofservices/consumers e.g., public call offices,rural consumers, mobile systems, to initiallystimulate socially desirable use of the serviceand/or recover full costs;

d) Financial Implication - a financial impactanalysis should be made linking tariff policy andthe resource mobilization capabilities of thetelecommunications sector. Consultants shouldensure that tariff policy procedures andrecommendations recognize ONT's financial

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viability to continue its operations andadequately finance its expaasion while at the sametime recogntizing Cote D'Ivoirels needs forresource mobilization. Specifically,interaational inpayments and outpayments controland impact should be examnued;

Organization - the consultants should review theorganizational aspects of tariff reviews,establishment and membership of a review committeeand the role of the economic studies unit tc beestablished in ONT. The consultants should alsoreview timing and methodology for reviewing,obtaining and implementiag tariff iucreases.

20. Results - The study should result in a recommetded set of tariffpolicy guidelines, together with an analysis of the relevant datanecessary as a precursor to tariff decisions. The study should alsoresult iu a set of alternative prices for various services, identifyingthe impact of these upon revenue a-d financial performance of ONT.Recommendatioas should also be made regarding the organizationalrequirements for a system to review tariffs ou a systematic and regularbasis.

,Task VIII: Radio Frequeucy Spectrum Management

21. Objective - To establish a sound regulatory framework for radiofrequency spectrum management and provide ONT with au efficient radiomonitoring system including, inter alia, a computerized data base.

22. Main Elements

(a) review and develop, as needed, the standards for radiofrequency spectrum management;

(b) establish systems, procedures asd facilities foreffective planning and utilizatio of the radiofrequency assigument, frequency interference studies andlicensing;

(c) formulate and design a comprehensive mcnitoring plan;

(d) assist ONT iu preparation of bid documents, evaluationof offers and in acceptauce testing of theequipment/facilities needed for radio monitoring;

(e) assist ONT iu establishing the monltoring stations andtrain key personnel on proper operation/maintenance ofthese stations.

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Task IX: Engineering Assistance

23. Objective - To assist ONT in planning and engineering cablenetworks, pover, switching and transmission equipment and air conditioningplant in the telecommunications buildings and in procuring the requiredequipment.

24. Main Elements

(a) review the existing facilities in the external plant inthe various towns, determine the expansion required tomeet anticipated demand/traffic and prepare a list oftypes and sizes of cables and accessories required;

(b) review the airconditioning facilities in the existingtelecommunication buildings and determine anychanges/additions required; design airconditioning plantrequired for the new telecommunications buildingsplanned and prepare a list of the equipment required;

(c) prepare bid documents for cables andaccessories,airconditioning, poaer, switching andtransmission equipment; and

(d) assist ONT in evaluation ci offers and in acceptancetesting.

Training and Transfer of Knowhow

25. Consultants will be required to train and transfer skills andknowhow to designated counterpart ONT staff in all the above tasks.Consultants shall make specific proposals in this regard.

26. It is assessed that not more than 120 manmonths of consultantsservices will be required for all the above tasks. Of the total, about 45manmonths will be required for the review process of tasks I-VIII, about 3-Jmanmonths for assisting ONT in implementing the agreed recommendations and45 manmonths for task IX. Consultants ma- however make their ownassessment of the actual services needed. Consultants shall indicate intheir proposal the following for each of the above tasks:

(a) total manmonths proposed to be employed;

(b) person (or persons) proposed to be employed with his/hercurriculum vitae, and period for which each will beavailable;

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ANNEX 1Page 9 of 10

(c) bar chart indicating the proposed dates of commencementand completion of the task, period for review,preparat.on of proposals, implementation of proposals,training of ONT staff, the availability of pereonnel forthe task both in consultants headquarters and in CoteD'Ivoire;

(d) detailed work program;

(e) program for transfer of skills and knowhow and trainingof ONT staff; and

(f) assistance expected from ONT specific to the task.

Language

27. French shall be Zb; o0verning language in respect of thisassigument. All consultants shall be fluent in French. All reports,communications and presentations shall be in French.

Consultants' Responsibilities

28. The Consultants shall be responsible for providing all theservices specified in the Terms of Reference and any additional servicesthat ONT deems necessary in the course of consultants' assignment which aremutually agreed between ONT and the Consultants. Additional consultartservices and their costs shall be mutually agreed between ONT and theConsultants and an amendment to the contract issued which shall be subjectto IBRD'r clearance before becoming effective.

29. The Consultants shall appoint a Teanm Leader and a Deputy TeamLeader to assume overall responsibility for the total assignment andliaison with ONT. The T4am Leader shall be fully responsible for allactivities and performance of all Consultants personnel, and settlement ofalfL accounts in Cote D'Ivoire including any duties or taxes that may becomedue during the Consultants assignment(s).

30. The Consultants shall be responsible for providing necessaryaccommodation (office and residential), furniture, office equipment, (wordprocessors, copying machines), tvpewriters, secretarial assistance, localtransport and all other facilities for their assignment in Cote D'Ivoire.ONT will provide the telecommunications facilities in reasonable quantitiesfor use of Consultants in their offices and the foreign staff in theirhomes. However, considering the current serious limitations on theavailability of telephone facilities in Cote D'Ivoire these facilitiesshall be limited to the minimum necessary for efficient performance of theConsultants services. For all such facilities, ON-T will finance theinstallation and monthly rental charges, but the Consultants shall beresponsible for all usage charges (local, domestic long distance and

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iaternatlonal call charges). The Coasultaats requiremeats oftelecommuaicatioas facilities vill be discussed duriag coatractaegotiatioas aad agreemeat recorded ia the miautes of the aegotiatioas.

31. In submittiag proposals and reports which require ONT'sagreement prior to Coasultaats proceediag with the aext step, theCoasultants shall allow ONT adequate lead times for review and comnents.ONT shall be responsible for providlag timely respoase to all suchCoasultaats requests.

32. The Coasultatts shall laform ONT promptly of aay circumstaacesor proposed chaages ia the agreed work program aad/or coastitutioa ofCoasultauts team which may affect the conteats of Coasultants assigameat,its budget, time schedule, and ia agreemeat with ONZ take all measures tomialmize the effect of such chaages.

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ANNEX 16




Selected Documents and Data Available in Project File

A. Selected Reports and Studies on the Sector

AI - A Master Plan (Plan Directeur) for the Development ofTelecommunications in the Republic of the Ivory Coast1984-2005, Vols. I to III (1984).

A2 - Plan National pour L'Amelioration de la Maintenance.A3 - Presidental Decree 84-773 dated June 13, 1984 establishing the

Office National des Telecommunications.A4 - ONT-Tableau de Repartition des Indemnites et Primes-March

1985.A5 - ONT-Decision No. 015/85/ONT/DIR portant Repartition des

Credits de l'ONT.A6 - ONT-Arrete portant Organisation et Attributions de l'ONT.A7 - Ministere de l'Economie et des Finances-Instruction No.

4546-81-MEF-Cab. du Il Decembre 1981 (portant RegimeFinancier et Comptable).

A8 - ONT - Tarifs des Telecommunications.A9 - Plan Quinquennal (1986-1990) prepared by ONT, March 1985.A10 - Plan de Redressement de la DGT.All - Plan de Redressement de la DGP.A12 - ONP - Rapport de M. Babin October 1983.A13 - ONP - Rapport de M. Babin April 1985.A14 - Circuits d'achat des Enterprises Publiques, January 1985.A15 - Presidential Decree No. 81-843 of September 25, 1981 estabishing the

Ecole Nationale Superieure des Postes et Telecommunications (ENSPT)

B. Selected Reports and Studies Relating to the Project

BI - Project Brief, October 11, 1984.B2 - Issues Paper, November 28, 1984.B3 - Decision Memorandum, December 20, 1984.B4 - Aide Memoire, Bank Mission - September 1983.B5 - Aide Memoire, Bank Mission - October 1984.

Selected Working Papers and Tables

Cl - OPT - Comptes Financier - 1982, 1983.C2 - ONT - Comptes Financier - June 30, 1984.C3 - Evolution of Demand for Telephone Services.C4 - Estimation of project costs - details.C5 - 1986-1990 Program - details of works.

COTE D'IVOIRE

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