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Implementation Completion Report (ICR) Review - Telecommunications

1. Project Data:   
Project ID:
Project Name:
Telecommunications & Informatics, Telecommunications & Informatics
L/C Number:
Partners Involved:
Prepared By:
Marcel Scoffier (Consultant), OEDST
Reviewed By:
Alain A. Barbu
Group Manager:
Gregory K. Ingram
Date Posted:

2. Project Objectives, Financing, Costs, and Components:

The project, supported by a loan of US$120 million equivalent, was approved in FY1991 and closed in FY1998, two years behind schedule. Actual project cost was US$357.8 million, about 5.5 percent lower than the appraisal estimate of US$378.7 million. A total of US27 million of the loan was cancelled due to cost savings from lower world prices for TC equipment during the project period and to the re-allocation of the Bank funded Technical Assistance (TA) sub-component to the EU’s PHARE grant program. Co-financing was provided by EIB (US$90 million) and EU PHARE (US$4.8 million). Project objectives were to : (i) strengthen and expand the national trunk network and make selected improvements in the international and local networks in order to rapidly relieve congestion and improve services for business; (ii) increase efficiency in the public posts and telecommunications utility (TPSA)’s operations; and (iii) improve quality of service. Project components comprised : (i) investments in overlay digital long-distance network connecting 17 major urban nodes plus expansion of international connections and selected investment in local networks; and (ii) technical assistance for measures to improve management, efficiency and financial performance of the TPSA and the regulatory capacity and expertise of the Ministry of Telecommunications.

3. Achievement of Relevant Objectives:

Physical Objectives were either met, albeit with delay, or exceeded as the development program was expanded taking advantage of equipment prices lower than estimated at appraisal due to technological progress and competitive procurement. Switching capacity increased from 3.7 million in 1991, to 9.3 million in 1998, the number of connected lines from 3.3 to 8.4 million, and the telephone density per 100 people from 9.8 to 21.6, Poland being now in line with the average density of 21 per 100 for Tier I EU accession countries in Eastern/Central Europe. Quality of service and operational efficiency objectives were also met or exceeded under the project and TPSA’s program: from 1991 to 1998, faults per 100 subscribers decreased from 8 to 2, call completion rate doubled from 38 to 76 percent, and staff productivity improved by more than 100 percent from 19.5 to 9.2 staff per 1000 subscriber lines. In addition, the new digital technology enabled the introduction of value added and new modern services, including data transmission and access to the Internet. TPSA’s financial performance also improved significantly. Project’s ERR was calculated at 20 percent (versus 27 percent at appraisal) which remains satisfactory in the current context of competitive tariffs re-balancing.

4. Significant Outcomes/Impacts:

Physical objectives were met or exceeded and noticeable improvements in quality of service and operational efficiency took place (see above). On the institutional development side, important studies and activities financed by the PHARE program supported a significant restructuring of the sector. Extensive amendments were made to the TC Act in 1995 to open up the sector and TPSA was partially privatized in 1998 through an IPO sale of 15 percent of its shares in Poland (further sales are being prepared). An independent Regulatory Authority is expected to be established in 1999.

5. Significant Shortcomings (include non-compliance with safeguard features):

Procurement delays arose during the early years of the project. Due to the borrower’s lack of familiarity with Bank ICB procedures and to Bank internal factors (staff changes and a lack of continuity in task management having caused some interruption and delays in early project supervision). Also, the Bank had to waive financial covenants on several occasions.
6. Ratings:ICROED ReviewReason for Disagreement/Comments
Institutional Dev.:
Bank Performance:
Borrower Perf.:
Quality of ICR:

7. Lessons of Broad Applicablity:

(i) This project confirms that the Bank’s primary value-added in telecommunications now lies not in resource mobilization, but in the provision of quality advice and incentives in sector reform programs. The new legislation discussed during project preparation and enacted as a condition of loan effectiveness was the key impulse to sector in-depth restructuring toward commercial operation and its opening to private participation; and (ii) staff continuity on the side of the Bank is of key importance in project supervision and was not met during the early years of the project, resulting in implemtation delays, though the essential dialogue on sector re-structuring and investment management could be maintain and the project satisfactorily implemented within an enlarged program.

8. Audit Recommended?  No


9. Comments on Quality of ICR:

The ICR is satisfactory within the limited context of the project. The report, however, could have included comments from the cofinanciers, and would have benefited from setting the project experience in the broader context of the Bank’s assistance sector strategy, sectoral and, in particular, of the circumstances and reasons that led to the abandonment of the proposed US$400 million second TC project appraised in 1993.

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