|1. Project Data:
ICR Review Date Posted:
|Samoa - Telecommunications And Postal Sector Reform Project
Project Costs(US $M)
Loan/Credit (US $M)
|Global Information/Communications Technology
Cofinancing (US $M)
Board Approval Date
|Telecommunications (50%), Postal services (40%), Law and justice (10%)|
|Regulation and competition policy (50% - P)
Rural services and infrastructure (25% - S)
Other financial and private sector development (25% - S)|
||ICR Review Coordinator:
|Melvin P. Vaz
||Robert Mark Lacey
|2. Project Objectives and Components:|
a. Objectives:The objectives of the project as stated in the Project Appraisal Document (PAD, page 2) and Development Credit Agreement (page 15) are: to assist Samoa in improving the performance of its telecommunications and postal sectors by (a) increasing competition and private sector participation in the telecommunications and postal sectors; (b) strengthening its institutional and regulatory capacities; and (c) enhancing the provision of these services in selected areas.
b. Were the project objectives/key associated outcome targets revised during implementation?
c. Components: 1. Competition and Sector Reform (US$0.73 million at appraisal, US$0.99 million at closure)
The activities under this component included:
- Selection and award of a digital mobile license through an open, transparent and competitive bidding process;
- Revisions to the telecommunications and postal legislation to allow for more competition including changes in existing regulations and preparation of new sector regulation, and enabling compliance with requirements on accession to the World Trade Organization (WTO) on telecommunications services;
- Developing sample model licenses for new operators and amendments to existing licenses of Telecommunications Samoa Cellular (TSC) and Samoa Tel; and
- Provision of technical assistance to elaborate on an implementable postal reform agenda.
The component was to finance technical assistance to support changes to sector legislation in order to increase competition, in the accession to the World Trade Organization (WTO); in the design of a postal policy; engagement of advisors for the award of a digital cellular license; and professional development (training, study visits).
2. Regulatory Framework (US$1.52 million at appraisal, US$2.33 million at closure)
The activities under this component included:
- Recommendations and drafting of new regulations in several areas of service interconnection, licensing, numbering, and others;
- Provision of new information systems within Ministry of Posts and Telecommunications (MOPT);
- Installation of spectrum management equipment;
- Recommendations on sector regulation, including tariff oversight, and preparing a national telecommunications frequency plan and its respective radio regulation;
- Training and offering of professional development activities to strengthen MOPT regulatory capacity;
- Monitoring and evaluating the effects of the telecommunications and postal sector reform progress in poverty alleviation;
- Preparation of a study on rural access to communications, with options to extend access to communications beyond the level offered by commercial operators;
- Design of a tender for Output Based Aid (OBA) for providers of rural communications, if an OBA piloting scheme were to be the preferred option to extend communications to rural areas; and
- Award of the OBA subsidy to providers of rural communications, through a least-cost, market-based mechanism.
The component was to finance technical assistance to establish a regulatory framework to ensure effective competition; procurement of equipment and software to put in place information systems within MOPT; technical assistance in the area of spectrum planning and frequency plan; procurement of spectrum management equipment; technical assistance to carry out monitoring and evaluation of poverty impact; professional development; and piloting OBA for rural communications.
3. Corporate Reform of Samoa Tel (US$0.79 million at appraisal, US$1.41 million at closure)
This component provided assistance to explore options to privatize Samoa Tel, and to carry out its privatization. The project would finance the technical assistance and the studies to be carried out, including advisors for privatization, as needed.
4. Postal Sector Reform (US$3.19 million at appraisal, US$1.13 million at closure)
This component involved the following two Phases:
(a) Phase I:
- technical assistance to the government to elaborate a postal sector strategy, including introduction of competition, definition and implementation of an adequate regulatory framework, extension of access, and review of the postal tariff regime;
- Technical assistance to Samoa Tel to prepare for competition in postal and telecommunications services through the definition and implementation of a corporate strategy;
- Design internal financial and management systems to provide Samoa Tel management with adequate management tools, including accounting and cost accounting;
- Separate financial audits for postal and telecommunications activities; and
- A comprehensive training program to provide staff with a new approach to business through exposure to private sector business management practices.
(b) Phase II included the investment to upgrade SamoaTel's postal capacity, both on the production side (sorting center at the Main Post Office and mail boxes throughout the network) and the retail side (upgrading postal outlets and counter organizations). This investment includes network information systems (hardware and software).
5. Project Management (US$0.10 million at appraisal, US$0.14 at closure)
This component supported the project steering committee (PSC) and the three implementing agencies with the implementation of the project.
In July, 2007, the postal component (i.e., component 4 of the project) was reduced to $1.13 million (ICR, Annex1, page 21) and the key performance indicators of the project were reduced from seven to five.
d. Comments on Project Cost, Financing, Borrower Contribution, and DatesProject cost. The total estimated cost of the project at appraisal was US$6.33 million. The actual cost was US$6.0 million according to Annex 1 of the ICR and confirmed by the project team.
Financing. The approved IDA Credit was SDR 3.4 million (equivalent at the time of appraisal to US$4.48 million. Of this, SDR 0.744 million was undisbursed at closure and canceled, mainly due to the non-accomplishment of planned activities in the postal sector. Due to exchange rate fluctuations, the remaining SDR 2.656 million, which was disbursed, was equivalent to US$4.54. There were no other sources of external financing.
Borrower contribution: The Government contributed US$1.46 million, compared to an appraisal estimate of US$1.85 million.
Dates. The original closing date (April 15, 2008) was extended 3 times for a total just short of three years: first, by 18 months (October, 2009) to allow for the privatization of Samoa Tel, the output-based aid Universal Access Program, and the purchase of Samoa Post fixtures; second, by 12 months (October, 2010) to amend the Development Credit Agreement to further reallocate funds to finance activities requested by the Ministry of Finance and Samoa Post; and third, by 4.5 months (February, 2011) to allow time to complete the technical assistance contract by the privatization advisors for the privatization of Samoa Tel. The project closed on February 28, 2011.
|3. Relevance of Objectives & Design:|
a. Relevance of Objectives:The objectives were highly relevant to country conditions: The major issues in the ICT sector that were identified in the PAD included limited coverage and access to the telecommunications network, poor quality of service, high communication costs, lack of adequate postal services, lack of competition which hindered growth, and lack of effective sector regulation.
The objectives were substantially relevant to Borrower strategy: Under the key strategic outcome "Private Sector Development and Employment Creation" defined in the Strategy for the Development of Samoa (SDS) for the period 2002–2004 (January, 2000) --- "... each household should be able to access a telephone. Additionally a national strategy for the development of ICT in Samoa will be formulated and implemented. Such a strategy will address amongst other things, how to take advantage of the potential benefits information and technology presents.”. Also, in the recent SDS for the period 2012–2016 (July, 2012), "Universal Access to Reliable and Affordable ICT Services” is listed as one of the key outcomes and a priority area under "Infrastructure Sector" (page 2, 16 and 17). However, development of the postal sector for Samoa was not mentioned in either version of the SDS.
The objectives were substantially relevant to World Bank strategy for Samoa: On March 5, 2012, the first individual Country Program Strategy (CPS) was prepared for Samoa covering the period Fiscal Year 2012-2016. Under the theme "Generate opportunities from global and regional integration" in the CPS (page i), it was mentioned that "... better transport and communications links can mitigate the cost of distance and encourage integration; and a key focus will be to build on the success of telecoms reforms and encourage new private investment to improve broadband connectivity". However, development of the postal sector for Samoa was not mentioned. The Pacific Island Strategy 2000 (Table 6, page 18) identified telecommunications as one of the priority sectors for Samoa. The Strategy also mentioned that "...measures to address the remoteness and isolation faced by the Pacific including in the transport infrastructure and telecommunications sectors and a focus on strengthening the the private sector's capacity to play a greater role in these areas" (page iii, para. xi). Again, however, there was no mention of the postal sector.
The overall relevance of objectives is rated Substantial.
b. Relevance of Design:The statement of the objectives was not fully clear as it did not specify the selected areas under the sub-objective (enhancing the provision of these services in selected areas) where the services (such as, basic communications, postal and internet) would be provided.
The causal chain leading to the achievement of the objective "improving the performance of Samoa's telecommunications sector" is clear and convincing in the results framework (PAD, Annex 1, pages 30-34). For instance, there is a clear linkage between the activity financed (engagement of advisors for the award of a digital cellular license), the output (selection and award of a digital mobile license through an open, transparent and competitive bidding process), the intermediate outcome (increased competition and private sector participation in the telecommunications sector), and the intended achievement of the objective (improving the performance of Samoa's telecommunications sector).
The causal chain leading to the achievement of the objective "improving the performance of Samoa's postal sector" is also clear and convincing. For instance, the financing of the activities: corporate strategy (focusing on internal management and financial systems); legal (determining the cost effective way to reach out in rural and remote areas by defining franchising options and an adequate outsourcing policy); training; and procurement of postal equipment for upgrading the postal infrastructure, might reasonably be expected to lead to increased competition and private sector participation in the provision of postal services which in turn would lead to the achievement of the objective of improving the performance of Samoa's postal sector.
Relevance of Design is rated Substantial.
|4. Achievement of Objectives (Efficacy) :|
1: Improvement in the performance of Samoa's telecommunications sector by (a) increasing competition and private sector participation; (b) strengthening institutional and regulatory capacities; and (c) enhancing the provision of these services in selected areas: Substantial.
- Technical assistance was provided for the revisions to the telecommunications and postal legislation in order to allow for more competition as well as facilitate the process of Samoa’s accession to the World Trade Organization, which was completed on May 10, 2012.
- No information is provided in the ICR on professional development. However, according to the project team, "41 Training courses were completed. Staff of the Ministry of Information Communication Technologies and the Office of the Regulator participated in courses to increase their capacity in the following technical areas: telecommunications operation (including broadband wireless, universal access), spectrum and frequency management and monitoring, broadcasting (public), e-government and Internet, telecommunications regulation, competition policy, telecommunications management, a legal framework for ICT, economics and accounting, and procurement. Attendance at key international conferences was financed".
- Technical assistance was provided to the Office of the Regulator.
- Technical assistance was also provided for the preparation of a statement of telecommunications policy, a proposed law on the postal sector and (updated in 2010); broadcasting legislation (2010); and a broader national information and communications policy statement, which was still pending at the time of completion of the ICR. The actual dates for these outputs were significantly later than the original target date of November 03, 2003 stated in the PAD (page 31).
- Information systems were supplied, installed and a maintenance program elaborated to assist the Ministry of Information Communication Technologies in its business operations.
- An Interconnection cost study was conducted to assist the Government in establishing fair and non-discriminatory cost-based interconnection rates for mobile and fixed line services. The Office of the Regulator received technical assistance in the area of interconnection dispute resolution (ICR, page 16). A new interconnection regime was in place by the end of October, 2009 (ICR Data Sheet, page vi).
- An integrated spectrum management system was procured to provide the Ministry of Information with the appropriate communication technology tools to facilitate the efficient use of the radio spectrum (ICR page 22).
- A spectrum assessment and national frequency allocation plan was put in place in October, 2004 significantly after the original target date of September 15, 2004 stated in the PAD (page 31). It involved technical assistance to the Ministry of Posts and Telecommunications which was later renamed the Ministry of Information Communication Technologies to: (i) prepare a national frequency allocation plan and relevant radio regulations; (ii) establish processes and procedures on spectrum management and monitoring; (iii) establish an appropriate pricing policy; and (iv) assess the system requirements for radio spectrum management and monitoring and prepare the tender documents for procurement.
- A planned output-based aid scheme to increase access to ICT services in rural areas was not implemented because the activities supporting the roll out of services to rural areas was only initiated in late 2010 when they were handed over from the Ministry of Information Communication Technologies to the Office of the Regulator, which left insufficient time to implement the services.
- According to the project team, ten training courses were conducted for staff of the Ministry of Finance and the Office of the Attorney General to increase their capacity in telecommunications regulation.
- A study was undertaken to advise and assist the Government to identify options for the reform of Samoa Tel (ICR, page 23). Advisors on privatization funded by the project provided technical assistance to the Government to valuate Samoa Tel and to prepare the privatization transaction. The privatization of Samoa Tel was completed on March 31, 2011, three years behind schedule.
- A tariff rebalancing plan (rates rebalancing for the main classes of services) was implemented in the spring of 2006.
- Competition in the telecommunications sector was increased through the issuance of a second mobile telephone license to Digicel Samoa Ltd. on March 8th, 2006 about 2 years after the target date of December 15th, 2003 (ICR, Annex 9, page 38). Prior to issuing this license, the Government first had to tackle the exclusive rights granted to Telecommunications Samoa Cellular (TSC) in its then existing 10-year license to provide analogue mobile services. Following an analysis of the Government’s options to deal with TSC’s exclusive rights, it was decided to renegotiate the terms of TSC’s license. Pursuant to a mutually acceptable Deed of Settlement, TSC agreed to relinquish its exclusive rights in exchange for being granted a GSM (digital mobile) license. The Government then issued a tender for the license, and awarded it through an internationally competitive process. This second digital cellular license effectively introduced competition in the mobile market.
- The Office of the Regulator, which was intended to be an independent regulatory body for telecommunications, was established in 2006. The Office is funded by revenues from the telecommunications sector, which the Ministry of Finance collects. The Ministry provides the Office with its budget. According to the ICR (page 16), “the institutional success of the [Office of the Regulator] (design and implementation) is…witnessed by the fact that the [Government] is considering appointing the [Office] to become the regulator for other infrastructure sectors in Samoa.”
- Increased competition and the operations of the Regulator have contributed to a fall in telecommunication tariffs. According to information provided by the project team, the cost per minute of a prepaid or postpaid call from Samoa to the US fell from 4.60 tala in 2004 to 1.79 tala in 2010, and a call to Australia from 3.07 tala in 2003 to 0,85 tala in 2010. The mobile Internet tariff charged by Digicel fell from 3 tala per megabyte in 2008 to 1 tala in 2010. The retail price of a 5 gigabyte per month Bears System was 1,000 tala in 2010, compared to 1,750 tala in 2008.
- Increased provision of service, together with greater affordability, has led to a considerable expansion in the size of the sector. In 2010, there were 168,000 customers of fixed and mobile telecommunication services combined (compared to 12,500 in 2002), nearly four times the target of 46,000 set in the PAD and well in excess of the revised target of 115,000 (the PAD target was for the original closing date of 2008; the actual number of customers in 2008 was 152,000). There has also been a large expansion in the provision of ICT services. In 2010 there were 12,000 Internet subscribers, four times as many as in 2002, and in excess of the appraisal target of 10,000 in 2008 (the actual number of subscribers in 2008 was 9,000).
- Access to telecommunications in selected areas has also increased. In particular, mobile penetration in rural areas increased dramatically, despite the fact that the output-based aid scheme did not materialize. There were nearly 58,000 mobile telephone customers in rural areas in 2010, compared with an estimated 1,200 in 2002, an appraisal target of 6,000 in 2008 and a revised target of 7,000. The improvement is the result of the rapid penetration of mobile services seen in rural areas in a wide range of countries. As the ICR (page 13) points out, some of the huge jump “reflects an underestimation of the expected targets; and weakness in gathering [particularly baselines] data.” Nevertheless, mobile penetration for the whole of Samoa is estimated at 95% (ICR, page 16).
- The ICR does not provide information of other, commonly used indicators of telecommunication sector performance, especially quality of service, but also operating efficiency and financial sustainability.
DO2: Improvement in the performance of Samoa's postal sector: Modest
- The original project design called for a postal reform component of US$3.19 million, about 50% of total estimated project cost. This was to enhance the management systems and headquarters office arrangement to make them more commercial and efficient as well as improving the sorting center and retail outlets. In the event, only about one third of the allocation was spent, mostly on technical assistance. According to the project team, the Chief Executive Officer of Samoa Tel “decided that the procurement processes were delaying the rollout of other facilities enhancements that he deemed urgent, and opted to fund part of the plans directly through his own budget.” The savings in project resources were reallocated to the telecommunications activities, including splitting it from the postal business in preparation for privatization.
- Technical assistance was provided for the preparation of a Postal Bill and Postal Policy. A detailed market analysis and a Strengths Weaknesses Opportunities Threats (SWOT) analysis of Samoa Tel's postal services was conducted to structure strategic recommendations and an action plan (ICR, page 23).
- Technical assistance was provided on the legal dimension of the postal business regarding partnership/service level agreement contracting. The technical assistance was aimed at strengthening the ability of the postal service to negotiate access of postal retail access points by partners and to seek an optimal outsourcing policy with a view to focus on its core business (ICR, page 23).
- A study provided Samoa Tel with a detailed methodology for asset valuation, cost accounting, and pricing policy to facilitate splitting telecommunications from postal services.
- The ICR does not provide any information on staff training which, according to the PAD (page 32), was scheduled for completion by December 31st, 2004. However, according to the project team, "27 training courses were completed, together with study tours and attendance at regional workshops, to increase the staff’s managerial, logistical and retailing capacity.”
- The ICR does not provide information on the status of the investment to upgrade Samoa Tel’s postal capacity, neither on the production side (sorting center at the Main Post Office and mail boxes throughout the network) nor the retail side (upgrading postal outlets and counter organizations). This was meant to be partially financed by Samoa Tel’s own resources and partly by the project. According to the project team, upgrading of infrastructure was confined to setting up an internet café in the Head Office and putting in place a cost accounting system.
- According to the ICR (page 13), the Postal Bill and Postal Policy were endorsed by Parliament in 2010. However, there is little information on the contents of the Postal Bill or on postal sector policy. The project team stated that “best practice elements include[ed] sector liberalization, level playing field competition and incentives for Samoa Post to perform better.”
- The ICR (page 23) reports that the technical assistance on the legal dimension led to only partial implementation of reforms by the postal services. This assistance aimed to strengthen the ability of the postal service to negotiate access of the postal retail access points by partners, and seek an optimal outsourcing policy with a view to focus on its core business. Little information is provided on which activities were outsourced.
- According to the project team, technical assistance in the area of partnerships for Samoa Post contributed to [the] signing [of] a number of partnership agreements with the utilities for bill payments (Samoa Water Authority, Electric Power Corporation, SamoaTel) as well as with Western Union, National Bank of Samoa, Land Transport Authority, etc.”
- The total number of postal office mail boxes per 100 inhabitants was 2.8 in 2010, below the target of 3.0 and significantly below the original target of 10.59 for 2008 and even the 2004 baseline of 5.58.
- The total number of letters per inhabitant in 2010 was at the same level as the target of 3.0, but significantly below the original target of 12.2 for 2008 (PAD, page 2) and the baseline of 4.5 (2004).
- Since the output-based aid scheme to award subsidy to providers to increase access to communication services in the rural areas was not implemented, the aim of extending postal services in those areas was not achieved.
The cost benefit analysis at appraisal (PAD, pages 40 to 43) computed the Net Present Value (NPV) of: (i) the cost of the project; (ii) overall fiscal revenues from the postal, cellular and telecommunications sectors; and (iii) cumulative fiscal gains -- the difference between (i) and (ii). The cumulative fiscal gains were estimated to increase to about US$ 3.5 million by 2008. Although the assumptions were stated in Annex 4 of the PAD, it is unclear how the revenues were estimated during the period 2003-08 for the postal, cellular and telecommunications sectors.
In the ICR’s ex post analysis (Annex 3), the economic benefits from the project were derived by estimating the increase in consumer welfare resulting from the introduction of the second mobile operator and from the privatization of Samoa Tel. With regard to the former, the analysis suggests that the welfare benefits were between US$20.3 million and US$56.56 million, depending on "pessimistic" or "optimistic" assumptions concerning price elasticity. With regard to the privatization, the value of operational net cash income during the period 2010-2020 was used as a proxy for the benefits from its privatization.
No attempt was made in either the PAD or the ICR to carry out a cost-benefit analysis for the Postal Sector.
There were several indications of inefficiency in the use of project resources. The project was extended three times for two years and ten months representing about 53 percent of the original implementation period of five years and four months. Long delays were caused by protracted negotiations between stakeholders, particularly once the decisions to separate the postal and telecommunications business units and to privatize Samoa Tel had been taken. Some planned activities, such as the output-based aid scheme for increased rural access to telecommunications and postal services, were not implemented since attention was focused on privatization of Samoa Tel.
Efficiency is rated Modest.
a. If available, enter the Economic Rate of Return (ERR)/Financial Rate of Return at appraisal and the re-estimated value at evaluation:
* Refers to percent of total project cost for which ERR/FRR was calculated