Report No. 1261-BO f-

Sector Memorandum i LBolivia Telecommunications

is>^B-2iiG LA1l & CJuly 12, 1977

Projects Department _

Latin American and Caribbean Regional Office

FOR OFFICIAL USE ONLY

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may not otherwisebe disclosed without World Rank authorization.

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CURRENCY EQUIVALENTS

Currency Unit - Bolivian Peso ($b)US$1.00 = $b20.00$bl.00 = US$0.05$bl million US$50,000

List of Abbreviations and Acronyms used in the Report

HF - High Frequency Radio

Microwave - Radio systems working at frequencies above 1,000 MHz

Telex - Subscribers Teleprinter Exchange System

DGT - Direcci6n General de Telecomunicaciones(General Directorate of Telecommunications)

ENTEL - Empresa Nacional de Telecomunicaciones

Carrier - A system providing several channels through onetransmission mode

CAF - Corporaci6n Andina de Fomento(Andean Development Corporation)

INSTEL - Instituto Nacional de Telecomunicaciones(National Telecommunications Training Center)

LABOTEL - Laboratorio Boliviano de Telecomunicaciones

UNDP - United Nations Development Program

UIT - International Telecommunications Union

Fill - Percentage of Installed capacity of a cable ortelephone exchange actually in service

FISCAL YEAR = CALENDAR YEAR

FOR OFFIAL US ONLYTELEuUMMUNICATIONS SECTOR

BOLIVIA

Table of Contents

Page No.

SUMMARY AND CONCLUSIONS i - ii

I. INTRODUCTION 1

II. THE SECTOR - INSTITUTIONAL ASPECTS 1

Access to Service and Sector Organization 1- General 1- Access to Service 2- Present Organization 2Sector Problems and Recommendations 3- Description of Sector Problems 3-Fragmentation 3- Recommendation 4-Planning 4- Recommendation 5- Financing 5- Recommendation 7-Accounting 7-Recommendation 7

III. THE SECTOR - DEVELOPMENT ASPECTS 8

Existing Facilities 8- Local Telephone Service 8- Long-Distance Service 8- Rural Telephone and Telegraph Service 8- International Service 8- Quality of Service 9- Ongoing Works 9Market Demand 10- Local Facilities 10- Long-Distance Facilities 11- Telex and Telegraph Facilities 11- International Facilities 11Investment Program 11- Investment Requirements 11- Development and Investment Priorities 12Tariffs 13Training 14

IV. RECOMMENDATIONS AND FUTURE ACTION 16

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

LIST OF ANNEXES

ANNEX 1 International Telephone Statistics.

ANNEX 2 Basic Data for ENTEL, DGT and Telephone Companies, as of December 31,1975.

ANNEX 3 ENTEL - Comparative Statements of Financial Position, 1970 and 1975.

ANNEX 4 ENTEL and Seven Main Telephone Companies - Comparative Statementsof Sources and Applications of Funds, 1970 to 1975.

ANNEX 5 Seven Main Telephone Companies - Comparative Statements of FinancialPosition, 1970 and 1975.

ANNEX 6 Past and Planned Number of Telephone Lines 1971-1980.

ANNEX 7 Summary of Investment Planned by Individual Companies 1976-1980.Comparison of Investment Actually Planned and Estimated.Investment with Sector Reorganization, 1976-1980.

ANNEX 8 Estimated Sector Investment with Sector Reorganization, 1976-1980.

ANNEX 9 Comparison of Telephone Tariffs, 1976.

TELECOMMUNICATIONS SECTOR

BOLIVIA

SUMMARY AND CONCLUSIONS

i. This report analyzes the situation in the telecommunications sectorof Bolivia and presents a diagnosis of its problems as well as proposals for itsfuture development on an efficient and economic basis.

ii. The Ministry of Transport, Communications and Civil Aviation isresponsible for overall control of the telecommunications sector. The GeneralDirectorate of Telecommunications (DGT) which reports to the Ministry, islegally empowered to supervise, regulate, plan and operate the telecommunica-tions services in Bolivia. The sector comprises some 18 public and privateenterprises which, at the end of 1975, employed an estimated 2,600 personsand had an aggregate share capital of about US$37 million.

iii. The Empresa Nacional de Telecomunicaciones (ENTEL) operates nationaland international long-distance telephone, telegraph and telex facilities. DGToperates, at a loss, an open wire and HF radio network of telegraphy and tele-phony in rural areas. Two private companies are active in radiotelephone be-tween cities in Bolivia, and two others operate international telephone,telegraph and telex services. There are also nine Cooperatives and threeMunicipal enterprises for local telephone services which operate their ownsystems independently. These systems range from a high of about 32,000telephone lines (La Paz) to a low of 100 lines (Villaz6n).

iv. Telecommunications services are insufficient and of low qualitydue to: (a) fragmentation of operations with each enterprise working inde-pendently and in an uncoordinated manner; (b) absence of a national plan forexpansion of services; (c) poor operating results and a shortage of invest-ment funds; (d) uncoordinated procurement of small quantities of equipmentfrom suppliers; and (e) lack of technical and managerial capability in themajority of the entities.

v. For an efficient, coordinated and economic development of tele-communications, the consolidation of the whole sector into a single nationaltelecommunications entity is most desirable. The new institution could be asemiautonomous Government enterprise, and, as its first step, it should acquireat least a majority of the shares of the telephone companies. The main ad-vantages of consolidation would consist of: centralized planning, priceadvantages of bulk procurement, lower cost of capital through long-termborrowing, standardization of equipment, unified service standards, uniformaccounting, rationalization of tariffs, better administration and centralizedtraining.

vi. The existing method of ownership of local telephone services(Municipal and Cooperatives) is based on share purchases by telephone sub-scribers. Current share price for a new subscriber is between US$530 and

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US$750. This self-financing has resulted in haphazard development, pooroperation, and high costs. It also restricts normal demand growth and issoon expected to reach a saturation level. This method of self-financingshould be phased out as soon as possible, and other methods and financingshould be made available to the proposed new integrated entity.

vii. Past growth based on the availability of subscribers' share moneyand on independent programs carried out separately by each enterprise is re-flected in the absence of an overall development plan designed to achievetechnical efficiency and economies. ENTEL's trunk network is expected to becongested from the very moment it becomes operational in 1977. Similarly,DGT plans its own rural network independently, without any standards of costeffectiveness, on the justification that it provides a necessary socialservice. It is urgent to define, therefore, a telecommunications policy uponwhich to prepare a five-year development program for 1976-80, correspondingto the current notional five-year (1976-80) plan.

viii. From the financial point of view, operating results of almost allenterprises in the sector are unsatisfactory. Depreciation reserves aregenerally non-existent, and, in some cases, depreciation charges are used forcovering operational losses. Some companies use a portion of the subscribers'share payments for fixed assets as a current income in order to show lowoperating losses. Except in ENTEL, the lack of long-term financing is a seriousweakness in the sector, and the independently contracted, relatively smallsupplier credits increase overall equipment costs.

ix. According to the General Law of Telecommunications (June 2, 1971)it is within the authority of DGT to suggest tariff rates and other chargesfor telecommunications services. In practice, however, this is left to thecompanies in the sector and DGT takes a passive attitude of approving therequests it receives as a matter of routine. Because of deficiencies in thelevel and structure of applicable tariffs, the vast majority of the operatingentities have normally shown operating deficits.

x. There was no serious attempt in the past to estimate the generaldemand for telephone service. On the urging of the World Bank sector mission,the first attempt to estimate demand was made by the Laboratorio Boliviano deTelecomunicaciones (LABOTEL). Assuming a reorganized sector - as proposed bythe mission - withunsuppressed demand, the number of telephone subscribers islikely to grow from 63,900 in 1975 to some 150,000 in 1980. Such an invest-ment program for the five-year 1976-80 period would cost about US$135 millionof which US$60 million would correspond to ENTEL and DGT for long-distance andrural development plans. Some US$67 million of the total is already backed byforeign loans and suppliers' credits.

xi. The Bolivian telecommunicationssectoris considering major expansionof its facilities, and this is the right time to embark on sector consolida-tion. The Government would consider making a request for external financingto enable it to improve the management and control of teleconmunicationsservices, and to improve and extend those serrices throughout the country.

TELECOMMUNICATIONS SECTOR

BOLIVIA

I. INTRODUCTION

1.01 At the request of the Government of Bolivia, the Bank agreed toassist in the review of the telecommunications sector in order to:

(a) diagnose sector problems and difficulties;

(b) propose measures for achieving an efficient and economic develop-ment of local and long distance telecommunications facilities; and

(c) estimate the demand for telecommunication services and the totalinvestment required for a five-year development program.

1.02 A preparatory mission visited Bolivia in November/December 1975to carry out a preliminary review. A subsequent full sector review missionvisited Bolivia in April 1976. This report was prepared in August 1976 byMessrs. N. R. Holcer and J. A. Datas and is based on information obtainedfrom the various telecommunications entities in Bolivia. The recommendationscontained in that report were discussed by Mr. M. DeLima with the Govern-ment in November 1976

II. THE SECTOR - INSTITUTIONAL ASPECTS

ACCESS TO SERVICE AND SECTOR ORGANIZATION

General

2.01 Bolivia has unusually rich and diversified natural resources mostof which, however, require heavy capital investment for their development.The country, with an area of over one million square kilometers, is inhabitedby only about 5.6 million people in widely dispersed locations. The rela-tively high cost of providing adequate transport, communications and socialservices due to this situation is further increased by the extremely ruggedtopography, which ranges from swampy flatlands in the north and east throughChaco and the valleys up to the mountain plateaus of the Altiplano at eleva-tions of over 3,500 meters. These conditions create serious obstacles tothe development of an adequate modern infrastructure, and investment costsfor a comprehensive transport system alone tend to be prohibitively high ona per capita basis. The difficulties of topography are compounded by adverseclimate, with frequent incidences of both floods and droughts which adverselyaffect the transport system and agricultural activities. On the other hand,the country is heavily dependent on its foreign trade; in 1976 minerals ac-counted for roughly 47% of exports, and another 41% was accounted by hydrocar-bons and agricultural products. The main export products are dispersed widelyover the territory so that together with the geographical characteristics ofthe country, efficient and economic use of transportation to arrange supplies

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and to facilitate deliveries are mandatory. This process can be facili-tated by providing efficient and adequate telecommunication services.

Access to Service

2.02 The quality, quantity, spread, and coverage of telecommunica-tions services in Bolivia are very poor and are inadequate for meetingthe needs of the economy. The present telephone density of 1.08 per 100population is low compared with that in neighboring countries (Argentina9.41, Brazil 2.50, Uruguay 8.97, Colombia 4.74, Ecuador 2.58 and Peru 2.14,see Annex 1). An estimated 98% of the telephones are in urban areas; ofwhich 52% are in La Paz. The telephone density in La Paz of 5.2 per100 population, however, still remains low in relation to other major citiesin the region (Lima 8.1, Quito 13.0, Bogota 11.4, and Montevideo 16.1).Indicative of Bolivia's present lack of long distance telephone facilitiesis the low nuwmber of long distance conversations, i. e., 0.33 calls persubscriber per month, as compared to Philippines 1.4 and Malysia 6.7. Simi-larly, some 60% of the rural population or some 900 communities (rangingfrom 100 to 500 people) are still without any kind of telecommunications.

Present Organization

2.03 The Ministry of Transport, Communications and Civil Aviation hasoverall responsibility for the telecommunications sector; the GeneralDirectorate of Telecommunications (DGT), which reports to the Ministry, islegally empowered to supervise, regulate, plan and operate the telecommunica-tions services in Bolivia. DGT, however, is poorly staffed and cannot performits functions effectively (among its 800 employees working mainly in ruraltelecommunications operations, there is only one telecommunications engineer).

2.04 Requests for approval of tariff rates are submitted to DGT, whichis supposed to review them for adequacy and composition. In practice, how-ever, DGT merely acts as a rubber stamp for these requests. DGT is also incharge of approving the individual investment plans of the entities includedin the sector. Here again, however, DGT is not staffed adequately to per-form its role of planner and coordinator in a national context.

2.05 Telecommaunications services in Bolivia are provided by some 18 en-tities, including private and public enterprises as well as cooperatives(Annex 2). The entire sector, at the end of 1975, employed an estimated2,600 persons, its aggregate share capital was US$37 million and its fixedassets were US$36 million.

2.06 Empresa Nacional de Telecomunicaciones (ENTEL), a Government ownedsemiautonomous entity, created in 1965 to take over gradually all long distance,telegraph and telex services both national and international still has manyproblems (managerial, financial, technical) to overcome. Large investmentscarried out by this entity are not planned properly or followed with adequateinstitution bulding, while overstaffing is creating financial problems.Despite these shortcomings, the expected boom in long distance traffic withthe new trunk network, referred to in para. 3.07, will generate sufficientrevenues and lead to operating profits.

2.07 There are nine cooperatives and three municipal enterprises forlocal telephone service, with a capacity of about 64,o00 lines, which operatetheir own systems independently; these systems range from a high of about32,000 telephone lines (La Paz) to a low of 100 lines (Villazon).

2.08 Four private companies are active in the field. Two of them, RadioSerrano and Radio Serval, operate HF radiotelephone circuits between Bolivia'sbiggest cities. The other two, All America Cables (a subsidiary of ITT) andCable West Coast (a subsidiary of Cables & Wires Ltd.), operate internationaltelephone, telegraph and telex services. Their franchises will expire in afew years (by 1982 at the latest), and ENTEL is expected to take over theiroperations.

2.09 In addition to the public telecommunications network, there areseveral private and Government telecommunications of different sizes andtypes which were built by those entities in the absence of adequate tele-communications in the country.

SECTOR PROBLEMB AND RECOMMENDATIONS

Description of Sector Problems

2.10 Public telecommunications services in Bolivia are insufficient andof low quality due to the following basic problems:

(a) fragmentation of operations among 18 public and private telephone/telegraph entities working independently and in an uncoordinatedmanner;

(b) absence of a national telecommunications plan for expansion ofservices;

(c) poor operating results and shortage of development funds due tounsatisfactory tariffs and inadequate financing;

(d) uncoordinated procurement of small quantities of equipment fromsuppliers, leading to high prices; and

(e) lack of technical and managerial capability in the majority ofthe entities because of their small size and financial limitations.

Fragmentation

2.11 The fragmentation of telecommunications services in Bolivia resultsin high cost due to lack of standardization and coordinated procurement, poormaintenance, operational deficiencies, and absence of planning at the sectorlevel. None of the enterprises have sufficient technical or financial capabi-lity to meet the normal demand. Quality of service is generally unsatisfactorybecause of lack of managements' knowledge of the sector, varying standards inoperation and maintenance, and absence of proper interconnections among theoperating companies.

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2.12 The problem of fragmentation is also present in rural telecommunica-tions. Besides its regulatory functions (para. 2.03) DGT is responsible foroperating and developing telecommunications in the vast rural areas of lowtraffic that require subsidization. Recently, its operating deficits, coveredby the Government, have been about $b 8 million (US$400,000) annually and areexpected to rise. Services in rural areas that generate profits are providedeither by ENTEL or the local telephone companies. At present, the largesttelephone companies (La Paz, Santa Cruz, and Cochabamba) are tending to ex-pand services into some rural areas of their respective regions which appearsto create a conflict with ENTEL and to reduce the overall efficiency of thenetwork. Dividing development responsibilities among several entities leadsto duplication of facilities, which in turn leads to high costs by foregoingthe significant economies of scale possible in this sector, particularly inlow density rural areas. The high cost leads, in turn, to high tariffs whichreduce the demand for telephones and high unit costs.

Recommendation

2.13 For an efficient, coordinated and economic development of thesector, consolidation through the integration of the different companies intoa single national telecommunications entity is most desirable. Decentralizedregional operational units would be in charge of operation, maintenance, ins-tallation, personnel and expansion in their respective regions. The newinstitution could be a semiautonomous, Government owned, commercial enter-prise with decentralized operations and a Board responsible to the Ministerof Communications. It would control overall operation and development ofpublic telecommunications in the country, under the direction of the Board,and would be responsible specifically for:

(a) technical and financial planning for the sector;(b) procurement activities for the whole country;(c) technical and operational standards;(d) tariff policy; and(e) training.

2.14 Integration, as recommended above, should include telecommunicationsin rural as well as in urban areas; fragmentation of the services between themarket towns and rural areas and between market towns and provincial towns shouldbe eliminated. Future investment should be chaneled through the planning officeof the new entity and done within the context of the whole integrated network.

Planning

2.15 Expansion of local telephone service is presently determined by theavailability of subscribers' share money and is carried out independently byeach company in an uncoordinated manner. As a result, there is no overall devel-opment plan designed to achieve technical efficiency and economies. ENTEL's trunknetwork is expected to be congested from the very moment it becomes operationalin 1977. Similarly, DGT has planned its own rural network independently without

any standards of cost effectiveness, on the justification that it provides anecessary social service. The existence of so many independent telecommunica-tion systems with lack of standardization and interconnection understandablycreates maintenance and operational problems.

Recommendation

2.16 It is urgent to define a telecommunications development policy uponwhich to prepare a five-year development program for 1976-80. At a later datea long-term plan for the sector should also be prepared.

The benefits of integrated sectoral planning would be reflected in:

(a) improved technical efficiency as a result of integration andstandardization;

(b) lower equipment costs through organized bulk procurement;

(c) better use of capital resources that will produce satisfactoryoperating ratios; and

(d) greater productivity of scarce manpower.

Planning functions could be performed by a central office in the new entityworking jointly with the decentralized regional units.

Financing

2.17 ENTEL's total assets expanded rapidly in the 1970-75 period from$b 34 million to $b 308 million (Annex 3). Almost 55% of this expansion wasprovided by long-term borrowing (mainly IDB) while increases in net worthcontributed another 35% (Annex 4). The remaining 10% came mostly from increasesin current liabilities. About 80% of all available funds went into fixed assetsand most of the rest into increasing current assets.

2.18 The consolidated financial statement for seven telephone companies(currently accounting for about 92% of all telephone lines in the country) rosefrom total assets of $b 208 million in 1970 to $b 1,073 million in 1975 (Annex5). This growth was made possible mainly by a 54% increase in net worth thatreflects the purchases of shares by subscribers in order to obtain telephoneservice (Annex 4). Long-term debt contributed about 36%, and the remaining10% came from increases in various liabilities. On the other hand, only 32%of available funds were converted into fixed assets during the five-year period.It is interesting to note that, while the net worth of these companies roseby $b 466 million in the period, the total fixed assets increased only $b 245million because of a lag in converting subscribers' contributions into opera-ting fixed assets. It also appears that a portion of these contributions wereused as current income in order to lower the operating losses rather than investedin the purchase of equipment.

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2.19 According to the laws applicable to ENTEL and the telephone companies,their operations should generate a reasonable return on the capital for thepurpose of setting up reserves and providing funds for expansion. In practice,however, the operating results are disappointing. During 1970-75, ENTEL haddeficits in every year except one. ENTEL's indebtedness is heavy, and revenuesare below what they would be in similar companies because of the lack of tele-phone development and of coordination. A similar situation of continuous annuallosses can be seen in the telephone companies. The insufficiency of currentrevenues is accompanied by the shortage of long-term funds at reasonable in-terest rates (except in the case of ENTEL). DGT operations show continuousand rising deficits (para. 2.12).

2.20 Depreciation reserves are generally non-existent, and in some cases,depreciation charges are used for covering operating losses. Some companiesalso use a portion of the subscribers' share payments for fixed assets as acurrent income in order to show lower operating losses. The level of inven-tories is inadequate, particularly for a country with difficult access tosuppliers. Finally, the accounting practices followed, as well as the pre-sentation of financial statements, vary among companies and are of limitedusefulness for monitoring and evaluating the operations properly.

2.21 ENTEL is the only enterprise in the sector that has received long-term financing (mostly from IDB) at reasonable interest rates. The local tele-phone companies finance their expansion with suppliers credits usually payablein four to eight years at interest rates between 8% and 10% annually. Thebasic issue in borrowing is to shift from medium-term costly supplier creditsto long-term debt.

2.22 The cost of financing is further increased by the practice of eachcompany purchasing goods on its own and in small quantities. The price advantagein bulk buying is lost; besides, a variety of equipment is bought and thestandardization advantages are lost. Bulk procurement for the sector as awhole would result in important savings and improved equipment performance.

2.23 Finally, the existing method of ownership of local telephone services(Municipal and Cooperatives) is based on share purchases by telephone sub-scribers. Current share price for a new subscriber is between US$530 andUS$750. This self-financing has resulted in haphazard development; it isseverly restricting normal demand growth and is soon expected to reach asaturation level because, once the business and affluent residential sub-scribers have obtained their telephones (as in the case of La Paz and Sucre)the real demand (which would occur if no share contributions were requested)is suppressed. It is also likely that such rationing of connections is a self-defeating feature since it would lead to a steady overuse of the country'stelephones in a few years which, in turn, would lead to repeated calling ofmany subscribers and very poor service. Some companies (Santa Cruz and LaPaz) tried to counterbalance such difficulties by offering credit paymentplans (i.e., the subscriber has the option to pay the share price in monthlyinstallments, including interest, over a period of up to six years), but theresponse was unsatisfactory.

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Recommendation

2.24 The existing method of self-financing telephone expansion should bephased out as soon as possible, and other sources of development financingshould be made available to the new integrated entity. Long-term loans shouldreplace short-term supplier credits and adequate tariffs should be introducedto generate sufficient funds for normal operation and part of developmentfinancing. If and when needed, the Government should contribute funds forthe initial operation of the new entity. Furthermore, through the help ofGovernment contributions, the new entity should, as a first step, acquire themajority (or all, if possible) of the shares of the telephone companies. Theirestimated share capital was about US$30 million at the end of 1975, excludingreported reserves of US$1 million, and accumulated losses of US$0.6 million.This transaction should result in a structural transformation of existingprivate entities into a Government controlled semiautonomous public enterprisewhich would guarantee the subscribers (old and new) wider and better publicservices -- for a reasonable price. BolivialB Law of Cooperatives permitsthe integration of the telephone companies into one national entity.

Accounting

2.25 Variations in accounting practices among companies and differentformats used for the presentation of financial statements hinder meaningfulanalysis of the operations.

Recommendation

2.26 A standardized accounting system applicable to the whole sector shouldbe introduced providing analytical financial statements to monitor and evaluatethe efficiency of the operations.

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III. THE SECTOR - DEVELOPMENT ASPECTS

EXISTING FACILITIES

Local Telephone Service

3.01 In Bolivia, as of December 31, 1975, one manual and 21 local auto-matic exchanges were in operation with a total installed equipped capacityof about 63,900 lines and with some 60,276 working direct exchange lines.The number of lines with automatic service was 99%, and the average exchangefill, i.e., the number of connected lines to total installed capacity was94% which is rather high as a result of high unsatisfied demand. Annex 6 setsout the development of exchange equipment in total capacity from 1971 to 1975.

Long -Distance Service

3.02 No modern reliable long-distance system exists in Bolivia.Long-distance services are provided by HF radio systems, open wire carriersystems and open wire physical lines. As of December 31, 1975, the statisticsfor long-distance circuits were as follows:

Physical lines 17,340 (km)Carriers on open wires 2,040 (circuit-km)HF radio 27,350 (circuit-km)

The total number of long-distance interurban circuits provided byoperating entities were:

DGT 34ENTEL 16Radio Serrano 15Radio Serval 26

Total 91

Rural Telephone and Telegraph Service

3.03 Bolivia's vast rural area is served by DGT's telephone and tele-graph network, consisting of open wire physical lines and HF radio systems.Some 837 rural communities (about 40% of the total rural population in com-munities ranging from 100 to 2000 inhabitants) in Bolivia's nine departmentsare served either by telephone (750 communities) or telegraph (87 communities)service. This include some 57 locations served by HF radio circuits. Anadditional 900 communities ranging in population from 100 to 500 inhabitantsare still without any telecommunications coverage.

International Service

3.04 Bolivia has limited international communications consisting of 19 HFradio telephone circuits and 11 radio telegraph (eight teleprinter and three

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morse) circuits operated by ENTEL. The two private carriers, All America Cablesand Cable West Coast, have four HF radio circuits each, used for telephone,telegraph and international telex service, which is operated on a semiautomaticbasis. There are six commercially leased circuits.

Quality of Service

3.05 The Bolivian telecommunication network has a number of deficienciesmainly caused by lack of investment and proper planning in the past, leadingin turn to insufficient coverage and inadequate quality of service. The demandfor service is apparently large, but the provision of facilities has been basedon a system of self-financing (para. 3.09) with inherent demand suppression.Both local and long-distance telephone services are congested due to higherusage of many telephones than the existing system was desiged to accommodate.Persons trying to reach these telephones get busy signals, try again, tie upother available circuits and thus add to congestion and failure of calls.The many independent local systems are interconnected with long-distance circuitswhich are inadequate in terms of quality and number and also tend to createcongestion. It takes hours, sometimes days, to get lgng-distance service andeven then the quality of transmission is poor. High fault incidence with extendedoutages in the local telephone system is the result of the poor maintenance onoutside plant and poor insulation on cables due to unsatisfactory cable joints.The congestion in the local service also results from repeated calls made tosubscribers whose lines are faulty over long periods of time.

3.06 There are no standards for fault clearance, and each entity decideson clearance time, depending on what they can afford to spend on maintenance,staff and facilities. Extended outages also contribute to the congestion ofthe long-distance circuits due to ineffective repetitive calls.

Ongoing Works

3.07 ENTEL has under execution the much delayed 960-channel microwavenetwork which will connect the four largest cities in the country (La Paz,Oruro, Cochabamba and Santa Cruz) and which is being financed by IDB; thenetwork is expected to be in operation in 1977. The initial 120 channelswill be served by manual switchboards acquired from Venezuela. The trunkswitching equipment (to be operational in 1978) is being supplied by L.M.Ericsson and is being financed with a loan from Banco do Brazil. ENTELhas also decided to install an earth satellite station near La Paz, for whichCAF is providing financing. However, problems in the award of bids have delayedthe project, and it will not be ready for operation before early 1979.

3.08 The local telephone companies are engaged in piecemeal expansions(see details on page 1 of Annex 7). Similarly, DGT's plans for ongoingvorks include expansion of rural communications by open-wire lines and VFand UHF radio circuits.

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3.09 Due to the system of financing, the expansion of facilities in the1971-1975 period was irregular and unsatisfactory. The three largest companies(La Paz, Cochabamba and Santa Cruz) expanded their telephone facilities (interms of exchange capacity) by some 7.5% annually. The average growth ratefor all the companies was 9.8% annually. Total growth of the country'stelecommunications was far behind the country's needs and the growth rateof other countries in the region. (Costa Rica 16%, Colombia 11.5%, andMexico 13.4% in the 1965-75 period). All of the expansions were carriedout by suppliers on a turnkey basis. None of the telephone companies havea comprehensive telephone development plan.

MARKET DEMAND

Local Facilities

3.10 There was no serious attempt in the past to estimate the generaldemand for telephone service. Foreign experts and IDB technical assistanceconcentrated mostly on day-to-day operational issues. On the urging of theWorld Bank sector mission, the first attempt to estimate demand was made bythe Laboratorio Boliviano de Telecomunicaciones (LABOTEL) - a DGT controlledunit. Similarly, due to the existing system of financing which restrictsdemand, the history of past growth is not a reliable source for forecast.

3.11 One of the projections in LABOTEL's study is a sum of the estimationof future expansion by each of the local telelphone entities, based on theexisting system of financing, which gives a 16.8% annual growth in capacity(from 63,900 in 1975 to 139,000 in 1980, Annex 6). However, LABOTEL and theBank mission agree that the real demand is not likely to grow by more than12% annually (from 63,900 to 115,000 in 1980) if the present system ofdevelopment financing is maintained. A market saturation will probably occurduring 1978/79, with a strong demand suppression, because some of the potentialsubscribers will not be able to afford the rising cost of a share.

3.12 The second approach for demand forecast, based on undepressed demand,which assumes a different way of development financing (without share con-tributions), gives a much higher composite growth rate. This method assumessupplying, over the period, an initial unsatisfied demand existing at yearend 1975 of about 30,000 subscribers, which appears reasonable on the basisof discussions with the telephone companies. It implies an 18.6% annualgrowth rate which would result in some 150,000 subscribers in 1980, stillleaving some 20-30,000 waiting applications. This target approximates theprojections proposed by LABOTEL and has been used as the basis for the invest-ment programs for 1976 to 1980. However, this projection assumes the utiliza-tion of the full five-year (1976-1980) period which is not likely, because ofthe necessity of a two-year delay in commencing the program.

Long-Distance Facilities

3.13 ENTEL, DGT, and the two private companies (Serrano and Serval) do nothave an operational demand forecast because there is no local telephone develop-

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ment forecast. Some projections were made by consultants during the appraisalof the IDB loan for ENTEL in 1968 and 1972. They are out of date, however,due to a more than three-year delay in project execution. Despite all thosedifficulties in estimation, ENTEL expects a 200-300% increase in long-distancetraffic when, in 1977, the 120 channels of the new microwave link, togetherwith the manual switchboard, become operational. After that, the next trafficincrease will occur when the trunk switching equipment together with additionalmultiplexing equipment, will be put in service in 1978 as a consequence oftechnical improvement. This will generate a second big jump in traffic,estimated to be at least some 150%. In addition to these two significantevents, a minimum 20% annual increase in long-distance traffic can be expectedbased on past trends.

Telex and Telegraph Facilities

3.14 There are no national telex facilities in Bolivia at present. ENTEL'splan includes, together with the initial installation of a telex exchange forsome 300 lines, an increase of another 300 lines in the five-year period. How-ever,the real market demand, according to LABOTEL, appears to be much higher,most likely around three times that much, i.e., 2,000 lines in 1980. Thiswould mean a 95% annual growth in the 5-year period, which appears feasiblefor this initial phase of the development of the telex network.

3.15 Because of the lack of telephone communications, the telegraph trafficis expected to grow for a few years by some 20% annually. However, later (near1980) the traffic may taper off as a result of increasing telephone usage.Also, there are still some 900 communities without any communications, and DGTand ENTEL intend to reach these villages with open wire or radio circuits,which will inevitably contribute to the steady telegraph traffic growth in thefive year-period.

International Facilities

3.16 The existing international circuits are not sufficient, and theirquality is low. To improve the situation and to cater for future trafficgrowth, the Government has authorized ENTEL to acquire a loan from CorporacionAndina de Fomento (CAF) for the procurement of an earth satellite groundstation, which should be operational in 1978/79. There are also plans to ex-pand the new microwave links to Peru as a part of the future inter-Americanmicrowave network. The demand is expected to grow some 15% annually.

INVESTMENT PROGRAM

Investment Requirements

3.17 In the past there has not been any investment program at the sectorlevel. ENTEL and DGT development was financed as a part of the Governmentbudget, and the telephone companies, as well as other private companies,developed in an uncoordinated manner.

- 12 -

3.18 One investment program, comprising the simple sum of ENTEL's,DGT's and the telephone companies' estimated investment in 1976-80, (andcorresponding to 80,000 new lines), amounts to about US$107 million withsome US$85 million in foreign exchange (Annex 7). This program assumesno changes whatsoever in organization, planning, method of financing, oroperations.

3.19 If, however, the proposed changes in financing and organizationtoward sector integration and operational improvement are carried out, theinvestment program can be improved for a hypothetical integrated entity(Annex 8). In this case, it would be possible to achieve a much highergrowth rate and an optimal development of the telecommunications sector atleast cost. Such a program, which contemplates an addition of some 104,000telephone lines during the five-year period, would cost some US$135 million,with about US$116 million in foreign exchange. The average cost per tele-phone line would be about US$550 (without long-distance equipment), whichis reasonable. The total investment includes ENTEL and DGT long-distancetelex and rural development plans costing about US$60 million (with a foreignexchange component of US$57 million); it would expand services to many newrural and suburban areas and would expand international communications aswell.

3.20 A substantial part of the proposed investment, some US$67 million,is already backed by foreign loans and credits. ENTEL, for example, hasobtained a CAF loan of US$8.5 million to procure an earth satellite stationand a supplier credit of US$10.8 million from L M Ericsson, through Banco doBrazil, for trunk switching equipment. Similarly, the local companies havecontracted about US$42 million in supplier credits from various equipmentsuppliers.

Development and Investment Priorities

3.21 The scarcity of development funds in the country limits the invest-ment opportunities in telecommunications severely. Therefore, choosing develop-ment priorities in the sector is of first importance for achieving economicdevelopment goals. Moreover, the balanced expansion of telecommunicationsfacilities is necessary to maximize economic benefits. It is important thatthe development of local, long-distance and international facilities shouldproceed in harmony and within the resources available not only to meet growthin demand in areas already served but also to extend the services to new areas.

3.22 Maintaining and improving the quality of service to existing sub-scribers is a task of the highest priority. Poor service standards have arelatively high economic cost, and, therefore, the extension of existing ex-changes and long-distance routes is a necessity in time of growing economicactivities. These expansions have to cater both for traffic growth of existingsubscribers and for growth of new subscribers so that the increased usage willnot cause the quality of existing service to deteriorate.

3.23 The second highest priority should be given to the expansion oflocal and long-distance facilities in and between the main cities to satisfy

- 13 -

-D part of the growing demand and to remedy the existing severeshortage of telephones in the country.

3.24 Political considerations in Bolivia influence the developmentpriorities. A Government decision to provide all the rural communities havingmore than 200 inhabitants with some sort of telecommunications is a factorof integration which promotes better administration of the country. For thisreason, the third priority should be the expansion of communications in ruralarea.

TARIFFS

3.25 According to the General Law of Telecommunications (of June 2, 1971)it is within the authority of DGT to suggest tariff rates and other chargesfor telecommunication services. In practice, however, this is left to theoperating companies while DGT normally limits itself to giving its approval.Contrary to the spirit of the telecommunications law, DGT has not accomplishedits duties as regulator and planner, but has concentrated its efforts on oper-ating its rural telecommunications network. With the proposed sector reorga-nization, this trend would be reversed.

3.26 The above-mentioned law states that the tariffs will be just andreasonable, will cover the operating costs and will finance a part of thedevelopment of telecommunications, but it does not spell out the achievementof a particular rate of return. In actual experience, however, because ofdeficiencies in the level and structure of applicable rates, the operatingentities in the sector have normally shown operating deficits. ENTEL hadoperating losses in five years of the six-year period 1970-1975. A similarpattern of losses or unusually low net incomes prevails in the telephonecompanies (La Paz, Santa Cruz, Cochabamba, Oruro, Sucre, etc.).

3.27 In the case of ENTEL, the rates currently charged are generallyhigh in comparison with those of other countries in the hemisphere, but,because of the limited volume of realized traffic, such rates have beeninsufficient to yield even a modest return on the investment. The basicrate for a long-distance telephone call (including taxes) is US$1.90 forthree minutes and US$0.70 for each additional minute, regardless of thedistance involved. With the new trunk network coming into operationin 1977, it would be advisable to introduce a revised tariff structure witha lower average price and a sliding scale according to distance. Thereshould be significant differences in the rates, say, from La Paz to Oruro(a distance of 200 km) as compared with La Paz to Santa Cruz (570 km) or withTarija to Riberalta (1,201 km). Such a tariff revision should aim at encouraginga greater demand for long-distance services at reasonable prices based on thecost of providing service that will generate larger revenues for ENTEL.

3.28 The average number of long-distance calls per telephone in 1974was only 2.5 in La Paz as compared with 5.5 in Cochabamba, 4.8 in Oruro and4.4 in Santa Cruz, the other terminal cities in the new trunk network. Lowcalling rates are mainly a reflection of the high long-distance tariffs and

- 14 -

the poor quality of the service. Improving the long-distance telephoneservice with La Paz is particularly important since it represents aboutone-third of both the total traffic and the revenues.

3.29 The general level of telephone rates is low because it is partiallycompensated by the high share prices paid by subscribers. Rates charged bythe local companies vary significantly even for similar sized exchanges(Annex 9). The monthly charge for professional subscribers is, for example,US$5.5 in the case of COTERI (Riberalta) and US$11.6 for COTEAUTRI (Trinidad),both operating exchanges of 800 lines or less. The average monthly residentialrate in the sector is about US$3.6 but the range varies from US$2.2 to US$8.3and commercial rates vary from US$4 to US$20 per month. Official rates aresometimes unduly low relative to commercial rates. On the whole, the revenuesgenerated by these tariffs have been insufficient to cover the operating costsof the entities and to provide a reasonable contribution toward developmentfinancing.

3.30 Integration of the entities would allow the introduction of asingle national policy for telephone rates which could merge considerationsfor size of exchange and cost of the services. The practice of providingtelephone services at less than cost to some official subscribers, suchas municipalities, should also be discontinued. This could be done by havingonly two categories (residential, and non-residential). Metered local tariffshould be introduced since it guarantees a revenue increase as the tariff growsand, at the same time, is a restraint on local call growth and, thereby, helpsto preserve the quality of service. A rationalization and standardization oftariffs should be included in the sector reorganization.

TRAINING

3.31 A few years ago, neither ENTEL nor the telephone operating entitieshad any training centers; the only on-the-job training was provided by seniorstaff. Training was also given by contractors during equipment installation.The lack of proper training was, and still is, reflected in the maintenanceinadequacies and the inefficiencies which exist in the services provided.

3.32 In 1971, a specialized institution for training in telecommunications,Instituto Nacional de Telecomunicaciones(INSTEL), was created by a Govern-ment decree. Later, during 1972, an UNDP/UIT technical assistance program(for an amount of some US$1 million) was signed for a two-year period to aassist INSTEL in the initial development period and to acquire training equipment.

3.33 The training center, which is under DGT authority, with its staff ofsome 20 instructors (of which eight are ITU experts) trained about 250 pupilsin 1975, including some 90 operators. The majority of staff trained were forENTEL, and only a few were for the telephone companies. Projections made byINSTEL indicate that there will be a steady need for training about 250 persons

- 15 -

annually if the entities wish to have properly trained staff; this does notinclude refresher courses and engineer training. The institution is equippedfor these tasks, and, if needed, it can be enlarged. a/

3.34 For any major investment program, it is essential that a supportingmanpower and training program be introduced, fully integrated with develop-ment objectives in the sector.

a/ In addition to training, INSTEL is proposing to help in other activities suchas preparation of standards, special projects studies and other advisory jobsto DGT and to the operating entities with the aim of fully utilizing its staffand laboratory equipment capacities.

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IV. RECO.,TDWATLIONS AND UTURE ACTIONI

Recormnrendations

14.0l The Government should aim at the gradual solution of the sector'sinstitutional issues. If the Government is willing to take adequate measures,considerable benefits can accrue to Bolivia. Major improvements in servicescan be achieved as a result of:

(a) consolidation of many entities into one national organization;

(b) development of the sector on the basis of a balanced nationalplan including the provision of much needed facilities in thesmaller towns and in rural areas;

(c) adaptation of accepted modern technical standards and operationalpractices; and

(d) establishment of a training program implemented as part of theoverall, development in the sector.

4.02 Consolidation of the sector through integration would result inmajor savings in plant and equiipment and in more effective use of availablefunds for development. Additional savings would also arise from the introduc-tion of bulk procurement through international competitive bidding. The com-bination of these factors would, it is estimated, result in a substantial savingof at least 30% of future investments (some US.$I,o million over the next five

years) that could be applied toward meeting additional demand and serving newareas, thus benefiting all users.

4-0n3 VThi-le full integration of the sector is a lengthy process, interimmeasures may be taken, leading to it over a specified period of time. If sucha step-by-step approach is preferred by the Government, the integration of thelocal telephone ^^panies may be the first step, followed by consolidation ofthe whole sector, i.e., the integration of ENTEL, DGT, and the already integra-ted local, companies into one national entity.

Future .1 :;.on

4.04 The recommendations contained in the report were discussed withthe Minister of Communications and the Ministry of Planning and Coordination.The Minister of Communications is in complete agreement with the recommenda-tions for consolidation of the sector in a new national Government telecommunica-tions entity and has instructed the Director of Laboratorio Boliviano deTelecomunicaciones (LABOTEL) to prepare a five-year (1976-80) telecommunicationsdevelopment plan which would include expansion of services in all telephoneentities operating in the country. Depending on the financial resources requiredto implement that plan and the availability of such resources, a decision wouldbe taken if the consolidation should be carried out simultaneously or in stages.The Ministry of Planning and Coordination has also prepared a tentative decisionpaper incorporating the recounendations for sector consolidation.

July 12, 1977

BOLIVIA

Telecommunications Sector

List of Persons Met

Ministry of Transports Communications and Civl. Aviation

*iinister Ing. Julio Trigo RamirezSub-Secretary for Communications General Jaime Ayala I4ercadoAssistant to the Sub-Secretary Sr. FloresDirector Planning Unit Ing. Cesar Bayer

Jirecci6n General de Telecomunicaciones

Airector General Sr. kene Osario i3eltrIn

Ministry of Finance

Director INDEF Lic. iector OrmanclieaLeputy Ji;ector INDEF Lic. Enrique Ackerman

Empres . Nricional de Telecomunicaciones (ENTEL)

General Manager Ing. Federico Paz (Col.)Administrative Jirector Col. Juan TrigoTechnical Jirector Ing. Jorge CabreraTechnical Dept. Ing. Carri6n

Telefonos AutomAticos de La Paz. S.A. (TASA)

General :4anager Ing. .ugo 3uhezo (CoL.)Administrative M'Ianager Lic. Guillermo CuadrosChief Planning iept. Ing. Le6n Viscarra

Cooperativa Tel4fonos Automaticos de Santa Cruz (COTAS)

President Sr. d. GasserGeneral 4-imager Ing. PFLacido iIolineTechnical Jirector Ing. Carlos Arlan'inancial Jirector Lic. Iver jadillo

3ervicio dlunicipal Telefonos Automgticc.s de Cochabariba (S.ATi)

Generrl ,kmnager Gral. Edilberto Semnp6rtegui2inancial Jirector MIrs. LeviTechnical Jirector Ing. Hugo Zamier

Expresa de Telefonos Oruro. S.A. (ETOSA)

Gener,al -I.aniager Ing. Victor .ui-o 116rvlezTechnical Jiiector Ing. Arteaga

- 2-

Tel6fonos ,Automnaticos Sucre (TASSA)

Finaicial 4 Xir-ctor Lie. livario Cruz

Instituto Nacji.al de Telecomunicaciones (IiiSTEL)

Arector Ing. Emilio KellembergerJefe Eqtudios Col. Antezana

Laboratorio Boliviano de Telecomunicaciones (LABOTEL)

Director Ing. Enilio Kellemberger

Cable West Coast

General Mlanager Hr. Manuel Jasa balde

Proprama de las Naciones Unidas para el Jesarrollo

Resident Representative Mr. denry C. ileyerITU Project Director Ing. Uldarico Posadt

Interamerican ievelopment Bank

ElITEL Project Supervisor Mr. GUonsales Jousdebes

UOLIVIA: TfLEWUOWNJCATIONS SeCT0R

International Teleone Stati cties

OBOSS H.ATIAL TELEIjI .':S - TANs .'WY 1075POPtULATTON- PNROTICT - 1973 NATIONAL rtijr.i [AT CITTFES R REST OF COUNTRY

Perh Capita Per A1. AnnualCLUNWTRY 1/1/75 Per Crovth Tottl 100 Grovth Rate Automa- Total Per Percentage Total Per Percentagze

Capita Rate Nwhber Fopu- (1965-T5) tization Number 100 of Nat'l Number 100 ofs Nat'l(000'a) us$ (1965-73) (o0O's) lation % (000's) Pop. % (000's) lop. %

AFRICAEast Africa 37,283 149 2.7 215 o.58 10.5 84.6 156 8.3 73.0 59 0.2 27.0Fgypt, Arab Rep. of 36,730 250 o.8 503 1.37 U.a,6 96.7 364 4.o 72.4 139 0.5 27.6Ethiopia 27,495 90 1.6 66 0.24 12.1 88.5 52 3.4 78.8 14 o.1 212Morocco 16,726 320 2.5 189 1.13 2.5 82.0 128 3.2 67.7 61 0.5 32-3

Nigeria 69,674 210 8.3 11i 0.16 6.4 83.4 68 3.9 61.3 43 0.1 38.'/Eiodesia 6,205 430 3.5 172 2.77 6.2 93.4 138 14.2 80.2 34 0.7 19.8

South Africa 24,914 1,050 2.0 1,936 7.77 5.5 82.6 1,399 24.2 72.3 537 2.8 27.7

Sudan 18,112 130 -o.6 56 0.31 4.5 91.4 49 3.0 87.5 7 0.1 12.5

Tunisia 5,628 460 4.9 1114 2.03 12.7 92.6 49 2.4 43.0 65 1.8 57.0Zaembia 4,687 430 -0.2 68 1.45 8.2 97.8 29 3.3 42.7 39 1.0 . 57.3

AIMERICA Argentina 25,225 1,640 2.9 2,374 9.41 4.9 96.8 1,378 18.9 58.1 996 5.6 41.9

Bolivia 5,612 230 3.0 64 1.14 9.7 99.0 55 5.2 85.9 9 0.2 14.1

Brazil 106,069 760 6.0 2;652 i.50 ' 7.7 914.6 1,992 8.3 75.1 660 o.u 24.y

Canada 22,661 5,450 3.5 12,1454 54-96 5.9 97.8 6,254 59.0 50.2 6,200 51.5 49.8

Colombia 25,025 440 3.1 1,186 4.74 11.5 99.7 813 7.8 68.6 373 2.6 31.4

Costa Rica 1,960 710 3.5 98 5.02 16.1 99.0 88 10.5 89.8 10 0.9 10.2

El Salvador 4,o65 350 o.8 50 1.22 8.6 97.2 44 2.9 88.0 6 0.2 12.0

Mexico 58,265 890 2.8 2,546 4.37 13.4 94.8 2,o69 10.2 81.3 477 1.3 18.7

Trinidad & Tobago 1,060 1,310 2.2 66 6.26 6.o 99.9 41 41.8 62.1 25 2.6 37.9

IS 212 013 6,200 2.5 143,427 67.65 5.0 99.9 75,904 73.5 52.9 67,523 62.1 47.1

Venezuela 11,918 1,630 1.3 554 4.65 7.9 99.2 477 9.3 86.1 77 1.1 13.9

ASIAChina, Rep. of 15,856 660 7.3 901 5.68 19.8 92.5 591 12.0 65.6 310 2.8 34.4

India 582,596 120 1.5 1,690 0.29 8.4 82.3 879 2.7 52.0 811 0.2 48.oIndonesia 123 840 130 4.5 285 0.23 3.4 63.3 201 1.4 70.5 84 0.1 29.5

Iran 33,565 870 7.4 806 2.40 16.1 94.1 541 5.3 67.1 265 1.1 32.9

Iraq 10,770 153 1.42 9.4 93.1 126 2.9 82.4 27 o.4 17.6

Israel 3,408 3,010 6.7 735 21.57 13.1 100.0 562 30.9 76.5 173 10.9 23.5

apai 110,626 3,630 9.6 41,905 37.88 13.1 97.4 26,527 42.9 63.3 15,378 31.5 36.7

alaysi 11,738 570 3.7 259 2.21 7.9 96.6 n.a. n.a. n.a. n.a. n.a. n.a.

Nepeal2 12,423 90 -0.1 11 0.09 13.9 n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Pakistar. 2/ 69,710 120 2.5 214 0.31 5.9 83.0 n.a. n.a. n.a. n.a. na. c.a.Fiilippines 40,941 280 2.6 446 1.09 11.4 96.0 374 4.3 83.9 72 0.2 16.2

Lir.gapcre 2,237 1,830 9.4 280 12.53 13.5 100.0 280 12.5 10.o0 - - -

Syria 3/ 7,121 400 3.6 152 2.14 7.8 89.7 126 5.2 82.9 26 o.6 17.1

Thailand 41,036 270 4.5 271 o.66 15.3 96.o 234 4.4 86.4 37 0.1 13.6

F'rance 52,742 4,54o 5.o 12,405 23.52 8.1 94.o 4,546 146.2 36.7 7,859 18.3 63.3

r;ermany, Fed. Rep. of 62,040 5,320 4.0 18,767 30.25 8.7 100.0 8,185 46.1 43.6 10,5'32 23.9 56.4Evedern 8,178 5,910 2.4 5,178 63.32 4.3 100.0 2,529 75.1 48.9 2,649 55.1 51.1

Switzerland 6,375 6,100 -3.0 3,790 59.46 5.9 100.0 1,793 76.2 47.4 1,992 49.6 52.6

urkey 39,127 600 4.4 900 2.30 11.3 78.9 618 8.6 68.7 282 0.9 31.3

3Kh 56,102 3,o60 2.3 20,342 36.26 7.4 99.9 8,087 45.8 39.8 12,-'55 31.9 60.?

253,323 2,030 3.5 15,782 6.23 8.2 94.8 4,234 17.4 26.8 12,5418 5.1 73.2

YCislavia 21,243 1,o60 6.o 1,143 5.38 11.9 97.2 532 17.3 46.6 611 3.4 53.4

A, stra1ia 13,337 4,350 3.0 5,000 37.149 6.5 95.2 3,840 42.9 76.1 1,1/X 26.8 23.-cNew Zealand 3,10r 3,680 2.0 1,495 48.12 4.5 92.7 1,135 53.0 75.9 36o 37.4 24.8

it F- v, .Lti o. at, January 1, 1'JT5 derived from the "'rotal Telephones" and "'elephornes per 100 Fqp,lation," appearing i ' 1. j'". I'ftl5'ction,

7' 0 el,pl,re and popv)atic' -niatintics for Nepal and Pakirtmn are I,'L avallal le ir, AIn-Ei, W.'1 'I I1crT. r a 3 (January 1, 7 .,-). T3.e f1jurecrnc-.g/. are estimates deri .T f-m ir.fc-rtiatio: avh1latlc from rep .rta in the lr4nk.

3/ Telepl,nie and populatio., ztatistics for Syria it not available irn AT&T's W,-rld Telephones (Jar,nry 1, 1975). 11,m firi-ies nh,ur, arederi ied f'r-m 1:TE'E Statisti'al AFntracl. oi' Th1enor in:a'ion, 1'f75.

SO'I3Ch - GNP StatIstics: World hank Atlas 1975).

- 'leTep' .- r eli nticr,: Worl d Tcle1J.- er hy AtT (T175).

August 1976

ANIEX 2

BOLIVIA: TELECOMMUNICATIONS SECTOR

Baaic Data for LZiTEL. DGT and Telephone Companies

in the sector, as of Jecember 31, 1975

Estimated Telephone Share ikiKedTotal Lines Capital .Lssets

Name Employees Capacity ilillionsr US4

Empresa Nacional de Teleoomunicaciones 900 6.33 12.11

Direcci6n General de Telecomunicaciones (DGT)300 - --- 0.41

Telefono Autom&ticos de La Paz (TASA) 351 32,000 13.50 7.61

Cooperativa de Telefono Automaticos deSanta Cruz de la Sierra, Ltda. (COTAS) 160 9,300 10.12 6.67`

Servicio Municipal de Telefonos Auto-viaticos de Cochabamba (SMTA) 190 8,700 1.36 3.09

Empresa de Telefonos Oruro (ETOSA) 40 4,500 1.13 1.00

Telgfonos Automaticos Sucre (TASSA) 17 3,000 0.32 0.;3

TelAfonos Autom'aticos Potosi (TAP) 16 a) 2,000 n.a. n.a.

Empresa de Telefonos Tarija (ETr) l 6 a) 2,000 0.74 0./5

Cooperstiva Telefonos Automaticos Tupiza Ltda.(COPE) 8 a) 300 0.09 0.0n

Cooperativa Telefonos Automaticos Camiri(COTEUA) 10 500 0.47 0.27

Cooperativa Telefonos AutomAticos Riberalta(COTERI) 7 200 0 .02) 0.021)

Cooperativa Telefonos Automaticos Trinidad b)(COTEAUTRI) 11 300 0 .41 0 43b

Cooperativa Telefonos de Villazon (COTEVI) j 100 n.a. n.a.

Total Reporting Companiesc)2,450 63,900 34.99 34.80

a) Approximationb) Dec. 31, 1974c) Does not include four private corlpauies (Radio Serval, hadio Serrano, All America

Cables and Cable West Coast) for which comparable data sre not available.

August 1976

ANNEX 3

BOMIVIA: TELECOMMUNICATIONS SECT C

Empresa Nacional de Telecomunicaciones CENTEL)

Comparative Statements of Financial PDsiti,on

Dec. 31, 1970 and Dec. 31, 1975(In millions of Bolivian pesos)

Amount of: Percent of:Incre ase Increase

1970 297 Decrease i-) Decrease C-)

ASSETSFixed AssetsFlant in service 9.0 24.4 15.4 171.1Less: Accumulated depreciation 2.4 9.0 6.6 275.0

Net plant in service 6.4 15.4 8.8 1 43.3Plant under 4onstruction 15.1 226.8 211.7 1,402.0

Total fixed assets 21. 242.2 220.5 1,016.1

InvestmentsAdvanced to ContractorsDeferred Payments -11.5 0.9 8.5Other Assetsi - _Current Assets 1.7 48.7 47.0 2,764.7Cash and Banks 0.5 25.2 24.7 4,90O.0Accounts receivables (net) 1.0 14.5 13.5 1,350.0Inventories - 2.0 2.0Other 0.2 7.0 6.3 3,400.0

Total assets 2. 807.1

LIABILITIESNet Worth 25.1 121.0 95-9 382.1

Capital 25.2 TM. 5 101.3 402.0Capital from revaluations - 6.6 6.6ReservesAccumulated losses or surpluses -0.1 -12.1 -12.0

Long-tern Debt 5.2 1 149.2 2,869.2Loans 5.2 149.4 144.2 2,773.1Other - 5.0 5.0

Current Liabilities 3.7 27.4 23.7 640.5Reserves for Indemnization- 5.6 5.6Other Liabilities - -

Total liabilities 2-4 30 8 07.1

Long-term Debt/Net Worth 17/83 56/46Current Ratio 0.5 1.8Working Capital (millions) -2.0 21.3

August 1976

AIRU-. 4

BOLIVIA. TELECOMNUNICATIONS SECTCR

Empresa Nacional de Telecomunicaciones (3NTEL)

and Seven Telephone Companies

Comparative Statements of Sources and

Applications of Fuxnds. Dec. 31!,1970 to Dec. 31, 1975

ENTEL Telephone CompaniesMillion Pesos Percent Million Pesos Percent

Sources of Funds

Net Worth 95.9 35.0 465.3 53.3Long-term Debt 149.2 54.4 310.4 35.9Current Liabilities 23.7 8.6 50.1 5.3Reserves for Indemnization 5.6 2.0 15.6 1.3Other Liabilities - - 2 2.7

100.0 100.0

Application of Funds

Fixed Assets 220.5 80.4 279.0 32.2Investments 4.7 1.7 - -Advances to Contractors 1.3 0.5 - -Deferred Payments 0.9 0.3 0.7 0.1Current Assets 47.0 17.1 151.2 17.5Other Assets _34.2 50.2

27T.T T o- 100.0 365.1 100

August 1976

ANNEX 5

BMIVIA: TELECCOMONICATIONS SECTOR

ComDarative Statements of FEiumcial Position

for Seven TeleDhone Comtanies&i 1970 and 1975

(in millions of Bolivian pesos)

Amount of: Percent of:Increase Increase

1970 a Decrease (-) Jecrease (-)

ASSETSFixed AssetsPlant in service 183.0 427.7 244.7 133.7Less: Accummlated depreciation 53.6 113.4 59.3 111.6

Net plant in service 129.4 314.3 184.9 142.9Plant under coxwtructioxi 13.0 107.1 94.1 723.9

Total fixd assets 142.4 421.4 279.0 195.9

Investments 0.2 0.2 - -Deferred Pa ients . 1.2 0.7 140.0Other Assets 18,6 2. 1-.2 2,32L.7Current Assets i99P'7.3 151.2 328.0

Cash and Banks 4.7 23.9 19.2 403.5Accounts Receivable (net) 16.6 89.3 73.2 441.0Inventories 10.6 21.4 10.8 101.9Other 14.2 62.2 -3.0 333.0

Total Assets 207.3 1.072.9 416.3

LIABILITIESNet Worth 156.6 622.4 465.3 297.5

Capital 110.0 5493.6 OM96 ,99.6Capital from revaluations 34.5 63.6 29.1 J4.3Reserves 11.6 20.5 8.9 76.7Accumulated losses orsurpluses 0.5 -11.3 -10.3 2,160.0

Long-term Dbt 9.9 50.3 31t0. 777.)Loans 39.9 350.0 310.1 777.2Other - 0.3 0.3 -

Current Liabilities 8.1 53.2 40.1 61d.5Reserves for Indemnization -2.5 13.115.6 6o24.0Other Liabilities 0.7 23.9 23.2 3

Total Liabilities 207.8 1.072.9 363.1 41.3

Long-term Debt/Net Worth 20/30 36/64Current Ratio 5.7 3.4Working Capital (millions) 38.0 139.1

a/ Includes companies of La Paz, Santa Cruz, Cochabamba, Oruro, Sucre, Caniri, andTupiza with a total capacity of 57,380 lines in 1975 or about 92% of lines in t!-ecountry.

August 1976

BOLIVIA: TsLECOMMUNICATIONS SCTR

Past and Planned Nuaber of Telephone Lines, 1971-80

Capacity of Exchanges

Actual PlannedCompany 12719 17 16R 1979 1980

TASA 22,500 22,500 31,500 31,860 32,000 32,000 42,000 52,000 52,000 62,000

LOTAS 8,000 8,000 9,0000 9,000 9,800 9,800 19,800 19,800 29,800 29,800

SMTA 7,300 7,300 8,800 8,700 8,700 ll,400 114,400 15,000 15,000 17,000

ET(6A 3,000 3,000 3,000 14,500 14,500 4,500 6,000 6,000 9,000 10,000

TASSA 1,500 1,500 2,000 2,020 3,000 3,000 3,000 5,000 5,000 7,000

TAP 500 500 2,000 2,000 2,000 3,000 4,000 5,000 5,000 5,000

ET$ 360 360 360 2,000 2,000 2,000 3,000 4,000 4,000 4,000

COPELECTRICA - - - - 300 300 300 300 400 400

COTECA 300 300 300 500 500 500 800 800 800 800

COTEI 200 200 200 200 200 350 400 500 550 600

COTEAUTRI 400 400 400 400 800 800 800 800 2,000 2,000

COTEVI - - - 100 100 100 200 200 200 200

GUAYARAM4EIN - - _ _ _ _ 300 300

TOTAL 44,0 4660 0 0 61.280 6 0 67.750 906 0700 109.700 124,050 139d00

August 1976 1oN

ANNEX 7Page 1 of 2

BOLIVIA: TELECOMMUNICATIONS SECTOR

Summary of Investment Planned by Individual

Companies in 1976-80

(in millions of US Dollars)

FinancingCompany Investment Total Committed Pending

ENTEL Microwave expansion telex 37.1 24.1 13.0and HF network expansionInternational and LDcircuits

DGT Physical lines and HF 1.0 1.0 -rural network

TASA 20,000 line expansion 27.7 25.7 2.0

COTAS 20,000 line expansion, 13.9 8.9 5.0rural network

SMTA 2,000 line expansion 14.8 3.0 11.8

ETOSA 1,500 line expansion 4.7 0.9 3.8

TASSA 2,000 line expansion 3.5 1.5 2.0

TAP 3,000 line expansion 1.6 1.6 -

ETT 2,000 line expansion 1.2 1.2 1.2

COTEAUTRI 1,200 line expansion 0.7 - 0.7

COTECA 300 line expansion 0.2 0.2 -

COTERI 600 line expansion 0.4 0.2 0.2

COPELECTRICA 100 line expansion 0.1 - 0.1

COTEVI 100 line expansion 0.2 - 0.2

GUAYARAMERIN 300 line expansion 0.3 - 0.3

Total 107.4 67.1 40.3

August 1976

ANNEX 7Page 2 of 2

BOLIVIA: JOOI CATIOS SECTOR

Comparison of Invataet ActualIy Planned

and Estimated Investment with Sector

Reorsanization., 1976-80(in millions of XB dollars)

Planned

Actually With Reorganization

Local Telephone Services 63.9!/ 5 6 .7i

long Distance Services 34.0 53.6

Telegraph and Telex 2.5 6.9

Rural Services 6.14

Trsining and Consultants 0.6 5.0

Contingencies (10%) - 12.2

Total 107.4 134.4

a/ Corresponds to 80,198 lines or lS$797 per line.

b/ Correapods to l010,000 lines or lS545 per line.

August 1976

BOLIVIA : TELEOKOUIICATIONS SECIOR

.M D SECTVR lNVISAT WITH SBC¶OR RIAFZATON. 1976-80(i millions of uS dollars)

Uziating AdditLonal 1976 1977 1978-- 1979 _198 1976 - 80Capacity Conig Forii Tot-l PTre@m Total boreWin Tog& or_U btl ia" I brein Total

Lend & buildings 0.60 0.60 0.70 6 2.06

Local Telephone Services 8.27 tO.10 8 .2 10.10 I1.73 t4,33 6 60 t0.l3 1246 44.70 54._ Switching equipment 64,o 00 .00 2.- Cable & subs. installation lines lines 4.27 6.10 4.27 6.10 6.10 8.70 3.00 4.60 5.13 7.46 23.07 32-94

Long-.Lstwnce Service 120J -,50/ 2 9.70 9.0 20 9.74 1 .2.00 98.0 50.54 5- Tranamission equipment M.

- Switching equlpment 1.20 1.20 9.20 9.20 2.00 2.00 2.60 2.60 4.00 4 .00 19.00 19.00- Int rnational 5.00 6.00 5.00 6.00

Tllogram and Telex 310y 1 990O/ 0.70 2.70 1.20 t.20 2.00 2.00 3.00 3.00 6. .90

inral Services

Training and Consultants 0.40 1.00 . 2.0 0.60 l°° 0.30 0-50 0.20 O.S 3.00 5.00

Contlngences (10%) 1.80 2.10 2.05 2.20 L. a .. ? 1.60 2.25 2.80 1060 1220

10]£~~~ --- -- TOTAL 1.7TDT1L ,19.7 22.50 22.22 25.30 34.68 40.63 14I.69 18.00 24.38 L2 11574 134.

W :Iz=.r-er of LJ chcnne's in June 1976.` :14,ber of LD ch-nne'3s in 1)31.

9I xruber of telex tern.Lials.Co=ts included in _>cl anc n'-dd;Lnce service costs.

3OULCC.: LJzb3T7,L

August 1976 {x4

BOLIVIA: TELECOMMUNICATIONS SECTOR

Comparison of Telephone Tariffs, 1976

Pesos per Month

Comnany and City ------ Residential---- --- Professional------ ---- Commercial…----- _____Official------- ------- Other--------- ObservationsNet Taxes Total Net Taxes Total Net Taxes Total Net Taxes Total Net Taxes Total

TASA (La Paz) 69.oo 17.60 86.8o 175.00 4o.00 215.00 320.00 73.00 393.00 320.00 33.00 353.00 480.00 105.00 585.00 "Other" is PL3X

COTAS (Santa Cruz) 39.00-/ 39.00a/ 39.00J/ 39.002/ 39.00C/ Up to 50 calls2/

SMTA (Cochabamba) 49.39 13.61 63.00 109.84 28.86 138.70 200.71 51.89 252.60 109.84 28.86 138.70

ETOSA (Oruro) 42.00 9.40 51.40 83.00 17.60 100.60 148.00 30.60 178.60 83.00 17.60 100.60 58.00 12.60 70.6 "Other" is hospitals and schools.

TASSA (Sucre) 35.10 9.60 44.70 52.10 13.90 66.oo 86.20 22.30 108.50 86.20 18.20 104.40 26.00 6.co 32.20 "Other" is mmnicipality.

TAP (Potosi) n.a. n.a. n.a. n.a. n.S.

ETT (Tarija) 40.00 10.00 50.00 60.00 15.00 75 N00 80.00 20.00 100.00 80.00 20.00 100.00

COTEAUTRI (Trinidad) 136.32 28.26 164.58 192.00 39.40 231.40 245.76 50.16 295.92

COTECA (Camiri) 43.oo 13.60 56.60 63.00 17.60 8o.60 Up to 120 calls/

COTERI (Riberalta) 66.0o 17.80 83.80 90.00 20.80 110.80 90.00 20.80 110.80 90.00 20.80 110.80

COPELEC"RICA (Tupiza) 45.oo 10.00 55.00 70.00 15.00 85.00 80.00 17.00 97.00 70.00 15.00 85.00

COTEVI (Villazon) n.a. n.a. n.a. n.a.

AverageL! 73 114 180 110

Range'/ 45-165 66-231 81-393 85-353

2/ Each additional call $bO.30 (US$0.015). Taxes are the same percentages as in La Paz.

J Each additional call $bO,40 (US$0.020).

_/ Excludes COAS which has a metered tariff.

August 1 376