world bank document...for telecommunications regulation and public enterprise reform project june...
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Document ofThe World Bank
FOR OFFICIAL USE ONLY
Report No: 22398
IMPLEMENTATION COMPLETION REPORT(IDA-28370)
ON A CREDIT
IN THE AMOUNT OF US$ MILLION
TO THE REPUBLIC OF SRI LANKA
FOR TELECOMMUNICATIONS REGULATION AND PUBLIC ENTERPRISE REFORM PROJECT
June 22, 2001
Energy Sector UnitSouth Asia Region
This document has a restricted distribution and may be used by recipients only in the performance of theirofficial duties. Its contents may not otherwise be disclosed without World Bank authorization.
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CURRENCY EQUIVALENTS
(Exchange Rate Effective)
Currency Unit = Rupees (Rs)Exchange Rate = US$ 1 = Rs 49.50 at Project Appraisal
US$ 1 = Rs 89.59 at Project Closing
FISCAL YEARJuly June
ABBREVIATIONS AND ACRONYMS
FMMS Frequency Management and Monitoring SystemICR Implementation Completion ReportICT Information and Communications TechnologiesIDA Intemational Development AssociationMCT Multi-Purpose Community TelecentersMOPT Ministry of Post and TelecommunicationsMTR Mid-Term ReviewPCD Project Concept DocumentPERC Public Enterprise Reform CommissionPMEAC Public Manufacturing Enterprises Adjustment CreditSAR South Asia RegionSLT Sri Lanka TelecommunicationsSLTA Sri Lanka Telecommunications AuthoritySLTL Sri Lanka Telecommunications Ltd.TRC Telecommunications Regulatory CommissionWLL Wireless Local Loop
Vice President: Mieko NishimizuCountry Director: Mariana Todorova
Sector Director: Alastair J. McKechnieTask Team Leader/Task Manager: Ritin Singh
FOR OFFICIAL USE ONLY
SRI LANKA.TELECOMMUNICATIONS REGULATION AND PUBLIC ENTERPRISE REFORM PROJECT
(P042263)-
CONTENTS
Page No.1. Project Data 12. Principal Performance Ratings 13. Assessment of Development Objective and Design, and of Quality at Entry 14. Achievement of Objective and Outputs 35. Major Factors Affecting Implementation and Outcome 86. Sustainability 97. Bank and Borrower Performance 108. Lessons Learned 129. Partner Comments 1310. Additional Information 13Annex 1. Key Performance Indicators/Log Frame Matrix 14Annex 2. Project Costs and Financing 17Annex 3. Economic Costs and Benefits 19Annex 4. Bank Inputs 20Annex 5. Ratings for Achievement of Objectives/Outputs of Components 21Annex 6. Ratings of Bank and Borrower Performance 22Annex 7. List of Supporting Documents 23Annex 8. Partner Comments 24Annex 9. Frequency Management and Monitoring System 30Annex 10. Telecommunications Sector Policy Implementation 31Annex 11. Telecommunications Operators 33Annex 12. Telecommunications Services Development 34Annex 13. Basic Telephone Service Supply and Demand 35Annex 14. Quality of Service Indicators 36Annex 15. Telephone Service Main Tariffs 37Annex 16. TRC Use of Consultants 38Annex 17. PERC Consulting and Marketing Services 39Annex 18. Schedule of Disbursements 41
This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not be otherwise disclosed withoutWorld Bank authorization.
Project ID: P042263 Project Name: TELECOM REG & PUBL..Team Leader: Ritin Singh TL Unit: CITPOICR Type: Core ICR Report Date: June 22, 2001
1. Project Data
Name: TELECOM REG & PUBL.. L/CITFNumber: IDA-28370Country/Department: SRI LANKA Region: South Asia Regional
OfficeSector/subsector: BI - Institutional Development; BR - Public
Enterprise Reform; CC - Telecommunications &Informatics; DI - Private Infrastructure
KEY DATESOriginal Revised/Actual
PCD: 01/21/94 Effective:Appraisal: 04/10/95 MTR: 06/01/98Approval: 11/10/95 Closing: 12/31/99 12/31/2000
Borrower/lmplementingAgency: GOSL/SLTA & PERCOther Partners:
STAFF Current At AppraisalVice President: Mieko Nishimizu Johannes LinnCountry Manager: Mariana Todorova Roberto BentjerodtSector Manager: Alastair J. Mckechnie Per LjungTeam Leader at ICR: Ritin Singh Mihkel SergoICR Primary Author: Ritin Singh
2. Principal Performance Ratings
(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HTJN=HighlyUnlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)
Outcome: HS
Sustainability: HL
Institutional Development Impact: SU
Bank Performance: S
Borrower Performance: S
QAG (if available) ICRQuality at Entry: S
Project at Risk at Any Time: No
3. Assessment of Development Objective and Design, and of Quality at Entry
3.1 Original Objective:
The project objectives were to reform the telecommunications sector focusing on promoting privateinvestrnents, operation and competition, and support the divestiture of state-owned enterprises. The
telecommunications component supported the strengthening of sector regulation, including the efficientallocation and use of the radio frequency spectrum. The main objective of the Public Policy EnterpriseReform Commission (PERC) component was to facilitate the privatization of state-owned enterprises byproviding expert advice and strengthening the technical and adriinistrative capacity of PERC.
The project objectives clearly and realistically addressed the reform program that the Govermnentundertook for the development of the telecommunications sector. The limitations placed on thetelecommunications regulator, Sri Lanka Telecommunications Authority (SLTA), as a department of theMinistry of Post Telecommunications (MOPT) indicated the need to change the regulatory structure. Thetelecommunications policy was defined in 1995 and included the conversion of SLTA into a moreindependent Commission with operational and administrative autonomy. The new regulatory frameworkaimed at adopting transparent procedures for licensing of operators, interconnection rules, and soundcost-based pricing principles, and providing regulatory certainty to investors.
The Government also planned to transform Sri Lanka Telecommunications (SLT) into a commerciallyoperated and fully autonomous entity, incorporated under the Companies Act. The reform of publicenterprises, including SLTA and a large number of public enterprises in other sectors, was to be undertakenby PERC, as authorized by the Public Enterprises Reform Commission of Sri Lanka Act No. I of 1996.
The above objectives were in line with the assistance provided by IDA in the first and secondtelecommunication projects and with the Bank's Country Assistance Strategy (CAS), which was linked toGovernment commitment and progress in reforming the policy and institutional framework.
3.2 Revised Objective:
The project objectives were not revised.
3.3 Original Components:
The project consisted of two main components:
(a) Technical assistance for the strengthening of SLTA, including:
(i) A Frequency Management and Monitoring System (FMMS), expert assistance during itsinitial period of operation, and staff training; and
(ii) Consulting services to assist SLTA in selected studies on sector regulation and support in itstransformation into a more autonomous commission.
(b) Assistance to PERC in financing consultants and financial advisors for specific transactions, andstrengthening of the PERC Secretariat (staff training, travel, office equipment, etc.)
Upon SLTA's conversion into Telecommunications Regulatory Commission (TRC) in 1996, it assumednew regulatory functions, with the management structure of one Director General and five Commissioners.This involved a complete reorganization of the regulator and the establishment of new procedures forservice pricing, network interconnection, quality and conditions of service, type approval of equipment,technical standards, and others. The project provided for consultants to assist TRC in these various areas,as well as training for its existing and new staff.
SLTA originally operated an FMMS that did not provide the necessary coverage and facilities to managethe use of the spectrum in a multi-operator environment. The new FMMS was designed to incorporate
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existing equipment and provided TRC with new licensing and monitoring tools to change fees for the use ofradio frequencies, and for ensuring the efficient allocation of a scarce resource. TRC also neededassistance in the starting operations of the system and in training its operators.
To achieve PERC's project objectives, two groups of consultants were utilized to provide the expertise inimplementing the privatization program established by the Government. The first group consisted ofinternational specialists and consulting firms recruited to advise on specific transactions. Their main taskswere to: (i) carry out studies for policy and strategy formulation, pre-reform packaging, andimplementation of privatization transactions; (ii) assess the past and current situation of the enterprises andidentify key issues to be resolved to facilitate restructuring and privatization; (iii) review the regulatoryframework; and (iv) assist PERC in preparing terms of reference, bidding documents and other tasksleading to a sales closure. A second group of domestic consultants and experts would be hired to plan andcoordinate the Government's privatization program and act as counterparts to the international consultants.In addition, for large transactions, investment banks would be retained to carry out the transaction. Theproject also provided the PERC staff involved in privatization transactions with training in the form ofad-hoc courses, seminars and study visits to foreign countries with relevant experience in the privatizationof public enterprises.
3.4 Revised Components:
During the Mid-Term Review in April-May 1998, it was noted that the initial cost estimates for the FMMSwere about 15 percent higher than the lowest price of the evaluated bids. Furthermore, TRC requested areduction in the scope of the system by eliminating three of the HF/MF stations and a VSAT network forcommunications among the monitoring stations. The final system configuration is described in Annex 9.The changes in the allocation of funds did not amount to a restructuring of the project and, therefore, werenot reported to the Executive Directors.
3.5 Quality at Entry:
The project was not reviewed by QAG for quality at entry. However, the project was reviewed under therapid assessment program and was found satisfactory. At the time of preparing this ICR, the quality atentry of the telecommunications sector component and the privatization program component wasconsidered satisfactory.
The Project was designed in line with IDA's priorities and the Government's strong commitment to thereform program. The design of the FMMS system and the preparation of the draft bidding documents wascompleted before Credit effectiveness. To familiarize TRC staff with procedures to operate the FMMS, astudy trip to Canada was also undertaken. PERC's work on SLTA and Air Lanka, which were the mainenterprises in the privatization program, was progressing well at the time of project preparation. Given thehigh level of ownership by the Government, no significant delays were experienced between Boardapproval and Credit Effectiveness.
4. Achievement of Objective and Outputs
4.1 Outcome/achievement of objective:
Overall, the project outcome is satisfactory (see Key Performance Indicators in Annex 1 and Rating forAchievements of Objectives/Outputs in Annex 5). It is well-recognized that the two most successfulinstitutions in Sri Lanka for implementing reforms have been TRC and PERC.
With IDA's support, the Government has been successful in creating a competitive, privately operated
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telecommunications sector overseen by an independent regulatory agency. With the privatization of SLT(now Sri Lanka Telecommunications Ltd., SLTL) and transfer of its management to a private operator, alltelecommunications services in Sri Lanka are now provided by priv4te operators. Competition has beenintroduced in all service categories, except for intemational telephone services on which SLTL has amonopoly until August 2002. In spite of these gains, rural access still remains an issue.
The introduction of competition and privatization has clearly had a major impact on the sector, which isone of the fastest growing in the Sri Lankan economy. Private telecommunications investments increasedin an unprecedented manner (25 percent p.a.), with over US$ 2,900 million invested in Sri Lanka by theoperating companies between 1996-2000. The number of new jobs created jumped from about 700 in 1996to over 3500 in 2000. In the last four years, fixed access telephony grew at an average of 32 percent p.a.and the mobile service providers averaged about 57 percent p.a. While new operators continue to expandand upgrade their services, SLTL also vigorously pursued an expansion plan with some projects funded bythe OECF, Japan, and a syndicated loan facility raised locally in 1998.
The PERC program has resulted in significant benefits to Sri Lanka. Besides the fiscal benefits, there hasbeen growth of several strategic sectors such as LPG Gas, Aviation, and Ports. It has attractedinternationally reputed investors, improved corporate governance, and developed capital markets. PERC,however, has led a transaction approach to privatization where maximizing financial returns was givenpriority over sector liberalization. The Government has granted temporary monopolies to newly privatizedindustries such as Colombo Gas Company, SLTL (for intemational service until August 2002), LankaOrient and Air Lanka in order to maximize the returns on the equity divested. This limited the long termgoals of full competition, reducing prices and ensuring an open market to benefit consumers.
4.2 Outputs by components:
4.2.1 SLTA/TRC Component
The outputs related to the telecommunications sector are satisfactory with the Government aggressivelyadvancing its reforms: (i) the Telecommunications Act was amended in September 1996; (ii) a regulatoryauthority, TRC, was established in February 1997 separate from the MOPT; (iii) SLT was incorporated asa Public limited liability company in September 1996 and 35 percent of its shares were sold to a strategicinvestor, which took over SLT's operations under a management contract in August 1997; (iv) competitionwas strengthened in several services (data transmission, Internet, payphones, etc.), and followingcompetitive bidding, two licenses were granted to Wireless Local Loop (WLL) operators in February 1996for the provision of basic services; and (v) a process of rebalancing SLTL tariffs was initiated in 1998.
The Government's February 8, 1996 telecommunications policy and its implementation status is describedin Annex 10. The Action Plan accompanying the policy was completed on time, with the exception of astudy for tariff/demand and tariff rebalancing, which was subsequently undertaken by PERC and thefinancial advisors.
The telecommunications infrastructure has been expanded and modernized due to increased private sectorparticipation and competition. Currently, there are six data transmission service providers, four cellulartelephone operators, two WLL operators, two payphone companies, two radio paging services and 14Internet access service providers (see Annex 11). A specialized infrastructure provider leases circuits totelecommunications and broadcast operators. As of December 2000, there were 645,000 subscribersconnected to SLTL; 111,000 WLL subscribers; and 395,144 cellular subscribers (see Annex 12), whichrepresents a mobile-to-fixed access ratio of 1.7. The fixed-access teledensity was 1.4 in 1996 andincreased to 4.01 in December 2000. With the additional access offered by cellular service operators, thetotal telephone penetration was 6.3 percent per 100 population in 2000. The waiting list has not decreased,
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and current estimates indicate (see Annex 13) that it will remain at the same level in the next five years. Itshould be noted that as a percentage of total demand, the waiting list has decreased. Moreover, the waitingtime for a new connection from the private operators is about a week, and a few months from SLTL.
The Government originally made a commnitment to the World. Trade Organization (WTO) to remove themonopoly on international telephone service by the end of 1999, subject to the completion of ratebalancing. However, this monopoly was extended by two years during negotiations with the strategicinvestor in SLTL. Since privatization, SLTL has dramatically increased the total number of telephonelines and plans to install another 80,000 telephones in 2001. SLTL has also invested about Rs. 44 billionsince 1997 in telecommunications infrastructure. This includes investments in an internationaltelecommunications gateway exchange, an undersea cable project and a 700 km fiber optic ring linking 15urban centers.
Although TRC placed a high priority on quality of service, the indicators (see Annex 14) show a marginalimprovement and TRC still needs to establish better controls. The 1998 Tariff Determination for SLTLhas several quality of service (QOS) provisions conveying TRC's resolve to enhance quality as tariffs goup.
Despite the sector liberalization and growth, rural access still needs to be addressed. SLTL's license andmanagement agreement, as well as the WLL licenses were crafted to ensure rollout, no formal universalservice (or access) obligations were imposed. Sixty percent of the telecommunications infrastructure is stilllocated in the Western province. There remains a need for a more balanced distribution oftelecommunications facilities. A study by TRC indicates that the lack of telephone facilities is the secondmost important unmet need of rural Sri Lankans. TRC has plans for: (i) installing subsidized payphones inrural areas; (ii) installing telephone facilities in over 800 post offices located in villages with no telephoneaccess; (iii) encouraging the WLL operators to expand their coverage faster in rural areas; and (iv)providing Internet access and other communications means through rural tele-centers.
The Telecommunications Regulator
TRC consists of five members: its Chairman is the Secretary to MOPT and its Chief Executive is theDirector General of Telecommunications, appointed by the Minister. The other three members are fromlaw, finance and management also appointed by the Minister. TRC provide: (i) policy advice and licenserecommendations to MOPT; (ii) fair, transparent, prompt and effective decision to operators; and (iii)safeguards consumers interests. TRC finances its operations (including staff salaries) with its ownrevenues, mainly license fees from operators and users of the radio frequency spectrum. Capitalexpenditures are also met from this revenue, although require Government approval.
Whereas, the TRC started as a model regulator in the region, in the recent past it has had problems withmaintaining its independence and needs to be given complete autonomy. The new draft telecommunicationspolicy makes the same recommendations that TRC adapt to the changing environment (see para 6.2).Furthermore, it appeared ineffective in the context of interconnection disputes between SLTL and the twoprivate WLL operators. SLTL initially refused to abide by TRC's determination in November 1998, andreferred the matter to the courts in March 1999. This highlighted certain shortfall in the existingTelecommunications Act which does not provide TRC with adequate power to enforce its determinations.Moreover, the prolonged interconnection dispute reduced confidence among operators and potentialinvestors in SLTL's planned IPO. It also revealed a contradiction between the Government's role as partowner of SLTL and the conveyor of TRC. The District Court subsequently brought the issue to a closewith its ruling in August 2000 that SLTL ceased blocking the traffic of the WLLs, until a further enquirywas made. This in effect compelled the parties concerned to abide by the earlier determination.
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TRC Institutional Development
The Government and Industry Canada (IC) signed a Memorandum of Understanding (MOU) on September29, 1997. The details were set out in a Financial and Administrative Agreement between TRC and IC andapproved by IDA. This agreement resulted in several critical institutional building initiatives by TRC toimprove its regulatory capacity and also expedited the procurernent of consulting services. TRC'sorganizational structure was adjusted to adequately perform its functions of promoting competition,mediating in the interconnection disputes between operators, regulating tariffs, supervising quality ofservice, and promoting universal access to services.
A brief description of the Credit-financed studies undertaken by TRC is included in Annex 16.Consultancy services on interconnection and Alternate Dispute Resolution procedures were initiated underthe MOU in May 1998. This was considered an urgent area as SLTL and the two WLL operators couldnot agree on revenue sharing. Other studies dealt with quality of services, billing, competition issues,emergency telecommunications systems, and public hearings. TRC also made extensive use of the Creditfor training its staff on regulatory matters and FMMS operation (see Annex 16). Training was alsoprovided by sending staff overseas and through domestic workshops conducted by international experts.
Frequency Management and Monitoring System
The Invitation for Bids for the FMMS took place on March 3, 1997 and a contract for this system wassigned in March 1999. The procurement of the FMMS was delayed about one year due to a reduction inscope of the FMMS contract, agreed by IDA, which resulted in a proportional price reduction. As a result,there were cost savings for this component of about US$ 2.0 million. With the expedited implementationplan, TRC is now operating the FMMS as envisaged.
4.2.2 PERC Component
The structural reform program that the Government undertook since 1996 included deregulation andprivatization, in which they made significant progress. Many price controls (bread, petroleum, bus and railfares, telecommunications rates, and electricity are excluded) and quotas were eliminated, import licensesliberalized, and import taxes terminated. A number of state-owned enterprises were divested in the1996-2000 period and the Government realized approximately US$ 535 million from its enterprise reformprogram (of which about US$ 225 million was from the SLTL privatization). On the whole, this projectcomponent was implemented satisfactorily.
PERC used the Credit mainly to finance consultants that advised on strategy formulation, pre-reformpackaging, implementation of privatization transactions, and review of the regulatory framework in varioussectors. Government officials were sent overseas to study best practice examples on Postal, Pensions andInsurance reform (see Annex 17).
In 1998, PERC sold 40 percent of Air Lanka to- Emirates Airlines and ceded management control to thenew owners. Similarly, management of SLTL, where the Government kept a 65 percent ownership, wasgiven to Nippon Telephone and Telegraph (NTT) in 1997. In particular, SLTL privatization helped boostannual growth in the sector to 45 percent during 1998-1999. In 1995, the Government began privatizingregional holding companies in the plantation sector (tea, rubber, and coconut). In 1995-1997, theGovernment privatized 20 plantation companies under long-term lease arrangements, with most of thesecompanies listed on the Colombo Stock Exchange. Privatization of tea plantations boosted productivityand helped Sri Lanka recapture its place as the world's leading tea exporter in 1997. Large proceeds fromthese and other privatization efforts helped the Government to contain rising public debt. PERC alsoprivatized Colombo Gas Company Ltd., Lanka Orient [duty-free business], Ceylon Steel Ltd and the
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Queen Elizabeth Quay in the Colombo Port. Divestment of Colombo Gas Company Ltd. facilitatedimproved distribution of liquid petroleum gas and enhanced safety standards. The privatization of theQueen Elizabeth Quay allowed for private participation in the container business, which was crucial tokeep the Colombo Port competitive in an environment where new more efficiently-run ports threaten tocapture the lucrative regional container traffic.
The Government still retains control over the ports, roads, the largest commercial banks, insurancecompanies, a national shipping line, and many other companies. While improvements in regulation andincentives have encouraged private participation in infrastructure, a renewed commitment to privatization isneeded to increase private sector investment. For example, privatization proceeds declined from US$ 380million in 1997 to US$ 2.0 million in 2000 (see Annex 17), and there has been no major transaction duringthe last three years. The Government has plans to sell an additional 10 percent stake SLTL and torestructure several Government departments such as the Post, Railways, Ceylon Electricity Board,National Water Supply and Drainage Board, Ceylon Petroleum Corporation and the National InsuranceCorporation.
4.3 Net Present Value/Economic rate of return:
Neither a NPV nor an ERR were calculated for the project as it mainly provided technical assistance.
4.4 Financial rate of return:
No financial rate of return has been prepared.
4.5 Institutional development impact:
As reported earlier, the ability of the executing agencies to make effective use of the available human andfinancial resources must be considered a significant achievement of this IDA operation. The institutionaldevelopment impact of the project is substantial.
TRC developed the capacity to implement the Government's sector reform program, including licensing ofnew private operators and introduction of new services. The willingness of TRC to act coherently andindependently resulted in 38 licenses being issued. As a part of its institutional independence, TRCfinances its operations through its own revenues, mainly license fees from operators and users of the radiofrequency spectrum. The amendment of the 1991 Telecommunications Act in 1996 to strengthen theregulator had a major impact on this development. As a result of the training of staff, and TA (study tours,workshops, advisors and a MOU with Industry Canada) provided under the project, TRC was able to buildup its competence in specialized regulatory functions. The private sector's interest in starting up newtelecommunications operations in Sri Lanka indicated that they had confidence not only in the legal and,institutional framework, but also the new regulatory regime that TRC was developing.
PERC developed substantial expertise under the project in handling both simple and complex transactionsrelated to the privatization of state enterprises. PERC utilized consultants to assist in carrying out theprivatization program established by the Govermment. While international investments banks, consultingfirms and specialists advised on sector specific transactions, PERC staff planned and coordinated theprivatization program and acted as competent counterparts. Over time, this led to building transaction andsector specific skills at the agency. The project provided for training of staff involved in privatizationtransactions through ad-hoc brief courses and seminars and study visits to foreign countries with relevantexperience in the privatization of public enterprises.
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5. Major Factors Affecting Implementation and Outcome
5.1 Factors outside the control of government or implementing agency:
None.
5.2 Factors generally subject to government control:
Although TRC was given the responsibility for the procurement activities of the FMMS, the final decisionto award the contract had to be taken by the Cabinet, which added to the delays in evaluating the bidsreceived.
Over the years, IDA has insisted on the importance of an impartial and independent regulator. Investmentsmade by the new operators to establish or expand their networks, require a regulatory environment thatensures fair competition and provides tools for enforcing interconnection determinations. In this context,IDA recommended: (i) a review of the Telecommunications Act to provide TRC with strongerenforcement mechanisms; (ii) staggered appointment of Commissioners; and (iii) more institutionalindependence. To address the demands of a competitive sector structure, TRC has responded by preparinga new draft telecommunications policy and corporate plan. MOPT and TRC are also preparing a newTelecommunications Act to give it additional powers to enforce its determinations.
5.3 Factors generally subject to implementing agency control:
TRC Staff TRC was established in February 1997, but its organizational structure, staffing requirements,and salaries were determined and approved to the Government only in late 1997. There was also a delay inrecruiting technical staff that were to be trained for operating the FMMS.
FMMS. Procurement of FMMS was primarily subject to TRC control that caused considerable delay ininstallation and the corresponding disbursements. During the initial months of project implementation,SLTA devoted attention to urgent activities related to sector reform: conversion into an independentCommission (TRC), licensing of WLL operators, and searching for a strategic partner and divestiture ofSLT's equity. It did not have the resources to finalize the bidding documents for the FMMS within theoriginal time frame agreed with IDA. TRC retained a consultant to review and finalize the specifications,and the final bidding documents were sent for IDA clearance in December 1996. Bids were received inJuly 1997, but changes to the scope of the system produced further delays in project implementation andOdisbursements. The contract was finally signed in March 1999, with TRC having agreed with thecontractor to expedite implementation to recuperate some of the lost time. This, however, is symptomaticof delays in procurement and the award of contracts in Sri Lanka. This also contributed to low levels ofinitial disbursements, which highlights the urgent need to reform tender procedures in the interest ofexpeditious procurement.
Tariff Study. IDA recommended that consultants with experience in a competitive, multi-operatorenvironment be retained for a tariff study to provide TRC with guidelines to establish interconnection, andrevenue sharing arrangements between SLT and other operators. While this study was not conducted asoriginally envisaged, PERC did undertake it during the SLTL privatization process.
Extension of the Credit Closing Date. The Closing Date was extended by one year to give TRC theopportunity to address some rural telecommunications issues. Additional training and consultancies forpreparing a new Telecommunications Policy and Corporate Plan were also completed. TRC also dealt withsome additional pressing policy issues, such as the studying of options for licensing other international
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gateway operators in 2002, streamlining spectrum usage in the broadcast sector, and following up onactivities started in 1998-1999: fixed-mobile interconnection procedures, cost reporting studies, and qualityof service rules, etc.
5.4 Costs andfinancing:
The project's original cost, based on mid-1995 price levels was estimated at US$ 21.6 million, with aforeign component of US$ 12.6 million. The original and final project costs, as well as the financingsources used, are shown in Annexes 2a, 2b, and 2c. The actual project cost was about 25 percent higherthan estimated at appraisal, with the difference funded directly by the Government. Foreign expendituresthat had been committed by the Credit's closing date, amounting to US$ 10.34 million were financed by theCredit before closing. The foreign cost savings of about US$ 4.2 million were primarily due to a reductionof the scope of the FMMS component, as explained in 3.4 above. The delays in awarding a contract forthe FMMS resulted in almost 50 percent of the disbursements made after June 1999 (see Annex 18).
6. Sustainability
6.1 Rationale for sustainability rating:
The sustainability of the project's achievements is highly likely. The policy reforms introduced forliberalizing the sector are irreversible and will continue to increase private participation and competition.Particularly noteworthy with this regard include the amendment of the Telecommunications Act in 1996,the conversion of TRC into a more independent commission, SLTL's privatization, and the number of newlicensed private operators who have established competitive networks and services. Based on its policycommitments, WTO agreements, and the management contract with the strategic investor in SLTL, theGovernment also intends to terminate SLTL's exclusivity on international telephone service by August2002. Given the dynamism in the sector and new emerging issues that TRC will have to deal with, itsregulatory focus will need to be constantly realigned to the needs of the market. Meanwhile, under theproject, the building blocks of an effective regulatory regime for the telecommunications sector were put inplace.
Further implementation of the privatization program by PERC will depend on the maintenance of credibleand firm macroeconomic policies, the creation of appropriate regulatory framework in various sectors, anda strong Government commitment to reform.
6.2 Transition arrangement to regular operations:
Telecommunications Policy. Much has been achieved in the past few years in strengthening TRC and theregulatory regime. However, it is now time to adapt TRC's organization and focus to the conditionscreated by increased competition, and to prepare it for full competition by August 2002. With theassistance of consultants, TRC has prepared a new national Telecommunications Policy and CorporatePlan that will guide its activities in the near future. It is also necessary to amend the TelecommunicationsAct to take into account the new market conditions and make necessary adjustments. Some of therecommendations in the new draft policy include:
* Transformation of the telecommunications market structure and regulation toward a moretechnology-neutral model, with no restrictions on cross-ownership of multiple network and services;
* Opening of international telephone services after August 2002, with no predeternined limit on the
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number of licensees;
* Establishment of an explicit Universal Access policy to promote access to the services made possibleby the new information and communications technologies (ICT) in rural areas;
* Support to the establishment and promotion of an Information Infrastructure;
* Obligations for licensed operators to contribute to universal access and creation of a RuralTelecommunications Development Fund with options for operators to contribute financially or throughin-kind investments;
* Encourage a program of rolling out Multi-purpose Community Telecenters (MCT);
* Creating a greater independence and authority to TRC to regulate the telecommunications sector,including ICT services; and
* Further strengthening of TRC with additional responsibilities for enforcing quality of service, consumerprotection, and its determinations. The internal functioning and organization of TRC should reflectprivate sector standards and be able to attract and retain top-quality staff.
Interconnection. Resolution of disputes between operators has proven to be especially troublesome. Asper the existing Telecommunications Act, TRC has adopted a policy to induce operators to arrive atinterconnection agreements on their own. The regulator must, however, be supported with strongerenforcement authority to deal with cases where the operators are not able to reach an agreement. TRC hasprepared amendments to the Telecommunications Act which include appropriate provisions in this regard.On the technical aspects, TRC must develop additional expertise and issue rules to ensure that operatorsadopt network standards and designs, which allow full interoperability or seamless interconnection.
Competition in International Telephone Service. IDA has raised with TRC the need to prepare well inadvance for the introduction of competition at the end of SLTL's monopoly in August 2002. TRC willrequire assistance from external consultants to examine issues and options, and develop appropriate rulesand procedures for licensing new operators.
Spectrum Management and Monitoring. The Government approved the necessary positions fortechnicians and engineers to undertake the regulatory functions. To continue this activity, TRC mustconduct additional staff training courses.
Given the nature of its mandate on privatization transactions, no special transition arrangements have beenagreed with PERC. However, a new phase of enterprise reforms has been planned by PERC includingrestructuring of the insurance sector, postal reforms, an additional 10 percent divestiture of SLTL, sixIPOs in plantations, Ceylon Hotels Corp., graphite companies, livestock farms, and sugar manufacturers.PERC also intends on focusing on improving corporate governance, initiating new pricing policies, andregulations, and encouraging competition in selected sectors.
7. Bank and Borrower Performance
Bank7.1 Lending:
IDA performnance at identification, preparation and appraisal of the project was satisfactory. The project
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team built on the relationship developed between IDA and the Government (including the MOPT andSLTL) during the implementation of previous IDA-financed projects and studies. The staff mix andcontinuity during these preparatory stages was satisfactory, as well as the assistance provided to theBorrower for preparation of technical specifications of the proposed FMMS. The project was appraisedprior to the requirement for financial management specialist participation during project preparation. Thetime spent for appraisal was adequate and was lower than other similar projects. All technical, financial,economic, and institutional aspects were reviewed carefully and taken into account in the project scope.Project risks were adequately identified, namely a possible delay in the amendment to the 1991Telecommunications Act and conversion of SLTA into a Commission, the lack of suitable staff for thetelecommunications regulator, procurement procedures affecting the proper functioning of the FMMS, andlikely opposition to the privatization program.
7.2 Supervision:
IDA's overall supervision effort was satisfactory and supervision was regularly carried out. There wereseven missions (see Annexes 4a and 4b) fielded during the life of the project, including a Mid-TermReview in April/May 1998. Implementation progress was adequately reported, implementation problemswere identified early, and prompt assistance was given or offered to the Borrower to solve the problems.The country based financial management officer was involved in the supervision of the project, particularlyin the review and follow up of audit reports. No significant financial management issues arose in theproject. In line with the main objectives of the project, special attention was given to the institutionalaspects, since strengthening the executing agencies was a major objective to ensure the development andimplementation of reforms. However, the number and duration of missions decreased toward the end of theproject due to budget constraints. This affected the necessary reform dialog with the Government and theexecuting agencies, and the preparation of the ICR. The discussions for the preparation of the ICR, andmost of the analytical data and arrangements for follow-up activities were conducted electronically.
No significant deviations from IDA policies and procedures occurred during project implementation. Whendeviations were detected in the procurement procedures, they were discussed and corrected with no majorimpact on implementation.
7.3 Overall Bank performance:
Overall IDA performance was satisfactory. Given the long established relationship in the sector, IDA staffworked closely with the Government and the implementing agencies to facilitate telecommunications sectorreform, strengthen the regulator, and accelerate the privatization of state enterprises by providing allnecessary assistance to PERC. Project modifications, including an extension of the Credit closing date,were processed efficiently by the IDA team.
Borrower7.4 Preparation:
The quality of the Borrower's commitment was notable. The contribution of the Government and theimplementing agencies to project preparation was highly effective, notwithstanding initial inexperience ofSLTA in regulatory matters within a competitive sector, and in the design and operation of a modemFMMS. The staff initially attached to the project were transferred from MOPT, and only at a later stagecould the regulator appoint suitable high-level managers. PERC had also been recently created and wasactively involved in project preparation. The Government took the necessary steps to organize within the
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implementing agencies, and establish procurement operations, project accounts and reporting systems.
7.5 Government implementation performance:
The Government remained committed to the objectives of the project during the implementation period, andwas very successful in implementing its policies for the telecommunications sector and privatization. Thiscreated a conducive climate to foster private financing of infrastructure in spite of an uncertain externalenvironment, and domestic political and security risks.
7.6 Implementing Agency:
Implementation performance of TRC and PERC was satisfactory. However, better performance couldhave been achieved by TRC in the procurement of the FMMS had there not been a change in the scope ofthe system, and the need for Cabinet approvals. Installing the system at a later stage of the project cyclemakes its difficult to fully assess the impact on the management of the radio spectrum. Training of stafffor operation of the FMMS was subsequently delayed as a result of the procurement delay.
Given the large number of transactions concluded by PERC, the progress of the privatization program wassignificant. PERC also gained considerable experience and built expertise while undertaking thesetransactions. This should allow for accelerating the reform program if the market and other internal andextemal factors permit. Despite the slowdown in reforms in 1999 due to political uncertainty during theelection cycle, some progress was made in areas such as privatization (Air Lanka), liberalization of theports and power sector reform.
7.7 Overall Borrower performance:
Overall, Borrower performance and participation in project preparation and implementation wassatisfactory. The reform of the telecommunications sector was timely, a regulatory regime was established,and TRC became a stronger entity whose authority is now well recognized. The Borrower is alsocommitted, on the basis of the project, to strengthen TRC in view of the conditions that will prevail after2002 with full liberalization of service provision. Similarly, PERC was legally established in a timelymanner and given strong support to undertake privatization transactions.
8. Lessons Learned
The main lessons to be drawn from the implementation of this project are the following:
* While emphasis could have been placed on the importance of a complete institutional separation ofTRC from MOPT, in spite of intensive training and independent budgets, building a long termsustainable regulatory and institutional capacity in newly created entities takes time;
* A strong display of Government commitment is crucial in attracting private investors, however, theissue of maximizing privatizatiori proceeds at the expense of full competition could have beenaddressed by PERC. In spite of intensive dialog within the Government and various stakeholders,SLTL was given an extension on its international monopoly to August 2002 by PERC. While to someextent the transaction focus of PERC could not be avoided, it is clear that benefits of competitionneeded to be highlighted;
* Proper implementation of sector reforms and market liberalization, followed by transparent
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privatization transactions, have successfully resulted in substantial private investment in-flows in thetelecommunications sector. Introducing transparency in the divestment and licensing process throughinternational competitive bidding helped identify the most appropriate partners and operators;
* Reforms could have focused more on rural access by stipulating roll out obligations and service targetsin operating licenses. This still remains a pending issue, in spite of the developments and growth in thesector;
* Radical sector reform takes time and continued involvement in a sector provided IDA with theopportunity to support step by step reforms under various governments. IDA can play a useful role insupporting politically unpopular reform initiatives;
* Patience and flexibility on behalf of IDA regarding project objectives and conditionality may bejustified to overcome labor and other opposition to changes, provided the Government is committed inthe longer term to sector reform;
* The successful private operation of value-added and other marginal telecommunications servicescreated new job opportunities and reduced staff fears of privatization. It provides comfort to potentialinvestors, as a track record of commercial operations and a working legal and regulatory framneworkhad been established;
o Labor unions were involved at an early stage of reform and their concerns addressed to reduceresistance to change;
- The Project team had continuity from identification to completion. This continuity of Project staffcontributed to making IDA's support for sector reform effective and credible;
* There could have been a better-structured technical training program early in implementation, beforeproceeding with complex procurement activities such'as for the FMMS. The initial lack of qualifiedpersonnel in TRC could have been one of the reasons for the delays in the procurement of this system;and
- The provision of timely and quality technical advice to PERC for various privatization transactions,and to TRC on telecommunication reforms, as well as their capacity for using and absorbing the TA,contributed to the overall success and sustainability of the Project.
9. Partner Comments
(a) Borr owser/implementing agency:
See Annex 8.
(bi Ct7financiers:
(c) Other partners (NGOs4private sector):
10. Additional Information
Not applicable.
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Annex 1. Key Performance IndicatorsALog Frame Matrix
OutputfImpact Indicators
0 ' Iadl diii_ -~ - T-" Protectid in Techial Anneiixett I Actu/Latest Estimste Va1. PRojECT IMPLEMENTATION (Project as a whole) -
f,a) Timelv completion of: -. steps in the Government's See Appendix 2 See Annex 10
Telecommunications Policy Letterr PERC's Operational Plan Attachment 1 of the Technical Annex of See Annex 17 for program
the Project shows PERC's operational implemented by 2000Plan for 1996-98.
(b) Timelv achievement of implementation pl ns:* SLTA See attachment 1 of the Technical Implementation plans were achieved,
Annex of the Project although with delays• PERC
(c) Number and seriousness of There have been no seriousobservations in project audit reports observations
-. THE TELECO,INIL3IC.ATIONs REcULATION Col upO.NE.NT (SLTA)
Inputs: (a) Radio frequency management system(b) Technical assistance and staff training
Outcome:(a) Radio frequency monitoring:
. HF band All over Sri Lanka f The FMMS allow monitoring of thisband, which compared with VHF andUHF is much less used. TRCcoordinates with other countries theselection of new operating frequencies.
. VHF and UHF bands Wherever these bands are intensively These bands are intensively used in theused country and the new FMMS allows their
full management and monitoring.
(b) Adequate procedures Licensing, billing of license fees, TRC has introduced procedures oninterconnection, pricing, dispute these matters, but they must be revisedsettlement, consumer protection, in the short term. The proposed newmonitonng of operators (including Telecommunications Act wiil strengthenquality of service). the controls that TRC may introduce,
especially on consumer protection andquality monitoring. Presently, licensefees are collected on time. Servicetanffs are approved by TRC taking intoconsideration anti-competitive practicesand cross-subsidization. To protect theinterest of consumers. in addition to theprovisions in the Act and conditions inthe licenses, TRC has launchedconsumer awareness programs.
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ExDected Impact (a) Availability of frequencies for new Services as are widely offered in more Intemationally agreed frequency bands
services advanced countries. are reserved and an efficientmanagement of the spectrum willpromote the introduction of any of theservices offered in more advancedcountries.
(b) Increased competition in the provision Measured in number of service Sri Lanka has licensed one wireline andof services providers, service prices. number of two wireless operators. Wireless
new services, etc., as compared with operators were licensed in 1997 andadvanced countries. both now have a subscriber base of
over 110,000. SLTL also has providedover 400,000 lines during the last 4years. Four mobile operators haveexpanded their subscriber base toabout 395,144 subscribers. PresenUy,Sri Lanka has more than 15 intemetproviders, compared with four in 1996.Expiration in August 2002 of SLTLmonopoly on international telephoneservices and the improved regulatoryenvironment are expected to open thedoor to new operators, both fordomestic and long-distance services.
(c) New operating licenses Licenses granted for (a) and (b) above. A list of licensed operators is shown inAnnex 11.
(d) SLTA revenues from license fees Increased revenues as compared to Revenues increased to about USS8.51996. million in 2000.
(e) Quality of service Improved quality, reaching intemational There was some improvement in thestandards by the year 2000. number of faults cleared per 100 lines
per month and the call-completion rateof domestic long distance traffic (seeAnnex 14). TRC must establishsystematic controls for the quality ofservice offered by all operators (notonly SLTL), as well as adequatereoortinc svstems.
(f) Satisfaction of demand Eliminabon of waiting lists and As indicated in Annex 13, the waitingsatisfaction of demand at recovery list for fixed telephone service in 2005pnces, including rural and less will still be a large percentage (about 16profitable areas, by the year 2000. percent) of the projected number of
subscnbers. It is not likely that cellularservice can entirely satisfy thisdemand. Rural areas are still
_ _________________________________ .________________________________ underserved .Ill. TliE PnLNIC ENTERPRISE REFOR. COMIPONENT (PERC)Inputs: (a) Foreign and local consultants
(b) Fixed retainer fees for financial advisory services for specific transactions(c) Training of PERC staff
Outcome.State-owned enterprises privatized by Lanka Electric, Air Lanka, Sri Lanka, See Annex 17the year 2000 Plantations, Manufacturing Units,
Insurance Companies, Banks, andothers.
Expected Impact.,(a) Fiscal benefits _ Substantial benefits See Annex 17.(b) Efficiency of the privatized enterprises Increased efficiency See Annex 17(c) Service quality and consumer Improved quality and increased See Annex 17
orientation of the privatized enterprises consumer orientation
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Output Indicators
THE TELECOMMUNICATIONS REGULATION COMPOENT (SLTA)(a) Number of service providers See attachment 1 of the Technical 38
Annex of the Project _
(bL Number of new services - do - Mobile, WLL. payphone cards, ISPs{c) New operating licenses -do' See Annex 11(dL Senrice pnices -do- See Annex 15(e) Quality of service -do- See Annex 14.(fl Revenues from license fees t -do- USS8.5 million in 2000(g) Waiting list -do- It is estimated to remain stable during
THE _____3_C_EwrE_PP_SE_RE_oR_A_COMPONENT (P IERC) the next five years. See Annex 13THE lPusUC ENTERPRISE REFORMU COMPONENT (F ERC)
| Number of privatized corpanies
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Annex 2. Project Costs and Financing
Project Costs by Components(USS '000 Equivalent - Contingencies included)
. Estimate at Appraisal . Actual .ofComponents F Ap6ralsil
L |i::F | T t L { F T A. SLTA
I REGUL- TIO.vConsulting Services 100.0 700.0 800.0 648.5 648.5 81.0Staff Training 50.0 200.0 250.0 655.9 655.9 262.4
2 F.%l.VMS _.
Hardware and Software 3.354.9 8.597.4 11,952.3Land. Works. Power Supply 3.250.4 57.6 3.308.0 4,079.2 4,357.1 8,436.3 54.5Training 50.0 250.0 300.0 1 1 _
Subtotal TRC 6.805.2 9.805.0 16,612.2 4,079.2 5.661.5 9,740.7 58.6B. PERCI Consulting- Scrvices and Marketing 2.145.0 2,740.0 4,885.0 __ 3,446.1 3.446.1 70.52 Staff Training 10.0 40.0 50.0 275.9 275.9 551.83 Office Equipment 5.3 63.0 68.3 462.1 152.1 614.2 899.34 Establishment Administration 1,924.5 1,924.55 Enterprise Restructurinng 11.047.7 11.047.7
Subtotal PERC 2,160.3 2.843.0 5.003.3 13,434.3 3,874.1 17.308.4 345.9Total Project Cost 8,965.5 12.648.0 2 1.613.5 17.513.5 9,535.6 27,049.1 i25.1
L: Locali: F: Forcign: T: Total.Thc cost data is not compleit.Custom duties are csntimated at 39.5 percent on imported goods or about L SS 3.3 million equivalent. This is reflected in the TRC - FMlMtS component.Enterprise Restructuring and Establishment Administration were locai costs bome by PERC which were not originally a line item in the PERC componentduring Appraisal.
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Annex 2b
Project Cost by Procurement Arrangements(US$ Million Equivalent - Contingencies are included)
PrtojectCoipoen% .lt _ ,
Equipment
FMMS and Office Equipment 8.6 0.07 8.7 5.08 | 5.08(8.6) (0.07) (8.7) (5.08) _ (5.08)
Land, Works, Power Supp(v 0.0 3.3 3.3 T(0.0) (0.06) (0.1) l
TA (Institutional Development) _
Training 0.0 0.6 0.6 .66 .66(0.0) (0.6) (0.6) (.66) (.66)
Consulancy 0.0 5.7 5.7 3.29 3.29(0.0) (5.7) (5.7) (3.29) (3.29)
Total Procurement 8.6 9.7 18.3 9.09 .66 9.75of which IDA Financed (8.6) (6.4) (15.0) .(9.09) (.66) (9.75)
Annex 2c
Financing Plan
(USS Million Equivalent)
Estimate At Appraisal Actual
Local Foreign T Total Local Foreign Total
IDA 2.4 12.6 r150 1.1 9.6 10.7
GOSUPERCITRC r 6.6 | 0.0 6.6 16.3 0.0 16.3
Total 9.0 12.6 r 21.6 17.4 9.6 27.0Actuals have been rounded off.
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Annex 3: Economic Costs and Benefits
(Economic costs and benefits were not estimated)
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Annex 4. Bank Inputs
(a) Missions:Stage of Project Cycle No. of Persons and Specialty Performance Rating
(e.g. 2 Economists, I FMS, etc.) Implementation DevelopmentMonth/Year Count Specialty Progress Objective
Appraisal/Negotiation04/95 1 PSD
I LEG1 FNAI EGRI INF
Supervision09/96 I EGR S S
I FNAI ECON
03/97 1 EGR S HSI FANI ECON
08/97 1 FNA S HSI EGRI ECON
04/98 (Mid-Term 2 EGR S HSReview) I FNA
1 ECON02/99 1 FNA S HS
I POFI ECON
i 1H99 I ECON S HSI EGR
I FNAI POF
ICR02/01 1 ECON S S
(b) Staff:
Stage of Project Cycle Actual/Latest Estimate___________________________ No. Staff weeks USS ('000)AppraisalUNegotiation 13.60 57.50Supervision 88.97 319.96ICR . 0 0Total 102.57 377.46
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Annex 5. Ratings for Achievement of Objectives/Outputs of Components
(H-High, SUsSubstantial, M=Modest, N=Negligible, NA-Not Applicable)Rating
03 Macro policies O H *SUOM O N O NAO Sector Policies * H OSUOM O N O NA03 Physical 0f * SUOM OVN O NAZ Financial O H *SUOM O N O NAZ Institutional Development * H O SU O M 0 N 0 NAl Environmental O H OSUOM O N O NA
SocialEl Poverty Reduction 0 H O SU OM 0 N 0 NAO) Gender OH OSUOM ON ONAEl Other (Please speci) 0 H OSUOM O N O IA
0 Private sector development 0 H 0 SU 0 M 0 N 0 NVAU Public sector management 0 H O SU OM 0 N 0 NAa Other (Please speciJf) O H OSUOM O N O NA
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Annex 6. Ratings of Bank and Borrower Performance
(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)
6.1 Bankperformance Rating
9 Lending OHS OS OU OHU1 Supervision OHS OS OU OHU
3 Overall OHS OS O u O HU
6.2 Borrowerperformance Rating
f Preparation OHS IDS O U O HU2 Government implementation performance O HS OS 0 U 0 HU3 Implementation agency performance OHS OS O u O HU3 Overall OHS OS OU O HU
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Annex 7. List of Supporting Documents
Annex 8: Partners' Comments (TRC and PERC)Appendix 1: Frequency Management and Monitoring SystemAppendix 2: Telecommunications Sector Policy ImplementationAppendix 3: Telecommunications OperatorsAppendix 4: Telecommunications Services DevelopmentAppendix 5: Basic Telephone Service Supply and DemandAppendix 6: Quality of Service Indicators Telephone Service (SLTL)Appendix 7: Telephone Service Main Tariffs (Rates in SLR, including taxes)Appendix 8: TRC: Use of ConsultantsAppendix 9: TRC Staff TrainingAppendix 10: PERC: Consulting and Marketing ServicesAppendix 11: Schedule of Disbursements
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Additional Annex 8. Partner Comments
TELECOMMUNICATIONS REGULATION COMMISSION (TRC)
Introduction
The Telecommunications Regulation and Public Enterprise Reforn Technical Assistance Project wasfuianced by IDA
The IDA credit was approved in March 1996 and made effective on I Ith June 1996.
Project Objectives
The objectives of IDA Telecommunications Regulation and Public Enterprises Reform TechnicalAssistance Project were:
(a) To support the divestiture of state owned companies and reform of the teleconmnunication sectorfocusing on promoting private investments, operation and competition. The telecommunicationscomponent supported the strengthening of sector regulation and provided for the efficient allocationand use of the radio frequency spectrum; and
(b) To facilitate the privatization of state owned enterprises by providing expert advice andstrengthening the technical and administration capacity of Public Enterprise Reform Commission.
Design, Implementation And Operation Experience
(a) Frequencv NManagement and Monitoring System (TRC component):
(i) Worldwide tenders were called to select suppliers for the procurement and installation ofequipment in respect of the Frequency Management and Mlonitoring System. The contract wasawarded to M, S Rohde & Schwarz & Co of Germany and an agreement was signed on 30thMarch 1999.
(ii) The procurement and installation of equipment has been completed except for one monitoringstation due to unavoidable circumstances. The completion certificate and the ProvisionalAcceptance Certificate have been issued in terms of the contract.
(b) (i) A Memorandum of Understanding (MOU) was signed on 29th September 1997 between theDepartment of Industry, Canada, Telecommunications Regulatory Commission of Sri Lankaand the Commonwealth of Learning, Canada, for Co-operation in TelecommunicationsRegulatory Activities.
(ii) Through the Memorandum of Understanding, TRC's institutional strength was much improvedparticularly in the following areas:
(a) Interconnection arrangements amongst fixed access operators and between fixed accessoperators and cellular operators
(b) Quality of service and public hearing procedures
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(c) Consumer relations(d) Competition policy(e) Rural Telecommunications policy(f) Broadcast licensing legislation(g) Use of telecommunications in emergency and disaster management(h) Cost studies to deal with cross subsidization,(i) Procedures manual for public hearings
(c) Development of a New National Telecommunications Policy for Sri Lanka and a Corporate Plan forthe Telecommunications Regulatory Commnission. The contract for this assignrment was awarded forMls David Townsend and Associates of USA for a sum of US$ 262.980, and the contract wassatisfactorily completed by end of year 2000.
TRC's Performance During Evolution And Implementation Of Project
I. With assistance of the Bank, TRC planned and prepared the FMMS project in accordance with theobjectives and implemented the project.
2. Even though there was a start up delay of about two years for the procurement of equipment, due tothe best efforts of the TRC and the Bank, physical objectives were achieved towards the end of year2000.
3. TRC's performance during the evolution and implementation of the project and its evaluation andcomments are as follows:
(a) Frequency Management And .lonitoring System
Introduction
The Radio frequency spectrum is a scarce natural resource which has to be managed carefully in order toachieve efficient interference free telecommunications and broadcasting services throughout the country.Standard technical parameters and frequency bands have been specified by the radio communicationbureau of ITU for various services.
The present Frequency Management and Monitoring System commissioned under the World Bank fundswill be utilized as the main instrument in improving the radio spectrum in Sri Lanka according tointemational standards and adhering to international and national commitments with regard to the optimumusage of the radio frequency spectrum.
The Frequency Management and Monitoring System consist of following major components:
(i) One Radio Frequency Management Centre located at TRC Head Office(ii) One Central Control Centre for Radio Monitoring System located at TRC Head Office(i) Three Regional Monitoring Centres(ii) One HF Monitoring Centre(iii) Six (06) Remote Monitoring Stations(iv) Four (04) Mobile Surveillance Stations (MSV)(v) Complete package of software tools and database for frequency management and monitoring.
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(b) Radio Frequency Management System
With the introduction of the Radio Frequency Management System, it is possible to maintain a nationalfrequency allocation plan according to the international standards. This system is capable of generatingautomated frequency channel plans according to ITU recommendations with user defmned parameters. TheEngineers in the Spectrum Division have already started preparing National Frequency Plans for differentservices using the software tools available in the Frequency Management System.
There are several Electro-Magnetic Compatibility (EMC) tools incorporated in this system which willassist, during the frequency assignment process, the selection of candidate frequencies for differentservices. By using these EMC tools it is possible to implement the propagation models defined by ITU,which takes care of the effects of terrain. rain attenuation and several other parameters. Other importantfeatures such as broadcast coverage zone predictions, frequency coordination between satellite earthstations and terrestrial networks, frequency sharing, co-channel and adjacent channel interference analysisand third order inter modulation products analysis can be performed using these EMC tools.
The FMMS is capable of generating invoices and the invoice values are automatically calculated based onthe fee schedule incorporated in the system. This system support licensing process for all the radiofrequency services offered by TRC. The officers in the Spectrum Management Division have alreadystarted issuing invoices and technical attachments related to license documents using the automatedfrequency management system.
(c) Frequency Monitoring System
It is the responsibility of TRC to verify the compliance of technical parameters by the users. The mainpurpose of the Frequency Monitoring System is to inspect/monitor radio installations in regard tocompliance with the conditions and requirements attached to the frequency assignments. The frequencymonitoring system is equipped to carryout inspections of the radio installations, which focuses particularlyan the radiated power, frequency, frequency deviation and the number of equipment in operation.
The present Frequency hMonitoring system facilitates the following key tasks by which it is possible tocheck whether a particular radio emission complies with the conditions stipulated by TRC.
(i) To monitor emissions in regard to compliance with the frequency assignment.(ii) To identify the locations of radio emissions.(iii) To locate illegal transmissions.(iv) To perform frequency occupancy measurements.(v) To carryout frequency band observations.(vi) To locate and mitigate radio frequency interference.(vii) To take illegal transmitters out of service.(viii) Measurement of field strengths.(ix) Calculation of coverage zones for broadcasters.(x) Measurement of over modulation.
(d) Technical Assistance - Consultancy Ana Staff Training
IDA Credit 2837 was granted in 1996 during a crucial stage in the process of Telecommunications sectorreformn and liberalization. Having previously successfully spearheaded reforms at the margins in about
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1996 the government embarked on reforms at the core i.e. fixed telephony. This was not only the final stepbut the most crucial step as well in liberalizing domestic telephony services. Undoubtedly resources thatwere available from the IDA Credit helped towards the success of this phase of reforrns.
The forerunner to this phase was the National Telecommunications Policy of the new government that tookoffice in 1994. One of the salient features of this policy was the recognition of the need for private sectorled competition-based growth of the sector. Another notable feature was the introduction of transparency indivestment and licensing process through the introduction of competitive tenders. This helped identify themost suitable partners and operators.
Despite the initial set back of the late 1980's the reform efforts at the core succeeded in mid 1990's largelyaided by pragmatic political, bureaucratic and regulatory efforts. The three main milestones of this processwas the privatization of SLTL, licensing of two WLL operators and the strengthening of the Regulator bythe Statutory conversion of it into a Commission. The results largely indicate the success of these boldinitiatives.
During the last four years, the fixed access telephony grew rapidly with an average growth of 32 percentper year. The Cellular sector perhaps grew even faster with an annual average growth rate of 57 percent.The variety of services also expanded. The most importance benefit was the ready availability of a choiceof telephone services in most urban centers. The competition also resulted in decreasing tariff for theconsumers except for fixed access sector where the government was committed to the five-year tariffre-balancing process. In view of the rapid expansion of the network, quality of service did take a plunge,but conscious efforts by the Commission helped incentives the operators to arrest this trend early.
Despite the focus on urban telephonv by the operators the govemment has taken several initiatives toincentives the expansion of telephony into the rural areas. This includes the introduction of competition forthe provision of telephony to hitherto unconnected sub post offices in rural areas. Another effort issubsidization of pay installations in rural areas, which is currently in progress.
The rapid expansion of the Telecommunications sector necessitated that the regulatory mechanism bestrengthened and developed. In this regard, the Commission structure was restructured to incorporate amulti disciplinary structure (i.e. the Technical, Economic and Legal divisions). As there were no humanresources with regulatory skills available intemally, the Commission had to make do with highly skilledhuman resources who did not have any previous regulatory expertise.
It necessitated intense regulatory training. This was aided by the IDA resources. The Commission coupledthis with the grappling of issues it faced in the regulatory environment. The Consultants who were sourced,handled such issues in the form of projects. A training component was built into such projects.
The Memorandum of Understanding between Industry Canada and the Commission helped the Commissionto source experts in different areas of specialization quickly, ranging from: (i) altemative disputeresolution; (ii) interconnection, rural telecommunications; and (iii) quality of service, consumer issueshandling to Y2K issues. Such sourcing of consultants helped the Commission not only train its staff butgrapple with multiple issues it faced. This helped the Commission becoming the most active and effectiveregulator amongst the South Asian countries.
Utilizing the Statutory policy advice mandate with the aid of IDA resources the Commission sourcedintemational consultants to work with its staff to develop a new draft National Telecommunications Policyand Corporate Plan for the Commission. This process has now been completed and it is now left for the
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government for the adoption of the former as national policy on Telecomnnunications. Having successfullysteered the sector it is important that we realign ourselves in the face of fast involving technology andconvergence of media for further consolidation and building upon the past success. This is the objective indeveloping a new National Telecommunications Policy.
The Corporate Plan is seen as the main instrument that would guide the implementation of the new NationalTelecommunications Policy. Hence it primarily deals with the regulatory structure. Another component thatfollows behind is the need to amend the Statute to fall in line with these two instruments. This is currentlyin progress under the Chairmanship of the former Commissioner of this Commission.
The focus from hereon should not only be limited to leverage the evolution of technology for the benefit ofSri Lanka but also should focus on areas that were not relatively well addressed during the past few years.This includes the need to expedite the network rollout to the rural areas, particularly as about 70 percent ofthe telephone subscribers in the country are in Western Province. Another important area of focus is theneed to strengthen the regulatory structure to help cope with the fast changing scenario. In this regard, it ispertinent to study the Indian as well as the Singaporean models where there is a shifting focus fromtelecommunications to convergence regulation. This is particularly important, as it may be futile to ignoreglobal changes in a fast evolving networked industry like telecormmunications.
AWhilst we have immensely benefited from IDA resources in reforming and liberalizing Telecommunicationssector there is further important work to be done in this regard as highlighted above and resources shouldbe available for such work. Hence, it is important that we seek further assistance from international donoragencies. Given our track record we are hopeful that we will get a good hearing for such future assistance.
PUBLIC ENTERPRISE REFORM COMIMISSION (PERC)
The World Bank provided Technical Assistance for the Govemment of Sri Lanka through theTelecommunications Regulation and Public Enterprise Reform Technical Assistance Project for the period1996-2000.
The objective of the assistance of the Public Enterprise Reform was to facilitate the divestiture ofGovemment owned enterprises including Sri Lanka Telecommunications by strengthening the technical andadministrative capacity of the Public Enterprise Reform Commission of Sri Lanka (PERC). The assistanceto PERC was to:
(a) Finance short-term consultants and financial advisors for specific transactions, advise on strategyforrnulation, pre-reform packaging, implementation of privatization transaction, identify key issuesand privatization review, regulatory framework and recommend action to be taken to implement therestructuring and privatization program;
(b) Assist PERC in the preparation of memorandums, terms of reference and bidding documents, aswell as in the transaction and all tasks leading to the transaction to be completed; and
(c) Strengthen PERC Secretariat to enable core staff to be hired on a long-term basis to plan andcoordinate the privatization progranl, including the provision of training and study tours forprofessional and policy makers.
During the above period of assistance, PERC carried out privatization transactions including the 35 percentstake in Sri Lanka Telecommunications, sale of major stakes in 20 out of 23 regional plantation companies,
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an intemnational placement of shares of National Development Bank, sale of 40 percent of Airlanka Ltd.,and a number of small manufacturing and agricultural enterprises.
This program has therefore resulted in significant benefit to Sri Lanka in terms of improving the growthpotential of several strategic sectors, attracting intemationally reputed investors, updating technology,improving markets, reducing Govemment debt, strengthening the balance of payments and contributing tothe process of fiscal consolidation.
During the course of project implementation, PERC employed international consultants for theprivatization of Sri Lanka Telecommunications and Airlanka. Approximately 52 percent of the total fundsfrom the project amounting to US$ 2,021,832.00 was utilized and pay the consultants for the privatizationof Sri Lanka Telecommunications Ltd.
The following intemational specialists and consulting firms were recruited to advise the Government of SriLanka on the following major transactions:
Consulting Firm/Specialist Applicable Transaction
Deutsche Morgan Grenfel and Coopers & Lybrand Sri Lanka TelecommunicationsSimat Helliesen & Eichner (SH & E) and Sidley Austin Airlanka
We did not find any undue delay or difficulties in the World Bank disbursement process, which enabled usto complete the work as scheduled.
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Additional Annex 9. Frequency Management and Monitoring System
A contract for the FMMS was signed between TRC and Rohde & Schwarz, Germany, on March 30, 1999with a price of DM 7,966,203 + SLR 65,371,084.
The Frequency Management System consists of one server based on the Unix Operating System, which isused to maintain an Oracle database of the radio spectrum users, runs the frequency management softwareand other technical tools shared by 14 client computers, and is capable of carrying out frequencyassignments in different services such as Fixed, Broadcasting and Land Mobile. The Frequency MonitoringSystem consists of the stations listed in the following table, linked by a remote access system of telephonelines leased from the public teleconrmunications network.
Acceptance tests were performed in December 2000, except for one station for which an altemate site isbeing sought. Some of the equipment for this site was used to replace the equipment damaged due tolightning at Yakkala and the faulty items were sent to the manufacturer for repairs. The database will bepopulated initially with information of about licenses and frequency assignments.
Frequency Monitoring Stations
Function/Site Type of InstallationRadio Monitoring Centers1. Colombo I VHFIUHF, DF2. Kadirana I HF, DF3. Kandy I VHF/UHF, OFRemote Monitoring Stations1. Bandaragama VHF/UHF, DF2. Bataramulla VHF/UHF, DF3. Katubedda VHF/UHF, DF4. Nawam Mawatha VHF/UHF, DF5. Sapugaskanda VHF/UHF, DF6. Yakkala VHF/UHF, DFSurveillance Vehicles (4) I VHF/UHF, DF
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Additional Annex 10. Telecommunications Sector Policy Implementation(Policy Letter, MOPT, 2/8/96)
Policy -. , 11`1CurrentSituation .
1. Amend the Telecommunications Act, 1991. The amended Act was passed by the Parliament on September 4,1996.
2. Convert SLTA into a regulatory Commission with As provided in the amended Telecommunications Act, SLTA wasoperational and administrative autonomy converted in February 1997 into a statutory corporation known as(including salary structure). the Telecommunicabions Regulatory Commission (TRC). The
Secretary of the Minister is the ex-officio Chairman of theCommission. The Director General of Telecommunications is theCEO. The other three members are also appointed by the Ministerfrom persons in the fields of law, finance and management. Thestaff and their salaries are determined by the Commission. Therecruitment of qualified senior staff has created a regulatory cultureand consolidatina initial efforts.
3. Finance the Commission's activities through TRC operations and salaries are financed from revenue eamed inlicenses and other operator fees rather than the form of license fees. Capital expenditures, once approved bythrough Govemment budget and provide it with Govemment, are also be met from this revenue.appropriate financial autonomy.
4. Promote competiton in the telecommunications Competition has been introduced in all sectors, except insector by: intematonal telephone services (SLTL's has a monopoly on these* adopting transparent procedures for services until August 2002). TRC has developed interconnection
licensing of operators; rules and taken steps to enhance the quality of services and move* facilitating interconnection: toward cost-based tariffs.. promoting economically sound cost-based
pricing prnciples; and. providing adequate regulatory certainty to
investors. _
5. Allow competition in the provision of Competition has been introduced in several services as planned.telecommunications services (other than thebasic wired voice telephony) with the operatorsusing technology of their choice (provided thatequipment is type-approved and an appropriatelicense has been obtained).
6. In particular, issue two licenses for radio-based Two licenses were granted in February 1996.basic services by March 1996.
7. Transform SLT into a commercially operated and On September 25. 1996. SLT was incorporated as a publicfully autonomous corporation and restructure company limited by shares (SLTL). In August 1997. theSLT's administration and operation within the Govemment sold 35 percent of the shares to NTT, Japan. Thenext two years. agreement with NTT includes managing SLTL, subject to a set of
Derformance targets and incentives.8. Ensure that SLT's its interconnection charges to The commercial terms of interconnection amongst fixed access
other service providers are based on financial operators and between fixed/mobile operators were approved bycosts. TRC.
9. Rebalance SLT's tariffs on the basis of a tariff A rebalancing process has been set through tariff revisions in 1997study combined with realistic demand forecasts. and 1998. As a result of the changes in ownership andAfterwards. enforce tariffs regulated by a price- management of SLTL, the price-cap provisions were suspendedcap system. until August 5, 2005. It is unlikely that price-cap regulation will be
fully enforced with other operators.
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Annex 10 continued
1. Amendmetnt of the b99 l T alecommunicatfons Act__ (a) Cabinet decision to amend Act February 19962.(b) Preparation bo Legial Draftsman of amended bill - April 1996 _
(c) Copy of legislation to Aefomey General and othera May 1996 F__ baMinistries for comrnent_ (d) Translalion of the bill into Sinhaia and Taniil May 1996.
(e) Cabinet approval of the bill and presentafion to June 1996Pariiament
2. Promotion of Competitlon and Private Investment:(a) Granting of the first license for provision of radio- March 1996 February 1996
based basic telecommunications services_ (b) Granting of the second license for provision of March 1996 February 1996
radio-based basic telecommunications services_ (c) Completion of tariff/demand study Third Quarter, 1996 1997/1998
(d) Design and implementation of a tariff rebalancing Early 1997 OngoingI-IP plan
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Additional Annex 11. Telecommunications Operators
Licenhs License -,
Dat Oeetrs PiI Aufthrb*.d 11i"e~
I. 07104/91 Lanka Communicabons Services 20 Data, store and forward fax, e-mail, videotext,(Pvt) Ltd. _ enhanced voice.
2. 08/08/91 Sn Lanka Telecommunications Ltd. 20 Telephone, telegraph, telex, data, martime(SLTL). mobile, fax, intemational TV, intematonal photo
telegram, voice cast transmission, IDS, Inmarsat.3. 111/05/91 Electrotek (Pvt) Ltd. 20 Data, directory informabon. fax, e-mail, videotext.
enhanced voice, electronic data exchange,database facilities, telex.
4. 02/11/92 Lanka Cellular Services (Pvt) Ltd. 20 Cellular mobile telephone.5. 08/06192 Societe Intemabonale de 20 Data, telex, e-mail, data processing related to the
T6elcommunications Aeronautiques air transport industry.(SITA)
6. 09/07/92 Infocom Lanka Ltd. 10 Radio paging7. 12118/92 Bell Communications Lanka (Pvt) 10 Radio paging
Ltd.8. 02/11/93 OTC Australia IPvt) Ltd. (MOBITEL) 7 Cellular mobile telephone9. 02/11/93 Fentons Ltd. 10 Radio paging10. 02/25/93 Dynacom (TrunkNet) Engineenng 5 Trunked mobile radio
(Pvt) Ltd.11. 04/01/93 Intercity Paging (Pvt) Ltd. 10 Radio paging12. 09110/93 Equipment Traders Ltd. 10 Radio paging13. 09/28/93 MTN Networks (Pvt) Ltd. (DIALOG) 20 Cellular mobile telephone14. 12106/94 Sn LankanAirlines Ltd. (AIR LANKA) 5 Voice and data limited to Air Lanka requirements.15. 12/06194 Lanka Intemet Service Ltd. 20 Store & forward e-mail, intemet, fax, e-mail to fax
and fax to e-mail, fax to ASCII characterrecognition/transmission. intemet-baseddatabases, telex. X.25 data, video conferencing,enhanced voice.
16. 12/09/94 The Pay Phone Company (Pvt) Ltd. 10 Payphones17. 05108195 MTT Networks (Pvt) Ltd. 20 Leased circuits to other licensed operators,
__________ sound and TV broadcasting systems.18. 09/07/95 Celltel Lanka Ltd. 13 Cellular mobile telephone, voice mail. fax, leasing
of excess radio capacity, wireless loops for___________ _________________________________ __________ licensed payphone operators.
19. 09/19/95 Ceycom Global Communication Ltd. 20 Data20. 02/22/96 Telia Lanka (Pvt) Ltd. (SUNTEL) 20 Fixed basic telephony, data, payphone, voice
_________ __ ___________ ___________ __ ________ m ail, fax.21. 02/26/96 Lanka Bell (Pvt) Ltd. 20 Fixed basic telephony, data. payphone, voice
__________ __________ ____________________m ail, fax.22. 06/06/96 Itmin Ltd. 20 Data23. 08/16/96 Eureka Online (Pvt) Ltd. 10 Intemet-based services24. 04/28197 Panka Lanka Networking (Pvt) Ltd. 10 Internet-based services25. 08/11/97 Millennium Communications (Pvt) 10 Multimedia, telemarketing, audiotext, intemet,
Ltd. data. value-added services.26. 03/20/98 TSG Lanka Ltd. 10 Payphone27. 04/28/98 Project Consultants Internabonal 10 Internet-based services28. 12/04/98 MTT Networks (Pvt) Ltd. 10 Switched and non-switched data.29. 01/27/99 OPMC Electronics (Pvt) Ltd. 10 Internet-based services30. 03/23/99 Celltel Lanka Ltd. 10 Internet-based services31. 04/08199 Victra-Soft (Pvt) Ltd. 10 Intemet-based services32. 04/08/99 Dynaweb Services (Pvt) Ltd. 10 Internet-based services33. 07/08/99 East West Information Systems Ltd. 10 Internet-based services34. 09/10199 Visual Intemet fPvt) Ltd. 10 Intemet-based services35. 09110/99 Lanka Global Online (Pvt) Ltd. 10 Intemet-based services36. 09/22199 Dynanet Ltd. - 10 tntemet-based services37. 12/30199 MTT Networks (Pvt) Ltd. 10 Intemet-based serviceS38. 01/24/00 Metropolitan Telecommunications 10 Switched and non-switched data
Services (Pvt) Ltd.
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Additional Annex 12. Telecommunications Services Development
Dec. 1996 Dec. 2000
WIRELINE TELEPHONE SERVICE
1 Installed Switching Capacity (Lines) 340.600 828,892
2 Main Lines (a) 254.500 649,991
3 Subscribers 251,498 644,941
4 Public Telephones 3,002 7,397
5 Waiting List (b) 274.030 235,897
6 Main Lines per 100 population 1.4 3.9
WIRELESS LOCAL LOOP SERVICE
7 Subscribers 527 111,011
CELLULAR TELEPHONES
8 Subscribers 727 395,144
9 Subscribers per 100 population 0.4 2.0
OTHER SERVICES
10 Intemet (Subscribers) 2.509 31.725
11 Radio Paging (Subscribers) 10,721 7,600
12 Domestic Lease Circuits N.A. 1,365
13 International Lease Circuits N.A. 74
14 Trunked Mobile Radio (Subscribers) 476 524
(a) As defined by the ITU, number of lines connecting subscribers' terminal equipment to the publicswitched network, each having a dedicated port in the exchange equipment. It includes publictelephones.
(bi Number of applications for a connection to main line that have been held up by a lack of capacity inthe exchanges.
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Additional Annex 13. Basic Telephone Service Supply and Demand
~ year 'C I Exchange Main an | iues/100Year LCapaciy(a) c Lines (b) Popit" .I Waiting Lstc1990 158.518 121,388 0.7 48,8721991 159,667 125,384 0.7 66,5741992 179,995 135,504 0.8 96,207
1993 207,227 157,774 0.9 124,0661994 237,586 180,724 1.0 185,5691995 271,250 205,963 1.1 227,198
1996 340,600 255.049 1.4 274,0301997 436,500 341,622 1.9 284,8761998 543,897 523,529 2.8 224,4111999 769,768 671,916 3.5 236,2252000 1,028,892 767,411 4.0 248,486
2001 1,028,892 874,109 4.5 260,7472002 1,028,892 974,109 4.9 250,747
2003 1,500,000 1,064,000 5.3 230,7472004 1,500,000 1,164,000 5.7 215,747
2005 1,500,000 1,269,000 6.2 205,747
(a) Number of installed exchange lines.(b) Number of lines connecting subscribers' terminal equipment to the public
switched network, each having a dedicated port in the exchange equipment. Itincludes WLL lines and public telephones.
(c) Number of applications for connection to service that have been held up by alack of capacity in the exchanges or the outside plant.2000-2005: SLTL, Suntel and Lankabell projections.
1,400,000
1,200,000 .
1,000,000 -.-------
800,000 - ~
600.000 ...........
400,000 . . . . . . ..
200.000 *--- - * - .
1990 1992 1994 1996 1998 2000 2002 2004
Year
-a Lines -&-Waiting List
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Additional Annex 14. Quality of Service Indicators
1996 2000Indicators
Colombo Other Colombo OtherMetro Regions Metro Regions
1 Complaints/100 lines per month (a) N.A NA. 13.98 N.A.
2 Faults/100 lines per month (b) 10.89 25.05 12.60 12.83
3 Faults Cleared/100 lines per month (b) 9.39 24.88 12.6 12.83
4 Call Completion Rate (%): (c)5 Domestic LD calls 26.43 33.83 41.67 42.51
6 Intemational outgoing calls n.a. n.a. 44.7 (d)
(a) 1996 - July to December avcrage; 2000 - January to September average(b) 1996 - July to December average; 2000 - January to September average(c) 1996 - July to December average; 2000- January to September average(d) For the whole country
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Additional Annex 15. Telephone Service Main Tariffs (rates in SLR, including taxes)
December 1996 December 2000
LocAL SERVICE 15,600 16,000- 22,0001. Connection Fee (a)
Rental Charge: (b)2. * residential subscribers 96 237 3803. * business subscribers 96 427 - 475
Call Charge per Unit:4. * first unit 1.32 1.305. * additional unit 1.98 1.65 - 3.30
INTERNATIONAL AUTOMATIC CALLSThree Min. or Fraction Rate:
6. * Australia 204 - 309 150 - 2157. * Germany 261- 399 195 - 2478. . India N.A. 120-1629. * Japan N.A. 150 - 21510. * U.A.E. 261- 399 195 - 25011. * United Kingdom 261 - 399 195 - 25012. * United States 261 - 399 195 - 250
Deposit for Intemational Subscriber Dialing13. * Residental subscribers 5.000 2,500 - 10,00014. . Business subscribers 5,000 2,500 - 10,000
Notes:(a) Indicate how it depends on the distance to the telephone exchange.(b) Specify period (per year or per month).
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Additional Annex 16. TRC Use of Consultants
The following studies were undertaken by the TRC:
1. Cost Study to deal with cross subsidization2. Study of Quality of Service and public hearing procedures3. Study on consumer complaints4. Study on service quality standards5. Inter connection arrangements amongst fixed access operators and between fixed access operatorsand cellular operators6. Competition policy7. Rural Telecommunications Policy to encourage the expeditious roll out of telephones in rural areas8. Telephone billing to formulate operationally feasible solutions to billing issues9. Broadcast licensing legislation10. Use of telecommunications in emergency and disaster management11. Development of a New National Teleconununications Policy for Sri Lanka and a Corporate Planfor the TRC
TRC Staff Training
Training on Regulatory issues including FMMS operations
Regulatorv Issues
I. Interconnection arrangements2. Cost studies3. Quality of service4. Competition policy5. Interoperability issues6. Emergency telecommnunications and disaster management7. Enforcement of license conditions8. Rural telecommunication policy
FMINIS Operations
A study trip was under taken by SLTAITRC staff to Industry Canada to review the FMMS process andprocedures. Three batches of personnel were also trained in FMMS operations at the factory of M/SRhode & Schwarz & Co. in Germany.
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Additional Annex 17. PERC Consulting and Marketing Services(Use of Funds as of December 2000)
Enterprise ConsultingRetorm/Privatization Services Marketing . Total Remarks
Utility & ServicesSri Lanka 35 percent shares and managementTelecommunications Ltd. 1.826,173.95 195.658.42 2,021,832.37 ransferred to
strategic investor (NTTC)40 percent shares and management
Air Lanka Ltd. 207,852.54 21,701.04 229,553.58 transferred tostrategic investor (Emirates)Public awareness on benefits of
Postal Reform 17,100.69 211,771.49 228,872.18 corporatization.Awaiting enactment of Legislation
Independent TelevisionNetwork 8,015.74 8,015.74Airport & Aviation ServicesLtd. - 2,040.18 2,040.18 To be restructured
Sr Lanka Insurance CorporationRobinson Clubs - Bentota . 4,311.55 4,311.55 considenng
new application.PlantationsRegional Plantation Sale of shares. 12 companies fullyCompanies 171,803.63 171.803.63 divested.
I___________________ ____________ _____________ _____________ 16 com panies listed.AgricultureSeed Paddy 2 seed farms leased to strategic investorFarms/Livestock Farms 13,225.25 8,304.63 21,529.88 on a long term
basis. 2 livestock farms to be handed overo investorshortly.
Sevanagala Sugar Ltd. 1,123.36 17,541.56 18,664.92 Proposal been evaluatedHigurana Sugar Ltd. - 1,952.59 1,952.59 Proposal been evaluatedCeylon Nor/FisheresCorp. _ 13.254.46 13.254.46 Proposal been evaluatedMiningBogala & KahatagahaGraphite _ _ 3150240_ 1,436.00 32,938.40 50 percent of Govemment shares sold.ManufacturingPugoda Textiles 2,136.75 3,577.37 5,714.12 Liquidation in progressCeylon Agro Industries 3,285.42 3,285.42Lanka Asoke Leyland 1,814.35 1,814.35
Transferred to Ceylon Heavy IndustresLanka Loha Hardware 5,705.31 - 5,705.31 Ltd.National PaperCorporation - 7,236.53 7,236.53Lanka Salusala . 995.36 995.36
90 percent purchased by employees' trustLanka Salt . 7,657.85 7,657.85 fund.Colombo Sack Makers . 2,617.65 2,617.65
90 percent transferred to Korea Heavyeylon Steel Corp. . 43,586.06 43.586.06 Industries and Construction Co.. Hanjung
^evlon Fertilizer Corp. . 5.566.72 5,566.72
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Annex 17 continued
Enterprise ConsultingReform/Privatization Services Marketing Total Remarks
BankingNOB 29,819.75 29,819.75 International placement of shares due.SMIB - 9,693.36 9,693.36BankingIlnsurance 21.975.12 10,186.69 32,161.81 Developing new insurance legislation.Petroleum
51 percent transferred to Shell OverseasColombo Gas (Shell Gas) 575.82 36,428.57 37,004.39 Investment B.V.Lanka Lubricants 7,557.72 7,557.72 39 percent Public Offer of sharespowerLECO 1,889.03 1,889.03
Restructuring of Ceylon Electricity Boardower & Energy - 15,986.33 15,986.33 and
.___________ establishment of regulator.TradingBCC Lanka Ltd. 10,647.28 10,647.28
60 percent Transferred to strategicOrient Lanka Ltd. 10,027.43 Investor, Alpha
oAirpors Group Plc.PERC
Post Privatizalion 790.78 - 790.78Computerization of PERC accounting
PERC Accounting System 2,668.91 - 2,668.91 systemPERC Awareness Program - 88,955.62 88,955.62
50 Members of Parliament on 10-dayMP's Study Tours 379,956.02 379,956.02 tours abroad
fotal _ 2,137,819.68 1,328,287.60 3,456,079.85
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Additional Annex 18. Schedule of Disbursements (US$ million)
Appraisal - ActualIBRD FY & Semester Ending Amount In Amount In._______________________ Semester Cumulative (%) Semester Cumulative (%)1996
June 30, 1996 0.5 3.3 0.0 0.01997
December31, 1997 3.1 24.0 1.1 7.3June 30, 1997 1.1 31.3 0.7 11.8
1998December 31, 1997 1.0 38.0 0.6 16.1June 30, 1998 5.0 71.3 0.8 21.2
1999December 31, 1998 3.0 91.3 0.3 23.3June 30. 1999 1.3 100.0 1.4 32.7
2000December 31, 1999 3.4 55.8June 30, 2000 0.8 61.4
2001December 31, 2000 0.1 62.1January 31, 2001 0.9 (') 73.1
Total 15.0 10.3 ( 73.1(*) As of January 31. 2001
-~100.0z 90.0
80.0E 70.0
60.0
.~50.0
40.0 -.2 30.0-
-0 20.0
1996(l) 1996(11) 1997(I) 1997(11) 1998(I) 1998(11) 1999(1) 1999(11) 2000(l) 2000(1i) 2001(I)
Semesters
I)O Appraisal U Actual
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