F ILE I. Appraisal of Third Telecommunications Project Colombia. Not for Public Use. Public Disclosure Authorized. Report No.

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized F ILE I Appraisal of Third Telecommunications Project Colombia Report No. 605-CO December 27, 1974 Regional Projects Department Latin America and the Caribbean Regional Office Not for Public Use Document of the International Bank for Reconstruction and Development International Development Association PV DC0 This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Croup authorization. The Bank Group d(les not a(ccept responsibility for the accurary or completeness ot the report.

2 CURRENCY EQUIVALENTS US$ = Col$26.oo Col$1 = US$ Col$1,OOO,00 = US$38,500 FISCAL YEAR January 1 to December 31 LIST OF ABBREVIATIONS AND TITLES USED IN THE REPORT TELECOM - Empresa Nacional de Telecomunicaciones - an entity solely responsible for operating national telegraph, telex and long distance services and international teleoummunications services; and with 53 other entities responsible i:'or local telephone services. TELEX - telegraph exchange service for subscribers VFT - voice frequency telegraphs VHF/HF - very high frequency radio mhz/high frequency radio up to 30 mhz GLOSSARY OF TECHNICAL TERMS USED IN THE REPORT CARRIER - a system of providing a number of circuits over one radio link, coaxial cable or a pair of wires FILL - percentage of installed capacity of a telephone exchange actually in service MICROWAVE - a system of communications using frequencies over 300 mhz and working on a line of sight propagation basis MULTIPLEX - part of the equipment in a carrier system - see above - which shifts and stacks the different circuits in the frequency spectrum appropriate to the particular carrier system TROPOSPHERIC SCATTER - a system of radio communication using very high or microwave frequencies capable of operating over distances beyond the line of sight by making use of the dispersion of radio waves in the troposphere

3 COLOMBIA EMPRESA NACIONAL DE TELECOMUNICACIONES (TELECOM) APPRAISAL OF THE THIRD TELECOMMUNICATIONS PROJECT Table of Contents Page No. SUMMARY AND CONCLUSIONS.... i - ii 1. INTRODUCTION * THE TELECOMMUNICATIONS SECTOR THE PROGRAM AND THE PROJECT... 4 The Program The Project... 5 Project Costs Contingencies Amount of the Proposed Loan... 7 Procurement Execution of the Project Disbursement JUSTIFICATION OF THE PROJECT Local Facilities Rural Services Long Distance Facilities Telex Least-Cost Solution Rate of Return THE BORROWER Organization Staff Recruitment and Training Accounting and Audit Billing and Collection This report is based on information obtained from TELECOM, and on the findings of (i) a mission composed of Messrs. M. DeLima and M. Kohler which visited Colombia in November/December 1973 and February 1974; and (ii) an updating mission composed of Messrs. M. DeLima and B. Holmgren which visited Colombia in November 1974.

4 TABLE OF CONTENTS (Continued) Page No. Tariffs ** 14 Insurance.*...*.... *...**....*..** 15 Existing IFacilities FINANCES..., Past Financial Performance Financing Plan Future Operating Results Forecast Financial Position AGREEMENTS REACHED AND RECOMMENDATIONS... 21

5 LIST OF ANNEXES 1. Telephone Entities Operating in Colombia as of December 31, International Statistical Data 3. Summary of Program Costs (197h-80) L. Physical Program (197L-80) 5. Schedule of Construction - Chart No Schedule of Disbursement 7. Demand, Equipped Capacity and Connected Lines ( ) 8. Internal Financial Rate of Return Analysis 9. Organization Chart - No Organization (Regional) Chart - No. 83h0 11. Staff Details 12. Summary of Tariffs 13. Basic Data as of December 31, 1973 and for 197lh-80 Program 14. Statistical Data on Exchanges as of December 31, Exchange Capacity, Connected Lines, and Telephone Stations - Actual ( ) and Forecast ( ) 16. Income Statements 17. Balance Sheets 18. Funds Flow Statement 19. Formula for Calculation of Financial Rate of Return 20. Program of Acquisition of Local Telephone Entities 21. Performance Indicators MAPS 1. Local Automatic Telephone Exchange Network 2. Long Distance Network

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7 COLOMBIA EMPRESA NACIONAL DE TELECOMUNICACIONES (TELECOM) APPRAISAL OF THE THIRD TELECOMMUNICATIONS PROJECT SUMMARY AND CONCLUSIONS i. This report appraises a project which includes a part of the works in Empresa Nacional de Telecomunicaciones (TELECOM) telecommunications development program scheduled to be started and completed during the first phase five-year period ( ). ii. The project is estimated to cost Col$ 1,609 million (US$52.1 million) with a foreign exchange component of US$33.5 million equivalent. The proposed Bank loan (US$15 million) would partially cover the foreign costs, while the balance (US$18.5 million) would be obtained through TELECOM's own resources. The project will provide: (a) about 18,000 additional lines of switching equipment; cables and subscribers plant to add about 16,000 new subscribers; (b) long distance equipment for 5,400 additional circuits; (c) telex equipment to connect 500 additional subscribers; and (d) telephone facilities to about 200 rural areas. iii. The proposed loan is the third lending operation for telecommunications in Colombia. The first Loan 499-CO (US$16 million) was made in 1967 to finance the establishment of a basic long distance network and for the expansion and improvement of national and international telecommunications services. The loan has been fully disbursed and the physical work still outstanding would be completed by mid The second Loan 740-CO (US$15 million) approved in 1971 will assist in financing new local networks and extension of long distance facilities. The project will be completed by June 1976 except for installation of 9,900 local exchange equipment lines which could not be procured for lack of loan funds caused mainly by changes in exchange parities. The installation of these local lines has been provided for in the third project. iv. TELECOM, the proposed borrower, is an autonomous entity responsible for national telegraph, telex and long distance services and all international telecommunication services. TELECOM, which together with 53 other entities operates local services, is now consolidating the sector by acquiring gradually some of these entities. TELECOM's organization structure needs some changes, which TELECOM has put into effect. With the assistance of financial and technical consultants to be retained by TELECOM for the first two years of the project period, the entity would be able to carry out the proposed project.

8 - ii - v. All Bank financed goods would be procured by international competitive bidding in accordance with the Bank's Guidelines for Procurement, except some extensions (valued at US$2.6 million) to equipment earlier contracted for under Loan 740-CO, which is being obtained for reasons of standardization from the same contractors as the original equipment at unit prices quoted under the earlier bid adjusted for inflation. vi. TELECOM's liquidity has been tight during the past four years, caused in part by significant arrears in collections from the Public Sector and the connecting local telephone enterprises, and in part by its increasing debt service burden which is attributable to stepped up borrowings and the devaluation of the Colombian peso. TELECOM would improve its accounts receivable position during the project period. TELECOM would provide about 65 percent of the funds required during the project period from its own cash generation. TELECOM's liquidity would be satisfactory and the annual rate of return on net fixed assets in operation would meet the 11 percent minimum level. vii. The project is suitable for a Bank loan of US$15 million equivalent for a term of 20 years including3 a grace period of 5 years. The guarantor would be Republic of Colombia.

9 COLOMBIA EMPRESA NACIONAL DE TELECOMUNICACIONES (TELECOM) APPRAISAL OF THE THIRD TELECOMMUNICATIONS PROJECT 1. INTRODUCTION 1.01 The Government of Colombia has requested Bank assistance in financing Empresa Nacional de Telecomunicaciones (TELECOM) telecommunications development program which aims to extend and improve long distance national and international telecommunications facilities and to provide local telephone service in some areas of Colombia where service is limited or non-existent. The program's cost is estimated at Col$ 5,929 million (US$171.2 million) including a foreign exchange cost of US$106.5 million equivalent The proposed project, which would cover part of the works in TELECOM's program on which construction would be started and completed during , provides for the installation of additional local exchange lines; the extension of long distance facilities; and telex equipment. The cost of the project is estimated at Col$ 1,609 million (US$52.1 million) including a foreign exchange component of US$33.5 million equivalent. The proposed Bank loan would provide US$15 million equivalent, while the balance of US$18.5 million equivalent would be financed through TELECOM's own resources This would be the Bank's third lending operation for telecommunications in Colombia. In 1967, the Bank approved a US$16 million loan (499-CO) to TELECOM to help finance the establishment of a modern long distance network, and for the expansion and improvement of national and international telecommunications services. The loan has been fully disbursed. Work on the project has been completed, except for four local exchange installations, which will be completed by mid The second loan (740-CO) for US$15 million approved in 1971, will assist in financing the installation of new local networks and the extension of long distance facilities. The project after initial delays is now progressing satisfactorily. About 9,900 lines of local exchange equipment provided in the project have been carried over to the third project due to shortage of loan funds mainly caused by changes in exchange parities. Except for this item, the project is expected to be completed by June about a year behind schedule Because of the important role of exports in Colombia's economy and for the development of its national resources, rapid and reliable telecommunications services are essential for providing a means of exchanging information between the producers and exporters of products such as coffee, petroleum and fuel oil, cotton and textiles, and bananas. Good telecommunication facilities are also extremely important for efficient administration of the country, particularly the inaccessible areas, and for improving transportation and distribution of goods within the country,. The proposed project aims at providing basic services in rural areas, and at extending and improving

10 -2- telecommunications services within the country. In addition, the Bank's participation in the project would assist in institution building including consolidation of the telecommunication sector (see paragraph 2.05) and the establishment of a reliable telecommunications network This report is based on information obtained from TELECOM, and on the findings of a mission compoi;ed of Messrs. M. DeLima and N. Kohler which visited Colombia in November/December 1973 and in February 1974: and an updating mission composed of Messrs. M. DeLima and B. Holmgren which visited Colombia in November THE TELECOVMUNICATIONS SECTOR The Telecommunications Sector 2.01 The Ministry of Communications exercises governmental control of the sector. It is responsible for policy making, licensing and regulation of the various entities operating in the sector. By law, "the Ministry of Communications, in agreement wit'h the President of the Republic, is responsible to adopt national communications policy in harmony with the overall development policy." A planning office has been set up to make a broad study of the telecommunication sector and to recommend to the Ministry ways to improve, extend and economically provide telecommunication services within the country. As the licensing authority for all telecommunicationservices, the Ministry has issued licenses to various municipalities to operate local telephone services and to TELECOM. The Ministry exercises regulatory powers by approving investment plans of the various telephone entities, and recommending tariff proposals receivec from these entities to the National Tariff Board for final approval Responsibility for providing telecommunication services in Colombia is shared by 54 entities as set out in Annex 1. Operating as a Government owned entity, TELECOM has the exclusive license to provide national telegraph, telex and long distance services and all international telecommunications services. Local telephone services are provided by TELECOM and the 53 other entities. TELECOM is also permitted to provide local telephone services, with the approval of Ministry of Communications, in any area where the local municipality does not obtain a license to operate such services, and requests TELECOM to do so. With prior minlsterial approval, TELECOM is also allowed to acquire an existing entity At the end of December 1973, about 677,000 local telephone lines were in operation in Colombia (245,000 of these in Bogota), of which TELECOM operated 35,000 representing about: 5 percent of total telephone lines operating in the country. Annex 2 sets out statistical information on telephones in various countries of the world. IDetails of telecommunications facilities currently operated by TELECOM are set out in paragraphs

11 The major problem of the telecommunication sector is the iragmented operation of local telephone service. Some large municipalities have created separate telephone entities to administer and operate the local telephone service. They provide reasonably good service. In smaller cities and towns, however the telephone service is operated in conjunction with other public utility services such as water supply and electric power. The quality of service in these areas is unsatisfactory due to the small scale of operation and the insufficient attention paid to the extension and improvement of the telecommunication service. The large number of entities (all except nine operate less than 10,000 equipment lines) complicates sector interworking with varying operating standards and often results in uncoordinated planning of facilities. Further each entity independently purchases costly imported plant and equipment, in small quantities, thereby paying high prices and causing an avoidable drain on the country's foreign exchange resources, and creating serious standardization problems The long-term solution lies in the consolidation of the several local operating entities into a single national telecommunication body. The large financially viable local municipal operating entities are reluctant to merge with other smaller similarly operated entities which are generally weak financially and technically and also local and regional political influences would defer or prevent voluntary mergers of entities in adjacent operating areas, or even compulsory mergers through legislation. For these reasons, when approving increases in TELECOM's long distance tariffs in 1971, the Government specified that a part of the expected additional revenue (see paragraph 6.14) should be set aside and used exclusively by TELECOM for local expansion including acquisition of local entities. Consolidation therefore can only be undertaken by TELECOM which is authorized to operate over the whole country. TELECOM has taken over some seven entities during the last three years and plans during to take over 19 more (see Annexes 1 and 20). By 1981 TELECOM proposes to acquire all local telephone entities, except the eight largest On completion of projects financed under Bank Loans 499-CO and 740-CO, TELECOM would have a reliable long distance network and good financial and technical management. The third project would extend telecommunications services to rural areas and increase long distance circuits. While TELECOM's long distance service development is progressing satisfactorily, local telephone service planning and development by other entities is not able to keep up with demands. The local entities do not have adequate financial resources for planned development. Two large entities (Bogota and Cali) would have serious problems in financing future development beyond 1975 and 1976 on the completion of their present plans and have requested Government for financial assistance from various sources including the World Bank. Supplier credits were considered unsatisfactory by these entities because of the higier prices of equipment to be paid (compared to prices under international bids) and short repayment periods. The position of the other smaller entities is no better, and their future development plans are based not on need, but on the quantum and timing of supplier credits which they hope to obtain. The uncertain availability of finance has caused even the larger entities to plan

12 -4- on a short term basis and has stopped development altogether in some smaller entities for which long term bank credits are not available. TELECOM's long distance development plans aft:er the end of the third project period (1978) will depend largely on the local service development achievement of the eight largest entities. Close coorclination of sector development and investment is therefore essential for a balanced development of telecommunications in the country. The Government is aware of these problems and has requested the Bank to undertake a sector study and to assist the Government to assess the requirements of each entity over the next 5-10 years, fix relative priorities for investment, and cc,nsider possible sources of funds. A Bank sector mission visited Colombia in August-September 1974 and is preparing a report. 3. THE PROGRAM AND THE PROJECT The Program 3.01 Government has approved TELECOM's third telecommunications development program for the period 1974 through TELECOM proposes to complete the program in two phases: from 1974 through 1978 and from 1977 through The program comprises mainly the following: (a) Installation of 119 new local automatic exchanges with a total capacity of 63,250 lines; additions of a total of 3,675 lines to 21 lo,al automatic exchanges; and associated cable network to connect about 54,000 additional subscribers; (b) installation of HF radio equipment; VHF/UHF radio equipment and microwave equipment with associated multiplex equipment to provide about 9,100 additional circuits; (c) installation of 3 new long distance automatic exchanges (total of about 2,600 terminations) and extension of existing long distance exchanges to provide a total of 18,000 additional terminations; (d) installation of 6 new teleprinter exchanges with a total of 2,450 subscriber lines and 1,350 channel terminations; 1,440 VFT channels and 2,500 teleprinters; (e) construction of buildings for housing equipment and stores; (f) extension of the international telephone exchange by 400 lines and the international telex exchange by 300 lines; and (g) purchase of testing equipment, tools and transport.

13 The program cost (including Col$ million with a foreign exchange component of US$19.6 million equivalent of preinvestments for the program after 1980) is estimated at Col$ 5,929 million (US$171.2 million) including a foreign exchange component of US$106.5 million equivalent. Details of the estimated cost of the program are given in Annex 3 and the physical content of the program and project with completion dates of each item is given in Annex 4. The Project 3.03 The project for Bank financing would cover part of the works in phase one of TELECOM's telecommunications development program and would be carried out during the five-year period ( ). It consists of the following: (a) Installation of 43 new local automatic exchanges with 14,150 lines and 3,675 additional lines in 21 existing exchanges; (b) installation of local distribution cables and subscribers equipment to connect about 16,000 additional subscribers; (c) installation of microwave, UHF/VHF radio terminals and multiplex equipment to provide about 5,400 additional long distance circuits; and 10 HF radio systems; and 30 VHF radio systems to provide telephone services in about 200 rural towns; (d) installation of 3 new long distance automatic exchanges and additions to existing exchanges, with a total of about 17,600 additional terminations; (e) installation of 6 new teleprinter exchanges with a total of 2,150 subscriber lines and 1,350 channel terminations; VFT equipment for 1,440 channels and 500 teleprinters; and (f) acquisition of land and construction of buildings to house equipment. Project Costs 3.04 The cost of the project is estimated at Col$ 1,609 million (US$52.1 million) with a foreign exchange component of US$33.5 million equivalent. A summary of costs is given below:

14 -6- Col$ Million us$ Million. 1. Local Facilities Local Foreign Total Local Foreign Total Switching (new) Switching (extension) j Standby Power Plant Cables 6' Telephones * Coin Boxes Subtotal Long Distance Facilities Switching (new) 9> Switching (extension) Switching (additions) Manual Boards ( Subtotal Microwave Radio UHF Radio Multiplex equipment Rural (VHF/HF) Telex and Telegraph Subtotal 7L Telex equipment _ VFT Equipment Teleprinters 1._ Subtotal L Land and Buildings Base Cost Estimate , Physical Contingencies Expected Price Increase 203. A (19%) 7. Total Expected Cost of Project 566. v 1, ,609.4 T1W

15 - 7 - The Bank loan would finance US$15 million equivalent of the foreign costs as shown in para 3.08, while the balance - US$18.5 million - would be financed through TELECOM's own resources The foreign cost estimates are based on price quotations recently obtained by TELECOM from various manufacturers, and on average prices adjusted for recent currency parity changes, obtained on international competitive bids under Bank loans. TELECOM is exempt from payment of customs duties on imported goods. Contingencies 3.06 TELECOM has fixed the total number of local exchange lines; radio equiptmenterminals; and telex equipment lines that would be installed under the project. The quantity of telephone subscribers equipment and number of teleprinters have also been finally decided. Variations in quantities could therefore only occur in cable duct works and buildings when final designs are prepared. TELECOM has included physical contingencies, at varying rates for the different building materials, in the basic estimates for cable duct works and buildings. Physical contingencies (about 10 percent of total local costs of these works) have been shown separately TELECOM has based the costs of some imported goods for which international competitive bids were called recently, on the lowest bids received. For goods for which bids have not yet been received, the foreign cost estimates include a contingency of US$1.7 million to cover a possible 10 percent increase in estimated prices of these imported goods. Local price contingencies of US$6.5 million have been provided to cover uncertainties during the construction period in the wages of construction staff and cost of locally procured materials. Amount of the Proposed Loan 3.08 The proposed loan of US$15 million would finance the following items: Local Exchanges US$ (million) Exchange equipment 2.1 Subscribers plant Long Distance Equipment Microwave system 4.2 Multiplex 1.7 Rural systems 2.0 V.F.T Systems 0.9 Switching equipment (extension) 1.7 Switching equipment (new) Contingencies 0.9 Total 15.0

16 Procurement 3.09 All goods (except extensions to existing long distance switching equipment) provided under the pr'oject for Bank financing will be procured through international coompetitiv,e bidding in accordance with the Bank's guidelines. Extension equipment (valued at US$2.6 million) to switching equipment - the latter was obtained through international competitive bidding under Loan 740-CO - is being ob-:ained from the same contractor at unit prices quoted under the earlier bid anct adjusted for inflation. Other imported goods will be procured by negotiations with the suppliers and through competitive bidding. Goods such as cables, cable ducts, poles and fittings which are manufactured locally, will be procured through competitive bids from domestic suppliers and financed with TEIECOM's funds None of the Bank financed project goods are currently manufactured in Colombia; hence price preference for locally manufactured goods does not arise. Though Colombia is a mermber of the Latin American Free Trade Association (LAFTA) and the Andean Pacl, TELECOM is exempt from import duties; hence bid preference for LAFTA and the Andean Pact is not applicable. Execution of the Project 3.11 The schedule for exect.tion of the project, set out in Annex 5 is realistic. T=LECOM's staff will do engineering designs and with the assistance of technical consultants retained under Loan 740-CO (see para 5.04) will prepare bid documents and technical specifications, evaluate bids and draw up contracts for goods. TELECOY. will lay, joint and commission all distribution cables and will supervise construction of cable ducts and buildings constructed by local contractore. All plant in new locations will be installed by the suppliers with the assistance of TELECOM staff. Extensions to existing plant will be installed by TELECOM since it has gained sufficient installation experience. TELECCM will carry out acceptance tests of all installed equipment. Disbursement 3.12 Annex 6 gives the estimated loan disbursements during the period. Disbursement would be for the CIF costs of imported equipment, and the foreign costs of its installation. Because the project as designed, does not meet all the estimated demand, any unused balance of the loan should be used to finance additional equipment, similar to that already procured under the loan, after consultation with the Bank. 4. JUSTIFICATION OF TIHE PROJECT 4.01 The basic justificatioa of the projcct is to support Colombia's development objectives by providing an essential service for the country's agriculture, business, trade and industry. Rapid and reliable communications

17 -9- are important for the efficient organization of the flow of inputs for production, and for the distribution and marketing of agricultural and industrial goods. The project would make an important contribution to the economic development of Colombia by increasing operating efficiency in administrative, industrial and commercial activities Colombia is currently undersupplied with telecommunication services in that the local and long distance network is inadequate in quality and congested and there is a large unfilled demand for telephones. The project aims to: (a) improve the quality of service to existing subscribers essentially by replacing manual by automatic local exchanges, and by providing an adequate number of high quality long distance telephone circuits; (b) extend and improve the telex system; (c) extend telecommunication service to about 200 rural areas; and (d) meet part of the demand for telephone. Local Facilities 4.03 TELECOM has computed separately for each exchange it is currently operating the local exchange requirements up to 1980 by considering the present unfilled expressed demand, the past growth and the commercial importance in each exchange. TELECOM has thus forecast a 10 percent annual growth (working connections plus unfilled demand) up to 1978, and an 8 percent growth thereafter up to The growth forecasts are reasonable. During the project period ( ) TELECOM would, with utilization of equipment installed under Loans 499-CO and 740-CO and this project, provide about 750 connections per month - an objective which is attainable and realistic. Even so, the project cannot meet the current unfilled demand in some exchange areas during the project period. The current unfilled and future demands up to 1980 in these areas would be met in TELECOM's second ( ) project. TELECOM has not proposed a larger project presently due to financial constraints, and the need for consolidation of administrative changes (see paragraph 5.03) before embarking or further expansion TELECOM currently operates in Colombia about 35,000 telephone connections with a total capacity of about 38,000 exchange lines. TELECOM would install in this project a total of 17,825 local automatic equipment lines. Existing exchanges would be extended by 3,675 lines. Another 11,400 automatic exchange lines would be installed to replace existing manual exchange lines at 35 localities to improve quality of service. The balance of the automatic exchange lines (2,750) would be installed at 8 localities where there is currently no service. These installations are justified on the basis of population and economic importance of the localities. The capacity of each exchange at these new localities has been worked out on the

18 basis of TELECOM's experience of demand in existing localities in the country with similar population and economic background. Annex 7 sets out the demand, equipped capacity an,l connected lines ( ). Rural Services 4.05 As the first step towards implementation of Government policy to provide telecommunications services to rural areas, TELECOM proposes to extend the telecommunication network by installing public call offices in a total of about 200 rural areas scattered over the country. Long Distance Facilities 4.06 While the quality of speech on long distance circuits is generally satisfactory, the traffic is much greater than the circuit capacity resulting in congestion and long wait for calls. TELECOM has computed separately for each route, future circuit requirements needed to remove existing congestion, and to meet increased traffic from existing and new connections provided within the country during the project period. The demand forecasts are in line with experience in other developing countries. The project is designed to provide an additional 5,400 high quality circuits - a growth rate of 23 percent per year, which is realistic. Telex 4.07 The number of telex network subscribers has increased from 2,138 in 1968 to about 2,600 in a growth rate of 5 percent per year. With the introduction of international. telex service via satellite communication, demand for telex connections is increasing and is projected at 4,600 by TELECOM aims to increase telex capacity by 2,150 lines and connect about 2,000 subscribers over the period to meet estimated demand; this will result in an annual grcwth of 12 percent. Least-Cost Solution 4.08 TELECOM's project consists of a number of separate small works covering expansion of capacity in a number of existing exchanges, and provision of automatic exchanges in new localities. The choice of automatic exchanges for providing local service and for handling long distance traffic provides a better more rapid and more reliable service and represents the least-cost solution. The original exchange installations provided for the most economical future extensions; extension of existing exchanges is being made with the same type of equipment. In general provision of large blocks of high grade long distance circuits can be made using coaxial cables; or radio equipment (microwave UHF/VHF). With Colombia's topography, utilization of radio equipment is the most economical way to provide such large blocks of long distance circuits. Depending on the anticipated number of circuits required from point to point, TELECOM will use either microwave, UHF or VHF systems.

19 Rate of Return 4.09 The project's rate of return is about 27 percent (Annex 8), if benefits are measured by the incremental net revenues attributable to the project. The incremental revenues, however, understate the benefits consumers receive from the project and therefore this rate of return is a minimum estimate only of the benefits to the economy. A sensitivity analysis has been carried out (para 4 of Annex 8) showing that the rate of return exceeds 22 percent for variations of the main parameters by 10 percent or 15 percent respectively. With the very unlikely combination of all adverse events, the rate would still reach about 21 percent. 5. THE BORROWER Organization 5.01 TELECOM, an autonomous entity established in 1947, is managed by an eight member Board of Directors with the Minister of Communications as ex officio chairman of the Board. The President of the Republic appoints all members of the Board and the president of TELECOM. An organization chart is shown in Annex 9. The day to day management of the entity is the responsibility of the president of TELECOM. He is assisted by five vicepresidents one each in charge of technical (engineering), operation, integration, industrial relations and finance. In addition the chiefs of the legal office, organization development and public relations report directly to the president. A secretary-general responsible for Board matters, project coordination and general services also reports to the president TELECOM has seven operations regions with regional managers in charge at Bogota, Bucaramanga, Cali, Manizales, Medellin, Barranquilla and Ibague. A regional organization chart is set out in Annex 10. The regional managers are responsible on the technical side for the routine maintenance and operations of all plants (except long distance) within their regions. The responsibility to plan, program and execute all new telecommunications works within the region, devolves on the technical vice-president at Bogota The organizational structure, though basically the same as existed at the time of second project appraisal, can no longer in its present form, effectively meet the additional commitments TELECOM has undertaken by acquisition of local telephone entities and expansion of local and long distance services to rural areas all over the country. No clear line of demarcation of duties exists at the headquarters: there is too much centralization of work at headquarters, and the regional managers mostly do commercial and public relation works and carry out routine technical maintenance. Financial management is weak, particularly in budgeting and cost and plant accounting fields. Planning, programming and project control need more effective coordination. TELECOM's performance in awarding contracts for goods under the two previous Bank loans was unsatisfactory, delaying project execution. TELECOM is aware of the need for reorganization and in June 1973 appointed

20 a director for organization development. The director reviewed and recommended a more effective headquarters and regional organizational set up. TELECOM has commenced to reorganize its headquarters organization to give clear cut responsibility to each department and unit and will complete the reorganization by March 31, TELECOM has at end of March 1974 decentralized work in Medellin and Bogota regions and made regional managers fully responsible for all operations within the region and plans to decentralize work in all regions by April 1, Financial consultants were to be engaged under Loan 740-CO to strengthen financial management. TELECOM expects to retain financial consultants by February 1, TELECOM has retained planning and technical consultants to assist TELECOM in planning, preparation of long term demand forecasts, programming, bid evaluation and contract preparation for goods to be procured under the third project and preparation of acceptance testing schedules. The cost of the technical consultants (US$200,000) would be met from savings under Loan 740-CO. The technical consultants would be retained through December 31, Staff 5.05 The senior engineeringr and financial staff are well qualified, experienced, and with some assistance from consultants, are capable of managing the present assets and those to be added under the project. The financial and technical consultants would also assist TELECOM staff in improving financial management and project cont:rol during the most important part of the project TELECOM's staff as of December 31, 1973 totals about 12,000 - about 8,500 for telephone operation and about 3,500 for telegraph operation. Loan 740-CO required TELECOM to limit: the net annual increases in staff during the project to a maximum of 5 percent of the number of employees at the beginning of each year. This provision which has been satisfactorily complied with. In view of the extensive commitmients for telegraph, telex and long distance facilities, it is no longer appropriate to relate TELECOM's staff to the number of local lines in service. As the existing staff levels are considered reasonable, and as TELECOM has expressed its intention to limit staff increases to those necessary to meet the additional commitments, a staff limitation covenant is now considered unnecessary Annex 11 gives details of the number of employees in each department with their pay ranges and service conditions. The pay scales are generally commensurate with the duties, and the salaries are comparable, or slightly higher in some cases, with those paid for similar duties and qualifications by other telecommunications organizations. Turnover of staff is negligible. Recruitment and Training 5.08 TELECOM is able to recruit an adequate number of professional staff who come mainly from the local universities. Likewise TELECOM has no diffi-

21 culty in recruiting staff with the required basic qualifications for its technical, operating, and administrative needs Graduate engineers are given on-the-job training and some supervisory staff are sent abroad for training under arrangements made with suppliers and under bilateral technical assistance programs. The Technical Institute of Electronics and Communications (ITEC) at Bogota imparts basic and refresher training to technical, operational, and administrative staff. During 1973, a total of about 1,800 personnel (1,000 technical, 300 operational and 500 administrative) completed a total of about 100 training courses at Bogota. While technical, operational, and administrative courses are given at this training center, only operational courses are given at the regional training centers in Barranquilla, Bucaramanga, Cali, Manizales, Medellin and Ibague. During 1973, a total of about 700 personnel completed a total of 32 courses in the regional training centers. The training facilities are adequate to meet TELECOM's needs for trained staff during the project period. Accounting and Audit 5.10 While a number of serious accounting deficiencies existed at the time of appraisal of the first Bank project, TELECOM's accounting system has now been brought to a generally satisfactory level. However, with the aid of the financial consultants (paragraph 5.04), TELECOM plans further improvements in cost and plant accounting and budgeting. Presently financial statements are only prepared at June 30 and December 31 with a relatively great time lag. The delay in preparing the financial statements has increased considerably in 1973 due to changeover difficulties with the new accounting code which was introduced in January This is of temporary nature only and TELECOM expects to prepare the financial statements beginning 1974 on a timely basis. TELECOM agreed during negotiations to adhere to the four-month deadline agreed in connection with Loan 740-CO The existing external audit arrangements are satisfactory and meet the requirements of Loans 499-CO and 740-CO. TELECOM agreed to the inclusion of the existing covenant for auditing and submission of financial statements in the new loan agreement. Billing and Collection 5.12 TELECOM's billing arrangements are rather complex due to its special status within the telecommunicationsector. The company bills the subscribers directly for telex and telegraph traffic. In the case of automatic longdistance telephone traffic, TELECOM bills the connecting local enterprises monthly for the total of the traffic originated by their subscribers In the case of operator-dialed (semiautomatic and manual) longdistance telephone traffic, TELECOM bills the local enterprise monthly by submitting details of the calls for each subscriber. In Bogota and Calarca TELECOM bills such services directly to the subscriber from whom it also collects.

22 For telephone service there are revenue sharing agreements in effect for each local connecting enterprise. The percentage shares of revenues granted to the local enterpriseel are from 22.5 percent to 33 percent for manual and semiautomatic service, decreasing with the size of the exchange area, and from 24.5 percent to 35 percent for automatic service. In the case of international traffic, these percentages are applied on the net Colombia share of revenues Collection has been a critical problem for TELECOM for several years particularly in the case cf accounts due from the Public Sector and the local connecting enterprises (paragraph 6.08). Most of the latter including all large ones are contractually bound to pay 1 percent interest per month on the total of past due accounts. However, since the nominal market interest rate for local bank loans is presently around 18 percent p.a. (effective cost up to 30 percent p.a.), this delayed payment rate does not provide much incentive for such entities to pay TELECOM promptly. Tariffs 5.16 Domestic tariffs are set by the Board of TELECOM, subject to approval by the Minister of Communications and the National Tariff Board. Details of TELECOM's principal tariffs are given in Annex 12. Telephone monthly rentals of about US$1 for residential and about US$1.40 for business subscribers - while in line with those of the other local enterprises - are low compared with other similar countries, particularly when considering the extremely low local call charge (paragraph 5.17). In addition to the installation charge of about US$14.50, and the guarantee deposit of about US$33, new local subscribers are required to pay a non interest-bearing deposit which varies between about US$20 and US$49 equivalent per line. Both deposits are refundable when service is terminated. Telegraph and telex charges are reasonable The local telephone call charge of Col$0.10 (US$0.004) is very low compared with any standard. The domestic long distance charges which have been increased from January 1, 1974, vary between Col$ 0.90 (US$0.04) per minute and Col$ 6.75 (US$0.27) and are generally reasonable. Nevertheless, the differences between manual and automatic call charges of 12 percent to 33 percent for the various distance categories seem low to induce direct subscriber-dialing in future when sufficient long distance facilities will be in service Tariffs for the international services and the related participations are established in agreemeats between TELECOM and the foreign entities. The equivalent Colombian peso charges for international traffic, which are based on and settled in dollars or gold francs, are revised approximately every two years to take into accaunt the peso devaluation. These arrangements are satisfactory.

23 In view of the unrealistically low level of some basic telephone charges (paragraphs 5.16 and 5.17) which are more or less the same for all local telephone entities in the country, as well as the structural deficiencies in TELECOM's long distance tariffs, a comprehensive study of the telephone tariff system in Colombia should be carried out,taking into.consideration suggestions which will be included in the Bank's sector study (see paragraph2.06). Insurance 5.20 TELECOM carries fire and related perils insurance coverage for its properties which contain technical installations with a value of Col$ 5 million (US$192,000) or more; in addition coverage is also maintained for its stores. The enterprise does not carry business interruption (loss of profits) coverage except for its earth satellite ground station which is insured for fire, lightning, vandalism, etc. These insurance practices are acceptable. Existing Facilities 5.21 Existing local automatic telephone exchange network is set out in Map 1 and existing long distance network is set out in Map 2. Basic network data are set out in Annex 13. A brief description of TELECOM's facilities as of December 31, 1973 is given below. Local Telephone Service 5.22 As of December 31, 1973, TELECOM operated 39 local automatic and 362 manual exchanges with a total capacity of 38,002 lines and 34,609 connected lines. The percentage of automatic lines was 55. Annex 14 gives a list of automatic exchanges, their capacity, and the number of connected lines as of December 31, The average exchange fill i.e. the percentage of total connected automatic lines to total installed automatic capacity was 89 percent. Annex 15 sets out data on exchange capacity, number of connected lines, and number of telephones from , and the projected growth from Long Distance Service 5.23 Long distance services are provided by microwave radio systems, VHF radio systems (see Map 2), HF radio systems, open wire carrier systems, and open wire physical lines. Facilities for subscriber dialing of long distance calls are available to nearly all subscribers on the automatic exchange network; for the others, long distance is provided on a semiautomatic and manual basis. Telex and Telegraph Service 5.24 TELECOM had in operation at end December 1973, 40 telex exchanges having a total capacity of about 3,200 subscriber lines and about 2,600 subscribers. A network of about 1,500 telegraph offices (about 200 connected to telex) serves public telegraph service needs.

24 International Facilities 5.25 Colombia has good int:ernational communications to countries in Central and South America, Europe and US. These services are provided through HF radio to Panama; VHF radio to Ecuador and Venezuela; earth satellite station to US; and through earth satellite station to all other countries in Central and South America, and Europe. Eighty-five international telephone circuits - 68 of these worked on a semiautomatic basis - are provided for an average daily traffic of about 1,000 international calls (mainly to US - 470, Venezuela - 170, Ecuador - 95, and Panama - 90). Quality of Service 5.26 Lack of adequate plarnning in the past has caused the telephone network to have a number of deficiencies which in turn have led to poor service. There is a large unfilled demand; service on large manual boards is unsatisfactory; and congestion exists on long distance service. The project aims to meet part of the unfilled demand. When some large manual boards are replaced by automatic exchanges, service would improve considerably. Congestion on long distance facilities is caused by traffic originated being much greater than can be handled by existing circuit capacity, and the unreliable service provided on open wire lines. The project aims to remove congestion by providing about 5,400 additional long distance circuits, to improve speech quality by using VHF and microwave radio systems on all main routes, and to install more reliable radio system to replace unstable open wire lines. 6. FINANCES Past Financial Performance 6.01 TELECOM's audited income statements for the years 1971 through 1973, are shown in Annex 16. The enterprise's overall revenues increased by 92 percent from 1971 to 1973 to Col$ 1,141 (US$43.9) million. This includes the effect of a 19.9 percent national telephone tariff increase on January 1, 1971, and a 25 percent national telegraph tariff increase on April 1, During the same period, total operating expenses increased by 91 percent to Col$ 1,022 (US$39.3) million, mainly due to personnel expenses Loan 740-CO requires 'CELECOM to achieve an annual rate of return of at least 11 percent (9 percent through 1970 under Loan 499-CO) on the net value of fixed assets in service calculatce on the current peso equivalent of the dollar value of the assel:s (see Annex 19). Any shortfall or overrun in the annual return can be carried forward to the subsequent year. On an annual basis, the rate of return was 11.7 percent in 1971, 14.9 percent in 1972 and 7.5 percent in Ilowever, TELECOM did not violate the rate covenant during the three years since it was able to meet the minimum requirement by taking advantage of the carry-forward provision.

25 TELECOM's debt service coverage by internal cash generation declined from 2.1 times in 1971 to 1.1 times in This has been caused by the continuous devaluation of the Colombian peso and the increasing amounts of foreign debt incurred TELECOM's audited balance sheets for the years 1971 through 1973 are given in Annex 17. TELECOM's financial situation was rather tight during the past three years and the enterprise had overdue debt service obligations at each year-end. The current ratio has fluctuated around 1:1 during this period TELECOM's debt/equity ratio was 60/40 as of December 31, 1973, which is slightly less favorable than in the preceding years, reflecting the increase in debt due to the disbursement of the Bank loans Under a 1968 law, the administration of severance payments for TELECOM's employees was to pass to the Fondo Nacional de Ahorro (FNA) as of January 1, 1972, and TELECOM was to transfer the funds for the total assessed liability for past services to FNA over a period of seven years. TELECOM made arrangements with FNA so that the transfer payment for 1972 was waived. TELECOM has obtained approval from FNA to retain these funds through 1975, while continuing to make payments directly to its employees Through 1970 TELECOM followed the practice of charging to operations the actual pension payments to former employees rather than amounts to cover the actuarially determined future pension costs. An actuarial study was made in December 1971 to comply with Section 5.07 of Loan 740-CO, but TELECOM has not established proper accounting procedures to build up a provision for past service pension costs. TELECOM agreed during negotiations to establish accounting procedures satisfactory to the Bank to reflect in its balance sheet TELECOM's pension liabilities as evaluated in the actuarial study carried out in December TELECOM has faced critical financial problems due to large amounts of account arrears mainly from the public sector and the connecting local telephone enterprises. TELECOM has renegotiated new contracts with local telephone enterprises and has included a rising delayed payment interest rate. Except for severance payments made by TELECOM and which are to be reimbursed by Social Security (CAPRECOM) and which are being separately negotiated TELECOM's outstandings with the Government,and current bills will be settled within 15 days of presentation,in consonance with Government orders recently issued. During negotiations the Government further agreed to continue to use its best efforts (a) to cause its agencies to make due and punctual payment of all their present and future debts to the Borrower; and (b) to ensure that the local telephone enterprises will make due and punctual payment of all their present and future debts to the Borrower. Financing Plan 6.09 The funds required for the five-year project period and the sources from which they would be met are summarized in the following table.

26 Forecast statements of sources and uses of funds on an annual basis are shown in Annex 18. Requirements Col$ US$ % --- millions ---- Project 1, Ongoing Works 1, Future Project ( ) Acquisition Program Intelsat Housing Social Welfare Others Working Capital Sources Total 4, From Operation 4, Less: Debt Service 1, Net 2, Subscriber Deposits Borrowings IBRD 740-CO IBRD Proposed Acquisition Program Supplier Credit Future Total Borrowings 1, Other Total 4, TELECOH would provide about 65 percent of the required funds, including part of the foreign exchange requirements from own cash generation, whereas 28 percent would be debt financing. The balance of the requirements would come from subscribers' deposit:s (3 percent), and miscellaneous sources (4 percent) The peso equivalents of all foreign currency capital expenditures and debt service payments have been based on projected foreign currency/peso rates of exchange which have been estimated considering an 8.5 percent annual peso devaluation compared to the US dollar. In addition, the amortization and

27 interest payments for Bank Loan 499-CO were forecast by taking into account the rates of exchange in early January 1974 between the US dollar and the various other currencies presently outstanding The financing plan also includes, besides the proposed US$15 million Bank loan (assumed to be at a 20-year term including five years grace) in 1977 and 1978, utilization of US$9.5 million of possible future long-te-m borrowiirs to cover the foreign currency costs of the 1977-& project and of the intern>tional faiilities not included in the Bank-project Col$ 77 million (US$2.5 million) included in the financing plan would be a supplier credit already secured, and Col$ million (about US$8.3 million) would be debt incurred by TELECOM for the acquisition of local telephone enterprises (paragraph 6.14) Due to the limitations in the availability of financial resources, TELECOM plans to acquire only 19 local telephone enterprises during TELECOM has not fulfilled so far Government's resolution authorizing the 1971 telephone tariffs increase, according to which 6 percent of gross national long distance telephone revenues, together with the net operating income of the acquired entities should be set aside by TELECOM in a fund for the development of local telephony. TELECOM has agreed during negotiations to establish accounting procedures satisfactory to the Bank to reflect in its balance sheet the funds allocated by the Borrower for the acquisition of local telephone entities Because TELECOM's capital investment program could be over-ambitious, a limitation on new investments, outside the investment program currently contemplated, is necessary. TELECOM has agreed during negotiations to obtain Bank concurrence before committing itself auring the project period to any capital expenditure not required for the project, if the aggregate of such capital expenditure made or to be made in any one fiscal year should exceed an amount equivalent to US$1.0 million, or an amount equivalent to ten percent of the aggregate amount of all its capital expenditure made during the preceding fiscal year, whichever amount is greater. Future Operating Results 6.16 Forecast income statements from are given in Annex 16. The rate of return in these years is projected to be maintained at 11.0 percent through periodic tariff adjustments. Operating expenses are expected to increase by nearly 20 percent each year during the project period. This is mainly attributable to: 15 percent higher average employee personnel costs per year (13-15 percent increase in the past three years); additional staff requirements; the systematic provision for future pension costs; and increases in other operating expenses caused by expanding operations Since the projections in Annex 16, page 1, indicate a continued need for tariff actions beyond 1974, the Government has undertaken to allow TELECOM to revise tariffs as necessary to offset continued domestic

28 inflation and meet TELECOM's cash requirements to service foreign debt, which are expected to increase becaise of continued depreciation of the value of the peso as well as TELECOM's borrowing plans Therefore, during negotiations agreement was obtained that TELECOM xvill maintain adequate tariff level;3 in the future to enable it to reach the 11 percent rate of return calculated on the peso equivalent of the US$ valued net plant in service (see Annex 19), by requiring TELECOM each year: (i) to estimate by April 30 (when prior year's statement have to be available) the adequacy of its tariffs to produce the 11 percent rate in that year and to cover any shortfall carry-forwards, and (ii) to implement tariff increases, if needed, by July 1. Forecast Financial Position 6.19 Forecast balance sheets a; of December 31, for the years from , and related notes are given in Annex 17. During this period TELECOM's financial position is expected to improve, in particular its liquidity position as reflected in the current ra~:io which increases from 1.0:1 in 1973 to 1.5:1 in The cash position would in every year be satisfactory to enable TELECOM to meet regularly its current debt service obligations If fixed assets, which are valued in TELECOM's balance sheet at historic peso costs, are considered at the current equivalent of their dollar value, as required for rate making purposes (see Annex 19), net fixed assets in service at December 31,, 1972, would have amounted to Col$ 1,129 million, as against Col$ million in the balance sheet. To avoid increasing distortion between the two fixed asset values and of the debt/equity relationship, while causing no change in the rate of return calculation for the Bank, TELECOM has agreed to adjust its book value of fixed assets at December 31, 1974 to the updated values containecl in the memorandum accounts and to adjust these values annually on an index-basis for future peso depreciation TELECOM's debt/equity ratio will decrease only slightly from 60:40 in 1973 to 59:41 in 1978, due to the annual revaluation of 8.5 percent of the foreign currency debts. As per Loan Agreement 740-CO, TELECOM requires Bank approval before incurring any long-term debt unless its maximum debt service in any future year is covered 1.5 times by the net revenues of the preceding fiscal year or a later 12-month period prior to the incurrence of the debt. This covenant is repeated in the proposed new loan agreement While total debt service playments are projected to increase from Col$ 183 million in 1974 to Col$ 372 million in 1978, the annual debt service coverage ratio is projected to improve from 1.1 times in 1973 to 2.0 times in This is acceptable. Indicators which will help monitor TELECOM's future performance are given in Annex 21.

29 AGREEMENTS REACHED AND RECOMMENDATIONS 7.01 During loan negotiations, agreement was reached on the following principal points: (a) TELECOM will have its accounts and financial statements audited by independent auditors and will furnish within four months after the end of the fiscal year certified copies of its financial statements (paragraph 5.11). (b) TELECOM will establish accounting procedures to reflect in its balance sheet (i) TELECOM's pension liabilities; and (ii) the funds allocated for the acquisition of local telephone entities (paragraphs 6.07 and 6.14). (c) Government will continue to use its best efforts (i) to cause its agencies to make due and punctual payment of all their present and future debts to the Borrower; and (ii) to ensure that the local telephone enterprises will make due and punctual payment of all their present and future debts to the Borrower (paragraph 6.08). (d) TELECOM wll obtain Bank concurrence before committing itself to any capital expenditure not required for the project, if the aggregate of such capital expenditure made or to be.rade in any orne fiscal year should exceed an amount equivalent of US$1.0 million, or ten percent of the aggregate amount of all its capital expenditure made during the previous fiscal year, whichever amount is higher (paragraph 6.15). (e) TELECOM will revalue its assets and maintain tariffs at a level adequate to assure a minimum rate of return of 11 percent calculated on the peso equivalent of the US$ valued net plant in service (paragraphs 6.18 and 6.20). (f) TELECOM will not incur debt unless its maximum debt service in any future year is covered 1.5 times by the Pet revenues (paragraph 6.21) The proposed project constitutes a suitable basis for a Bank loan of US$15 million for a term of 20 years, including a grace period of 5 years. December 27, 197h

30

31 ANNEX 1 Page 1 of 2 pages COLOMBIA EMPRESA NACIONAL DE TELECCMUNICACIONES (TELECOM) Telephone Entities Operating in Colombia as of December 31, 1973 Name of Entity Lines of Equipment Operated 1. Empresa de Tel6fonos de Bogota 312, Empresas P&bliaas de Medellln 170, Empresas Municipales de Cali 80, Empresa Municipal de Tel6fonos-Barranquilla 40, Empresa Municipal de Telgfonos Bucaramanga 16, Empresas P(iblicas de Manizales 15, Empresas P6blicas de Pereira 14, Compafia Telef6nica de Cartagena S.A. 12, Empresas P&blicas Municipales - Palmira 7, Empresas P6blicas en Armenia 8,500 *8*11. Empresa Departamental de Tel6fonos Boyaca 6,100 *1*12. Empresas PXblicas Municipales de Ibagu6 5,000 ***'13. Telef6nica Municipal de Santa Marta 5, Empresa Nacional de Telecomunicaciones 38,000 *15. Compafla Telef6nica del Huila S.A. 8, Empresas Municipales de Cartago 6,ooo 17. Empresas Municipales de Girardot 5,000 *18. Empresa Departamental de Tel6fonos de Narifno 4, Telef6nica Municipal de Popayan 4, Empresa Municipal de Telgfonos Barrancabermeja 2, Empresas Municipales de Buga 2, Empresas Municipales de Tulua 2, Empresas Departamentales de Antioquia 7, Empresas Municipales de Calarce 2, Planta Telef6nica Departamental-Meta 2, Empresa Municipal de Telefonos de Armero 1,060 *-,88*27. Telef6nica Municipal de Caicedonia 1, Empresa Telef6nica Municipal de Fusagasugai 1,000 *MH-29. Empresa Municipal de Telefonos de Ipiales 1,000 4*8w30. Empresa Municipal de Tel6fonos de Riosucio 1,000 *4','31. Compaffia Telef6nica de San Gil S.A. 1,4O0 *32. Empresa Municipal de Telefonos del Socorro 1, Empresas P6blicas Municipales - Sta. Rosa Cabal 1, Telef6nica Municipal de Yarumal Empresas Ptblicas Municipales de Sevilla Telefonica Municipal - Espinal 1,200 *'*-*37. Telef6nica Municipal de Zarzal Empresas Prblicas Municipales de Honda Empresa Municipal de Telefonos de La Dorada Empresa Telefonica Municipal de Salamina 700

32 ANNEX 1 Page 2 of 2 pages Nape of Entity Lines of Equipment Operated ****41. Empresa Municipal de Teleifonos - Garzon 600 *42. Planta Telefonica de Valledupar Telefonica Municipal de Iiguadas 500 ****44. Planta Telefonica de CierLaga Telefonica Municipal de lariquita Telefonica Municipal de Zipaquira Telefonica Municipal de Florencia 700 ****48. Empresa Municipal de Teletfonos de Riohacha 400 ***49. Empresa Municipal de Telefonos de Fundacion Telefonica Municipal de Cajica 200 *51. Telefonica Municipal de l'umaco 200 ****52. Empresa Telefonica de Agtua de Dios 100 ****53. Telefonica de Maicao Telefonica Municipal de Chinchina 1,000 TOTAL 8OO.590 Telecom's program of acquisition is as followst Year lines * L,200 ** ,100 *** , , , _3.Q25 Total 1MOC590 December 4, 1974

33 ANNEX 2 COlt*tFIIA 3d2 SA McONA wg zl3csalhcaciomb ("NZON)( lnternational StatiatiSel _Dta 09oss Ntional rt Population TAT101rAL IT u.xj40.1 National Internationsl Servicel Per pe a i a 0*IITRY Capita stt O?Oetb Sate Tot* lo. Per 100 PoP, Growth Auto_ Sta.f per r ovt'i5 Long Direct Access to: oatic 1,000 tel.= puation T,lpbos Distance Submarine U2g 5 000's 000's No. & NO. Sa atellite Cable 14, , , n.a Atl. Pac. x 2, ,050 4, n.a. 43 E _ X 2, ,700 9, nil Atl. X i, ,350 2, o E _ x h '2, ,000 8, E Atl. x :c,o (vei.rep.) 2,? ,800 13, n.a E Atl. Ind. X 2, ,500 3, E Phc. Ind X o. in+ blbll.c 2, ,950 1, X i.. 1, o050 13, E Atl, Ind. x,p,, 1, ,800 23, n.a E Ind. Pee. S Ilr4y 1, ,600 8, n.a E Atl. X Ven--el o,65o F Ind, Pe. X A-gent!na ,400 1,68 6.9o , 86 o Atl. X "io.sapor , OD Trlnidel Mnd Tobago , n.a G Atl. _ ,950.1, n.s G Atl. Yo,yosiavt& , G Th le , F Atl. -tsa ROica (1973 data; , G - _ ivory (Cort , n.a F-& Atl. ili _ X Iran , F Atl. - Mal vy.ib , lnd , P , n.k G Atl. -.,i1o (TaIwan) , F El (aivador , Pee. _ lrr , F Brazil ,500 1, n F Atl. a.=hi, , P - - Papua & New Guitoea , l P Tenegal , P Ati. Ceylon n.* P Thailand , (1972) (ftnkok 74 F Atl. Ind. - Ghana 1971i ,000* 47* 0.53* * 127^ 14. only) 76* FP K.eery , o ) (7 73) Uganda , ) 149!/ (5 61) 0 Ind. _( Tanzania , ) (3 43) Pakistan , F ;ndla S0,100 1, F _ Etdonepia , F Tod. Ethiopi , (1972) 4 81 P - - NigerIa n.e F Atl. N.pal 67 o.4 10,800 6 o Upper Volt& , P - - Malawi , n.a F Kali , F!/ These ricuree are not strictly coape1le. In s$ cases lnteroatioon., local anl long distance ervi,ces ere provided by dirforent organizations in the Aie country, Telegraph staff sfy or _y not be included sm there er. wide variations in the use of contract labor for both ntenance nd unxtruwtlon work. The number of telephont operators required elso varies with the proportion of manual to utt anrvice. te / *.P,. SIn the U.S.A., 45% of the opultion live in the principal cities and have 51% at the country's teleph&ona., Excellent - Most citiel ana center connected by microwave or coaxial systems with extensive Subscriber Trunk Dialing. r. ood - PrincIpa1 cities conneted by microwave or coexial systems with ILbacriber Trunl Dialing. F. nir - PrinaiWl aitis conmeeted by minronvv or oeexal ystet but ceil handled asi-autcmtically or Manually. P. Poor - Little or no microwave or coaxial. CaIls betw.r interoonnected cities handled manually. r Ucuntries which here stellite earth station or subrine cable tersinals within their borders. -ervice provided by a co_on organication. 3curcas. Population anil U.N.P. - World lsak Atlas (1970) Telephone Statistica - The Worlad' T.elpones by A.S. 4 T. (1970) LI.g Distance end intern%tional Service dvision R eords March 1, 1974

34 A COLOMBIA NACIO8AL DE TELZCOKUNIICAGICHES (TELECOM0) SUM"RY OF oprg0014 C0STS ( ) Ann-o 3. (INl moojools) Ppe I of 2 Pe.9.. IT Looo1 Fo-iM Totol L00.1 Fo.-i To0.1 Locol -0014, 00.1 oll& P0.-ig 00.ta L-o.1 Porig. T00. Loo.1 P0.1g. 7ot.1 Locol PoeIp OT.W Loosi F..iv. T:.I Col 1113$ Coi $ Coil 31g1 Coilt Coi CCC'Z Col CoIl I 0u1 Col I Coil 0US$ Coil8 Coil uil Co1I Coil 011io Co., C I ll1s s C.11 N.. Oootooogo. - ~~ ~~ ~ ~ 843 ~~~~ otoic~~~o.. lo00ooogos to ~~~ Otoolby PO.oo ~~~~ ~~~ 5 ~~~~~~~~~~ ~~.0'IC< o~~~~~ olop2oooc ~~~ ~~~~~~~~~~~~~ BID B C_o Bo LONG0 DISTANCE FOClLlTliS (SWT-317C~) Oo.OOOo , ot.. io.- to E-2haoo- (En- Fi-o-so Ottor Cot---on Onn-ol BoorO I L.000 DI C11.TIS (TooNOlISSICV E;tllo.o oo T112034P0 / TELEX FACILITIES L'.0.P ~~~ ~~~~~~~~~~~~200 Osral Oyot..oO ~~~~~ ~~ ~~~~~~~3270 T:l:protot- l0o6ho, d P.I prlt,o' Tro-si,oon Eq..poo B BASE C00T W P Cow31lOOINls EXPECTE11 PRIC WM39 TOT0AL IXXfCYZ COEI OF P60381T Do.-bo

35 DtP9006 IACT INAL COLO31s DI TELE0O I01 (8:11000) Anox 3 SUNARY 011 W'J003AX COSTS ( ) Pox (2IN 8OUBANDS) u _ 0 - F90JvaPr PROJ_ S72 i kooai F-r ig. Tot-l Loo-1 F-oiSg. Totl Looal 0ord1g Total Loo-l F-0g109 T ot F0r0 Total L... io. t.1 L-.1 o1 Orog tta LoOl Por.is C.l I Loo-l?.1. Fnoiliti. 1oo45-a Lo 740-CO F_t_ P-1.- ( r tr Frogr ( CA411g L Oo _ 1200 _ _0 -_ 1200 Loae 740 Co _ _ _ F0t0 PooJot (197760) -_ _ _ _ Fotr.- Pro 6,. ( SUB0T00110 PLANT L.aa 499-Ca Lo. 740-Co B o LOt.,?4-Ce t ( ) oso LoO 1DIIANC0 0WI Loo. 499C..C Loo. 740-Co W F. t.,. PP 0J ) t00.- P2,. ( ) TOO TOO LOO DISN6SCE TR9U t bo- 499-Ca Loon 740-C _ C 4 00ta-0n.a..o Lik _ Foto "r. 1j0.t ( ) _ " O0 F. t,1' P-ogr ( ) ) TS0G0940 / T0f1 F CILITII- Pat80, Pr,J.ct (1977T Fat,,. Prtg. ( SW LA000 J28 t'il0120 L C De 02 L0 740-Co *43 Othe Vt. (94-77) T W97 Fat,.,. P D _ _ Iota,. Frog,. P _ _ 90D *000 8 II11 T AL ACWIbtfl= B."8t st.i Pooilitti s4o B lo007 WeZopbc. S o - _ " S T.lopriatsr lc. _- - 8o t ISCE1A.U00I tdool D O_.P. t o e O0OI20 4Mg an" er PROOIUm PSNSI5! = 2Y7s _ _ O OOIIPII 10h 7r _ Other B43C P92100L C W1228c _ _ E082T2D PRICE lbcr TOTAL ap1 C000 or *8 P C cr P500J S7 381S TOTAL C0M? OF P ta ( ) 16461e O.c_b.r h. 19Th TMr2, xe.t.,.t. n 1,. Col.?26,o og -nd l P... -opla.to D.-b- Lo.r: J nrl I - D.o.bor 31

36 ANNEX 4 Page 1 of 17 pages,colombia EMPRESA NACIONAL DE TELECOMUNICACIONES (TELECOM) 1. NEW LOCAL EXCHANGES Physical Program ( ) Items Merked (*) Comprise the Project Capacity Power Plant Exchange Building Exchange Lines (KVA) Completion Completion Alban 50 - March - 2. Alcala March 3. Ansermanuevo March 4. Argelia 50 - March 5. Bol ivar (V) March 6. El Aguila 50 - March 7. El Banco Nov. (499-CO) - 8. El Cairo 50 - March 9. El Carmen de Bolivar Nov. (499-CO) El Dovio March 11. La Union (V) 50 - March 12. La Victoria (V) March 13. Obando 50 - March 14. Toro March 15. Ulloa 50 - March 16. Versalles 50 - March Subtotal Ceret& March (740-CO) - 2. Chaparral March (740-CO) - 3. Codazzi March (499-CO) - 4. CCucuta April (740-CO) - 5. Guamo March (740-CO) - 6. Lorica March (740-CO) - 7. Malaga March (740-CO) - 8. Neira March (740-CO) - 9. Ocafia 2,000 - Sept. (740- CO) - 0.Planeta Rica March (740-CO) - 1. Plato March (499-CO) Sabanalarga March (740-CO) Sahagun March (740-CO) San Marttn March (740-CO) Tocaima March (740-CO) Valledupar 2,500 - Sept. (740-CO) V'elez March (740-CO) Villeta March (740-CO) - Subtotal 18 26,600

37 ANNEX 4 Page 2 of 17 pages Capacity Power Plant Exchange Building -Exchange Lines (KVA) Completion Completion 1976 *1. Acacias September July 75 *2. Aguachica September July 74 * 3. Aranzazu September Aug. 75 *4. Arauca September Sept. 75 * 5. Chinacota September Sept. 75 * 6. Convencion September Aug. 75 *7. Fresno September Sept. 75 *8. Granada September Sept. 75 *9. La Plata September Sept. 75 *10. La Virginia September Sept. 75 *11. Manzanares September Sept. 75 *12. Marsella September Sept. 75 *1 3. Melgar September July 75 *1 4. Pacora September Sept. 75 *1 5. Pensilvania September Sept. 75 *16. Piedecuesta September Sept. 75 *1 7. Puente Nacional September Sept. 75 *18. Puerto Lopez September' Sept. 75 *1 9. Puerto Tejada September Sept. 75 *20. Puerto Wilches September Nov. 74 *21. San Juan del Cesar September Sept. 75 *22. San Marcos September Sept. 75 *23. San Vicente de Ch September Sept. 75 *24. Tuquerres September Sept. 75 *25. Viterbo September Sept. 75 *26. Zapatoca September Sept. 75 Subtotal 26 9t * 1. Apia September Sept. 76 *2. Barbosa September April 76 * 3. Belen de Umbria September Sept Buenaventura 700-3ept;w,,Ler April 76 * 5. Campo Alegre September Sept. 77 * 6. Charala September Sept. 76 * 7. El Bordo September Sept Mocoa September Sept. 76 * 9. Ortega September Sept. 76 *10. Puerto Asis September Sept. 76 *11. Puerto Leguizamo September Sept. 76 *12. Purificacion September Sept. 76 *13. Rio Negro September April 76 *14. Supia September Sept. 76 *15. Tame September Sept. 76 *16. Tibu September April 76 *17. Venadi I lo September Sept. 76 Subtotal 17 5, Under Planning December Under Planning December Under Planning 7, 000 December - TOTAL_ , 250

38 ANNEX 4 Page 3 of 17 pages ADDITIONS TO LOCAL EXCHANGES Capacity Extension Power Plant Exchange Building Exchange Lines Lines (KVA) Completion Completion 1975 * 1. Alcala October * 2. Argel ia October * 3. Buenaventura 1, December * 4. El Aguila October * 5. El Cairo October * 6. La Union (V) October * 7. La Victoria October Oct * 8. Obando October * 9. Roldanillo October Nov. *10. Toro October 1974 *11. Versalles October Subotal 11 1, * 1. Andalucia July Nov * 2. Bugalagrande July * 3. Darien July July 1975 * 4. Cerrito December Sept * 5. Restrepo July July 1975 * 6. Rio Frio July * 7. San Pedro July * 8. Trujillo July Nov * 9. Yotoco July July 1975 Subtotal * 1. Sincelejo 2, May TOTAL 21 3, 675 SUMMARY Lines Loan 499-CO 1, 350 Loan 740-CO 25,800 Development Fund 950 Project (Third Loan) 17,825 2nd Phase ( ) 21,000 66,925

39 ANNEX 4 Page 4 of 17 pages (c) STANDBY POWER PLANT Station Capacity (KVA) Completion 1. Manizales 50 December Puerto Gaitan 15 December Ricaurte 15 December Salamina 50 December Santa Rosa 20 December National Territories (3 sets) 10 December 1976 (7 sets) 3 December Mobile sets (7) 30 December 1976 II. CABLES Completion Date *(a) New Exchanges January September 1977 *(b) Additions to exchanges December July 1976 *(c) Second Phase ( ) June December 1978 Ill. SUBSTATION PLANT *(a) Telephone (nos) 18,000 July September 1976 *(b) Coin Boxes (nos) 900 September December 1975 (c) Second Phase ( ) June December 1978 IV. TELEPRINTER EXCHANGES AND TELEGRAPHS Subscriber (a) New Exchanges Lines Channels Completion Date *1. Barranquilla March 1977 *2. Bogota 1,400 1,000 March March 1980 *3. Bucaramanga 50 - March 1977 *4. Cali March 1977 *5. Medel I in March March 1980 *6. Pereira 50 - March 1977 (b) Teleprinters (nos) 1,000 September March 1977 * 150 June ,000 March 1978 *(c) VFT Equipment (Channels) 1,440 December 1976 *(d) Modem Equipment 25 March March 1980

40 ANNEX 4 Page 5 of 17 pages V. LONG DISTANCE EXCHANGES (a) New Exchanges Terminations Exchange Building City Total/Long Distance Completion Completion * 1. Armenia 1116/642 March 1978 Nov * 2. Cartagena 1094/694 March 1978 Nov * 3. Valledupar 390/288 March 1978 (b) Additions to Exchanges Ci ty 2600/ Aguadas 28/12 April 1979 * 2. Banco 28/12 December 1977 * 3. Barrancabermeja 193/34 April 1977 July Barranquilla 377/322 July Bogota 2341/1073 April 1975 (loan 740-CO) * 6. Bogota 1663/747 March 1976 * 7. Bol ivar 56/27 August 1977 * 8. Bucaramanga 1434/652 April 1977 * 9. Buenaventura 173/132 August 1977 *I10. Buga 189/84 December Cali 1895/813 June 1976 (loan 740-CO) - *12. Cali 763/395 June 1977 July 1974 *13. Carmen 12/12 December 1977 *-14. Cartago 351/156 December 1977 *15, Cerete 12/12 December *16. Chaparral 12/12 December *17. Cucuta 324/144 April 1977 *18. Facatativa 81 /26 April 1977 *19. Florencia 81/26 April 1977 *20. Pundacion 28/12 August 1977 *21. Gamarra 12/12 December 1977 *22. Garazon 81/36 April 1977 *293. Girardot 378/168 April 1977 *24. Guamo 56/56 April lbague 378/168 August 1975 (loan 740-CO) *26. Ipiales 138/60 August 1977 *27. Magangue 28/12 August 1977 *28. Maicao 28/12 August 1977 Nov *29. Malaga 24/24 April 1977 *30, Mani'zales 864/3.34 August 1977 Nov *31. Mariquita 297/1 32 August MedelIin 587/306 June 1976 (loan 740-CO) *33. Medellin 856/1.350 December 1976 April 1974 *34. Mompos 28/1 2 August *35. Monteria 243/108 August 1977 *36. Neiva' 378/1 t,8 April T977 *37. Ocana 138/72 April 1977 *38. Palmira 300/9x1 August 1977

41 ANNEX 4 Page 6 of 17 pages *39. Pamplona 108/48 April 1977 *40. Pasto 603/276 August 1977 *41. Pereira 1531/696 August 1977 Nov *42. Plato 12/12 August 1977 *43. Popayan 324/144 August 1977 *44. Puerto Lopez 44/19 April 1977 *45. Quibdo 81/36 April 1977 *46. Riohacha 54/24 August 1977 Nov *47. Riosucio 28/12 August 1977 *48. Salamina 28/12 August 1977 April 1974 *49. San Gil 54/24 April 1977 Oct *50. Santa Marta 675/300 August 1977 July 1974 *51. Sincelejo 162/72 August 1977 *52. Socorro 54/24 April 1977 Oct *53. Tulua 297/132 August 1977 *54. Tumaco 37/i 6 August 1977 *55. Tunja 238/108 August 1977 *56. Tuquerres 55/24 August 1977 *57. Velez 110/48 April 1977 *58. Vi I lanueva 12/12 August 1977 *59. Villavicencio 556/247 August 1977 *60. Zapatoca 54/24 April 1977 *61. Zipaquira 216/96 Augyst 1977 Total 14988/6789 (c) Manual Boards * units 1200/1200 September 1976 * units 600/600 September 1976 * units 600/600 September 1976 Total 2400/2400 VI. LONG DISTANCE TRANSMISSION (a) Microwave Radio Completion Date Capacity * 1. Armenia-Pereira 1 RF/960 September Barranquilla-Cartagena lrf/960 February 1974 (740-CO) 3. Barranqui I la-~medel I in 1 RF/1 260 February 1974 (740-CO) 4. B/quil la-bucaramanga 1 RF/1260 June 1980 * 5. Bucaramanga-Barranca 1 RF/300 September Bucaramanga ŽCbcuta 1 RF/960 February 1974 (740-CO) * 7. Buenaventura-Cal i 1 RF/960 January 1977 * 8. Bogota- Ibagu'e 1 RF/960 May 1977 * 9. Bogota-La Cruz 2RF/2400 January Bogota-Mariquita 1 RF/600 October Bogota-Facatativ& 1 RF/ 300 June 1980 *12. Bogota-Tunja 1 RF/960 May Bogot&-Villavicencio lrf/300 October 1979

42 ANNEX 4 Page 7 of 17 pages Microwave Radio Capacity Completion Date 14. Bogoth-Zipaquir- 1 RF/600 June Cal i-buga 1 RF/600 October 1979 *1 6. Cali-La Cruz IRF/1200 January 1977 *17. Cali-Popayan-Pasto 1RF/960 January Cali-Tulua 1RF/600 October 1979 *19. Cartago-Pereira 1 RF/300 September Cucuta-San Cristobal 1 RF/960 February 1974 (740-CO) 21. Girardot-Guamo IRF/120 June 1980 *22. Medellin-La Cruz 1RF/1200 January Neiva-Popayan 1 RF/960 June Santa Marta-Valledupar lrf/300 June Sincelejo-Monteria 1 RF/960 February 1974 (740-CO) *26. Valledupar-Barranquilla 1RF/960 January 1978 (b) UHF Systems Channel Completion Date * 1. Aguachica-Bucaramanga 24 September 1977 * 2. Arauca-Tunja 24 December 1977 * 3. Banco-Val ledupar 24 September Belen de Umbria-Manizales 24 June 1980 * 5. Bordo-Popayan 24 April Caicedonia-Armenia 24 October * 7. Carmen-Sincelejo 24 September Cerete-Lorica 24 April 1974 (499-CO) * 9. Cienaga-Santa Marta 36 August 1977 *10. Codazzi-Valledupar 24 September Corozal-Sincelejo 24 October Chiquinquira-Tunja 24 June Duitama-Tunja 60 April Floridablanca-Bucaramanga 24 June Fresno-Manizales 24 June 1980 *1 6. Fundacion-Santa Marta 24 August *17. Fusagasuga-Bogota 36 December Gamarra-Bucaramanga 24 October Girardot-Guamo 24 April 1974 (499-CO) *20. Ipiales-Pasto 60 April La Dorada-Mariquita 24 June La Virginia-Pereira 24 June Libano-Mariquita 24 June 1980 *24. Magangue-Sincelejo 24 August 1977 *25. Maicao-Santa Marta 36 August Melgar-Bogota 24 April 1979 *27. Mocoa-Pasto 12 April 1977 *28.. Mompos-Sincelejo 24 August Montelibano-Monteria 24 April Monteria-Ayapel 24 April Pacora-Manizales 24 June Pamplona-Bucaramanga 24 October *33, Paz de Ariporo-Tunja 12 December 1977

43 ANNEX 4 Page 8 of 17 pages UHF Systems Channel Completion Date *34. Plato-Sincelejo 24 August 1977 *35. Puerto Asis-Pasto 12 April Puerto Boyaca-Mariquita 24 October 1979 *37. Puerto Lopez-Villavicencio 12 December 1977 *38. Puerto Wilches-Bucaramanga 12 December 1977 *39. Purificacion-Girardot 24 April 1977 *40. Riohacha-Santa Marta 36 August Roldani I io-cal i 24 October Sabanalarga-Barranquilla9 24 September San Gil-Bucaramanga 60 October San Juan de Cesar-Valledupar 24 June San Vicente-Bucaramanga 24 June 1980 *46. San Martin-Villavicencio 24 December Santa Rosa de Cabal-Pereira 24 June Sevilla-Armenia 60 October Simitf-Barranquilla 24 October Socorro-Barichara 24 October 1979 *g;1. Tame-Tunja 12 December Tame-CGcuta 24 June Tibu-Ctucuta 24 April Tierralta-Monterta 24 June 1980 *55. Trinidad-Tunja 12 December 1977 *56. Tuquerres-Pasto 12 April Ubate-Bogota 24 October Velez-Bucaramanga 24 October Villanueva-Valledupar 24 October Vi I I eta-bogota 24 October Viterbo-Manizales 24 June 1980 *62. Yopal-Tunja 12 December 1977 *63. Zapatoca-Bucaramanga 12 September 1977 Total Project 624 (c) Multiplex Channel Completion Date * 1. Armenia-Bogota 60 December 1977 * 2. Armenia-Manizales 24 December Armenia-Medellin 48 December Armenia-Pereira 120 December Barranqui l la-cartagena 120 February 1974 (740-CO) * 6. Barranquilla-Cartagena 120 December Barranquilla-Medellin 60 February 1974 (740-CO) 8. Barranquilla-Medellin 24 August Barranquilla-Cali 60 August 1977 *10. Barranqui I ia-bogota 240 August Bogota-Barranquilla 240 September 1974 (740-CO) 12. Bogot&-Bucaramanga 24 September 1974 (740-CO) *13. Bogot&-Bucaramanga 120 April BogotS- Ca i 120 September 1974 (740-CO) *15. Bogot_-Cali 300 April Bogota-Caracas 120 October 1974 (740-CO)

44 ANNEX 4 Page 9 of 17 pages MultipIex Channel Completion Date 17. Bogota-Cartagena 60 September 1974 (740-CO) *1 8. Bogot&-Cartagena 60 August 1977 *19. Bogota-CCicuta 60 April 1977 *20. Bogota-Girardot 12 December 1977 *21. Bogotf- lbagu& 240 April BogotE-Manizales 24 September 1974 (740-CO) '*23. Bogot&-Manizales 36 December Bogota-Medellin 120 September 1974 (740-CO) *25. Bogota-Medel I in 324 August Bogota-Monterta 84 October 1979 *27. Bogota-Pereira 48 December 1977 *28. Bogota-Pasto 60 April 1977 *29. Bogota-Neiva 72 December 1977 *30. Bogota-Quito 120 April 1977 *31. Bogota-Tunja 180 August 1977 *32. Bucaramanga-Barranquilla 120 August 1977 *33. Bucaramanga-Barranca 180 April 1977 *34. Bucaramanga-Cali 24 April 1977 *35. Bucaramanga-CCucuta 60 April Bucaramanga-CCjcuta 300 February 1974 (740-CO) 37. Bucaramanga-Gamarra 12 October Bucaramanga-Medel I in 60 October Bucaramanga-Ocapa 72 October 1979 *40. Buenaventura-Cali 180 April Cali-Armenia 12 September 1974 (740-CO) *42. Cal i-armenia 48 December Cali-Barranquilla 60 September 1974 (740-CO) *44. Cali-Barranquilla 60 August Cal i-bucaramanga 12 September 1974 (740-CO) 46. Cali-Manizales 12 September 1974 (740-CO) 47. Cali-Manizales 36 October Cali-Medellin 12 September 1974 (740-CO) *49. Cali-Medellin 120 August Cali-Palmira 120 September 1974 (740-CO) *51. Cali-Pereira 72 December 1977 *52. Cali-Pasto 180 April 1977 *53. Cali-Popayan 180 April 1977 *54. Cartagena-Medellin 60 December Cartago-Cali 60 September 1977 *56, Cartago-Pereira 180- September Ceret"e-Lorica 12 October 1979 *58. Cerete-Monterta 12 December 1977 *59. Ci'cuta-San Cristobal, 144 April 1977 *60.Florencia-Neiva 24 December 1977 *61. Garzon-Neiva 24 December 1977 *62. Girardot-Neiva 12 December 1977 *63. lbague-girdrdot 36 August lbague-mariquita 36 August 1977 *65. lbagu"e-neiva 24 December 1977 *66. K%riizales-Aguadas 12 December 1977 *67. Manizales-Medellin 24 December 1977 *68. Manizales-Pereira 60 December 1977 *69. Manizales-Riosucio 24 December 1977 *70. Manizales-Salamina 12 December 1977

45 ANNEX 4 Page 10 of 17 pages Multiplex Channel Completion Date 68. Medel i in-monteria 60 February 1974 (740-CO) *69. Medellin-Monteria 60 August 1977 *70. Medel I in-pereira 36 December Medellin-Sincelejo 60 February 1974 (740-CO) *72. Medellin-Sincelejo 36 August Monteria-Barranquilla 60 February 1974 (740-CO) *74. Monteria-Sincelejo 24 August Pasto -Tumaco 12 October 1979 *76. Popayan-Pasto 24 April 1977 *77. Santa Marta-Barranquilla 132 December Sincelejo-Barranquilla 60 February 1974 (740-CO) 79. Sincelejo-El Carmen 12 October Sincelejo-Magangue 12 October Sincelejo-Plato 12 October 1979 *82. Valledupar-Barranquilla 84 December 1977 *83. Valledupar-Santa Marta 36 December 1977 Total Project (d) Maritime Service C eon Date Estaciones Costeras de Barranquilla y Buenaventura. June 1974 (740-CO) (e) Rural Services (VHF) Channel Completion Date * 1. Achi-Majagual 1 September 1977 * 2. Aguazul-Trinidad 5 September 1977 * 3. Algarrobo-Val ledupar 3 Seotember 1977 * 4. Anzoategui-Espinal 5 December 1976 * 5. Aracataca-Santa Marta 5 September 1977 * 6. Arauquita-Arauca 1 December Bagado-Quibdo 1 October 1980 * 8. Barranco de Loba-EI Banco 1 September 1977 * 9. Baranoa-Barranquilla 1 September 1977 *1 0. Barbacoas-Pasto 1 December 1976 *11. Becerril-Valledupar 1 September 1977 *12. Bitaco-Cali 1 December 1976 *1 3. Buenavista-Pasto 1 December Bucarasica-Ocana 1 October Caceres-Yarumal 1 October 1980 *1 6. Campocorral-Orocue 1 September 1977 *17. Caimital-Majagual 1 September I Cardon-Nundua 1 October 1980 *1 9. Casacara-Val ledupar 1 September Chigorodo-Murindo 1 September Chigorodo-Mutath 1 September 1979 *22. C. Matoso-Monterta 5 September 1977 *23. C. San Antonio-Santa Marta 1 September Colombia-Neiva 3 October 1960 *25. Contratacion-Oiba 1 December 1976 *26. Coloso-Sincelejo 1 September 1977 *27. Cordoba-Sincelejo 1 Septehiber 1977 *28. Corocoro-Arauca 1 December 1976

46 ANINEX 4 Page Rural Services (VHf=) Channel Completion Date 29. Corozal-Tunja 3 October *30. Cravo Norte-Tunja 1 September 1977 *31. Cubara-Tunja 1 September 1977 *32. Cumbitara-Pasto 1 December 1976 *33. Curumani-El Banco 3 September 1977 *34. El Calvario-Puerto Lopez 3 September 1977 *35. El Carmen-Cali 1 December 1976 *36. El Copey-Valledupar 3 September 1977 *37. El Dificil-Valledupar 3 September 1977 *38. El Limonar-Cali 1 December 1976 *39. El Paso-Valledupar 1 September 1977 *40. El Rosario-Pasto 1 December 1976 *41. El Tambo-Cal i 1 December 1976 *42. Encino-Charala 3 December 1976 *43. Galapa-Barranquilla 1 September Granada-Puerto Lleras 1 October Granada-San Juan de Arame 1 September 1979 *46. iuaranoa-majagual 1 September 1977 *47. Guaimaro-Santa Marta 1 September Hato Corozal-Cardon 1 September 1979 *49. Juan de Acosta-Barranquilla 1 September 1977 *50. La Mario-Cali 1 September 1977 *51. La Suiza-Armenia 3 September 1977 *52. La Tagua-Puerto Leguizamo 1 December 1976 *53. Llano. Bajo-Cali 1 December 1976 *54. 19lanati-Barranqul la 1 September 1977 *55. Mani-Trinidad 5 September 1977 *56. Mansalvi-Pasto 1 December 1976 *57 Maqui-Pasto 1 December 1976 *58. Margarita-Mompos 1 September 1977 *59. Mahates-Barranquilla 1 September 1977 *60. Medina-Puerto Lopez 3 September 1977 *61. Media Luna-Santa Marta 1 September 1977 *62. Milan-Florencia 1 December 1976 *63. Monterrey-Trinidad 1 September 1977 *64. Morales-Aguachica 1 December 1976 *65. Morichal-Tunja 1 September 1977 *66. Negritos-EI Banco 1 September 1977 *67. Orocue-Trinidad 5 September 1977 *68. Orito-Puerto Asis 5 December 1976 *69. Ovejas-Sincelejo 1 September 1977 $70. Pailitas-EI Banco 3 September 1977 *71. Palmito-S.ncelejo 1 September Paya-Trinidad 1 October 1980 *73. Pinillos-EI Banco 5 September 1977 *74. Pioio-BarranquiIla 1 September Pisba-Trinidad 1 October 1980 * 7 6. Pizarro-Galeras 1 December 1976 *77. Pijino-santa Marta 1 September 1977= *78. Pinuela-Santa Marta 1 Septrember of 17 pages

47 ANNEX 4 Page 12 of 17 pages Rural Services (VHF) Channel Completion Date *79. Pivijay-Santa Marta 1 September 1977 *80. Pedraza-Santa Marta 1 September 1977 *81. Pore-Paz de Ariporo I December Providencia-San Andres 1 October 1980 *83. Puerto Bay-lpiales 1 December 1976 *84. Puerto Colombia-Barranquilla 1 September 1977 *85. Puerto Leguizamo-lpiales 5 December 1976 *86. Puerto Ospina-Ipiales 1 December 1976 *87. Puerto Solano-Florencia 3 December 1976 *88. Punta de Pledra-Santa Marta 3 Septernber 1977 *89. Puerto Viejo-Santa Marta I September 1977 *90. Queremal-Cal i 1 December 1976 *91. Raposo-Cali December 1976 *92. Ricaurte-Tumaco 5 December 1976 *9.3. Roberto Payan-Pasto l December 1976 *94. Rondon-Tunja 1 Seoiember 1977 *95. Sabana de Torres-Bucaramanga 5 December 1976 *96. Sabana Grande-Barranquilla September Sacama-Tunja 1 October Salazar-C6cuta 5 October 1980 *99. Sampues-Sincelejo September San Carlos-EI Toro September 1979 *101. San Jacinto-de Achi-Majagual Seotember 1977 * 102. San Pedro-Sincelejo 2 September 1977 *103. San Jose del Palmar-Istmina Seotember 1977 * 104. San Estanislao-BarranquilIa d September 1977 *105. San Fernando-Mompos 1 September 1977 *106. San Bernardo-Cali December 1976 * 107. San Martin de Loba-EI Banco September 1977 *108. San Fernando-Mompos September 1977 *109. San Roque-El Banco Seotember 1977 * 110. San Bernardo-EI Banco September 1977 *111. San Zenon-Mompos September 1977 *112. Salado-Cal i September 1977 * 113. San Sebastian-Mompos September 1977 * 114. Sitio Nuevo-Santa Marta :' ep'ember 1977 *1 15. San Jose-Cal i December 1976 *116. Santa Ana-Mompos 3 September 1977 *117. Santa Catalina-Barranquilla 1 September 1977 * 118. Socorro-Arauca 1 December 1976 *11 9. Soplaviento-Barranquilla September 1977 *120. Sucre-Magangue - 3 September 1977 *121. Sucre-Pasto (December 1976 *122. Tacalda-Sincelejo 1 September 1977 *123. Tacamocho-Sincelejo 1 September 1977 *124. Talaiguia-Mompos I September 1977 *125. Tamalameque-EI Banco I September 1977 *126. Tamara-Trinidad 1 September Taminango-La Union 3 October 1980 *128. Tenerife-Sincelejo 1 September 1977

48 ANNEX 4 Page 13 of 17 pages Rural Services (VHF) Channel Completion Date 129. Toledo-Caucasia 1 September 1979 * 130. Toluviejo-Sincelejo 1 September 1977 *131. Valparaiso-Florencia 1 December Vi I lacaro-ocaffa 3 October Villarrica-Girardot 5 October 1980 *134. Villavicencio-San Jose 12 September 1977 *135. Zambrano-Sincelejo 2 September 1977 (f) Rural Services {HF) Channel Completion Date * 1. Amanaven-Puerto Inirida 1 June 1977 * 2. Arauca-Cubara 1 June 1977 * 3. -Puerto Contreras 1 June Puerto Rondon October 1980 * 5. -Saravena 1 June 1977 * 6. Arica-Leticia 1 June 1977 * 7. Atacuari_Leticia 1 March 1978 * S. Barrancominas-Puerto Inirida 1 June 1977 * 9. Barranquilla-Acandi 2 March Araguani 1 October El Penon 1 September Pedraza 1 October 1980 *13. -Puerto Libertador 1 March *15. -Remolino -Riosucio 1 1 October 1980 March Salamina 1 October San Antonio 1 October San Sebastian 1 October San Zenon 1 October Sitio Nuevo 1 September Turbo 2 October 1980 *22, -Zapzurro 1 March Bogota-Amanaven 1 October Araracuara 1 October Arboletes 1 October Atacuari 1 October Casuarito I October Cravo Norte 1 October Cubara 1 October El Canto 1 September Guaviare 1 September La Chorrera 1 September La Pedrera 1 September Maticuro 1 September Milan -Miraflores 1 1 September September Miriti Parana 1 September 1979 *38. -Mitu 1 March Morfchal 1 September Nueva Antioquia 1 October Obando 1 September 1979

49 ANNEX 4 Page 14 of 17 pages Rural Services (HF) Channel Compietion Date 42. Bogot&-Pacoa I October 1980 *43. -Puerto Carreno 1 December Puerto Gaitan 1 October 1980 *45. -Puerto Inirida 1 December Puerto Leguizamo 1 October Puerto Murillo 1 October Puerto Narino 1 October San Relipe 1 October San Jose del Guaviare 1 October San Jose de Ocuna 1 October San Luis de Palenque 1 October 1980 *53. -San Vicente del Caguan 1 December Saravana 1 September Solano 1 September Solita 1 September Tarapaca 1 Septernber Valparaiso 1 October i Vaupes 1 September Yavarate 1 October Bojaca-Bel lavista 1 October 1980 *62. Buenaventura-Alto Baudo 1 December 1977 *63. -Bahia Solano 1 March Bajo Baudo I October I Cumbitara 1 October El Charco 1 October 1980 *67. -Jurado 1 March Mosquera i October 1980 *69. -Nuqui 1 March 1978 *70. -Pie de Pato 1 March Pizano 1 October Puerto Merizalde 1 October Riosucio 1 October Timbiqui 1 October 1980 *75. Calamar-San Jose del Guaviare 1 December 1977 *76. Canamos-Mitu 1 March 1978 *77. Laguadalupe-Puerto Inirida 1 December 1977 *78. La Primavera-Puerto Carrefio 1 December 1977 *79. Leticia-EI Canto 1 March 1978 *80, -La Chorrera 1 March 1978 *el. -La Pedrera 1 March 1978 *82, -Miriti 1 March 1978 *83, -Tarapaca 1 March 1978 *84 -Yaguas 1 March 1978 *85. Mitu-Camanao 1 March 1978 *86. -Caruru 1 March 1978 *87, -Monfart 1 March 1978 *88. -Pacoa 1 March 1978 *89, -Querari 1 March 1978 *90. Puerto Carreno-Campocorral 1 June 1977 *91. -Cabuarito 1 June 1977 *92. -Nueva Antioquia 1 June 1977 *93. -Puerto NariPio 1 June 1977 *94. -Puerto Nuevo 1 June 1977

50 ANNEX 4 Page 15 of 17 pages (g) Rural Services (Open Wire) Channel Completion Date 1. Aguachica-Tisquirama 5 September Arjona-San Pablo 5 September Armenia-Circasia 5 June 1974 (740-CO) 4. Armenia-Cordoba 5 October Armenia-Filandia 5 June 1974 (740-CO) 6. Armenia-Montenegro 5 June 1974 (740-CO) 7. Armenia-Quimbaya 5 June 1974 (740-CO) 8. Armenia-Tebaida 5 December 1974 (740-CO) 9. Barranquilla-Calamar 5 June 1974 (740-CO) 10. Barranquilla-Candelaria 5 September Barranquilla-Juan Mina 5 September Barranquilla-Pivijay 5 December 1974 (740-CO) 13. Barranqui I la-ponedera 5 September Barranquilla-Santo Tomas 5 June 1974-(740-CO) 15. Barranquilla-Usiacuri 5 September Barbosa-Arcabuco 5 October Barbosa-Santana 5 June 1974 (740-CO) 18. Bolivar-Altamira 5 June 1974 (740-CO) 19. Boltvar-La Sierra 5 October Bolivar-Santiago 5 June 1974 (740-CO) 21. Bucaramanga-Cachirl 5 October Bucaramanga-Charta 5 June 1974 (740-CO) 23. Bucaramanga-Lebrija 5 October 1974 (740-CO) 24. Bucaramanga-Sabana de Torres 5 July 1974 (740-CO) 25. Bucaramanga-Vanegas 5 October Bugalagrande-Cellan 5 June 1974 (740-CO 27. Caldas-Chiquinquirh 1 October Cali-Vijes 5 June 1974 (740-CO) 29. Carmen de Bolivar-San Juan Nepom uceno 5 September Carmen de Boltvar-Zambrano 5 September Cartagena-Sincerin 5 September Cartagena-Turbana 5 September Cerete-Cotorra 5 December 1974 (740-CO) 34. Cerrito-EI Castillo 5 June 1974 (740-CO) 35. Cienaga-Pueblo Viejo 1 October Cordoba-Plato 1 October Chameza-Tunja 1 October Chimichagua-EI Paso 5 September ChTquinquira-Muzo 5 October Chiquinquira-Otanche 5 October Chiriguana-La Jagua de 1. 5 June 1975 (740-CO) 42. Choconta-Guateque 5 June 1975 (740-CO) 43. El Banco-Guamal 5 December 1974 (740-CO) 44. El Banco-Pallitas 5 Deeember 1974 (740-CO) 45. El Bordo-Mercaderes 5 December 1974 (740-CO) 46. Factativ&-Vergara 5 October 1974 (740-CO) 47. Florencia-Albania 5 June 1975 (740-CO) 48. Florencia--EI Doncello 5 June 1975 (740-CO) 49. Florencia-Puerto Rico 5 June 1975 (740-CO) 50. Florida-Corinto 5 June 1974 (740-CO) 51. Fresno-Mesories 5 October Fundaci6n-Santa Rosa-El Copey 5 June 1974 (740-CO)

51 ANNEX 4 Page 1 6 of 17 pages Rural Services (OPen Wire) Channel Completion Date 53. Garzon-EI Pital 5 October Garzon-Suaza 5 June 1974 (740-CO) 55. Getucha-Florencia 1 October Girardot-Nariffo 5 June 1974 (740-CO) 57. Girardot-Medellin 1 October Girardot-Jerusalen 5 October Guamo-Natagaima 5 June 1974 (740-CO) 60. lbague-juntas 5 October Ibague-Rovira 5 June 1974 (740-CO) 62. Ipiales-Cumbal 5 December 1974 (740-CO) 63. lpiales-jose Ma. Hernandez 5 December 1974 (740-CO) 64. Ipiales-La Victoria 5 October Ipialees-San Juan 5 December 1974 (740-CO) 66. Juan de Acosta-Barranquilla 1 October La Dorada-Florencia 5 October 1973 (740-CO) 68, La Mesa-Santandercito 5 December 1974 (740-CO) 69. La Plata-Belen 5 June 1975 (740-CO) 70. La Plata-Puerto Valencia 5 June 1975 (740-CO) 71. La Plata-Tesalia 5 June 1975 (740-CO) 72. La Union-Sahagun 1 October La Victoria-Yopal October La Virginia-La Celia 5 June 1975 (740-CO) 75. Libano-Casablanca 5 June 1974 (740-CO) 76. Libano-San Fernando 5 October Majagual-Zapata 5 September Malaga-Cerrito 5 June 1974 (740-CO) 79. Malaga-Enciso 5 June 1974 (740-CO) 80. Malaga-San Andres 5 June 1974 (740-CO) 81. Maratea-Puerto Colombia 5 June 1974 (740-CO) 82. Mompos-Mamoncito 5 September Monteria-Puerto Escondido 5 june 1974 (740-CO) 84. Montenegro-La Siria 5 October Neiva-Aipe 5 June 1974 (740-CO) 86 Neiva-Colombia 5 June 1975 (740-CO) 87. Neiva-Ospina Perez 5 December 1974 (740-CO) 88. Neiva-Ramo 5 June 1974-(740-CO) 89. Ocania-La Playa 5 July 1974 (740-CO) 9o. Pacho-La Palma 5 June 1974 (740-CO) 91. Pamplona-Cacota 5 June 1974 (740-CO) 92. Pamplona-Silos 5 October Pasto-Chachagui 5 June 1974 (740-CO) 94. Pasto-EI Tampo 5 December 1974 (740-CO) 95. Pasto-La Cruz 5 June 1974 (740-CO) 96. Pasto-La Union 5 December 1974 (740-CO) 97. Pasto-Sibundoy 5 December 1974 (740-CO) 98. Piedecuesta-La Mesa de los Santos 5 December 1974 (740-CO) 99. Piendamo-Mondomo 5 June 1974 (740-CO) 100. Planeta Rica-Ayapel 5 June 1974 (740-CO) 101. Piojo-Baranoa 1 October Popayan-La Sierra 5 June 1974 (740-CO) Popayan-Purace Popayan-Totoro 5 5 June 1974 (740-CO) December 1974 (740-CO)

52 ANNEX 4 Page 17 of 17 pages Rural Services (Open Wire) Channel Completion Date 105. Puente Nacional-La Venta 5 December 1974 (740-CO) 106. Purificacion-Hidroprado 5 June 1974 (740-CO) 107. Sabanalarga-Hibracharo 5 September Sabanalarga-Lena 5 September Sabanalarga-Santa Lucia 5 September Samana-Florencia 5 October San Gil-Cepita 5 October San Gil-Galan 5 June 1974 (740-CO) 113. San Gil-Onzaga 5 December 1974 (740-CO) 114' San Gil-Villanueva 5 October San Juan-Barrancas 5 June 1974 (740-CO) 116. San Juan-Sincelejo 1 October San Martin de Loba-San Antonio 5 September Santana-Mompos 1 October Santiago-Cucutilla 5 December 1974 (740-CO) 120. Santiago-Sardinate 5 December 1974 (740-CO) 121. Sincelejo-Sarnpues 5 September Socorro-Contratacion 5 June 1974 (740-CO) 123. Socorro-Simacota 5 October Sogamoso-Arguitania 5 October Sopo-Gama 5 October Sopo'-Ubala 5 December 1974 (740-CO) 127. Tenerife-Plato 1 October Tensa-Tunja 1 October Tibana-Tunja 1 October Tibasosa-Sogamoso 1 October Tunja-Chiquiza 5 October Tunja-Leiva 5 October Tunja-Siachoque 5 October Tuquerres-Cumbitara 5 October Tuquerres-Guachavez 5 December 1974 (740-CO) 136. Turbaco-Soplaviento 5 September Val ledupar-caracoli 5 June 1974 (740-CO) 138. Velez-Guavata 5 October Velez-La Pradera 5 December 1974 (740-CO) 140. Venadillo-Santa Isabel 5 June 1974 (740-CO) 141. Villa Amazonica-Mocoa 1 October Vi I I eta-utica 5 December 1974 (740-CO) 143. Viterbo-Guarato 5 October Viterbo-Santuario 5 December 1974 (740-CO) (h) Troposcatter Systems Capacity Completion Date 1. Barranquilla-San Andres 60/24 June 1979 December a, 1974

53 COLOMBIA EMPRESA NACIONAL DE TELECOMUNICACIONES (TELECOM) SCHEDULE OF CONSTRUCTION iR IB7I * D M J S 0 I is D I D I LANDT I I I II ACOUIDITION 2 CULDLNGS ON LOCAL EXAAGES (NEW) DCOVY NST ALLCTION - I - BIDS CONTRACT 0)0 _WNS S1 DELIVERY h INSTALLATION * 4 TELEPHONES & COIN BOXED ITT N CONTRACT T T C 2 TEDELIVERY * INSTALLATION WONVFt _ NALTO LONC DiTANCE EXCHANCES INE*) I T CONTRACT DELIVERY & INSTALLATION 8 LONG DISTANCE EUCRANOCiS (EDTENBIONI _ WOND S B INSTALLATION e A - DELIVERY& N ISLLATION MOANAL D0ISANC E AG swo CONTRACT 0 MICROWIAVE R DIO (EXTENSION CONTRACT 11 U. H F. RADIO 01MCRW00 RDI CONTRACT LECO[ DELIVERY & ONYAl LLATION j =. m - m MU'LTIPLEX EQUIIPMENT 12 I T T - - CONTRACT DELIVERY & INSTALLATION - 13 RURLAL SYSTIMS leap NF API 7 - VHF HE RE R R CONTRACT LIVEEY & INSTALLATlON TELEX U EQUIPMENT DELIVERY CONTRACT * INSTALLATION - - I CONTRACT IDELJEY&ISLTO V F _ DELIVERY & INSTALLATION TSELEXPRUINTERNT 16 CONTRC DELIVERY ft INSTALLATION STALPRNDBOER LN 1e BIDE CONTRACT DELIVERY At INSTALLATION - - F A PAUSES OF COMPLETION -,IS

54 ANNEX 6 COI,OMBIA EMPRESA NACIONAL DE TELECOMUNICACIONES (TELECOM) SCIEDULE CF DISBURSEI4ENTS It is assumed that the loan would be approved by Bank in January IBPD 1iscal Year Cumulative Disbursements and Quarter at end of Quarter U( S$ Thousands ) 1975 June 30, Septenber 30, ,085 December 31, ,922 March 31, ,600 June 30, , September 30, ,048 December 31, ,872 March 31, ,932 June 30, , September 30, ,556 December 31, ,196 March 31, ,496 June 30, , September 30, ,900 December 31, ,000 December 26, 1974

55 ANNEX 7 LINES THOUSANDS 140 COLOMBIA EMPRESA NACIONAL DE TELECOMUNICACIONES (TELECOM) DEMAND, EQUIPPED CAPACITY AND CONNECTED LINES ( ) _ 60 - DEMAND _70 60k~~~~~~~~~~~~~~~0 EQUIPPED CAPACITY _- 00 -CONNECTED LINES YEARS (DECEMBER 31) World Bank-8420

56 COLOMBIA AIENEX 8 Page 1 oc 2 pages EMPRESA NACIONAL DE TnECLM!IVNCACIONES (TELECCO4) Internal Financial Rate of Return of the Project 1. The table below presents the cost and benefit streams relating to the project over a period of 23 years. This period was determined as extending from 1977, when the majority of the facilities will be put into service, over the estimated useful life of 20 years. Cash Capital Operating Years Ex enditu-7es ExDenses Revenues (in millions of Colombian Pesos) _ l The costs and benefits are on the basis of 1974 prices and no residual value was assumed at the end of the useful life period. 3. Based on the above assumptions, the rate of return will be about 27%. 4. A sensitivity analysis of the internal financial rate of return to four different variations in the main parameters was made, as given below: (a) the construction periol is extended by one year (to six years in lieu of five), the construction cost increased in total by 15%, the increased costs being allocated over the last four years. Revenues and cash operating outlavs are also delayed by one year. The rate of return would fall to about 22%. (b) a decrease of revenues by 10% is assumed. The rate of return would fall to about 24%. (c) An increase of operating expenses. The rate of return would fall to about 26%.

57 ANIEX 8-2- Page 2 of 2 pages (d) with the least favorable assumption of a very unlikely combination of adverse events of 10% increase in capital expenditures and operating revenues, and a 106 decrease of operating revenues the rate would be 21h. December 17, 1974

58 COLOMBIA EMPRESA NACIONAL DE TELECOMUNICACIONES (TELECOM) ORGANIZATION CHART BOARD OF lwrctos LEGAL OFFISCRETR GENRA PROJEC I ~~~~~~~~CODA DIN ATING ORGANIZATIONAL L R I COMMISSION DEVELOPMENT OFFICE I COMMUNICATION AND DEVELOPMENT UNIT ORGANIZATION AND ANALYSIS UNIT -I EXECUTIVE ASSISTANT I VICE PRVICE PRESICE PRESIDENT VICE PRESRDENT VICE PRESIDENT VICE PRESIDENT FINANCIAL I NDUSTRIAL RELATIONS TELEPHOIE INTEGRATION TECHNICAL OPERATIONS - ACCOUNTING DIVISION I - PERSONNEL DIVISION I - OIVISION INTEGRATION I PLANNINGTECHNICAL YSTEMATIZATION SCALE AND SALARIES FINANCIAL INTEGRATION ACCEPTANCE TESTING DIVISION DII N DIVISION DIVISION SUPPLY DIVISION TECHNICAL INSTITUTE CREDIT AND COLLECTION DIVISION INSPECTION AND CONTROL DIVISION RTEASURY DIVISION DIVISION FINANCIAL INVESTIGATION RHEGIONAL MANAGER REGIONAL MANAGER REGIONAL MANAGER REGIDNAL MANAGER IREGIONALMANAGERI REGIONAL MANAGER EGIONAL MANAGER L CARRANDUILLA I I BOGOTA I I BUCARAMANGA I CALl I lieibague I I MANIZALES MEDELLIN I World E..nk-8341

59 COLOMBIA ENPRESA NACIONAL DE TELECOMUNICACIONES (TELECOM) ORGANIZATION (REGIONAL) CHART REGIONAL MANAGER OPERATION EPARTMENT FINANCIAL CREPARTMENT INDUSTRIAL RELATIONS -E 1 AND TREASURY ACCOUNTING GROUPI ~~~~CASH GROUP COMERCIAL GROUPILNVSIGTON TABULATION STELEGRAPHIC OPERATION M AINTENANCE REGIONAL UPISRU CREDIT AND COLLECTIONSI GROUP GROUP SUPPLIES GROUP CROLLCIOS MAINTENANCE CENTER TRAINING World Sank-&34OW 0

60 ANNEX 11 Page 1 of 2 pages COLOMBIA ENPRESA NACIONAL DE TELECOMUNICACIONES (TXLEcOM) Staff Details Number The breakdown of staff employed at the end of December 1973 was as follows: Pay Scales Management 1 Commercial 38 Accounting and financial 1,070 Engineering - Planning 120 Engineering - Maintenance 1,545 Operations - Telegraphs 3,415 Operations - Telephones Ad.ministration & Others 3, Total 12,163 The number of staff in each pay range is given below. Col $ (month) No. of Staff 1. below 2,500 1, ,501-3,000 8, ,001-4,ooo 1, ,001-5, ,001-6,0oo ,001-8, ,001-10, over 10, Leave Total 12,163 Annual leave with full pay Casual leave with full pay Medical leave with 75% pay 15 days 3 days at a time 180 days Pension Staff are eligible for pension benefits after completing 25 years service. Rate of pen-ion is 75% of average of the 12 months pay before retirement. Mandatcry retirement age is 55 years. Death gratuity is paid to heirs of staff. The amount paid equals 12 months last pay drawn by the employee.

61 ANNEX 11 Page 2 of 2 pages Promotion Promotions are based on qualifications, ability and seniority of employees concerned. march 5., 1974

62 COLOMBIA ANNEX 12 Page 1 of 2 pages EMPRESA NACIONAL DE TELECOMUNICACIONES (TELECOM) Summary of Tariffs DOMESTIC Telephone - Local Service Col$ (a) Subscribers' deposit (refundable) (i) Guarantee 800 (ii) Investment - automatic service 1, manual service (b) Installation fees 350 (c) Monthly rental - business 35 - residentiel 25 (d) Call charges 0.10 per 3 minutes Telephone - Long distance service Telegraph (a) Calls - manual and semi-automatic Per minute Col$ - up to 40 kms to 80 kms to 150 kms to 220 kms to 300 kmns over 300 kms 6.75 *Minimum charge for 3 minutes. (b) calls - automatic -up to 40 kms to 80 kms to 150 kms to 220 kins to 300 kms over 300 kms 5.70 Ordinary Urgent 0.15 per word 0.30 per word *Minimum charge for seven words.

63 ANNEX 12 Page 2 of 2 pages Telex Local Col$1.00 per 3 minutes -up to 50 kms C01$2.00 per miiute -51 to 150 kms Col$3.00 per minute INTZRNATIONAL (examples) Telephone - minimum charge of three minutes - the following are per minute charges. Spain Col$ USA (NY) Col$ Brazil Col$ Australia Col$ Argentina Col$ Mexico Col$ Telegraph - the following are the charges per word. Spain Col$ USA Col$ Brazil Col$ Australia Col$ Argentina Col$ Mexico Col$ 7.60 Telex - miniwum charge per three - the following are per minute minutes. charges: Spain Col$ USA Col$ 78.05* Brazil Col$ Australia Col$ Argentina Col$ Mexico Col$ *Minimum one minute in automatic service. March 5, 1974

64 ANNEX 13 Page 1 of 2 pages COLOMBIA EMPRESA NACIONAL DE TELECOMUNICACIONES (TELECOM) Basic Data as of December 31, 1973 and for Program (197h-80) 1. Plant and Facilities in Service as of Dee. 31, 1973 Dec. 31, 1978 Dec. 31, 1980 (a) Total number of local exchanges (b) Total- nwnber of automatic local exchanges ' (c) Total installed capacity of automatic local exchanges (lines) 21,430 74,355 88,355 (d) Subscribers lines in automatic local exchanges (lines in service) 19,063 60,519 79,209 (e) Total number of manual local 3xchanges (f) Subscriber lines in manual local exchanges (lines in service) 15, 5 h 6 9,000 9,000 (g) Total capacity in local telephone exchanges 38,002 84,246 98,268 (h) Total number of subscriber lines (lines in service) 34,609 69,519 88,209 (i) Percentage of automatic subscriber lines (j) Total nunber of telephones 36,933 76,720 9q,b10 (k) Total number of inter-urban exchanges 39 h2 (1) Total number of long distance telephone circuits 4,097 11,652 13,152 (m) Total number of "terminals" in long distance exchanges 16,013 33,601 33,629 (n) Length of inter-urban circuite (Circuits-Km) - Physical line 34,470 40,800 hl,920 - Carrier on physical line 32,828 67,620 77,020 - HF 30,860 46,945 58,600 - VHF and UHF 316, , ,000 - Microwave 1,219,810 2,289,700 2,586,320

65 ANNEX 13 Page 2 of 2 pages Plant and Facilities in Service as of: Dec. 31, 1973 Dec. 31, 1976 Dec._ (o) Number of telegraph offices 1,535 1,626 1,635 (p) Offices connected to the Gentex Network (q) Offices with manual operation 1,340 1,385 1,397 (r) Number of telex exchanges (s) Capacity of telex exchanges 3,211 5,360 5,660 (t) Number of telex subscribers 2,552 4,510 5,o60 2. PROPOSED EXPANSION DURING PROGRAM (a) Annual growth of telephone connections 14.5% (b) Increase in local automatic exchange capacity 66,925 (c) Total increase in connections 53,600 (d) Total increase in long distance circuits 9,o55 (e) Total telephone construction costs of project (excluding long distance)(in millions) US$ 11.L4 (f) Cost per exchange line in project us$ 640 December 4, 1974

66 ANNEX 14 CONIMBIA EMPRESA NACIONAL DE TtKBCOMUNICACIOIES (TELECOM) Statistical Data± on Exchanges as of Decenber 31, 1973 Connected Total Applicants on Name of Exchange Cacity Lines Telephones Waiting List Automatic 1. Andalucia ', Bolivar (C.) 1( Buenaventura 1,800 1,780 2,100 2, Sugalagrare-e 5: Candelaria 1CO Cerete 2C Cerrito 3C Corozal Cucuta 5,800 5,800 6,676 4, Chia Darien Facatativa 60oD Florida 10C c Ginebra Guacari Istmina 10() Leticia 20() Libano Lorica Maganque ho !. Melgar loc Ž. Moinpos 20C , 23. Monteria 2000C 1,959 2, Neira Ocana , Pamplona Pradera Quibdo Restrepo Riodrio Roldanillo , San Andres 1, , Santander Sincelejo 2,000 1,235 1, Sopo 36. Trujillo Ubate , Villanueva Yotoco Sub Total 21,430 19,063 21,3 Manual 3W Systems 16,572 15,546 15,546 1,000 -*Estimated March 5, 1974 Total 38,002 34,609 36,933 16,996

67 ALINEX 15 E1{PRESA NACIONAL DE TELECOLTNICACIONES (TELECOM) EXCHANGE CAPACITY, CONNECTED LINES AND TELEPHONE STATIONS ACTUAL ( ) AND FIORECAST ( Year Exchange Capacit Connected Lines Manual Autmatic Total Manual Automatic Total,; increase on Fill Total Telephone j/ previous year, stations A C T U A L ,500 6,780 12,280 L;,680 5,900 10, , ,000 14,320 20,320 5,000 10,900 15,900 50, , ,300 ;,1 0 23,h0D 5,450 13,200 18,650 17, , ,200,780 25,980 9,400 14,100 23,500 26, , ,500 16,630 30,130 12,500 15,020 27,520 17, , ,572 21,430 38,002 15,546 19,063 34,609 25, ,933 F 0 R E C A S T 197L 15,072 22,930 38,002 14,000 21,019 35,019 1, , h,779 51,205 65,984 13,500 29,519 h3,019 22, , ,333 61,705 75,038 11,000 LO,519 51,519 19, , ,993 67,355 78,348 10,000 50,519 60,519 17, , ,913 7b,355 81b,246 9,000 60,519 69,519 14, , ,913 81,355 91,268 9,000 71,519 80,519 15, , ,913 88,355 98,268 9,000 79,209 88,209 9, ,41o 1/ Includes systems acquired through 1973 only December 4, 1974

68 COLOMBIA EMPRESA NACIDNAL OF TELEC(WUNICACIONES (TELECOM) ANSYEX 16 Page 1 of 5 pages INCOME STATEMENTS (Col$ millions) Pctual. Forecast Year Ending December 31: 1971 J Operating Revenue Telephone ,161 1,367 1,584 1,866 2,161 2,553 Telegra?'h Telex Additional Revenue U ,070 Tot.a'j loh 810 1,00 1 T,46 T1,771 2,0B9 T; 3,123 T3W7,1t Operating Expenses Personal ,124 1,371 1,672 2,040 2,489 3,037 Jepreci qt on L , Others ( Tot -i 1, = 1,46 1,775 2,167 2, Operatir,l income i L n Non Operating Income Miscellaneous Revenue Foreign Exchange loss (7) (19) (19) (63) (70) (83) (98) (107) (147) (I9M) Other (22) (22) (22) (22) (22) (22) (22) Interest. (34) (54) (84) (85) (108) (140) (147) (175) (230) (320) Tot.l (13) -CI) ) (124)2)- ) =) (214) 7 ) 3) (42) Net Income co Rate Base (IBRD) 964 1,229 1,466 1,782 2,195 2,750 3,436 4,237 5,060 6,010 Operating Incane (IBRD) Rate of Return (IBRO) L ll.0 Revenue Increase (.1) Pravious Year (%) Operating' Ratio d November 24, 1974

69 ANNEX 16 Page 2 of5 pages COLOMBIA EMPRESA NACIONAL DE TELBCQMUNICACIONES (TELECM4) Notes on the Statements of Operating Revenue and Income and Expense I. Operating Revenue (a) Telephone revenue (i) Installation fees were forecast on the basis of the number of telephones TELECOM will install during each year and Col$350 per telephone. (ii) Rentals were forecast on the basis of the average number of connected TELECOM subscribers, reducing the 1972 average rental by 1% per annum to account for the changing mix of business/residential subscribers. (iii) National call charges are based on the average number of total subscribers in Colombia, and the average subscriber revenue increasing by 5% per annum. (iv) Participations were forecast at the 22.0% overall revenue sharing percentage experienced in the past.lj (v) International calls - outgoing were increased by 18% per year; periodic adjustments of tariffs for the peso devaluation were factored into the projections. (vi) Participations were forecast at 62% of total outgoing revenues, the percentage experienced in the past. (vii) Incoming international calls were projected as 71% of the outgoing international traffic which was the actual in / Revenues from long distance calls made in TELECCMt's public call offices as well as operator dialed traffic originated in Bogota by central government are not subject to revenue sharing.

70 ANNEX 16 Page 3 of5 pages (viii) Leased channels and other telephone revenues were forecast at 10% growth every year plus an adjustment every two years for the peso devaluation. (b) Telegraph revenue (i) National revenue3 were forecast to increase 7% per year from , thereaf-,er by 4,% due to better telephone facilities which are put in-;o service. (ii) International oulgoing revenues were forecast to decline in volume by 6% from , thereafter by 8% due to the improved telephone and telex services (this is in line with past experience). Revenues were adjusted every two years for the peso devaluation. (iii) Participations were assumed to stay constant at 40% (1973). (iv) Incoming international revenues were assumed to stay constant at about 47% of gross outgoing revenues. (v) Leased telegraph channels were assumed to increase 9% per year. (c) Telex revenue (i) Rentals were forecast at the average subscriber rate considering the forecast rumber of subscribers. (ii) National revenues per subscriber were assumed to increase 6% per year. (iii) International outgoing revenues were assumed to increase 12% per year per subscriber for , 8% for and 5% thereafter; moreover they were adjusted every two years for the depreciation o: the peso. Only 55% of all telex subscribers use the international services as experienced in the past.

71 ANNEX 16 Page 4 of 5 pages (iv) Participations were forecast at 47% of gross outgoing revenues. (v) Incoming international revenues were assumed to stay at the 1972 level of 35% of gross outgoing revenues through 1976 and thereafter to drop to 30%. The depreciation of the peso was taken into consideration every year. (vi) Other telex revenues were assumed to increase by 15% per year. II Operating expenses (a) Personnel expenses were forecast at 221 per annum: staff increases at 5% per annum; annual increase of 16> of the average compensation per employee for imerit and cost of living increases. (b) Other operating expenses were assumed to increase about 15% per annum as in the past and include in 1974 and 1975 the expenses for the financial and technical consultants. The expenses include maintenance expense, expense of the Auditor General Staff, rental of the satellite space segnents, data processing equipment and of buildings, provisions for doubtful accounts and for inventory losses, etc. (c) Depreciation has been calculated at the composite annual rate of 6% on average gross fixed assets in operation (historic peso costs). For the purpose of calculating the financial rate of return under the Loan Agreement, a 4-1/2% annual dedreciation rate is being applied on the revalued amount of average gross fixed assets in operation. III Non-operating income and expense (a) Interest expense was forecast individually for the various types of debt. The interest related to the severance pay provision has been calculated at 9% per annum. Interest is not being capitalized. Miscellaneous revenue was forecast to increase by 5% per year.

72 ANNEX 16 Page 5 of 5 pages (b) Exchange losses are due to the estimated annual adjustment of the outstanding long-term debt for the peso devaluation. (c) Other is the amount bei.ng amortized annually from the deferred credit corresponding to the accumulated pension liability for prior years for which no provision existed. December 4, 1974

73 COLOMBIA ANNEX 17 Page 1 of 3 pages EMPRESA NACIOIAL DE TELECCP0MUNICAGI0NRS (TELECOM) Balance Sheets (Col$ millions) Actual Forecast As of December 31: Assets Fixed Assets Plant in Service 1,052 1,186 1,542 1,824 2,314 2,859 3,599 4,343 5,109 6,099 Less: Depreciation 3i I Net Plant in Service ,07 1,250 1,601 l, 2, ,4o 4,06 Work in Progress ,017 1,348 1,440 1,436 1,879 2,507 Other AsseTs intelsat Receivables let Housing, Sccial Welfare Fund Deferred Charges Total Other 185 Tg ' '62 ' Current Assets Cash Receivables 'let ,027 1,291 atores Advances 3 a _ Totai Current 322 _ _ 9- _ _, ,k63 Liabilities T0TA.i- ASSETS 7,1 3, , Z598 6, ,8 Capital ,102 1,341 1,592 Net Income 104 _ Total , ,592 l,826 Long Term Jebts Loans (5M9 ( ,036 1,150 1,287 1,479 1,592 1,806 Exchange Fluctuation Reserve ( ( Other Liabilities Pension and Severance Pay ,124 1,323 1,573 1,863 2,215 2,640 3,158 Others Subscriber Deposits Total Other , ,410 1,7 2,008, v09 Current Liabilities 194' TOTAL LIABILITIES 150 1,771 2, i ,822 9 m Debt/Equity - 53/87 89/51 60/40 59/41 60/80 60/40 60/40 59/41 58/42 59/81 Debt/Equity 2] 61/39 60/40 76/24 75/25 76/24 76/24 76/24 76/24 75/25 76/24 Current Ratio / / Total Long Term Debt to Equity. j Total Long Term Debt and Pension and Severance Pay Provision to Equity. 3 Current Asset/Current Liabilities plus Current Maturities.

74 ANNEX 17 Page 2 of 3 pages COLOMBIA EKPRESA NACIONAL DE TELECOMUNICACIONES (TELECOM) Notes on the Balance Sheets 1. Fixed Assets ( book values, not adjusted for peso devaluation) Works under construction were assumed in general to be equal to 50% of the balance brought forward from prior year plus the current year capital construction. However, in 1980 all works related to the future program we:-e assumed to be still under construction. 2. Other Assets (a) Investments were increased by the estim,ated amounts of further capital contributions to INTELSAT. (b) Accounts and Notes Receivable assume settlement of Col$5 6 million through real estate tiansfers of Col$ million from the National Post Administration (I'PA) in 1974 and 1975 which would create a liability to NPA. Past due debts of Col$12.7 million from the Ministry of Communications was assumed to be settled in (c) Employees' housing and other loans were assumed to increase by estimated annual requirements. (d) Deferred charges (deferred pension obligations and interest of Loan 499-CO during construction) are being amortized by TELECOM over 20-years. 3. Current Assets (a) Cash represents the rec;idual of TELECOM's future cash flows. (b) Accounts receivable - gross were assumed to be 30% of TELECoM's future net revenues; this assumes some improvement of TELECOM's receivable collection. The corresponding provision for doubtful accounts was assumed to be O11 of gross receivables.

75 ANNEX 17 Page 3 of 3 pages (c) Stores were assumed to be about 6% of net fixed plant in operation which is in line with the industry's and TELECO''s experience; the total gross balance was reduced by a 10% provision for inventory losses. Materials related to project under construction are presented under fixed assets. (d) Advances and prepaid charges were assumed to increase 15% per year. 4. EgLutr does not show separately as "appropriated earnings" the amounts TELECCM4 should set up in form of a fund for the development of local telephony, but which so far has not been complied with by TELECOM (see paragraph 6.16). 5. Provision for pension and severance payments was assumed to increase in the future in line with total projected staff costs. 6. Subscribers' deposits were increased by the estimated new deposits to be paid by TELECCM's additional telex and telephone subscribers. 7. Current liabilities - accounts payable were assumed to increase by 15% per year. Short-term borrowings of Col$200 million has been assumed for 1976 and 1977 to cover a temporary cash shortage. December 6, 1974

76 ANNEX 18 COLCOBIA EMPRESA NACIONAL DE TELECC2KflNICACIONES (TELECOM) munds Flow Statement (Col$ millions) Actual Forecast Total Year Ending Jecember 31: l l76 Sources of Funds From Operation Net Income interest i Jeporeciation Provision for foreign Exchange Provision for Pension etc ,256 Other 15 (19) o Total T TX W7' 97u9 TT56,,05T76 1,120 Borrowings IBP.D 499/740-co Proposed Bank _ Su,pliers and Local Bank ' ;cou'sition Loans c Future Total ,303 -ubscriber DeoosLts Others (17) 9 96) TOTAL 300SJC.3S 379 7T , , T, T9 2,5073 ;,657 Uses of Funds InvestrLents Program ,115 1,521 3,282 Acquisition of Telephone Ent Intelsat (31 ( d Housing & Soca!f4 Welfare Fund ( ( Other l -p Transfers ipn Total Investments ~7 780 f,255 1,-670 3,866 Debt Service Amortbzation nterest fotal Debt Service -16 1T l7t T576 1,273 increase in Working Capital Cash (72) (31) (254) 268 Others 4 17 (39) 5 23 (134) Total Working Capital _17) ( = & 779) _ ff ) T15 L7 T7 (93) 496 TOTAL go2 1 L55l j,5 Jebt Service Coverage (Net Incorne before Interest & Depreciation/Debt Service) j For 197i-73 included under Program. December 6, 1974

77 ANNEX 19 COLOMBIA EMPRESA NACIONAL DE TELECOW4UNICACIONES (TELECOM) Formula for Computation of Financial Rate of Return 1. The rate of return will be computed annually by relating the Ihpresa's net operating income for the year in question to the average value of the net fixed assets in operation. 2. For the purpose of this computation: (a) The valuation of gross fixed assets in operation and of accumulated depreciation will be determined as explained in paragraph 3 below. (b) The "net fixed assets in operation" means the gross value of the fixed assets in operation less the accumulated depreciation thereon. The "average value" of the net fixed assets in operation will be determined by adding the value of the net fixed assets in operation at the beginning of the year to the value of the net fixed assets in operation at the end of the year and dividing the total by two. (c) The "net operating income" shall be determined by subtracting from total operating revenues all operating and administrative expenses, including taxes (if anr) and adequate provisions for maintenance; provision for depreciation should be included at a notional h-1/2% rate on the dollar value of fixed assets in operation, converted into pesos at the average exchange rate during the year. 3. For the purposes of computing future values of net fixed assets in operation as basis for our rate commitments, the dollar value of gross fixed assets in operation and the depreciation reserve will be recorded in memorandum accounts which will be made up as follows: (a) to the agreed value of gross fixed assets as at December 31, 1972 will be added each year a sum representing the annual amount of new plant commissioned translated into dollars at the average exchange rate during the year, subject to a deduction of an amount for retirement of assets during the year; (b) to the agreed dollar value of depreciation reserve as at December 31, 1972 will be added each year a sum representing the annual provision for depreciation calculated at 41% of the dollar value of the average gross fixed assets in operation; appropriate adjustment will be made to reflect retirement of assets during the year. 4. For purposes of the rate covenant the dollar value of the net fixed assets in operation will be averaged and converted to pesos at the average rate during the year. March 5, 1974

78 ANNEX 20?0L)NLEIA EMPRESA NACIONAL DE TELECOMUNICACIONES ' TELECOM Program of Acquisition of Local Telephone Entities (Col$ millions) Amortization (A) and Interest (I) Paymernts Year of Acquisition Name No. of Lines Acquisition Price A I A I A I A I A I A I Huila 8, hi.r I! 2 _IT i-. I4.4 u.4 Socorro 1, Narino 4, _ Tumaco _ Valledupar _ BoyacA 6,0oo Ibague 5, Santa Marta 5, Fundacion _ - _ Riohacha _ San Gil 1, _- M8-3.2 ' _ Cienaga _ Ipiales 1, _ Agua De Dios ( n _ Garzon Riosucio 1, Zarzal Caicedonia 1, Maicao _ _ Unidentified 10, _ Unidentified 10) _ TOTAL 57, ( December 6, 1974

79 ANNEX 21 COLOMBIA EMPRESA NACIONAL DE TELECOMUNICACIONES (TEIECOM) Performance Indicators 1. A set of indicators which will help monitor TELECOM's performance has been established. TELECOM will be asked to report on actual as well as projected/budgeted achievements related to the performance indicators. 2. Performance indicators. Year Ending December 31 : Telephone subscribers added h10 8,000 8,50o 9,000 9,000 Employees - projected 12,ho1 12,900 13,425 13,960 1h,380 - not more than 12,770 13,405 14,075 14,780 15,550 Rate of Return (per Bank formula) s Operating Ratio Debt Service Coverage Ratio December 4, 1974

80

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