47504 PPI data update note 12 October 2008 Investment commitments to telecommunications reached a new peak in 2007 Investment commitments to telecommunications projects with private participation in low- and middle- income countries amounted to US$75 billion in 2007, according to just-released data from the Private Participation in Infrastructure Project Database.1 That marked a new peak for the 1990­2007 period. The high level of investment commitments (hereafter, investment) was driven by projects implemented in previous years. Projects that reached financial closure between 1990 and 2006 attracted US$70.5 billion, while new projects accounted for US$4.5 billion (figure 1).2 Investment in physical assets (that is, network expansion) grew by 18% to US$64.9 billion, reaching a new peak for the third consecutive year (figure 2). Payments to the government (such as spectrum or concession fees and divestiture revenues) amounted to US$10 billion, or 13% of annual investment. Figure 1 Investment commitments to telecom projects with private participation in developing countries, 1990­2007 Figure 2 Investment commitments to telecoms projects with private participation in developing countries by form of investment, 1990-2007 Projects 80 2007 US$ billions* 120 2007 US$ billions* 100 80 60 70 80 60 40 60 50 40 40 30 20 20 20 10 0 0 0 1990 1995 2000 2005 2007 1990 1995 2000 2005 2007 New projects Previously implemented projects Telecom projects Investment in physical assets Payments to the government Source: World Bank and PPIAF, PPI Project Database. * Adjusted by the 2007 US CPI. Source: World Bank and PPIAF, PPI Project Database. * Adjusted by the 2007 US CPI. In 2007, 29 telecommunications projects with private participation reached financial or contractual closure in 28 low- and middle-income countries. Of these projects, 23 were greenfield merchant projects, involving investment of US$3.1 billion, and 6 were divestitures, with US$1.4 billion. Previously implemented greenfield projects accounted for another US$46.9 billion, and previously divested companies for US$23.6 billion. Stand-alone mobile operators accounted for most of the investment growth. Investment in this segment rose by 15% in real terms in 2007 to US$41.4 billion, its highest level ever and 55% of annual This note was produced by Ada Karina Izaguirre, infrastructure specialist, and Edouard Perard, consultant, Finance, Economics, and Urban Development Department, Sustainable Development Network, World Bank. 1 Telecommunications includes projects that provide basic telephone services (fixed access and long distance) or mobile access using their own physical infrastructure. Not included are voice over Internet protocol (VoIP) services or operators providing services with leased infrastructure. 2 Data on telecommunications contracts include primarily medium-size and large projects as reported by the media and other public sources. Small-scale projects are generally not included because of a lack of public information. Additional annual investment in some previously implemented projects may have been omitted for the same reason. Barbados, the Czech Republic, Estonia, and Trinidad and Tobago became high-income countries according to the 2007 World Bank country classification (released in July 2007) and are therefore excluded from the PPI Project Database beginning with the 2007 update. - 1 - investment in the sector (figure 3). Multiservice providers, the second largest segment with 31% of sector investment, maintained investment at around US$23 billion for the third consecutive year. These two segments also accounted for most of the new projects (figure 4). This concentration of activity in the two segments was observed across developing regions. Figure 3 Investment commitments to telecom projects with private Figure 4 Telecomm projects with private participation in developing participation in developing countries by segment, 1990­2007 countries by segment, 1990­2007 2007 US$ billions* Projects 80 120 70 100 60 50 80 40 60 30 40 20 10 20 0 0 1990 1995 2000 2005 2007 1990 1995 2000 2005 2007 Multiservice provider Mobile access Fixed access and long distance Fixed access Long distance Source: World Bank and PPIAF, PPI Projects database. Source: World Bank and PPIAF, PPI Project Database. * Adjusted by the 2007 US CPI. Activity by region. Investment has become less concentrated by country in recent years. In 2007 the top 5 recipient countries (India, Brazil, the Russian Federation, Iraq, and Poland) accounted for 36% of total investment, while the top 10 (with Indonesia, Mexico, Nigeria, the Arab Republic of Egypt, and Pakistan added to the list) attracted 56%. These concentrations are a few percentage points lower than those in 2006, when the top 5 accounted for 44% of investment and the top 10 for 58%. And they are significantly lower than those in 2002­05, when the top 5 accounted for more than 50% of investment and the top 10 for between 60% and 70%. In East Asia previously implemented projects attracted investment of US$6.8 billion, and two new projects US$696 million, for a total of US$7.5 billion. The Philippines sold a 6.4% stake in Philippine Long Distance Telephone Company, the largest telecommunications company in the country. The government's stake in the company came about as a result of a Philippine Supreme Court decision concluding that the shares were ill-gotten assets of former President Ferdinand Marcos. The region's other project was a new mobile license in Papua New Guinea (table 1). In Europe and Central Asia investment in previously implemented projects amounted to US$21.2 billion. In addition, eight countries implemented eight new projects with investment of US$622 million, bringing the total to US$21.8 billion. Albania sold 76% of Albtelecom, the state-owned incumbent operator providing fixed, mobile, and long-distance services, to a consortium led by Turk Telekom. Six other countries granted mobile licenses to new operators--Georgia, the former Yugoslav Republic of Macedonia, Moldova, Montenegro, Serbia (in Kosovo), and the Slovak Republic. Romania issued a multiservice license to a new operator. In Latin America and the Caribbean previously implemented projects attracted investment of US$15.5 billion, while two new mobile licenses amounted to US$140 million. Digicel Group (Bermuda) was awarded the two mobile licenses: one in Honduras and the other in Suriname. In the Middle East and North Africa investment in previously implemented projects amounted to US$7 billion, while a new mobile operator in Iraq, Korek Telecom, acquired a 15-year national license for US$1.25 billion. Iraq accounted for almost 60% of investment in the region, primarily because of investment in new licenses. Besides Korek Telecom, two existing mobile operators (Asia Cell and Zain) acquired additional mobile licenses for US$1.25 billion each. In South Asia previously implemented projects attracted investment of US$12.3 billion. Mobile and multiservice operators accounted for US$11.5 billion of that investment. India attracted 62% of regional investment, including investment in new projects. Two new projects were implemented in the region. Bangladesh awarded a national public switched telephone network (PSTN) license to National TeleCom (NTC) for US$1.7 million, and Sri Lanka awarded a mobile license to Indian operator Bharti Airtel for US$4 million. - 2 - In Sub-Saharan Africa investment in previously implemented projects amounted to US$7.6 billion. In addition, 13 countries implemented 14 new projects that involved investment of US$1.8 billion, bringing the total to US$9.4 billion. Of these new projects, 4 were divestitures. Gabon sold 51% of Gabon Telecom, the incumbent national operator, to Maroc Telecom. Ghana divested 75% of the multiservice operator Westel, which had become fully state owned in 2005 when the U.S. ACG Telesystems sold its stake in the company to Ghana National Petroleum Corporation after disputes over sector regulations and company management. Kenya sold a 51% stake in Telkom Kenya, the incumbent fixed-line operator, to France Telecom for US$390 million. Rwanda divested 80% of Rwandatel, the national mobile and fixed-line operator, to Libya Africa Portfolio for Investments. The other 10 new projects were greenfield merchant projects for mobile service or multiservice operations. These brought a fifth mobile operator in Benin (Globacom Benin), a second mobile operator in the Central African Republic (Orange Centrafrique), a new mobile operator in Guinea (Orange Guinea), a mobile license in Guinea-Bissau (Orange Bissau), a second mobile license in Namibia (Powercom), a multiservice operator in Niger (Orange Niger), a multiservice operator and another mobile one in Nigeria (Emerging Markets Telecommunications Services and Alheri Engineering), a multiservice operator in Senegal (Sudatel Senegal), and another in Uganda (Warid Telecom Uganda). Potential new projects. Besides the 29 new projects reaching financial or contractual closure in 2007, at least 17 others were awarded but did not reach closure before the end of the year. Thirteen of these are new mobile operators: two in Poland, one in Tajikistan, two in the Dominican Republic, one in Guatemala, one in West Bank and Gaza , two in Afghanistan, one in Sri Lanka, one in Benin, two in Burundi. In addition, Argentina and Uganda each awarded multiservice licenses to two new operators. And Brazil awarded 3G licenses to three existing operators. Canceled and distressed projects. Four telecommunications projects were canceled or became distressed in 2007, bringing the total number to 42. These 42 contracts represent 5% of all telecommunications projects and 4% of investment commitments during 1990­2007. Two of the projects were canceled, one in República Bolivariana de Venezuela and the other in Rwanda. The Venezuelan government nationalized the incumbent telecommunications operator Compania Anonima Nacional de Telefonos de Venezuela. The company had been divested in phases during the 1990s: a 40% stake was sold to a consortium led by the U.S. GTE Corp in 1991, and subsequent shares were sold on the local stock exchange and the New York Stock Exchange in 1996­97. The Rwandese government bought back Rwandatel, the national mobile and fixed-line operator, from the U.S. Terracom Communications, which had acquired 99% of the company in 2005. A few months later the government divested Rwandatel for second time. The two projects that became distressed are in Bolivia and Pakistan. The Bolivian government began the legal process to nationalize Entel Bolivia, the incumbent long-distance and mobile operator, which had been divested in 1995. The Pakistan government requested termination of the mobile license of Pakcom, which had started operating in 1990, because of disagreements over license fee payments. Concluded projects. No telecommunications projects were concluded in 2007. - 3 - Table 1 Telecom projects reaching financial or contractual closure in 2007 Note: .. = not available. East Asia and Pacific Type of Investment Capacity Project private Private commitment size and Country Project name status Segment participation equity (%) (US$ millions) type Main sponsors 1 Papua Digicel Papua New Construction Mobile access Greenfield 100 150 .. Digicel (100%, New Guinea project Bermuda) Guinea 2 Philippines Philippine Long Operational Fixed access, Divestiture 100 546 .. .. Distance Telephone mobile access, Company and long distance Europe and Central Asia Type of Investment Capacity Project private Private commitment size and Country Project name status Segment participation equity (%) (US$ millions) type Main sponsors 1 Albania Albtelecom Operational Fixed and Divestiture 76 161 250,000 Calik Holding (..%, mobile access connections Turkey), Turk Telekom (..%, Turkey) 2 Georgia GeoComInvest Operational Mobile access Greenfield 100 10.2 .. GeoComInvest project (100%, Georgia) 3 Macedonia, VIP Macedonia Operational Mobile access Greenfield 100 71 141,000 Telekom Austria FYR project connections Group (100%, Austria) 4 Moldova Eventis Mobile Operational Mobile access Greenfield 100 43 100,000 Eventis Telecom project connections Holding (100%, Cyprus) 5 Montenegro Mtel Operational Mobile access Greenfield 100 21.5 260,000 Telekom Srbija project connections (51%, Serbia) 6 Romania RCS & RDS Operational Fixed and Greenfield 100 35 200,000 RCS & RDS (100%, mobile access project connections Romania) 7 Serbia Second mobile Construction Mobile access Greenfield 100 275 .. Telekom Slovenije license in Kosovo project (..%, Slovenia), IPCO International Ltd. (..%, Singapore) 8 Slovak Telefonica O2 Operational Mobile access Greenfield 100 5.7 565,000 Telefonica SA Republic project connections (100%, Spain) - 4 - Latin America and the Caribbean Type of Investment Capacity Project private Private commitment size and Country Project name status Segment participation equity (%) (US$ millions) type Main sponsors 1 Honduras Digicel Honduras Construction Mobile Greenfield 100 80.1 .. Digicel (100%, access project Bermuda) 2 Suriname Digicel Suriname Operational Mobile Greenfield 100 60 .. Digicel (100%, access project Bermuda) Middle East and North Africa Type of Investment Capacity Project private Private commitment size and Country Project name status Segment participation equity (%) (US$ millions) type Main sponsors 1 Iraq Korek Telecom Operational Mobile access Greenfield 100 1,250 600,000 Others (100%, ..) project connections South Asia Type of Investment Capacity Project private Private commitment size and Country Project name status Segment participation equity (%) (US$ millions) type Main sponsors 1 Bangladesh National TeleCom Operational Fixed access Greenfield 100 1.7 17,000 Others (100%, ..) Ltd. and long project connections distance 2 Sri Lanka Bharti Airtel Sri Construction Mobile access Greenfield 100 4 .. Bharti Enterprises Lanka project (45%, India), Singapore Telecom (16%, Singapore) Sub-Saharan Africa Type of Investment Capacity Project private Private commitment size and Country Project name status Segment participation equity (%) (US$ millions) type Main sponsors 1 Benin Globacom Benin Construction Mobile access Greenfield 100 69 .. Globacom (100%, project Nigeria) 2 Central Orange Operational Mobile access Greenfield 100 12 33,000 France Telecom African Centrafrique project connections (100%, France) Republic - 5 - 3 Gabon Gabon Telecom Operational Fixed access, Divestiture 51 93.4 410,000 Maroc Telecom mobile access, connections (51%, Morocco) and long distance 4 Ghana Westel Operational Fixed access, Divestiture 75 120 .. Zain (75%, Kuwait) mobile access, and long distance 5 Guinea Orange Guinea Operational Mobile access Greenfield 100 0 185,000 Sonatel (100%, project connections Senegal) 6 Guinea- Orange Bissau Operational Mobile access Greenfield 100 26.5 36,000 Sonatel (100%, Bissau project connections Senegal) 7 Kenya Telkom Kenya Operational Fixed access Divestiture 51 390 280,000 France Telecom and long connections (40%, France) distance 8 Namibia Powercom (Pty) Operational Mobile access Greenfield 100 8.5 .. Nampower (37%, Limited project Namibia), Telecom Management Partner AS (39%, Norway) 9 Niger Orange Niger Construction Fixed access, Greenfield 100 72 .. France Telecom mobile access, project (80%, France) and long distance 10 Nigeria Alheri Engineering Construction Mobile access Greenfield 100 150 .. Dangote Group Limited project (100%, Nigeria) 11 Nigeria Emerging Markets Construction Fixed access, Greenfield 100 400 .. Emirates Telecommunications mobile access, project Telecommunications Services (EMTS) and long Corporation (Etisalat) distance (40%, United Arab Emirates), Mubadala Development Company (60%, United Arab Emirates) 12 Rwanda Rwandatel, Second Operational Fixed access, Divestiture 80 100 .. Libya Africa Portfolio Divestiture mobile access, for Investments and long (LAP) (80%, Libya) distance 13 Senegal Sudatel Senegal Construction Fixed access, Greenfield 100 200 .. Sudatel Group mobile access, project (100%, Sudan) and long distance 14 Uganda Warid Telecom Construction Fixed access, Greenfield 100 200 .. Abu Dhabi Group Uganda Limited mobile access, project (100%, United Arab and long Emirates) distance - 6 -