ITU/94-2
14 February 1994
Original: English
Telecommunication investment and financing strategies:
what role for the private sector?
The International Telecommunication Union is holding a roundtable in Banjul (The Gambia) from 28 February to 2 March next to address the issue of the role of the private sector in telecommunication investment and financing.
The roundtable follows up on a resolution of the African Telecommunication Development Conference held in Harare in 1990 which recommended that African governments and administrations create an appropriate investment climate. The Resolution also called for the introduction of commercial practices in telecommunication operations,  guarantees for investors and liberalization of selected services and for the widening of financing possibilities with options such as equity participation or fund-raising through the issue of domestic bonds.
Organized by the Telecommunication Development Bureau of the ITU, the meeting is addressed to top management, to finance officers, to investors and consultants involved in investment and financing. The aim is to review current and foreseen investment and financing strategies, assess the obstacles (regulatory and legal) which have so far prevented private sector involvement in telecommunication and propose an action programme which would define the investment conditions, regulatory and interconnection issues, tariff policies, funding and resource mobilization requirements as well as the role of financing institutions. The roundtable will also provide an opportunity to review privately financed or co-financed projects for Africa thus illustrating the potential for private sector participation and partnership in the development of African telecommunication networks and services.
40 participants are expected including representatives of African telecommunication operators and regulators, international telecommunication companies, regional development banks, African business organizations, bilateral finance institutions as well as the International Finance Corporation and UNIDO Centre for Industrial Development.
In addition to providing participants with know-how on policy reform and evaluation of projects, the lessons to be drawn from the case studies that will be presented will also constitute valuable guidelines to create an attractive environment for both domestic and foreign potential investors. The meeting is also expected to produce policy recommendations to be submitted to the World Telecommunication Development Conference taking place in Buenos Aires from 21 to 29 March 1994.
The programme of the roundtable is available on request. 
For press enquiries, please contact:	For information on the contents of the roundtable, please contact: 			

Francine Lambert
Chief, Press and Public Information
International Telecommunication Union
Tel: +41 22 730 5969
Telefax: +41 22 730 5939
E-mail:  
X400: s=lambert;a=arcom;p=itu;c=ch
Internet:  francine.lambert@itu.ch	
Jürgen Muller
Senior Economist
Policies, Strategies and Programming
Telecommunication Development Bureau
International Telecommunication Union
Telephone: +41 22 730 5945
Telefax: +41 22 730 5484
E-mail:  
X400: s=itumail;a=arcom;p=itu;c=ch
Internet: itumail@itu.ch

As from 28 February 1994, Mr Muller can be reached at +220 22 55 96 or +220 45 29 40	

INTERNATIONAL TELECOMMUNICATION UNION
 Telecommunication Development Bureau (BDT)		

Roundtable
on Telecommunication Investment and Financing Strategies
–What Role for the Private Sector?–
Banjul (The Gambia), 28 February – 2 March 1994
What is the potential for private sector participation and partnership in the development of African telecommunication networks, provision of services and manufacturing? 
1.	Overview of the worldwide evolution
	Recent experiences and perspectives, selected countries
	Private sector - many actors and relationships
	The policy debate, emerging consensus
	The multiple role of telecommunication (essential infrastructure, public service, economic sector, business prospects)
	From private sector participation to partnership
2.	Preconditions for successful cooperation with the public sector
	Creating an attractive climate for private investment
	Sector reform and restructuring, principles and practice
	The government policy environment - stability and trust
	Rules on liberalisation, commercialisation, competition and privatisation – the regulatory framework
3.	Challenges and opportunities in Africa
	Current private sector position and prospects domestic and foreign
	Development objectives, current patterns of growth
	Investment and financial requirements
	Structural reforms in progress
	Sub-regional and regional programmes and projects
	Are universal service provision and private participation/partnership compatible?
Review of investment and financing strategies with case studies
1.	The variety of strategies subject to the economic environment
	A review of different market structures
	Termination of monopoly as a device to attract private sector resources
	Illustrations of restricted, partly liberalized and open markets 
	The public/private mix and sector segmentation
	The stages towards organizational and financial autonomy of public networks and service providers
	Widening choice in evolving domestic capital markets
	Phases of privatisation (regulatory framework, enterprise autonomy, valuation of assets, sales/leasing policy)
2.	Investment strategies
	Unit costs in Africa and elsewhere, comparisons and rationale
	Sector analysis, demand forecasts, technical choice, cost assessments, project capital budgets and projected cash flows, evaluation of financial requirements, institutional capabilities and strengthening plans, economic cost/benefit analysis, risk (sensitivity) analysis, business plan, private sector participation (partnership)
	Decision criteria for investment decisions (Net Present Value, Internal Rate of Return, Return on Investment, Cost of Capital, Equity/Assets Ratio, Productivity targets)
	External financing needs and liquidity planning
3.	Financial strategies depending on the telecom sector/market structure – sources and instruments (varying combinations and percentage shares)
					·	Bank credit and loans	
					·	Supplier/buyer credits	
			Debt		·	Credits from subscribers/clients	
			·	Domestic		·	Other credits (e.g. leasing)	
			·	Foreign		·	Bonds and obligations	
					·	Public sector loans (e.g. with grant elements)	
					·	Countertrade obligations	

					·	Joint debt/equity schemes of project financing 	
	External				and future revenue sharing (e.g. Build-lease-	
	(Markets)		mixed forms		transfer, Build-operate-transfer; license, 	
					franchise etc. arrangements)	
						
Sources			Equity		Private shareholders	
			·	Domestic		Public sector equity (e.g. state, national 	
			·	Foreign		development banks & finance corporations, IFC, 	
					etc)	
	Internal		·	Revenues		Joint venture partnerships	
	(Enterprise)		·	Profits		Funds-in-trust	
			·	Sale of assets			
			·	Employee contributions			

Outline of an action programme
1.	Private sector requirements
	Political and economic stability (risk assessment, credit rating)
	Unambiguous regulatory framework
	Clear government policy regarding public/private mix, domestic/foreign private participation, rules on establishment of companies, non-discriminatory treatment in respect of ownership of assets, taxes and custom duties, revenue retention and profit transfer, procurement, employment, local content, repatriation of assets, etc.
2.	Government policies and actions
	The African Green Paper Recommendations
	Convincing policy and planning framework, including assessment of financial needs
	Lifting the telecom sector's share in gross capital formation 
	Enabling the sector to reinvest operational revenue for expansion and modernisation
	Create a stable economic environment (convertibility, monetary stability, price and trade liberalization)
	Remove institutional constraints to the optimal generation and use of resources (e.g. distorted tariffs)
	Make credible commitment to private investors in terms of risk reduction (government guarantees), access to domestic sources of finance.
3.	Telecommunication sector strategies
	Market demand, customer specifications, and social needs - analyses and forecasts
	Tariff and pricing systems, cost based tariffs , revenue generation, index formulas to protect from inflation
	Subsidisation of essential needs
	Programme establishing financial autonomy of monopoly provider (stage 1) and eventually removing the monopoly (stage 2)
	Programme privatising specific sector segments and other selected operational functions
4.	Project level requirements
	Present the projects for private (co) financing in attractive, brief form
	Investment projects may be for sector/agency restructuring, asset replacement, expansion, enhancement, or for new business, including outsourcing of specific functions (e.g. accounting, building maintenance, project management, etc)
	Projects to be viewed in the context of the capital budget of the agency (cash planning)
	Project merits to be evaluated in terms of discounted cash flow and in terms of financial policy choice (e.g. licensing, sale, co-financing)
	The investment decision should be arrived at separately from the financing decision
	There should be procedures for project performance control, reporting, and incorporation of improvement possibilities.
5.	The prospective roles of ITU and other international agencies
	Promotion and coordination
	Information, management training
	Method development (e.g. project preparation and presentation)
	Expert missions and advisory services on behalf of public and private sector parties on specific issues raised during the Roundtable.