ۥ-1@ -+ 96)%4(4((6866666X7777 7"7727M7[8(888888888888884868H6X88ITU/95-2 27 January 1995 Original: English Large private capital could soon flow to the developing world to launch profitable business ventures to close the communications gap The findings of a feasibility study conducted by McKinsey and Co. for the International Telecommunication Union (ITU) shows that the concept of a new organization to launch profitable business ventures in the developing world is not only commercially viable but would also provide the type of vehicle sought by key members of the investing community. The conclusions are based on detailed research and analysis where the WorldTel concept was iteratively refined through over 150 in-depth interviews conducted with top political and decision-makers in ten potential client countries and investors in the US, Europe and Asia/Pacific. This new organization to be known as WorldTel, is a proposal designed to commercially narrow north-south gap in telecoms and IT infrastructure and give access to telecommunication services to large segments of the world population of which 80% still lacks access to the most basic telecommunications. The background economic reality In many areas of the world, poor availability and quality of telecommunication deter investors from providing the development capital, paralyzing economic growth. After a number of decades of international development cooperation, records show that very few countries effectively made it to the class of newly-industrialized countries. Traditional modes of ODA-driven development cooperation to trigger self sustaining economic growth are being questioned. Today's political and economic environments have pushed the pendulum to swing from relying on the public sector for development to the more dynamic private sector. Private ownership, liberalization and competition became acceptable notions for economic development. Private flows during 19901993 have reached US$380 billion but still fall short of the investment needs of the developing and emerging countries of the globe. Against this background, the ITU has been exploring new and innovative ways to trigger capital flows for the creation and expansion of telecommunications in the yet "unconnected" developing world. The urgent need for WorldTel Research and analysis indicates that sufficient investment funds are not available from existing development institutions. The total funds provided by such institutions and banks only comprise % to 3% of their annual portfolios in the telecommunications sector each year. This results in an annual funding gap for the conventional approach of up to US$30billion. WorldTel could help break this vicious circle by offering new solutions to radically improve telecommunications access in select client countries. After the very positive reception of a prefeasibility study presented to a group of prospective investors at a meeting held in New York on 27 October 1993, a full feasibility study was conducted by McKinsey and Co. and a business plan was prepared. WorldTel's mission WorldTel is defined as a private sector driven multinational funding and development organization focused on the countries, or parts of countries, where conventional approaches have failed to provide adequate access to telecommunication networks and services. It is designed to have a two-pronged mission: symbol 183 \f "Symbol" \s 10 \h value-added venture capitalist and symbol 183 \f "Symbol" \s 10 \h developmental operator/solutions provider The breakthrough offered by this two-pronged mission is that it ties new sources of funding to expertise, information and skills tailored to the needs and environment of each client country. It would carefully address the key issue on how the money is invested in client countries under rigorous criteria. Being a value-added venture capitalist means providing more than purely finance: it implies being a long-term partner. The role of developmental operator would provide client countries with direct operational support as a joint venture partner in, for example, Build, Operate and Transfer schemes. WorldTel would complement, not compete with, existing efforts of multinational companies by providing a model to inspire continued liberalization in telecommunications and creating demand that would otherwise not exist. Meetings with top institutional investors, infrastructure investment funds, investment banks and equipment vendors indicated sufficient private capital would be available to WorldTel provided that it is properly structured, carries ITU imprimatur and demonstrates successful pilot projects. Value proposition to client countries Unlike other funding and development organizations, WorldTel will be sector specific. It will only focus on telecommunications and IT technology. Accordingly, client countries would obtain : symbol 183 \f "Symbol" \s 10 \h timely, responsive financial assistance that is tailored to their needs and constraints symbol 183 \f "Symbol" \s 10 \h access to innovative financing sources, structures and packaging coupled with leading edge technologies, policies and management practices symbol 183 \f "Symbol" \s 10 \h neutrality and transparency in providing high-impact solutions symbol 183 \f "Symbol" \s 10 \h information and advisory services when needed Meeting investors needs To serve the needs of investors, WorldTel would maintain a strictly commercial perspective by keeping the organization lean and evaluating potential client countries and projects on purely economic grounds. Client countries would be selected on their willingness to create necessary regulatory and business environments to facilitate commercially viable partnerships. Equity in WorldTel would be limited to private financial investors although governments, telecoms operators and vendors would be invited to take part in WorldTel projects through debt and/or equity participation at the project level. As client countries would be selected if willing to negotiate guarantees to provide needed risk management mechanisms and adequate financial and investment structures, investors would operate in an environment where their interests could be safeguarded. WorldTel could provide a valuable tool for investors to diversify their portfolios on projects and terms that would be unavailable to traditional private investors lacking the ITU imprimatur. A mixed structure to create climate of confidence WorldTel, with its unique governance structure, is expected to be able to open vast new markets which will provide attractive commercial returns on investment. It will consist of: symbol 45 \f "Symbol" \s 10 \h an Assembly of Governors, which will be primarily composed of client countries, to evolve policy conducive to telecommunication expansion and also to elect a representative to the Board of Directors to reflect their views symbol 45 \f "Symbol" \s 10 \h a Board of Directors, consisting essentially of representatives of investors, that have powers to set broad policy, establish investment criteria and appoint a top management team which will report to it symbol 45 \f "Symbol" \s 10 \h the ITU Secretary-General, participating in the meetings of the Assembly and the Board as a non-voting member. ITU would thus act as a facilitator and a moral guardian of the scheme without direct involvement in the operation of WorldTel Such a structure will permit the private sector to have full control of its investment, allow clear accountability of management, and timely responsiveness to market conditions. At the same time, the client countries will have access to capital under reasonable conditions along with the necessary advice in order to provide service to a large segment of their population. This climate of confidence will find its full expression in an ITU-elaborated Charter to be signed by the stakeholders of WorldTel, i.e., investors and client countries. Such provisions would give WorldTel an exclusive ITU imprimatur which would serve as a seal of approval by the world body testifying its neutrality and transparency in its operation. The next steps The report has now been endorsed by the Sponsors of the feasibility study which included major telecom operators, manufacturers and potential client countries from around the world. The World Telecommunication Advisory Council also commended the study and invited the Secretary-General to take measures to implement the scheme without delay. ITU Secretary-General, Pekka Tarjanne, told the Sponsors "I have the feeling that we are at the point of launching a radically new approach for telecoms development that leapfrogs over current constraints to trigger economic growth in large segments of the world and put us on the road to closing the global communications gap." The Secretary-General accepted the recommendations and plans to proceed as follows: symbol 183 \f "Symbol" \s 10 \h to appoint an interim Board of Directors immediately symbol 183 \f "Symbol" \s 10 \h to nominate the Chairman of the interim Board by mid-February after consultation in New York with major investment banks symbol 183 \f "Symbol" \s 10 \h to circulate the report widely and solicit commitment of client countries and investors alike symbol 183 \f "Symbol" \s 10 \h to charge the Chairman of WorldTel, under the guidance of the interim Board, to raise the seed capital to set up the organization and to identify two or three replicable pilot projects in the first half of 1995. WorldTel in a nutshell symbol 183 \f "Symbol" \s 10 \h Focuses exclusively on telecommunications and information technology  symbol 183 \f "Symbol" \s 10 \h Provides direct equity investment raised from private financial investors and co-ordinates project finance from other sources of debt/equity  symbol 183 \f "Symbol" \s 10 \h Delivers tailored solutions to select 'client countries' through a lean, regionally decentralized organization  symbol 183 \f "Symbol" \s 10 \h Improves operating skills in 'client countries' through information, management support, and/or a direct operating role  symbol 183 \f "Symbol" \s 10 \h Carries the imprimatur of the International Telecommunication Union which is safeguarded by an innovative governance structure that balances the needs of private sector investors and developing countries  For further information or to obtain a copy of the report, please contact: T. Ras-Work WorldTel Project Manager Tel: +41 22 730 5401/5427 Fax: +41 22 730 6448  Official Development Assistance  Sponsors include key players such as Ameritech (USA), AT&T, Burgan Bank (Kuwait), Cable & Wireless (UK), NEC (Japan), Nokia (Finland), Sprint (USA), Teleglobe (Canada), Telekom Malaysia and Telstra (Australia) Page page 4 of numpages 1 "v.Astitableno~ z{%&ststbc""S$T$s$t$$$$$G%H%g%h%%%%%&&&&&&A'B'a'b'''(((((($)%)D)E)      VE)*****++++++++++++++++ 4u < Z \ V k 1kLzVo^ssbsK![!""#S$$G%%Ⱦṹȯܠׯጄ||:!.$:!.$:!. :!.:!.:!. :!.:!.:!.:!. :!.:!.:!.:!.:!.:!.:!.:!.:!. :!.:!.:!:!:!.0%&&?'A'''((")$)**a***++++++¼:!.:!.:!.l" @ .l" @ .l" @ .:!.:!.$NNormal_after_headingsRel#Rel Date Orig LangTitleindent1y      ! F 18!o#h 7 7 7 7 7 e 7x xx 7BB7S W*#####W*+'W*|##)E)+%+MTimes New Roman Symbol&Arial "HelveticaTimes5Courier New > d u#C""+#K###H$h$W%w%%%s&&'''''W*999999999999999999 )!6) "h:E;Eb,*6ITU/95-2Maurice Francine MAURICE FR.