NOTE NUMBER 288
P U B L I C P O L I C Y F O R T H E
privatesector
APRIL 2005
Ada Karina Izaguirre
The Private Participation
in Infrastructure (PPI)
Project Database tracks
infrastructure projects
owned or managed by
private companies in
energy (electricity and
T H E W O R L D B A N K G R O U P PRIVATE SECTOR DEVELOPMENT VICE PRESIDENCY
natural gas transmission
and distribution),
telecommunications,
transport, and water and
sewerage. For more
information on the
database, see the Web site
at http://ppi.worldbank.org.
Ada Karina Izaguirre
(aizaguirre@worldbank.org)
is an infrastructure
specialist with the World
Bank’s Infrastructure
Economics and Finance
Department.
Private Telecom Projects
Private Activity Down 15 Percent in 2003
Drawing on the World Bank’s Private Participation in Infrastructure Project
Database, this Note reviews developments in the telecommunications sector
in 2003. Data for the year show that investment in projects with private
participation was back to 1996 levels. Two regions—the Middle East and
North Africa and Europe and Central Asia—saw private activity grow in
2003. And developing country companies were the most active sponsors.
Private activity in telecommunications in low- declining in the other developing regions (see
and middle-income countries remained sub- table 1). The Middle East and North Africa saw the
dued in 2003.1 Investment flows to projects with region’s highest investment flows in 1990–2003,
private participation declined for the third con- more than US$5 billion, driven mainly by the par-
secutive year, amounting to US$28.5 billion tial divestiture of Saudi Telecom. Other new proj-
(table 1).2 Nevertheless, 22 new projects with ects included three mobile operators in Iraq. In
fixed or mobile operators reached financial clo- Europe and Central Asia investment flows grew by
sure in 16 developing countries. 17 percent as mobile operators expanded net-
Most of the decline in investment occurred in works in the Czech Republic, Hungary, Latvia,
lower-middle-income countries, where investment Poland, Romania, and the Russian Federation.
flows dropped from US$11.3 billion to US$8.8 bil- In Sub-Saharan Africa investment flows fell
lion. Low-income countries also contributed to the slightly but remained at around US$3 billion—
slowdown, with investment flows falling from the third highest in 1990–2003. Most of the
US$6.8 billion to US$5.4 billion. Flows were nev- investment went to network expansion by
ertheless strong, the fourth highest for this group mobile companies. Nigeria, where mobile oper-
in 1990–2003. Investment flows to upper-middle- ators aggressively expanded their networks,
income countries grew by 9 percent to US$14.2 bil- accounted for more than a third of the region’s
lion, yet were still close to the level of 1996. investment flows in 2003.
In Latin America investment flows fell by 30
Regional trends percent. Mobile operators in Brazil and Mexico
Investment flows grew in the Middle East and accounted for most of the year’s investment. In
North Africa and in Europe and Central Asia while East Asia, which saw investment flows fall by 50
P R I V A T E T E L E C O M P R O J E C T S PRIVATE ACTIVITY DOWN 15 PERCENT IN 2003

Investment in telecom projects with private participation in developing countries, by region, 1994–2003
Table (2003 US$ billions)

1 Region
East Asia and Pacific
Europe and Central Asia
1994
4.0
2.2
1995
6.6
4.5
1996
8.5
5.6
1997
10.5
12.3
1998
1.9
10.3
1999
4.9
9.0
2000
7.7
17.5
2001
4.2
8.8
2002
4.7
6.7
2003
2.3
7.9
Latin America and the Caribbean 11.5 7.9 11.1 14.6 41.8 19.5 17.5 22.5 10.1 7.1
Middle East and North Africa 0.1 0.1 0.1 0.2 1.9 2.0 3.6 1.7 1.2 5.2
South Asia 0.7 0.9 1.8 4.6 0.9 1.4 1.0 3.6 5.1 2.8
Sub-Saharan Africa 0.7 0.8 1.1 3.1 1.6 3.1 2.8 3.9 3.2 3.1
Total 19.2 20.8 28.3 45.3 58.4 40.0 50.1 44.6 31.1 28.5

Source: World Bank, PPI Project Database.

percent, most went to integrated fixed and Private participation spreading

mobile operators. And in South Asia, where
investment flows declined by 40 percent, activity
was driven mainly by mobile operators in India.
Mobile services leading the way
Private activity grew or remained stable in seg-
ments that include mobile services while declin-
ing in the others (fixed line and long distance).
Stand-alone mobile operators, accounting for
half the 22 new projects in 2003, kept invest-
ment flows at US$13 billion (figure 1). Most
went to network expansion by existing opera-
tors. Integrated fixed and mobile providers, the
second most active segment, saw investment
flows grow by 13 percent, thanks mainly to the
divestiture of Saudi Telecom. For fixed line
operators without mobile services investment
flows fell for the fourth consecutive year. The
decline confirms that mobile telephony has
become by far the most dynamic telecommuni-
cations business in developing countries.3
Investment in telecom projects with private participation in developing
Figure countries, by segment, 1990–2003
Private activity in telecommunications expanded
geographically in the past few years, with 15
countries introducing private participation in
the sector in 2001–03. In the Middle East and
North Africa four countries—Algeria, Iraq, the
Syrian Arab Republic, and Tunisia—opened the
sector to private mobile operators, while Saudi
Arabia divested its incumbent operator. In Sub-
Saharan Africa five countries—Angola, Eritrea,
The Gambia, Liberia, and Mali—allowed private
mobile operators, and Mauritius partially
divested its incumbent operator. Afghanistan,
Belize, and Tonga also allowed private mobile
operators, and the former Yugoslav Republic of
Macedonia divested its incumbent operator. By
2003, 128 countries had private participation in
telecommunications.4
After the boom of 1996–2000
Among infrastructure sectors, telecommunica-
tions was the least affected by the decline in pri-
vate activity in the past few years, maintaining
high investment flows. Annual investment flows
averaged US$34.8 billion in 2001–03, much

1 2003 US$ billions

25

20 Mobile access
higher than the US$15.8 billion in 1990–95.
During the boom of 1996–2000 annual flows
averaged US$44.4 billion.
The decline in investment flows after the
15 Mobile and fixed access boom did not reflect a slowdown in sector
and long distance expansion. Instead, it resulted from the end of
10 major privatizations and spectrum license
5 awards. Investment flows for the acquisition of
Fixed access
and long distance government assets (divestiture revenues and
0 license fees) dropped significantly after 2000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
(figure 2), while investment flows for sector
Source: World Bank, PPI Project Database.
expansion kept growing after the boom.5
Network expansion had been facilitated by
falling equipment prices and new technologies.
Indeed, the rapid network rollout that started in
the 1990s continues.6
The slowdown in private activity played out
differently across regions (figure 3). The three
regions most active during the boom—Latin
America, Europe and Central Asia, and East
Asia—saw sharp declines in investment flows in
2001–03. Conversely, the other three developing
regions saw investment flows rise after the boom.
Sub-Saharan Africa was the most successful in
maintaining the growth, accounting for 11 per-
cent of the investment flows to the sector in 2003.
Telecommunications also was the sector least
affected by contract cancellations and distress.7
By 2003, 21 projects, involving 4.1 percent of the
total investment in telecommunications in
1990–2003, had been canceled or were in dis-
tress. Among the projects that were canceled,
few had run into disputes over pricing or col-
lection. Instead, most of the projects, involving
cellular services in markets with alternative sup-
pliers, were canceled because they failed to
attract enough customers or because the gov-
ernment decided to alter the market structure.
Who is investing?
Developing country sponsors have become
more active. Eight of the top 10 telecommuni-
cations sponsors in 2001–03 were companies
from developing countries: Reliance Industries
Average annual investment in telecom projects
with private participation in developing
Figure countries, by destination, 1990–2003
2 1990–95
0 5
1996–2000
2003 US$ billions
10 15 20
2001–03
25
Acquisition
of government
assets
Sector
expansion
Source: World Bank, PPI Project Database.
(India), America Movil (Mexico), Telemar
(Brazil), Orascom (Arab Republic of Egypt),
Globacom (Nigeria), MTN Group (South
Africa), Econet Wireless (Africa), and Bharti
Enterprises (India).
The emergence of these investors reflects in
part the withdrawal of global sponsors from
developing countries. Except for the Spanish
Telefonica, which acquired BellSouth’s assets in
3
Latin America and mobile operators in Mexico,
global operators have reduced their presence in
developing countries by selling underperform-
ing or nonstrategic assets as part of strategies to
improve their financial situations. In 2001–03
France Telecom exited Argentina, El Salvador,
and Indonesia and began trying to sell assets in
Brazil. Deutsche Telecom sold assets in
Malaysia, the Philippines, and Ukraine. Verizon
exited Argentina, the Czech Republic, and
Mexico. TeliaSonera divested assets in Brazil,
Hungary, and India and announced that it
would focus on Eurasia, Russia, and Turkey.8
By 2003 these changes had become notice-
able in the regional lists of top 10 sponsors. Nine
of the top 10 in Asia were regional companies,
such as Singapore Telecom, Ayala Corp, and
Charoen Pokphand Group in East Asia—and
Reliance Industries, Tata Enterprises, Bharti
Enterprises, and Essar Group in South Asia. In
Latin America and Sub-Saharan Africa 5 of the
top 10 sponsors were regional operators, includ-
ing such companies as America Movil and
Average annual investment in telecom
projects with private participation in
Figure developing countries, by region, 1990–2003
30
3 1990–95 1996–2000
0 5
2001–03
2003 US$ billions
10 15 20 25
East Asia and Pacific
Europe and
Central Asia
Latin America and
the Caribbean
Middle East and
North Africa
South Asia
Sub-Saharan Africa
Source: World Bank, PPI Project Database.
P R I V A T E T E L E C O M P R O J E C T S PRIVATE ACTIVITY DOWN 15 PERCENT IN 2003

Top 10 sponsors of telecom projects with private participation in developing countries,

Table by region, 1990–2003

2 Investment
East
Asia
Europe
and
Projects by
Latin
America
region
Middle
East and Sub- viewpoint
(2003 US$ and Central and the North South Saharan
Sponsor billions)a Projects Pacific Asia Caribbean Africa Asia Africa
Telefonica SA 50.3 18 0 0 17 1 0 0 is an open forum to
Carso Group 40.2 2 0 0 2 0 0 0 encourage dissemination of
Telecom Italia 38.3 16 0 2 14 0 0 0 public policy innovations for
America Movil 21.4 16 0 0 16 0 0 0 private sector–led and
France Telecom 20.6 29 3 5 4 5 1 11 market-based solutions for
Deutsche Telecom 19.4 24 0 22 0 0 0 2 development. The views
Portugal Telecom 18.3 10 0 0 7 1 0 2 published are those of the
Telemar Participacoes 13.4 2 0 0 2 0 0 0 authors and should not be
Verizon 12.8 5 2 1 1 0 1 0 attributed to the World
Telecom Malaysia 12.4 8 1 0 0 0 2 5 Bank or any other affiliated
Totalb 228.8 119 6 29 54 6 4 20 organizations. Nor do any of
the conclusions represent
Note: The ownership structures of the projects are as of December 2003.
a. Investment from all sources in projects in which sponsor has a stake of 15 percent or more. official policy of the World
b. Data may not sum to totals because of projects involving more than one sponsor.
Source: World Bank, PPI Project Database. Bank or of its Executive
Directors or the countries
they represent.

Telemar in Latin America—and MTN Group, 4. This number does not include countries with private
Vodacom, Econet Wireless, and Celtel in Sub- telecommunications operators established before 1990. To order additional copies

Saharan Africa. Regional operators also 5. The PPI Project Database underestimates invest- contact Suzanne Smith,

appeared in the top 10 lists of the Middle East ments in sector expansion because of data gathering prob- managing editor,
Room F 4K-206,
and North Africa (Orascom) and Europe and lems. It relies on public information, but many operators
The World Bank,
Central Asia (AFK Sistema). Among the top 10 do not release data on investments.
1818 H Street, NW,
sponsors across all developing regions in 6. See World Bank, “Financing Information and
Washington, DC 20433.
1990–2003, 4 were regional companies (table 2). Communication Infrastructure Needs in the Developing
World: Public and Private Roles,” draft for discussion
Telephone:
(Washington, D.C., February 2005) http://lnweb18.world
001 202 458 7281
bank.org/ict/resources.nsf/InfoResources/04C3CE1B933
Fax:
Notes 921A585256FB60051B8F5.
001 202 522 3480
1. The Private Participation in Infrastructure (PPI) Proj- 7. Canceled projects are those in which private spon-
Email:
ect Database includes only low- and middle-income coun- sors sell or transfer their economic interest back to the gov-
ssmith7@worldbank.org
tries as classified by the World Bank. For the country ernment; remove all management and personnel; or cease
classification used in the 2003 update, see http://ppi.world operation, service provision, or construction. Distressed Produced by Grammarians,
bank.org/wbclassification.asp. Project information and projects are those under international arbitration or for Inc.
country classifications are updated annually. which cancellation has been formally requested.
2. All dollar amounts are in 2003 U.S. dollars. Nominal 8. TeliaSonera’s 2003 annual report on Form 20-F as Printed on recycled paper
figures have been deflated using the U.S. consumer price filed with the U.S. Securities and Exchange Commission
index. The PPI Project Database records total investment (http://www.teliasonera.com/ir).
in infrastructure projects with private participation, not
private investment alone.
3. See International Telecommunication Union,
“Mobile Overtakes Fixed: Implications for Policy and
Regulation” (Geneva, 2003) http://www.itu.int/osg/spu/ni/
mobileovertakes/Resources/Mobileovertakes_Paper.pdf.
This Note is available online:
http://rru.worldbank.org/PublicPolicyJournal