21 January, 2010 The World Bank Group – ICT Department Rémy Fekete, Partner

1. PPPs in Backbone and Access Networks in developing countries : Benefits and Legal Issues 21 January, 2010 The World Bank Group – ICT Department Rémy Fekete, Partner

2. Significant impact of Broadband for Economic Development Economy-wide impacts based on sharing costs and benefits Better circulation of information – Ensuring access of the network Every 10-percentage-point increase in penetration of broadband services triggers a 1.3-percentage-point increase in economic growth A needed structure to offer a new dynamic Inadequate technology Digital divide Large gaps in geographical coverage Reinforcement of economic inequalities Introduction

3. Introduction • A dead-end situation: • Private initiative alone will not… • National budgets alone cannot… …fully answer ICT development demand • PPPs have emerged as an effective tool for overcoming this tangled- up situation by combining private sector know-how with public interest aims. • Average yearly PPP investment increased by 118% between 2000 and 2006 in telecommunications.

4. 1.1 Definitions PPP: any form of partnership between the public authorities and the private sector that aim to ensure the funding, construction, renovation, management or maintenance of infrastructure or to provide a public service. Build a PPP project on a sector diagnostic A realistic assessment of the sector constraints must be set up: 1- The legal, regulatory and policy framework. 2- The technical issues. 3- The financial, economic and social issues. 1- What is a PPP ?

5. 1.2 Parties involved Capital Sponsor Other shareholders Concession sphere Guarantee and financing sphere Corporate sphere 1- What is a PPP ? State/public sector Private sector Debt Banks Multilateral Organizations Project Company Constructor Operators Revenues Users/ Client

6. 1- What is a PPP ? 1.3 Stakeholder interests in PPPs : a balance to reach Government • Maximize revenue • Provide universal access to service • Ensure affordable basic service • Promote fair competition • Attract investors • Improve public welfare Employees • Ensure fair treatment of present employees • Provide career opportunities • Improve productivity, efficiency, Consumers StakeholderInterests • Ensure fair pricing • Improve quality and reliability of service • Increase accountability and responsiveness Investors • Ensure stable, transparent regulatory process • Enable organizational restructuring and asset allocations • Provide trained human resources • Generate more investment opportunities

7. 1- What is a PPP ? 1.4 Three key characteristics of PPP projects • A contractual agreement defining the roles and responsabilities of the parties and in particular the ownership of the infrastructure • Sensible risk sharing among the public and private sector partners • Financial rewards to the private party commensurate with the achievement of pre specified outputs.

8. 2- Different forms of PPPs 2.1 Forms of cooperation Source: ICT Regulation Kit – 16 October 2009

9. 2. Different forms of PPPs : each structure suits the project characteristics

10. 2- Different forms of PPPs 2.2 Financial options of PPP projects • Loan Agreement / Grant / Subsidy Key questions: • Which party supports the maximum amount of risk? • Which financial guarantee can be implemented? • Are By Laws in compliance with the scope of the PPP project? • Joint venture / Public party becomes a shareholder of an ad hoc entity Key questions: • What is the scope of the exit clause? • Is there any Golden share clause? • How is the valuation of the public’s shares made?

11. A few figures to illustrate: Strong increase in mobile penetration eg.: from 2% in 2003 to 33% in 2008 in Africa Strong increase in web users eg.: yearly growth rate of 30,6% between 2003 and 2008 in Africa Installation of intercontinental undersea optic fiber cable systems 3- An attractive structure for ICT in Developing Countries

12. 3- An attractive structure for ICT in Developing Countries African undersea cables (active and projects)

13. 3- An attractive structure for ICT in Developing Countries Global Carribean Network (active) Source: globalcarribean.net

14. 4. Major steps for a successful PPP Procurement Implementation Project Appraisal Project Identification Design & Agreement Preliminary Stage Stages EVALUATION MONITORING • Preparation of National and local legislative and regulatory structures • Suitability Assessment • Selection of PPP type • Define PPP structure • Tender • Evaluation • Negotiation • Contracting • Construction • Operation • Monitoring • Contract management • Evaluation • PPP Design • Procurement process selection an design • Agreement of National Authorities and funders Requirements • Legal contest • Institutional capacity • National policy • Identification of funding strategies • Desired gains • Obstacles and constraints • Private sector interest • True cost of services • Cost and benefits of PPP • Needs assessment • Risk allocation • PPP components • Budgeting • Expectations of a PPP • Integration of PPP into design • Procurement procedure selection & design • Funders requirements • Financial and socio-economic appraisal • Open and transparent process • Detailed recordings • Effective implementation structures • Effective working relationship

15. 5- Practical considerations : contractual toolkit

16. 5- Practical considerations : contractual toolkit

17. 5- Practical considerations : contractual toolkit

18. Conclusion • New verbal designation for a pre-existing but evolving legal structure. Moving responsibilities from the public to the private sector, creating a new dynamic. • Wide coverage in telecommunications requires this PPP structure to enhance the networks. • Key role to play in ensuring a successful economic and social development of poor and fragile populations.

19. Abu Dhabi Alger Belgrade Bruxelles Bucarest Budapest Casablanca Dubai Hanoi Hô Chi Minh Ville Hong Kong Istanbul Kiev Londres Moscou New York Paris Pékin Prague Riyad St-Pétersbourg Shanghai Tunis Varsovie Rémy Fekete, Partner fekete@gide.com Gide Loyrette Nouel Association d'avocats à responsabilité professionnelle individuelle 26, cours Albert 1er 75008 Paris - France Tél. +33 (0)1 40 75 61 90 Fax +33 (0)1 43 59 69 83 www.gide.com THANK YOU QUESTIONS Page 19