RESTRICTED
Report No. PU-ZZa
This report was preptred oi use within the Bank and its affiliated organizations.
They do not accept responsibility for its accuracy or completeness. The report may
not be published nor may it be quoted as representing their views.
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
INTERNATIONAL DEVELOPMENT ASSOCIATION
SINGAPORE
APPRAISAL OF THE TELEGOMMfTNIGATTINS EYPANSION PROG-RAM
(1970-1973)
SINGAPORE TELEPHONE BOARD
November 28, i969
Public Utilities Projects Department
R)
E-4 .
O
c3 i
i D
a) t12 � P4U] r-i
CQO\ ODD H
~C\i. CJ2 42)
Cix ^ CD E-> > ClJ Er-,
rr C H ID
-mE r N \O E-4 H la
40+ P ~ ~ P -4 .14 4
1 - e .. ; Ib
3 43 1 ] 0u < Dc
C) > t2] O] C ) ;E rl z ) Cr
SINGAPORE
APPRAISAL OF THE TELECOMMUNICATIONS EXPANSION PROGRAM
(1970-1973)
SINGAPORE TELEPHONE BOARD
Table of (nn-tents
Page No.
SUMIARY AND CONCLUSIONS . . . . . .. . . . . . . . . i
1. INTRODUCTION . . . . . . . 1
2. BACKGROUND . . . . . . . . . . . . . . . . . . . 2
3. THE PROJECT FOR BANK FINANCING . . . . . . . . .. . 4
4. ECONOMIC JUSTIFICATION . . . . . . . . . . . . . .. 6
5. THE PORROWER . . . . . . . . . . . . . . . . . . 8
Tariffs . . . . . . . . . . . . . . . . . . . . . 8
Accounting and Audit. . . . . . . . . . . . . . . 9
Insurance . . . . . . . 9
Present Financial Position . . . . . . . . . . . 9
Past Earnings . . . . . . . . . . . . . . . . . . 11
Tax . o. .............. ................... 12
6. FUTURE FfLUANES . . . ... *. . . .* 13
Financing Plan. . . . . .. . . . . . . . . . 13
Future Operating Results. . . . . . . . 14
Future Financial Position . . . . . . . 15
7. RECOMMENDATIONS . . . . . . . . . ........ 16
This report was prepared by Messrs. A. M. Minton and J. M. Vance.
List of Annexes
1. Exchange Installation Program
2. Cost Schedules
3. Past & Forecast Demand
4. Cost Benefit Analysis
5. Organization Chart
6. Summary of Tariffs
7. Balance Sheet 1965-1975 (Page 1)
Notes and nAssi.mptions on the Balance Sheet (Pares 2 and 3)
8 nPeratnj S tate l.. .nt1965-1975 (Page 1)
Notes and Assumptions on the Operating Statement (Page 2)
9. Forecast Sources and Applications of Fands
Map of Singapore
SINGAPORE
APPRAISAL OF THE TELECOMIMUNICATIONS EXPANSJDN PROGRAM
(1970-1973)
SDJUAPORE TELEPHONE BOARD
SUMMARY AMN CONCLUSIOiNS
i. The Singapore Telephone Board (STB) is currentlv expanding local
telephone service with the assistance of a Bank loan (513-SI, US$3 million,
1967). The work is Droceeding as Dlanned and will be comDleted enrlv in
1970. The standard of service being provided is good, but there are in-
creasine arrears in meeting new demands becanuse of an unnprecedented upsmrge
in industrial and other development.
ii. The project appraised in this report is the four-year 1970-1973
expansion progrnm of the Board. The rate of epr ion4' is b nncr
to keep up with the commercial and industrial demand and to fit in with the
roverment qs plans for the long dis+tnce service (which ithe responsib;it,--
of a Department of Government) and other infrastructure work in the Republic.
iii. The cost of the project would be US$37.1 million equivalent
wta forei. conter.t of TTQrS2.7 mi Mo T-e- propose 1d . -A w ,l be 'or
U%J4JLL* - I JJJ L LVL p1. J.kJJOUU .L'J0.L VWVU-LL Li~ iU
US$11 million, to finance goods procured by international competitive bidding
unclyL_J theLUZ U 1�blr.ce o aui . W UJ)IFiItU cULUIt.-' -LunUe Luai
513-SI. The remaining requirements wTould corne from earnings, borrowings from
Go,rnve..r.4 .n,A 41.. the.2 -nib-re baac o- Loa 513-SI.
2.v. Dr ear-ly 1970 there wili be 12 automatic excnanges serving the
area, with a capacity of 120,000 lines. The project is to add four further
exchanges and expand the existing excnanges to a total capacity of about
200,000 lines. About 70,000 new subscribers would be added during the period.
v. The STB which would be the borrower is a Government-owned corpora-
tion. It has a good degree of autonomy, is we organized and managed, and
operates efficiently in terms of staff utilization, level of tariffs, and
return on invested capital.
vi. STB's financial position is sound and forecasts show it would
remain so throughout the project.
vii. The program is technically sound, well balanced and designed to
meet the economic needs of the Republic. The incremental rate of return
of the project is calculated to be 11.5%. This is only on the local network
and does not include the benefits from the more profitable long distance
service which is under a Government Department.
viii. During negotiation agreement was reached on the points listed
under Chapter 7. The project would be suitable for a loan of US$11 million
to be repaid over 20 years including a grace period of 4h1 years.
SINGAPORE
APPRAISAL OF THE TELEODMMUNICATIONS EXPANSION PROGRAM
(1970-1973)
SINGAPORE TELEPHONE BOARD
1. INTRODUCTION
1.01 Tne project covered by this appraisal is lane four-year
1970-73 construction program of the Singapore Telephone Board (STB).
Tne total cost is estimated at S$113.5 million i-u0'(.1 million
equivalent), of which US$22.7 million is foreign expenditure. The
proposed Bank loan would be for US$!! millicn. The balance of the
funds would come from STB's internal cash generation, borrowing from
the Goverrment, and the undisbursed balance of Loan 513-SI.
1.02 STB is currently expanding its facilities under a two-
year 1968-69 project costing S$30 million (US$10 million equivalent)
with the assistance of a US$3 million Bank loan (513-SI) towards the
foreign expenditure of US$7 million. This project is proceeding
according to plan; however, there has been a not unexpected upsurge
in the demand for telephone connections brought about by buoyant
conditions in trade and industry. Consequently, STB now faces a
bigger challenge than previously to increase its construction effoxts.
1.03 The Borrower would again be (as in Loan 513-SI) the
Singapore Telephone Board, a statutory corporation owned by the Govern-
ment, which would be the guarantor.
1.04 This report is based on information furnished by STB and
on the findings of Messrs. A. M. X4inton and J. M. Vance, who made
an appraisal visit to Singapore in July 1969.
- 2 -
2. BACKGROUND
2.01 The Republic of Singapore, with an area of 225 square miles,
consists of the island of Sinapnore (26 bv 1L miles) and about 40 adjacent
islets. The island is separated from the southern tip of the Malay peninsula
(We.st MAlnayin) by th> .t+.ril-. rf .Thhra +.traversed by a causeO-
way, and from Indonesia by the Singapore Strait. The country has a population
of over two million +wo-thiric of whom. lire in the port city of Singapore.
Since 1819, wihen the British set up a trading post at the site of a small
fishing ,rfl 1a -n g -n t- .hMs becme a m.ebtropolis and re-
gional center for commerce and communications with its port handling the
for+,"h llargaist tonn.age -. 4the wol.Th ai rwh h ats.,,
..'** ..k.~. U .L.I UJL.L WJL.L.A. L.LLV. A. d<J.Fl.L .L U� LJi l L1. u.llo j&D. u 0 ul/Vull u.
from Singapore's focal position as a trading center and its strategic loca-
tW44 O kn~ asa.r.4'ita.y baOs fV.Lr LJoJutheLasU sijJa. S-ce 1U9v ULinm g8UVeL.L1UU.LIL' by
the People's Action Party., the country has seen a very active program of
rLk~.dLusr.;at. UUVio. e lju UeUJJ-LVUe are toA U�-VU.L-Ly JLL1h econuoiri,ry 5.d t
a more secure long term source of foreign earnings than is provided by
entrepot trade and the ritdish naval and air establishments, which are being
withdrawn. Public housing and urban renewal projects have been carried out
on a massive scaLe, providing additional employment and giving Singapore one
of the highest standards of living in Southeast Asia. In 1965, Singapore
separated from the other states making up the Federation of Malaysia two
years after joining it.
2.02 The local public telephone system in Singapore was started in 1882
by the Oriental Telephone and Electric Company Ltd. (OTEC). Under the
Telephone ordinance of 1953, the Government set up a statutory board, STB,
which in 1955 took over the assets and operations of the Company. The Board
is a corporation fully owned by the Government. Its expansion can be gauged
from the fact that its assets have grown from S$13 million in 1955 to S$80
million in 1969.
2.03 The Government's Department of Telecommunications is responsible
for all other aspects of telecommunications, including telegraph and telex
services, the trunk service to Malaysia, intexational radio and cable services,
and services for shipping and civil aviation. This Department's activities
have also expanded greatly in recent years by the acquisition of the assets
of Cable and Wireless Ltd., and by the completion in 1967 of the Commonwealth-
owned 'Seacom' cable which links Singapore with high quality speech circuits
to Hong Kong, Australia, Canada and the United Kingdom. The Department will
soon establish a satellite earth station.
2.o4 There is a close relationship between the Department of Telecommu-
nications and STB. STB leases circuits to the Department for telegraph,
telex and other services. and meters and renders bills on its behalf for
trunk calls to Malaysia dialled by subscribers. For these services, STB
is reimbursed onlv for direct ost ii-. btdoes not+. qhynrp in t-he coniiArnh1l
profits made by the Department in operating the more remunerative of the
telecozmmunicati;onst senrvces. lThis division of arevenues v.tu-m1A 1-or 1n +1,e
satisfactory if it were not a fact that both entities are fully Goverrnment-
ow.n.ed, that STB's financrial resul+us a~e good an.d that the Uvern.t
expects eventually to amalgamate them under one statutory board. During nego-
it4 a+.io-w. + thi was~ v.r cw'aer,edA ther +iGovr,a. wwl kee w 4 to,-.e of ;y
steps that are taken.
2.05 STB operates a fully automatic telephone system consisting of 11
~~~~- - 4__ .0 - 'I I %_n x -^ D_L Q_ nnn _1_ __ 1:_
excLuLarsges with V -i d uJa.LJy LV.L- LUU.1U X . LrIZ uL WX�U U uuvUu are wuo.J
(June 30, 1969). Exchange equipment installed prior to 1967 is the step-
by--step type (post-war British manufacture) installed and maintained i1
close conformity with British Post Office practices. Since 1967, 20,000
lines of Swedish Ericsson crossbar equipment have been used in new installa-
tions. Local calls are not metered; most trunk calls to Malaysia can be
dialled by the subscribers and are recorded on meters. International calls
are handled by operators at the Department's trunk switchboard. Outside
plant practices are based on those of the British Post Office, modified
to suit Singapore's tropical conditions. The standards of maintenance of
both equipment and outside plant being very good, STB is not faced with
appreciable reconstruction of existing plant as is sometimes necessary to
pave the way for expansion. Since it provides neither a rural nor a long
distance service, STB's operations are rather more straightforward than
is usually the case.
4
3. THE PROJECT FOR BANK FINANCIG
3.01 STB has made forecasts of telephone demand through to 1975, and
has drawn up a program that would follow its current Bank-financed program
(Loan 513-SI) and enable it to connect new subscribers without incurring
too much delay.
3.02 The project for the proposed second telecommunications loan is
the time slice of STB's expansion plans covering the period from January
1970 to December 1973. During these four years, five new exchanges are to
be established, including one of 10,000 lines, already well advanced for
commissionimg in early 1970 and financed from Loan 513-ST. The system
capacity will be expanded to about 200,000 by the progressive installation
of these new exchanges and regular 3-yearly extensions at each of the
existing exchanges. The exchange installation program is shown in Annex 1.
The junction cables and main subscriber cables will be augmented as necessary
to allow connection of about 70,000 additional subscribers, bringing the
total to about 16h,000.
3.03 The nonstru tion of new ecxhange buildings and associated duct
systems will be coordinated with other infrastructure work which the
Government plans in connection with new inHustrial nreas nd satellite towns.
It is particularly desirable, in the interest of overall efficiency, that
this rather substar.tial forw.ard investment be made at. the right stage of
road and other formation work.
3.o4 Estimated costs of the Project as shown in Annex 2 are summarized
noQ Pr 1 1 At.e Q -
CtJ 4.JJ4AV_'VIJ * -
S$ mil5lior. _ 3S'$ mill or.n
Item Local Foreign Total Local Foreign Total
A. Land & buildings 17.3 - 17.3 5.7 - 5.7 15
B. ExchanFepequipment 4.2 31.0 35.2 1i4 10.1 11.5 31
C. Outside plant &
telephones 21.6 37.4 p9 � 7.1 12.2 9.3 5
D. Miscellaneous 0.7 1.3 2.0 0.2 �.4 0.6 2
Iotal 43.8 69.7 113.5 14h4 22.7 37.i '10
3.05 The loan will cover US$11 million of the foreign costs. The items
financed will be exchange equipment estimated to cost US$2.5 million under
B above and cables and accessories estimated to cost US$8.5 million under
C above.
3.06 STB's normal procurement policy is to call international bids for
all items costing in excess of S$5,ooo. In the case of switching equipment,
the Board has followed a policy of standardization. This is sound in view
- 5 -
of the limited scale of its operations and the fact that all its exchanges
form a slngle metropolitan network. After calling international bids undcr
Loan 513-SI, the Board entered into a four-year supply contract with the
Swedish L.M. Ericsson Co. for some 50.000 lines of crossbar equipment for
new exchanges and major extensions. Loan 513-SI financed most of the C.I.F.
cost of the first 18.000 lines of eouinment ordered under this contract,
equipment now installed and mostly in service. A further 23,000 lines of
equinment is in the cowrse of mannufacturre for deliverv in 1970 and 1971.
The proposed loan will cover payments of US$1.3 million still to be made
tfnr +.his eniimentr+ _nA an estim.a TeTd.1 millinn fnr a finAl 10.000 lines
of equipment soon to be ordered for delivery in 1971 in completion of the
contract. For the fi4ifr sTB has recently a-ranged with L._M_ Ericsson to
form a jointly owned subsidiary in Singapore to assemble telephone equipmerlt
commencin- about 1973. The price t+ STB is expected to be close to present
prices. An interim requirement of equipment for the project in 1972 will be
obtained by- negotiating an, exter.sior. of the preent contract. Step-by-step
switching equipment which STB buys only to build out the capacity of smaller
exitirg sep --ch,-es, 4s obta4.ed P--- 4the -4i-l upler 1
~~ .W ~ W U nJ L1.CLAS1~O 4.0 L/ I) UG.L %A .L. L AJAI VA&JV VL/J .LAr.J
finance will be confined to equipment supplied under the contract entered
.LLAA UV LJ _U '..L AJ te w.LL,LL .DCULML 6LA.LUt..LJ.LtJeO U.LIUR4. UIJIJ %.LA.J.V.1..LU .LJU"L/L
3.07 During the ~r~~appra l miSsionL biduuug doc.UU ,ents for the supply ot^
cable for 1970 and 1971 were approved for the issue of bid invitations.
awa-rd -wi.L not be maue prior to the loan signing, except o.Lr Uion � --
cable which it is necessary to lay early in 1970, and which it has been
agreed may be ordered for delivery in February 1970. It Will cost less
than US$250,000.
3.08 On items for which a local source of manufacture exists STB
would be required to pay a 40% customs tariff. Two cable factories enjoy
this protection on the limited range of small size plastic insulated and
sheathed cables which they produce, amounting to about 3% by value of SrB's
cable purchases. STB will finance this local procurement.
3.09 Disbursement would be made for the CIF cost of imported cables
and equipment.
3.10 The project is part of an on-going expansion of services. Should
there be overall savings in expenditure for the various items proposed for
Bank financing the savings may be utilized to finance other similar items
in the project.
- 6 -
4. ECONOMIC JUSTIFICATION
4.01 Traditionally, a major justification for Singapore to have a
good telephone service has been the entrepot trade. The coordination
necessary for the expeditious movement of goods and quick ship turn-around
in this fourth largest port in the world is very dependent upon an efficient
telecommunications system. At six telephones per hundred population,
Singapore has a telephone density greater than most Asian cities, comparable
with Taipei, Manila, but less than half that of Hong Kong and Japanese
cities. In respect of telephone density to GDP and in respect of invest-
ment proeram to GDP it is in a median position.
L.02 Thp econnmic importance of the servinp tn the unsrq is indicated
by the continuing demand for this service which covers its operating costs
and shnws a rat.e nf retuin, of 12% on the invtr ea.t -n locanl seice and
of about 50% on the investment in long distance service. Long distance
revenues, all from calls to o
largely for business purposes, already exceed local service revenues
and are vected to increase m , ral d ing +h e p bsf
the advent of an earth satellite station.
4.03 The incremental rate of return on the investment as shown in
Ann.ex h is 1l. f% without accou,nting for its contribution to the long
distance service. If the two services were considered together, the
in--^ental ratLe of re"urn co--" excee' 20o
LL~~ ~1tIi~.L �U~ L lLU�1 "Li� ~.UU CU'Ao.
.V4 r. LI epou iUCraue coni-lnues co increase, Ib LI ul UUlL- b e is
an upsurge in industry and tourism to be catered for. In 1968 Singapore
entered a phase of accelerated growth in private investment, naif oI it
in manufacturing. A number of Hong Kong entrepreneurs and Japanese manu-
faeturers have establisned subsidiaries, while large u.S. corporations
have opened regional distribution centers and manufacturing and assembly
plants. Several petroleum companies are increasing storage facilities
and in one case setting up a refinery; aerospace and shipping industries
are planned for establishment on soon to be vacated British air and naval
bases. The number of visitors, both directly for business purposes and
othenrise, has increased 2� times between 1966 and 1969, and this has
inspired a boom in hotel building. Compared with an average growth of 7%
per annum between 1960 and 1965, GDP increased an average 10% per annum
from 1965 and 13% in 1968. One third of the increase was from entrepot
trade, the balance from manufacturing, tourism and domestic trade.
4.o5 The effect of this recent economic expansion on the demand for
telephones has been considerable. Demand increased from an average 8% per annum
increase between 1961 and 1966 to 12.2% in 1967, 14.3% in 1968 and 16%
for the first half of 1969. In 1966, STB had planned for a continuation
of the 8% per annum growth then being experienced for its 1968-1969
expansion program. It was appreciated that a higher growth was a real
possibility, but there were offsetting uncertainties, such as the impending
British forces withdrawal, which at that time made it prudent to be
conservative. As it takes two to three years from the time an exchange
-7-
or an extension is ordered until it is brought into service, the present
upsurge in de.mand is resulting in an increase in the backlog nf applicants=
In December 1966 there were 2,300; by 1968 this had risen to 4,000; in mid_
1969 4+ was '0 even though tiing +.hs +.tw an na hal f' year nSTR had
connected 23,000 new subscribers, bettering its target. STB's 1970-73
exrpanfin 4is 1bmarnA nn densm- ;n -U ,ncrac n at about+ 7 n 1;4S4l -
which it can reconcile with firm development plans for the Republic.
h.o6 The program is correctly phased to come within 2% or 3% of meeting
thl1e es 'e.Ute erdLianU wi,,hI a m nL.-2-I,. of fo.LrU provision. ..,L i9 lndicatVed
graphically in Annex 3, which shows that the relationship between exchange
equipment and connected subscribers remains at about �0% a-verage fill, a
good level for a constantly growing multi-exchange system. In the first
full year following project completion net benefits (cash flow) will equal
10% of project investments, indicative that forward provision of outside
plant also is not excessive.
- 8 -
5. THE BORROWER
5.01 Under the 1953 Ordinance the Board is made up of seven members,
who are appointed from time to tine by the Minister of Communications.
They are selected from among responsible officials in public service and
5.02 The organnization is shownm in Annex 5. The chief exeiutivp offic.er
is the General Manager. The present incumbent has a commercial background.
STB is org. ^ ed so that the G-eeral Manager controls the activities of
three non-technical departments--personnel, stores, and accounts. Two
engir.Leers OrL s-",milar age anr.d experience 1"ill epsto fDi.sora
Manager, each also controlling three departments embracing, respectively,
the aspectus ofL Zxtuernlal r'ant ar,d UI,terna'l 4EQui-|Fs,ert. E"ach of t~he D^ar
nine departments is further subdivided into from two to five sections.
Organization and lines of responsibility are clearly defined and well nder-
stood by all concerned. The General Manager and most of the other 11 mem-
bers of the staff at the level of Department Manager and Divisional Manager
have held their positions since 1966, when the Bank first began dealings
with the Board. They are well qualified and trained, and are managing the
entity effectively.
5.03 Adequate steps are taken to recruit and train at all staff levels
for future needs. Overseas experience is given to professional and tech-
nical staff as necessary in order to prepare them for broader responsibil-
ities or new techniques.
5.04 Total staff is currently about 1,600. Only one member of manage-
ment is an expatriate. The number has increased at a slower rate than have
telephones, staff per 1,000 telephones having fallen steadily from 14.8
in January 1965 to 13.2 in January 1969. This indicates a good overall
efficiency in staff utilization under STB's circumstances.
Tariffs
5.05 The Telephone Ordinance of 1953 permits STB to determine and set
its own tariffs. No definitive tariff policy is laid down in the Ordinance
except that total revenues should cover total expenses. As shown in Annex
6, charges are on a flat rate rental basis. These tariffs have been in
effect for the past five years without any substantive changes.
5.06 Tariffs for service to points in Malaysia are set by the Director,
Telecommunications Department, in agreement with the Malaysian authorities.
Revenue from the Malaysian service, which is billed and collected by STB,
is remitted to the Department after deducting estimated costs of handling
the traffic, including working expenses, depreciation on plant utilized,
and interest charges of 8yk on capital invested.
5.07 Just nrior to negotiations the Board decided to proceed with a
tariff adjustment which would convert the flat rate rental charge for
bu.siness connections into an arrangement where anmy clls in excess of a
- 9
certain number each month would be charged at a specific rate per call
(untimed local call metering). The present plan would be to proceed with
further studies on the subject during 1970 and introduce the system in 1971.
Available statisticAl data are not fullv adequate to assess the average
calling rate per consumer group and to make a reliable computation of the
e~ffecsr1t s nf t h han-es; a roug h estimate Tn nicates however that the new
tariff should actually yield higher revenues than presently forecast.
5.08 The Loan Agreement 513-SI includes a rate covenant stipulating
+ha+ tarif will be maintained +to "td en a minuimim -retum.,n nf inl on
properly valued net fixed assets in operation. This commitment has been
fL '_l- m,et b-Y S17BU .. the'L pastC"L ar.d itwas agreved to con ne h-coen-.
as a condition for the proposed loan. Forecasts on the basis of present
ar-LL.Ld sUW thiat, the rate VI rIeu� f.or thUe nx fLv1 y -W'L v-
between 12.6% and 10.4%. Considering the tariff adjustment mentioned in
the previous paragraph, the return ig-ures wo'uld most likely be higher ater
1971.
Accounting and Audit
5.09 STB's senior accounting staff is well qualified. The accounting
system is well organized and is oriented to provide management with timely
information. STB intends to further organize its accounting system by
computeriz ing the whole of the Accounts Department by 1971; at present
only the billing operation is mechanized.
5.10 Under the first Bank Loan (513-SI), STB engaged a local auditing
firm of chartered accountants, Goh and Associates, to perform the annual
audit and certify the financial statements. Also, as agreed upon with the
Bank, certified copies of the statements are sent to the Bank not later
than six months after close of the fiscal year and unaudited financial
statements not later than four months after fiscal year close. This is a
satisfactory arrangement and will be continued under the proposed loan.
Insurance
5.11 STB's insurance practices are satisfactcry. Adequate coverage
against losses and liability is maintained.
Present Financial Position
5.12 Balance sheets as of December 31 for fiscal years 1965-1969 are
shown in Annex 7. A summary of the estimated 1969 balance sheet is given
below.
s$t ooo TiTc -t -oo
Assets
Telecommunications plant 128,997 42,142
Net fixed assets 27,790
Investments 1,500 -490
Currmen.t assets ,99 -,7'
Tota-' assetlus ^2.6 30,237
T i-a,b-l I 4t4-4is
uIu.Jina.U s1ck40,��O 13,068
Reserves 39,282 12,833
Total equity 79,282 25,901
Long-term debt
IBRD Loan 513-SI 6,574 2,148
Current liabilities 5,100 1,666
Deferred credit 1,600 522
Total liabilities 92,556 30,237
Debt/equity ratio 8/92
5.13 In 1955, assets valued at S$12.6 million (US$4.1 million) were
acquired from the Oriental Telephone and Electric Company Ltd. All sub-
sequent plant additions have been recorded at historical cost. Deprecia-
tion is charged on a straight-line basis at a composite rate of about 5%,
awhich is satisfactory. The asset values are realistic, since there has
been a high degree of price stability in Singapore in the past 10 years.
STB investments consist of S$1,000.000 in a fund for emnlovee housing
loans and S$500,000 in Government securities. The ratio of current assets
to current liabilities is 1.17 to 1, a satisfactorv cuirrent positior for
STB.
5.14 The 1953 Ordinance provides that the Board may, with approval
of the Minister of Finance. issue shnres opf c Twoissues hav been
made, in 1963 and in September 1969 by capitalizing part of the general
reserve and unanpropriated srplusn Each was in the amorunt of S$20 mllion
with the Government as sole stockholder.
%.15~ Equity, represent-,, O% O 9< ov toa aiaiain was bui.lt '-
from accumulated earnings. Except for the payment of moderate dividends,
STB has IDbee- n pe..,te A 4-ui: its U4-.*gs-- epso p -poses -d
has self-financed a substantial portion of its expansion projects over
thLle past-P__ _ five year- (se -I-a 5.17). Ton-tr, debt_ ( of- 4total- capital-
U J.LVU YUI._ %0U jJJ..4. - .J. .LilJlr,- UriA-�L Ut:UL' %U/3 UJ. ULC,UI.,d� _UC_
ization) is wholly represented by the partially drawn Bank loan 513-SI
for JUS$3 mIllIon. The only- other long-teL1 rm borrownlg -was a l976 GovernmentE.
loan of S$15 million (US$4.9 million), at 5 1/4h, interest with a 20-year
r-epaymltentb period, in l965 STb k cided to acceler-tg repayment of the loan
to the Government and maxe the final payment in 9 9.
Past Earnings
5.o Operating statements for the five fiscal years 1965 througn 1969
are shown in Annex 8. As a result of substantial expansion of the network
during this period, net operating income increased from S6b.b mllion at
end of 1964 to an estimated S$10.6 million in 1969. The rate of return
on average net fixed assets during the period varied between 12.5% and
14.8,o and the operating ratio between 52% and 59%. The drop in the return
in 1966 resulted from a change in the method of accounting for overhead
expenise by charging overhead against revenue rather than capitalizing it.
The return rose to l14% in 1968 as a result of a large number of ne;w sub-
scribers being connected to the expanded network. STB s past earnings
record is particularly good considorLng the fact that its operations do not
include the more profitable long distance and telex services. In the past
dividends have been paid at a rate of 16% of net earnings.
5.17 As shown in the following figures, past earnings have contributed
substantially to the financing of expansion since, as mentioned above,
STB is permitted to utilize its internal sources for such purpose..
1965-1969
(Estimated)
St 1Milli on /10
Internally generated funds 69.2
Less:
Debt service 12.6
Dividends 7.2
Net internal cash generation 49.4 72
Cos-t of construction includi-ng working
capital increase 68.6 100
- 12 -
Financing 72% of the expansion from internal sources during the past five
years was made possible in part by the small amount of debt serviced and
conservative dividend payments. Nonetheless, this is a very high propor-
tion in view of the fact that the value of STB's Dlant has increased by
about 75% during this period.
5.18 The collection performance is generally satisfactory. There is
some ronm for imnprovemePn+t, however, as is reaized by the chief financial
officer. He is taking steps to tighten up the collection procedures.
Tax
5.19 By law, STB is exempt from paying income tax. On January 1, 1969,
nars in, r lwc,.e n+-nto efaect+ tha.+ req.u,,es -r-ns,erA 1-. Qby ,+r+- y
Boards to pay a tax on services billed. The Boards collect this tax on
bAOa.i .jj. UoAP ULVUe LU LU. For STD subsc,-ibLer-sL, LALi-e tdX rate is .wh
in the period 1970-1973 would bring in tax collections amounting to an
a C% dl _: 5 : _ b nmrS _ n * - ~1 :._ __._ 2 _ ZL
estU ated S$20 milliOn. DTID Collects th tax o11 tunk bills W, II h i
renders on behalf of the Telecommunications Department.
6. FUTURE FIWANCES
Financing Plan
6.01 A forecast of sources and applications of funds for the six years
1970 to 197? is shown in Arnnmx 9. Tt is hnsed on foreast eanrnings pre-
sented in Annex 8, borrowings as listed in paragraph 6.02 and dividend
navmTents nq ,npla-ined in pnvrarnnh 6.o8. Tho r'eina, ngpnv fo-r +the fo-i
year period of the proposed Bank-financed program (1970 to 1973) is
su mm-nrJ7z=r as follows:TQ
S$f 1000 vSw ��� e
P.equirem..er,s
Construction program 113,450 37,063 97
Jnete..I.V. t 1,275L L416 1
Working capital increase 2,g09 820 2
u ual nuqu-__emerlu____ ii0.f c'2 100uu
Sources
Internal Cash 92,845 30,332 79
Less: debt service 10,637 3,476 9
dividends paid 12,6o0 4, il6 11
Net internal cash generation 69,608 22, 740 59
Borrowings:
IBRD 513-SI 2,h26 797 2
Proposed IBRD loan 33,700 ll,000 29
Government loans 11,500 3,762 10
Total borrowings 4 7,626 E iL2- lull
Total so-urces ilJ -j'299 100
6.02 internal cash generation after meeting debt service and dividend
payments would finance 59% of total requirements while the remaining 41%
would come from borrowings as follows:
(i) the undisbursed balance of Bank Loan 513-SI;
(ii) the proposed Bank loan of US$11 million equivalent which
has been assumed at an interest rate of 7% for a term of
20 years including a 4'�-year grace period;
(iii) loans from the Government of Singapore totalling US$3.8
million equivalent in 1971, 1972, 1973 each at an assumed
interest rate of 7% for a term of 15 years (no grace period).
The forecasts assume a loan for future construction works to begin in 1974,
on similar terms to present Bank loans.
6.03 In regard to the proposed Government loans (see (iii) above) the
Sinwanore rGovernment has given assurances that these funds will be made
available at the terms indicated if and when required. To the extent that
the tariff adjustment mentioned rn paragraph 5 07 will nrntThuee higher
revenues this will reduce the need for such Government loans.
6.o4 The investment of S$1,275,000 represents the 51% participation
*A the l m&an acwUt-Afr plntZ - .fl4.*fl for a-'
to start jointly with L.M. Ericsson (see paragraph 3.06).
Future Operating Results
6.05 Forecast statements of earnings for the six-year period 1970-
ln nr' --_ !-_ w_ A __O '_ _LI _ __|_ _- I iJ _.__o __ r.r:'&I 4 U -
197 de sonuwll in annex u, tUgether witn notes aulU abssumptinUD. VWiLt t
expansion and improvement of the existing network under the proposed cons-
truction program, net operating income is forecast to increase from S$L0.6
million in 1969 to S$19.7 million in 1975. Total operating revenues over
the six-year period show an average annual rate of growtn of about i2%.
Operating expenses, not including depreciation, provide for an average
annual increase of about 11%; this is considered reasonable to cover the
additional staff and other expenses in connection with the expanded
facilities.
6.o6 In 1968, STB signed an eight-year contract with the General
Telephone Directory Company, an American firm, granting exclusive right to
the Company to compile, print and sell advertising in its directories. STB
will receive a percentage of the advertising revenue as well as payment for
billing the advertising. This has been taken into account in the forecasts.
6.07 The rate of return on average net fixed assets is shown to decline
during the four-year expansion program from 12.6% in 1970 to 10.4% in 1973
(last year of the program), and to rise to 10.9% beginning in 1975. The
operating ratio remains at 56%-58%. A decline in the rate of return durir;
the period of large expansion is normal, and results from the time-lag
between putting new plant into service and connecting new subscribers. An
additional factor in the decline is the greater-than-usual proportion of
the construction program being devoted to long term provision in duct lines
and buildings. These operating results are very satisfactory and might
improve further if a tariff adjustment is introduced in 1971 (see paragrapri
5.07).
6.08 Under tho last Loan Agreement (513-SI) dividend payments for the
period 1967 to 1969 were restricted to a snecific amount or a Dercentage
of net earnings whichever was lesser in order to assure a satisfactory
financing' plan. In view of the sizeable cash renu rements under the present
expansion program it was agreed during negotiations to continue to limit
dividend payments tn the snovernment to A maxniynim pay out tmrtino of 30% of net
earnings for the period of the project (1970 to 1973) and to 40% thereafter.
For the four years 1970 to 1973 diriden.ds totallneg S$13.8 million are
expected to be declared, amounting to slightly less than 30% of net earnings
ayLA. re-resentting 6%. or. ord -irJr stock outstanding --m ng - *-re- 4 t
- 15 -
the latter from time to time through capitalization of general reserve and
unappropriated surplus (see Annex 7). The summarv financing plan in
paragraph 6.01 shows only S$12.6 million in dividends due to dividends beiig
declared in one year and paid in the follnwing yearr These tn'mmitments a'r.
dividend policies are reasonable and in line with the 1953 Ordinance which
spcifies t+hat nn.terest (dijide.n9Q) *..Jr be ra...~ id.. ~ u? o1s" +he s of
the undertakings and the financial position of the Board appear, in the
evr-^ of, ~ e^P +he Thn-W +o Ql4-n" Sh A (rml S e posito.- 4-,-pro
Jw. VA& .AW L'-. VW' UVCYO.dL cuau * I4SV.JLLLI .L.LJJ 0 /JJ. ..J-L ~ Sk' ''
significantly after the prospective 1971 tariff adjustment (paragraph 5.07),
ViLtL J30/' -.L-L.LLLLL..UJ.i WVU.LU stU.L Lbe des-U-ableUJLL. LvLt LIthe higher JUe.L:-.- LdaSj
generation would replace assumed government loans (paragraph 6.03). The 40,O
Pay- out limitation-after the project might, however, have to be revised in
the light of the new circumstances.
Future Financial Position
6.og Forecast balance-sheets (Annex 7) as of December 31, 1970, through
19 show--that the value of net plant is fmpected to increase from S$85.1
mlillion at the- beginning of 1970 to S$187.5 million at the end of 1975. The
debt/equity ratio would be 18/84 in 1970, rising to 32/68 in 1973 and
thereafter declining to- 29/71 by 1975. These ratios reflect a financing
pattern idhereby it is-expected that STh would use a substantial portion of
its earnings to finance its expansion. The current position would-remain
satisfactory.
6.10 Internal cash- generation is estimated to increase-from S$17.3
-milli,n in 1969 to S$33A4 million in 1975, and would (after debt service
and dividend payments) finance 68% of-total requirements during the six-year
period. This is a substantial contribution when one considers that the
entity's total net fixed assets would more than dcLuble.
6.11 Due to the low debt capitalization of STB, coverage of interest
and debt service in the first few vears of the forenAst is verv hiph And
is therefore not very meaningful. In the latter part- of the forecast peri,,'.
debrt se-rvir. m cerage> byinte i-,lcah generation is sut+ar.ia1 __---onver
below five times.
6.12 The Loan Agrsement 5.3-SI contains a debt limitation -covenant
to Th^-,ifj " ths+ +i.e n,or1 yjr.a,^A r^+ 4j"^,,. 1 A debt s-.,+u 1s,-
approval unless historic 12 months net-revenues -would cover maximum future
ioAh+ om at 1--t 4,.,- timez. 41r- ano -n4- 1 L 4 4-;- 7A_At)1A'
w_ cw _ws u ullliV uaw _VsWs;us U .LUG .LLL4u J.l LJ.LL.) 0 LU IIG
debt is expected to remain small- in the foreseeable future it was nonethe-
v- 6 L a_ -A -4. --A .L J1inr ..4 . IU U i U . Dd-.l. 4. - 4L&- U IlJ-
same covenant in the proposed loan.
- 16 -
7. RECOMMEIDATIO1NS
7.01 During loan negotiations agreement was reached on the following
principal points:
(i! STB will maintain tariffs at a level to produce a rate of
return of not less than 10% on average net fixed assets
properly valued (para. 5.08):
(ii) pres-t audit arrangements will be continued (para. 5.10);
(iii) dividend payments to Goverrnment will not exceed certain
limits (para. 6.08);
(iv) as and when necessary Government will extend term loans to
STB for the project (para. 6.03);
(v) STB will limit debt incurrence (para. 6.12).
7.02 The program would be suitable for a Bank loan of TTS ll million
with a term of 20 years including a grace period of 43� years.
November 28, 1969
ANNEX 1
SINGAPORE
SINGAPORE TELEPHONE BOARD
Exchange Installation Program 1969 to 1973
Date of Final
Size/ Foreign Order commen- cutover
Exchange Style cost in S$ Date cement date Remarks
Changi 1,OOOES 3/69 Bought prior to Loan '13-ST
Katong 4,OOOEX 5/69 Bought " " ,
North 4.0OOEX 6/649 3ouught " I" I
Queaenstown 4,oooEX 1,200,428 6/68 10/68 10/69 Part financed 513-SI
Butkit Timnh )4.nnoEY 915,900 8/68 -4/69 3,/70 Pn+. finnn.ced 513-SI
Orchard lO,OOONX 3,889,629 5/68 2/69 7/70 Part financed 513-SI
nn,.y,OEY 1,570,000 12-/68 7 /69 4I/701 1 n' _^ of 5,0 ^otra,,4t
KaWong 4,OOOEX 800,000 12/68 9/69 8/70 Balance of 50,000 contract
Pnar:> T.a'hnw 1 nnnzv Pon rnn n In /f-Q ' /Kc le /.17n O _ P en onn An .
PayaLebar )4,000~( 820,000 "6V' vvv I.I7A c vI A/ vCLA%V|V VnVVUUW
Bukit Panjang 1,OOOES 5/69 1/70 8/70
jurI 0f)rnV Ci nn In 0Z In /Z IL r' I'2A n-~1 en nne%
_TJronUd !,eIUU 530/,007 12/68U J1D0/69 70 VB. o UfUUf 5U0l, c trU
Wooidands 1,OOONM 11/69 9/70 12/70
North 5,o0Ex 1,080,000 12/68 7/70 5/7i Balance of 50,coo contract
Queenstown 4,OOOEX 970,000 12/68 5/70 3/71 Balance of 50,000 contry'.-.
Paya Leebar 4,OOOEX 2,300,000 169 v /70 9/71 Balance of 50,000 ccntra&
City 6,OOOEX 830,000 1/70 5/71 12/71 Balance of 50,000 contic.. -
East 6,000MX 1/70 11i71 12/72
B1&iuk 8,OOONX 1/70 3/71 5/72
Qi.;estown 4,O0EX 8/70 11/71 9/72
-!.41- ng 3,000EX 7/70 1/72 10/72
!31,.t Timah 4,OOOEX 8/70 11/71 9/72
N\fee Soon 1,OOOEX 7/70 9/71 7/72
E:a.st 4,OO0EX 1/70 11/71 3/73
Katuri. g 4,OOOEX 1/71 11/72 9/73
Pava Lebar 4,OOOEX 7/71 4/72 6/73
Uortii 4.,OOOEX 12/71 4/73 12/73
Telok Blangah 6,OOONX 12/71 1/73 12/73
Bukit Panjang 1,OOOES 5/71 7/72 3/73
Changi 1,OOOES 6/71 8/72 5/73
*Increased from h.000. makine 51.000 lines to be N - New Exchange
ordered under the present contract and 33,000 lines E - Extension
to be finnnced from th e proposed loan-. M - Mobile
S - Step
X - Crnssbar
October 2, 19&'
ANNEX 2
Page 1 of 2
SINGAPORE
SINGAPORE TELEPHONE BOARD
CONSTRUCTION COST ESTIMATES 1970-73 PROJECT
(in S$ millions)
Foreign Bank Local
Item Cost4 Loan costs Total
Tand 3.78 3.78
Buildings 13.55 13.55
FPrhanap rquinpment 0n.96 7-66 h.2h 35.20
Dehydrating plant 1.85 .16 2.01
Mi n+- 1; in n e-2 7 12 - R) 1 3-.11
Cables, coils and jointing materials 27.0o 26.80 3.82 30.86
Overh'ead plant+ 2.3) 2.92 5.26
Telephones, PABXs 5.91 1.97 7.88
T70oo'ls ar.d worki4ng eq:p.er. 1.28+ _A o.52 C:9 I
M04- 'I An ^Ao VI 7) ). I Pn -I I1 I, <
Note:- The estimates for the Deriod 1970-1973 include exDenditures of
S$2,570,000 under exchange equipment which are financed by the
balance of Loan 513-SI, but form part of the proposed project
(see also Annex 9).
November 25, 1969
ANNEX 2
Page 27of 2
SINGAPORE
SINGAPORE TELEPHONE BOARD
CONSTRUCTION COST ESTIMATES 1970-73 PROJECT
(in SS millions)
Total
Item 1970 1971 1972 1973 1970-73 1974 1975
Land 1.59 1.23 .90 .o6 3.78
Ruildings 1.78 A.48 357 2.72 1355 .17 .oL
Exchange Equipment 8.33 8.16 7.59 11.12 35.20 6.93 7.26
Dehydrating Plant .o6 . 72 .73 2.01 .
Duct Lines 3.48 3.77 3.44 2.42 13.11 4.29 4.30
Cables 6.3A 6A A9-11 9.26 o0.86 7.95 PQ. 3
v > v v . | s ,7 . X s 7 * : v . vL- v *7 v.
Overhead Plant 1.15 1.27 1.37 1.47 5.26 i.64 1.60
Telephor.es, PABXs I r.1 2).3 2.0 2.26 7.88 '. - 3.01 ,.2
Tools and Working .45 .h5 .45 .45 1.80 .42 .42
EqI-Auipment _
Totals 29).37 29.36 29.23 30.4, 113.45L 2h44 25.)h6
October 2, 1969
SINGAPORE TELEPHONIE B3OARD
PAST AND FORECAST GiROWTH
(IN THOUSANDS)
30C0 -- __ -- I I _- 3010
CURRENT BANK | 1
PIROJECT - PE.RIOD OF PROPOSED PROJECT-
250- F 1 ---t t--1 250
200- _ _- __ _ __-- 200
150- C -- --- ,--- -- 150
DEMAD -
EXCHANGE CAPACITY\ r DEMANDw_. _
Ioo --<j C i K= - t -- 10''
5CIt C_ _ -_ CO)NNEECTED LINES
5 0 - -- _ _ _ _ _ - - _ _--50i
o t - _ L__-_ _0
1965 1!966 19167 1968 1969 1970 1971 1972 1973 1974
-ACTUAL - -FORECAST -- z
IBRE) - 41507 >
ANNEX h
SINGAPORE
SINfl,AP0PR Tm.TPMNET POAPTn
COST BENEFIT ANALYSIS OF PROPOSED PROJECT
(ir L. ; Alli J4 of Singapr -
The following table presents the cash flow of the investment
for 20 years. .LL1'e increas~e in rt~evenue IA) L,Le eighth yI yar comes dUrec"ly
from additional subscribers connected to the exchanges installed under
the project. Fr;om the ninth to the 20th year, the increase is an l es-
ment of the contribution to the revenue from later expansion made by the
Iorward provision of cables, duct lines and buiidings included in the
project. The incremental rate of return is calculated to be 11.5%. Not
included are benefits from the more profitable long distance service
which is the responsibility of a Government department.
Operating
Revenue Epenses
attributable attributable
Capital Residual to the to the Net
No. Year Investment Value Project Project Flow
1 1970 2h.4 .759 .180 -23.821
2 1971 29.4 3.688 .900 -26.612
3 1972 29.2 6.259 1.560 -24.5ol
4 1973 30.5 10.887 2.760 -22.373
5 197h 15.4o5 3.960 11.145
6 1975 17.539 4.560 12.979
7 1976 19.000 4.86o 14.14o
8 1977 20.000 5.000 15.000
9 1978 20.250 5.000 15.250
10 1979 20.500 5.ooo 15.500
11 1980 20.750 5.000 15.750
12 1981 21.000 5.000 16.000
13 1982 21.250 5.000 16.250
14 1983 21.qon 5_ 1��� ~n0n
15 1984 21.750 5.000 16.750
16 1985 22.nnn 5.oo0 17-nnn
17 1986 22.250 5.000 17.250
18 1987 22-fOn 50nnn 17 -nn
19 1988 22.750 5.000 17.750
20~ 10R9 23.000 5.��� l8.ooo
3. .0 31.000
SINGAPORE TELEPHONE BOARD
ORGANIIZAT1ON CHART
R o A R D
GENERAL MANAGER
r~~~
DIVISIONAL MANAGEFt DIVISIONAL MANAGER
(EXTERNAL Pl_ANT) (INTERNAL EQUIPMENT)
7 7 PURC HAS ING; CE7
GE SIGN L - ~~~~~~~~~~~uI~~UNTS ACCGMODA~~~~~~~~t ION ~~CE.SINI7GN
PLANNING MIN4OR WORKS PERSONNEL FINANCE ACCOMODA1 ION FORECASTING PRACTICiS
MAJOR WORKS INSTALLATION
DESIGN . _ t MAINTENANCE TRAINING ACCUNTS I PLANNING RESEARCH
I I I I I M~~~~~~~~~~~~~~~~~~~~~~~~~~~~~NA INTENiANCE
ii _ I K IL JR~~~~~~~~~~~ ~~~~~ELATIONS LI 1
z
z
IBR D-4597 0
ANNEX 6
S INGAPORE
SWL\T.PRMRP Tr.T.P.PT4TF. 'ROARn
SiTTMM a RV OF TREEPHONE TAR'FRS
Annual Installation
Cls~~~~~~~~~~~~~~~~Tv off Sec Pr.ta Feesn
AJ>,sI LLUneJ J .L.LJsX~ .Lq, t,J*U.-_ IJ4 2 0 5.0 *
Residential line 180.00 50.00 *
T_ e!-n l e & enS LA_ en efn nn. on
External extension 52.50 50.00 *
fl A B V - ,..tI. J Qrion.50 20.00
L*tL) A. ernJ.La.L exUf~.~ sLUALL L
P.A.B.X. external extension 82.50 50.00 *
Colored telephone 12.00 35.00
Private wire - within the same
exchange 25o>.uu ,u.uu
- involving more than
one exchange 485.o0
* An additional installation charge will be applicable when long over-
head lines are required.
The first year's rental and the installation fee must be paid in advawc-.
o the imstallation. Thereafter, rental for business and residential
lines and private wires are paid quarterly in advance. Extensions and
colored telephone rentals are always paid yearly in advance.
PRIVATE AUTOIATIC BRANCH EXCHAiNGE (P.A.B.X.)
Installation fees: Contractors' charge + 30% + any STB costs.
Annual Rental fees - Non-Government Subscribers:
Nil - PABX is purchased by subscriber.
Annual Rental fees - Government Departments:
Capacity to 30 extensions - 26.42%Q of capital cost
for d.nimunm of 5 years
Capacity to 400 extensions - 20% of capital cost for
minimum of 7 vears
Capacity over 400 extensions - 13.15% of capital cost
for minimum of 12 years
The above charges are to recover the capital costs of the P.A.B.X, Tn
addition to these charges, P.A.B.X. subscribers pay the above listed
enots for triinkq (busines lines) and P.A.B.X. xYtensions.
October 2, 1969
SINGAPORE
SINGAPORE TELEPHDNE BOARD
Actual and Forecast Balance, Sheete
A c t u a 1 F o r e *a a t
As of December 31: 1906_ 196. 1_7 7b j 77 7r 1974
_ _ _ _ _ _ _ _ _ _ - ~~ ~~~ ~~~~~~~(E:a - -
ASSETS
Pixed assets
Teleconmunications plant 82,123 91,324 10L,372 110,877 128,997 150,767 177,427 203,857, 231,447 252,887 275,247
less: depreciation reserve 29 555 33 075 36,837 4o6434 43 931 48 325 53. 830 60 562 68. 544 77652 87.755
Net fixed assets 5 t,s6a 3, I !1295 MIM T TV
ltvestments _ 1.00 1 1.500 1.500 1,500 3.150 2.11 ZM' 2iaflz 27;L
Carrent assets
Cash 3,885 3,292 637 5,594 603 1,552 l58 53]. 641 712 860
Accounts receivable
(less advance billings) V 1,687 465 514 2,572 1,300 1,400 1,5;00 1,700 1,900 2,100 2, 300
Materials and supplies 1,378 2,494 2,965 3,070 3,737 4,318 4 ,'64 5,658 6,408 7,219 3,092
Other 43 142 121 352 350 - 350 350 35(0 350 - 5� - 350
Total current assets 7.277 6.393 4.237 LL.588 _5.990 7.620 7.6,72 8.23! _ 9.299 L0.381 11.602
TOTAL ASS ETS 259561 66,142 70.272 8353 92.556 112.212 1346(t44 1.309 174.977 1Ig0SL 2a
IABILITIEt
Ordinary stock 20,000 20,000 20,000 20,000 O,0(0 SCI,DOO 60,)00 60,000 60,000 60, ooo 60,000
General reserve and unappropriated
1surplus 22,208 28,038 34,689 43,760 32,282 30,612 28,833 37,485 46,872 56,932 &B,995
Other reserves 7. 002 7,000 7. 70. 000 7, 03 .� 7. 000 7. 7t) --000 . 0.00
Total e iLty 49,208 55,038 61,689 70,760 79,282 87,612 95,833 1O6,485; ]13,872 123,932 135,995
lAon-ten debt
Singapore Government loans 5,765 4,835 2,825 1,739 - - 1,5'23 6,16i' 10,699 :1O,198 9,662
IBRD Loan 513-SI - - - 1,474 6,574 9,000 8,6t88 8,357 8,006 7,63h 7,240
Proposed IBRD Loan _ _ _ - 8,ooo 19,200 26,700 33,700 32,527 3:1,272
Future borrowings - _- _ _.. _A...k0 _-0S8
Total lolg-term debt 5,765 4,835 2,825 3,213 6,576 17,000 29,c811 L1,226 52,605 5'i,859 56,174
Current :Liabilities
Accrued dividends 1,20D 1,200 1,174 1,200 2,400 3,000 3,600 3,60c0 3,600 h,200 4,200
Trade creditors 1,212 669 295 667 600 600 600 600) 600 600 600
Other 451 411 607 707 1,500 1,500 1,500 1,50() 1,500 1,500 .L,500
Trunk call revenue owed Telecom Dept. 541 592 1,327 5,432 2/ 600 700 700 8o() 800 900 900
Bank ov,erdraft -- 2,105 920 - - - - - _ - -
Total current liabilities 3,408 6,977 6,323 8,oo6 5,100 5,800 6,600 6,50X) 6,5s0 7,200 7,200
Deferred credit 18, 1,292 1,435 1,552 1,600 ,800 2,000 2,10) 2,200 2,400 2,500
TOTAL LIAB3ILITIiti 59,Tht 56L 66 70,2?2 83,531 92,556 112,212 13,0l lL3 174,977 188,391 201,869 ?
Long-tert debt/equity r-atio 10i/99 U,2 L/9j '6/96 5/92 15/8.! 24/6K 28/72 32/68 31/DY 29/71
1/ AccoLnts receivable fluctuate durling 1965-1960 due to large on tfuL accounits provision netted against recv .ables and the initial effects of bi:ling for the 15 goverrnment tax
(see page 2 Of Annex 7 ).
2/ Inclu[des trunk revenues toriporarily held by ST3.
ricvember 26, 1969
ATNThT?Y 7
Page 2 of 3
C! TMTr A D nD V
T1\Tt, Ann=~fI~ flTMT rmTMTTf 1f l.' nfT%
Notes andssumptions on Balance sheet
Telecommunications Plant
Telecommunications plant, other than that acquired in 1955
from' the Oriental Telephone and Electric Company Ltd. for S$12.6
million (US$4.1 million), has been included in the balance sheet at
cost. In determining such cost, items recovered and reinstalled
have been brought in at their estimated depreciated values.
Also included in telecommunications plant is that amount of plant
which normally is under construction. No interest is capitalized.
ine composite rate of depreciation on average plant is about 5%, which
is reasonable.
Cash
Cash includes trunk call collections not yet paid the Tele-
communications Department; the corresponding entry is shown as a
current liability. The forecasts assume that the 15% aovernment tax
is remitted as it is collected.
Accounts Receivable
Accounts receivable include trunk billings on behalf of the
Telecommunications Department; the corresnondinct entry is shg- s
current liability. Accounts receivable do not include rental billings
made in advance of the due date and therefore the ammonv. is relatively,,
small consisting more of trunk revenue uncollected. This is explained
by STB billine all subscribers in advance, thus at the end of any
calendar quarter, the advance billings for that quarter would have been
paid and the new advance billings unilud not yet be due.
In the Dast. Government has som.etim.es pressed SE to rem4it
trunk revenue before collection was made. As a counter measure, STB
would assume that there would be an abnormally large amount of bad
debts from trunk and net the amount of trunk accounts receivable with
a large Drovision for bad debs+. Conrsequently, th.e yea 1966 and 1967
show an even smaller amount of accounts receivable than usual. Receiva-
bles were higher in 1968 due to billings beng held up pending a de-
cision on the handling of the 15 government tax.
Forecasts are based on billed revenue for rentals and trunk
caiTh annd also take into account the lo government tax to be collected.
It is assumed that trunk call collections will improve over the next
five a' 's
Page 3 of 3
Materials and Supplies
Forecasts assume materials and supplies to increase propor-
tionately to the increase in gross telecormiunications plant.
Current Liabilities
Current liabilities do not include current maturities of
long-term debt. "Other current liabilities" include accrued expenses,
such as interest on debt, directory advertising collected and not yet
remitted to General Telephone Directorv Comnany, and tender deposits.
Deferred Credit
Dfefrr.ed -rpd'it, rTanTqPnts rc-,h rnnivrd frem V>nri n bill-
ings prior to their due date.
October 1, 1969
SINGAPORE
SINOA20RE TELEPHDNE BDARD
Actual and Forecast eatin4 Statemts
(i igpore thoDusamisT
A c t ua 1 F o r e c a s t
~~~~~~~~1 196 1 1970 19071 1-972 1917_3 ___ qIT- 1975
Year ending Del:emlber 19 UZg 1967 1968 1(Est7d) -L -- -
OperatinF I venuesL
Rentals and feee 14,184 15,711 17,299 19,639 22,039 24,873 28,020 31,313 34,962 381,882 43,089
Miscellaneous revenues 1. LL7 1.012 1.291 lJI29 2.01 2234 2j,457 2L702 2,972 __209 3.433
Tota:L opersting revenues 15.301 16.723 18,590 21.,468 24,070 27,107 30,77 34,0JS 37934 442.091 4S.522
0perating e cpenses
Costs of operatim 14,089 5,540 1/ 6,119 6,742 7,,461 8,258 9,118 10,020 11,092 12,385 23,607
Depreciatian 3,849 14,296 4,781 5,268 5,997 6,994 8~,205 9,532 102 12108 13.203
TotaL operatig expnaes 7,938 9.836 10,900 12,010 13 i458 15,252 17,323 19,552 21,974 214,493 26.810
NET OPERATIIIG INCCME 7,Y)3 6,887 7,690 9,1458 10,612 11,855 13,154 134,463 15,960 17,598 19,712
MLsceIlaneLLs incoe 623 383 o58 700 500 500 500 500 500 500
Miscellaneouis income charges 22 18 71 - _ 50 _ 50 50 50 50 _ 50 _ 50
Net income before interest 7,9614 7,315 8,002 10,1416 11,;'62 12,305 13,604 14,913 16,410 18,048 20,162
Interest expense 539 235 178 ]45 340 _975 ,83 2 661 3,423 _178�8 3j822
NET Pi.OFIT 7, 425 7,030 7,824 10,.71 10,922 11,33C' 11,821 12,252 12,987 114,260 26,263
Dividend declared 1,2C10 1,200 1,174 1,200 2,100 3,000 600 3,600 ,60 1,200 _4,200
Balance trarsferred to
surplus and general reserves 6,225 5,830 6,650 9,071 8,522 8,330 8,221 8,652 9,387 10,060 12,063
Average net fixed assets 49,688h 55,h409 61,392 67,l89 77,755 93,7514 113,020 133,446 153,099 169,069 181,364
Rate of retiurn 2/ 1LI.8% 12.5% 12.5% 14L.0% 13.6% 12.6% 12.6% 10.8% 10.4% 10.14% 10.9%
Operating rstio 3 52% 59% 59% 56% 56% 56% 57% 57% 58% 58% 58%
1/ First year for new meathod cf treatirg overhead expenses (see para.. 1.).
2/ Hatio of ret operatinyg inc orre to average net telecormmunica;aions nlant.
3/ matio of total opera-ing expenses to tota_ -eritinr .ew r neo.
November 25, 1969
ANNEX 8
Page 2 of 2
SINGAPORE
SINGAPORE TELEPHONE BOARD
Notes and Assumptions on Operating Statement
Operating Revenues
Rentals and fees have been forecast on the basis of planned
average J--ease *n d c ehg-n ves nd present t ar.ffsf
special jobs, disconnection charges and directory operations, are
assu -eA to4^ as a t 1 -n --- r-a. of 10V
Non-Operating Income and Charges
Miscellaneous income consisting of staff housing rental and
interest on bank deposits, is forecast at a uniform. level or N w UU,UuU.
Miscellaneous income charges, such as loss on foreign exchange.
is forecast at a uniform level of S$5O,OOO.
Expenses
Costs of operation have been forecast to increase on the ba
of planned increase in direct exchange lines. Depreciation has been
assumed at a composite rate of 5% on average telecommunications plant.
October 1, 1969
ANNEX 9
SINGAPORE
SINGAPORE TELEpHONE BOAR
Forecast Sources and ApplicationS of Funds
(in Singapore $ thousands)
Year ending December 31: 1970 1971 1972 1973 1974 1975 Total
SOURCES OF FUNDS
In-'uerr-al cash gene ration
Net income before interest 12,305 13,604 14,913 16,410 18,048 20,162 95, 1!i2
Depreciation 6.994 o,205 9,532 10,oo2 12,108 13,203 bU,92J4
Total internal cash generation 19.299 21,809 24.445 27,292 30,156 33,�6, 156,366
Borrowings
IBRD Loan 513-SI 2,426 - - - -2,
Proposed IBRD Loan 8,0oo 11,200 7,500 7,000 - - 3, 00
Goverr.--,ent icans - 2,000 14,500 5,000 - - 1,,00
Future borrowings _- - _4,500 Jo2
Total borrowings 10,426 13,200 12,00 12,000 4,500 00 ;
TOTAL SOURCES OF FUNDS 29,725 35,009 36,445 39,292 34,656 36,L,5 211, 'l2
APPLICATIONS OF FUJNDS
Construction program 24,370 29,360 29,230 30,490 24,440 25,4f0 L63, 3>.
Investments 650 625 - - - -1,2
Debt service
Interest - IBRD Loan 513-SI 472 540 521 501 4S0 2,>:
Proposed IBRD Loan 503 1,103 1,690 2,140 2,359 2,277 10,07
Government loans _ 1140 4)0 782 749 714
Future borrowings _ _ _ _ 200
S/Total - Interest 9I 2,66 1 3,1423 3,752 3, 2
Am,.ortization - 151' Loan 513T SI _.312 31 351 372 7,(
Proposed IBRD Loan - _ _ 1,173
Government loans _ 77 2':6 468 501
S/Total - Aorization
ch/luuei UuI.iaa4.J.uII ~~ ~~~- JSOY 9( Oily e,U4) t,)
Total debt service 975 2,172 3,2L3 4,242 5,334 3Pi 22,-";*
Dividends paid 2,400 3,000 3,6() 3,600 3,600 Ij,2 2 ) 20,L00
Variation in working capital
Cash increase (decrease 9 (694) (327) 1 71
Other than cash, increase 381 546 694 850 711 973 o,_1__
N"et increase (decreasel) i-n
working capital 1,330 (148) 367 960 782 1,121 4,41.
TOTAL APPLCATIUNS OF F-UNDS 29,725 35,009 3614145 39,292 34,656 36,86j 211,992
Times debt service covered by internal
cash generation 19.8 10.0 7.5 6.4 5.2 5.S
No.ember 26, 1969
M 7-\ A L ? - 4(J A Y S I A
7,/''->-''cE.a,\-;� \\<
WOODLANDS . _-_ ,
f~~~~Y / 1970 -' r~~~~~~'~~' ~ ~-9 7
AMA K6NG Ne- Son *
( / = g Ld \ Bo1,it P.nj.n 9 YIC) CHU KANG)
1973/4
| / f \ X| i s {* Cb;n3i~~~~~~~~~~~~~~~~~~~~~~~~~~~
/cyc Lbcr ',
A, t
Bli~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~E
-<'SURMAj ~ ~ Jro ga.I1- B -__, kiy SICAPR TElEPHONE B972/
CITY SOT
92 9 7 O I 3
ORCHARD
OUR M ~~~~~~ U. V/Or -~~~~~~~M 75112K BLAI'JGA C y~~~~~~~~~~~~~ SINGAPORE TEL.P OE BOARD
AAAF.19317/ EXISTING & PROPOSED EXCHANGES
PAYG4 OF r Y V IE
BENGAL 19 A 0CYPCA2NO I
* iL~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~Existioig 0
Proposed 1975 0
IN0,ANV OCEANMLE
O/2TOPER lgbC I/RN-270CE