INFORMATION NOTICE RELATIVE TO

THE PRIVATIZATION OF MAURITEL

(THE NATIONAL TELECOMMUNICATIONS OPERATOR OF MAURITANIA)

Source: Government of The Islamic Republic of Mauritania

As part of the reform of the telecommunications sector in Mauritania, the Government of The Islamic Republic of Mauritania (the Government) has decided to privatize Mauritel, the national telecommunications operator, and to sell a portion of its capital to a strategic partner.

The reform of the postal and telecommunications sectors began in 1987 when the Department of Postal and Telecommunications Services (OPT) became that of a statutory body, and continued with the transformation of OPT, in 1990, into a National Company. On March 22, 1998, a new sector policy was adopted that established the Governments objectives for the postal and telecommunications sectors, and specified the principal facets of the sectoral reform, as well as the timetable for its implementation.

The key facets of the reform program include:

• The promulgation of a new telecommunications law on July 11, 1999;
• The creation of an independent regulatory agency that is already established and participates actively in the reform process;
• The ongoing implementation of a regulatory framework for the sector that includes: the development of an interconnection regime, the preparation of a tariff policy, a numbering plan, and a frequency management system.

On December 31, 1999, OPT was split into two separate legal entities: Mauritel (MT) took over the telecommunications activities and Mauripost (MP), the postal activities.

An international competitive bid for the award of the first cellular license to a private operator has just been completed through the award of a license to Mauritano-Tunisienne de Télécommunications, a Mauritanian-Tunisian consortium, on May 17, 2000. All bidders commended the high level of quality and transparency of the bidding process.

The first steps in the privatization of Mauritel include:

• A capital increase through the issuance of new shares to a strategic partner who will be granted management control. The percentage of the capital that will be sold to the strategic partner will be determined by the Government. This percentage will be at least equal to 33.33%.
• The participation of Mauritel’s employees in the capital of the company.

This will be followed by a public offering of shares to the general public and local private investors in Mauritania.

The Government has retained the International Finance Corporation (IFC) as principal advisor for the privatization of Mauritel.

This Information Notice was prepared to provide potential investors with information on Mauritania, the telecommunications sector and Mauritel, as well as to give potential investors an opportunity to express their views on strategic issues related to the privatization strategy of Mauritel, which is expected to be finalized by the Government in June 2000.

Interested candidates are requested to submit information as indicated in section "Information to be Submitted by Potential Investors."

Upon finalization of the privatization strategy by the Government, a prequalification process will be initiated among the candidates who have submitted an expression of interest. The prequalification process is expected to take place in July 2000.

The tentative timetable for the privatization of Mauritel is as follows:

• June 2000: Government decision regarding the privatization structure;
• July 2000: issuance of Information Memorandum and prequalification procedures;
• September 2000: transaction documents sent to prequalified candidates for comments;
• October 2000: commencement of the bidding process;
• December 2000: submission of bids and award.

Economic and Political Environment

1. Geography

Mauritania is located on the northwestern coast of Africa. The country has a surface area of 1.3 million km² and covers the western portion of the Sahara desert. Morocco borders it to the north, Mali to the east and Senegal to the south. The western border consists of 700 km of coast along the Atlantic Ocean.

The country is divided into 13 wilaya (regions), 53 Moughataa (administrative units) and 208 communes of which 163 are rural.

2. Demography

The population is estimated at 2.5 million with an annual growth of 2.9%. At independence in 1960, Mauritania was essentially a nomadic country and only 5% of the population was sedentary. Since then, the demographic evolution has been characterized by a rapid increase of the sedentary population (88% of the total population in 1998).

The population is concentrated primarily in the capital, Nouakchott (40%), and in Nouadhibou (6%). The population in the main urban areas is as follows:

The literacy rate is estimated at 58%. Primary education has doubled since the 1970s to 57% on average for the overall population.

3. National languages

The national languages are Arabic (the official language), Pular, Soninké and Wolof. French continues to be the language generally used for business purposes.

4. Political environment

From the 8^th to the 11^th century, before the arrival of the Almoravides, Mauritania was under Ghanaian, Malian and Songhaian domination. During the 14^th century, the Hassenic warriors created emirates in the south of the country, but did not did not conquer the central region until two centuries later. France, which colonized Senegal, launched a pacification campaign in 1901. In 1903, the territory became a French protectorate, and then a French colony in 1920. It acquired autonomy in 1956 and independence on November 28, 1960.

On July 21, 1991, a new constitution that put in place pluralism and systematic national elections was approved. In 1992, Mr. Maaouya Ould Sid’Ahmed Taya won the first national presidential elections under a pluralistic system in the history of the country.

The most prominent among the 23 officially recognized parties are Democratic and Social Republican Party, Democracy and Progress Union, Action for Change, Assembly for the Democratic and National Unity, Union of Democratic Forces, Popular, Social and Democratic Union, and Mauritanian Party for Renewal.

The stabilization of the country and the strengthening of democracy in the political environment led to the liberalization of the press, the promotion of private initiatives, the opening of the economy and the integration of Mauritania with several international organizations. It is a member of the United Nations, Organization of African Unity, the Arab Maghreb Union, World Trade Organization (WTO) and the International Telecommunications Union (ITU).

5. Economic environment

The main economic indicators show the positive development of Mauritania’s economy:

Growth has been relatively stable at about 4% per annum, and inflation has been under control, not exceeding 5%.

Towards the end of the 1970s, the difficult economic situation resulting from, among others, arid conditions and the growing level of external debt led to a financial crisis. As a result, Mauritania undertook an economic stabilization program in 1978. In 1985, the Government successfully implemented the economic stabilization program and structural reforms in cooperation with the World Bank and IMF. In order to achieve its macro-economic objectives, Mauritania has strengthened the management of its public resources, liberalized the exchange rate regime and introduced a reform of the banking sector in order to create a more favorable environment for private investments. The World Bank and IMF cited Mauritania for its exemplary performance with its structural adjustment program.

Mauritania is one of the five countries eligible for the Debt Initiative for Highly Indebted Poor Countries (HIPC) program. As part of this, Mauritania signed an agreement with the World Bank and the IMF in 1999 to reduce its debt. As a condition of this program, Mauritania has adopted new structural reforms that will further liberalize its economy and reduce its import duties to an average level of 25%. Finally, the sectors still controlled by the Government will be privatized, particularly the transport, water, electricity and telecommunications sectors.

The Mauritanian economy, which had experienced high debt levels, has been considerably reinforced from the Paris Club HIPC program. The "Naples" program canceled 67% of the debt incurred in 1995, 1996 and 1997 and rescheduled the remainder over 23 years. In 1996, the "Lyon" program reduced 80% of the debt through the HIPC program. The most recent HIPC initiative reduces 50% of total debt outstanding.

Evolution of debt (millions of dollars)

Source : World Bank

Structure of the debt (millions of dollars)

Source : World Bank

IDA: International Development Agency
IBRD: International Bank for Reconstruction and Development

As of July 1999, World Bank assistance is dedicated to 13 projects, of which, US$10.8 million is dedicated to the reform of the postal and telecommunications sectors.

The Mauritanian economy is composed primarily of a developed industrial sector dominated by mining and commercial fisheries, irrigated agriculture, and a commercial sector dominated by small and medium sized enterprises. This activity has laid the ground for the development of a middle class, among which women play a key entrepreneurial role. In Nouakchott, businesses controlled by women are organized in cooperatives or Economic Interest Groups, and are primarily active in clothing and retail.

Mauritania’s primary commercial partners are the following:

• Exports : France, Spain, the United Kingdom and Japan (primarily fisheries);
• Imports: France, Italy, Belgium, Spain, Germany, The Netherlands, Algeria (petroleum products) and Southeast Asia (rice).

Foreign investments are neither subject to any authorization or declaration, nor to any guaranty. There is no obligation to affiliate with local partners, and no limitation to the amount of capital in a Mauritanian company that may be purchased or acquired by a foreign investor. Foreign investors benefit from equal treatment with Mauritanian investors. Free transfer of dividends is guaranteed, as is the repatriation of capital and professional salaries for foreign employees. Indemnification is provided in the case of nationalization.

Mauritania is a member of the International Telecommunications Union (ITU). The Government has undertaken an institutional reform of the telecommunications sector to open it to foreign investors in anticipation of the requirements of the World Trade Organization (WTO), of which it is a member according to the Marrakech accords.

Institutional and Regulatory Framework of the Telecommunications Sector

1. Introduction

The creation, in 1997, of the Department of Postal and Telecommunications Services (OPT) as an independent statutory body, started the current evolution of the sector. OPT was established as a Public Institution with Industrial Purpose (Etablissement public a caractère industriel et commercial - EPIC), and was subsequently transformed into a national company in 1990. This process was followed by the declaration of a sector policy by the Government in 1998 that led to a reform centered on five key principles:

• The separation of the postal and telecommunications services into two distinct companies, with financial and managerial autonomy, and subject to specific regulation;
• The separation of the management and regulatory functions of the telecommunications sector;
• The establishment of a regulatory framework controlled by an independent regulatory authority with managerial and financial autonomy;
• The liberalization of the sector, particularly through the introduction of competition initially in specific segments, and eventually to all segments, as well as the granting of a cellular license to a private operator;
• The capital increase of Mauritel through the issuance of new shares to a strategic partner.

The Government has put in place the following structures in order to successfully implement this reform:

• An Interministerial Committee composed of the Ministers of the various departments involved in the reform program. This Committee takes decisions on behalf of the Government with regards to its global policy for the postal and telecommunications sectors reform, and decides the strategy for the reform process. The Committee makes these decisions based on the studies undertaken as part of the reform process;
• A Procurement Committee for the reform of the Postal and Telecommunications sectors;
• A Project Implementation Unit responsible for the planning, coordination, implementation and oversight of the different aspects of the reform (including the privatization of Mauritel) as well as the financial management of the project.

2. Summary of the current sectoral reform

A new telecommunications law was promulgated on July 11, 1999. This law redefines the institutional framework of the telecommunications sector with the view towards market liberalization and increased private sector participation. In particular, it separates the management and regulation of the sector.

A regulatory entity (Regulatory Agency), headed by individuals who cannot be affiliated with the telecommunications sector, was created to oversee the application of the law and its decrees. The Regulatory Agency is already operational and currently active in the reform process. It works with the help of international consultants on the preparation of the following key institutional elements:

• An interconnection regime that will be suitable for an environment with multiple operators, where interconnection tariffs will reflect market prices and where interconnection agreements between public operators allow all users to access all public networks. A regulatory text for the interconnection regime is being prepared and will define the interconnection obligations of the different operators as well as the tarification that should be based on the costs of providing services;
• A tariff policy whose key principles will be decided by the Regulatory Agency. This tariff policy will take into account the price of a basket of telecommunications services which will be recalculated on a yearly basis;
• A numbering plan;
• Universal access policy;
• The strengthening of the frequency management system that will be under the responsibility of the Regulatory Agency;
• A license and draft cahier des charges for Mauritel, as well as the preparation of the licenses for all other types of operators;
• A strategy for rural telecommunications services;
• The implementation of a communication campaign to inform the employees of Mauritel, the general public and other stakeholders of the reform process about the objectives, steps and timetable of the reform.

On May 17, 2000, an international competitive bid for the award of the first cellular license to a private operator was completed through a process that was commended by all bidders regarding the high level of quality and transparency. An investor’s conference organized by the Regulatory Agency was held with all interested companies in Paris on April 4, 2000. The Central Bank, Minister of Finance, Mauritel and the Assistance Project to the Postal and Telecommunications Sectors Reform also participated in this session. The companies that attended this investor’s conference include:

• France Telecom
• Portugal Telecom
• Telefonica de Espana
• Telecel International
• Vodafone Airtouch
• Millicon International Cellular (Luxembourg)
• Maroc Telecom
• Tunisie Telecom
• Orascom Telecom (Egypt)
• Qatar Telecom
• Top Technology (Mauritania)
• World Africa Development Forum
• RDS
• Saudi OGER Ltd.
• Group M.A. Oumer – Barouc S.A.
• Nortel Networks
• Intercel H. Ltd.
• Parinacom International
• Lintel

Seven bidders submitted a technical and financial offer. The Regulatory Agency evaluated the offers in a timely manner and five companies passed the technical evaluation. The financial offers presented by the five companies were the following:

Results of the Financial Offers

Mauritano-Tunisienne de Telecommunications was selected as the winning bidder.

In addition, OPT was split into two separate companies: Mauritel for telecommunications services and Mauripost for postal services. The accounting and financial activities were separated, and an opening balance sheet as of January 1, 2000 was prepared for each company.

3. Institutional Framework

3.1. The Ministry of Telecommunications

The Ministry of Telecommunications oversees the telecommunications sector. The Minister of Telecommunications defines the policy for the development of the sector, particularly the universal access policy.

The Minister has the authority to grant, suspend and retract licenses, as decided by the Regulatory Agency. The Minister also represents Mauritania, in cooperation with the Regulatory Agency, on telecommunications issues in international or regional intergovernmental organizations. The Minister’s objectives are to promote international, regional and sub-regional cooperation.

The Ministry of Telecommunications is responsible for the preparation and negotiations of international telecommunications agreements, in coordination with the Regulatory Agency, as well as the implementation of agreements and international treaties related to the telecommunications sector.

3.2. Regulatory Agency

The Regulatory Agency is an independent body responsible for the regulation of the sector. Its mandate will shortly be extended to cover other infrastructure sectors. Its role is clearly and distinctly separate from that of the operators in the sector as well as the Ministry. The Agency is currently operational and participates actively in the reform of the sector.

Roles and Responsibilities

The role of the Regulatory Agency is to oversee the application of the Law and its decrees. In particular, it organizes and oversees the bidding process for the granting of licenses and provides the required authorizations. It also makes the decisions regarding the granting, suspension and retraction of licenses which is conveyed to the Minister of Telecommunications. The Regulatory Agency is also in charge of defining the rules with regards to:

• The rights and obligations related to the establishment and operation of telecommunications networks and services;
• The planning and management of the frequency spectrum;
• The tariffs for telecommunications services not subject to competition, as well as directives for the tariffs for other services;
• The directives applicable to the technical and financial conditions for interconnection;
• The numbering plan and management, as well as the determination of the associated fees;
• The technical guidelines related to telecommunications networks and terminal equipment to ensure their interoperability, number portability and the proper usage of frequencies and telephone numbers;
• The description of standards and the publication of a list of approved equipment, including equipment approved internationally.

Branches of the Regulatory Agency

The Regulatory Agency is composed of two bodies: the National Regulatory Counsel and the General Director. In order to ensure the independence of the Regulatory Agency, its members cannot have interest, either directly or indirectly, in any telecommunications, audiovisual or information technology firms. In addition, they can neither be employed by the private sector, nor be elected to any public position.

• The National Regulatory Counsel is made up of five members appointed for a four year term for the president and a two year term for the other members, as follows:

• Three members nominated by the President;
• One member nominated by the President of the Senate;
• One member nominated by the President of the National Assembly.

4. Objectives of the new telecommunications law

The law promulgated on July 11, 1999 has the following key objectives:

• To increase the competitiveness of the telecommunications sector by creating a favorable environment for private investment, and by encouraging market based pricing of services;
• The separation of the regulatory and operational activities of the sector, which is reinforced by the fact that the officials of the Regulatory Agency are prohibited from having operational or financial interests in the sector;
• The definition of the rules of competition for the sector and sanctions for abuse of dominant position;
• To ensure the transparency of the regulatory process through the independence of the Regulatory Agency and the obligation that all proposals and agreements be made public;
• To provide guarantees in terms of interconnection in order to ensure that: i) all users have access to all public networks and are able to communicate freely through them, and ii) interconnection tariffs reflect interconnection costs;
• To promote universal access.

5. Competitive environment

Mauritel currently has exclusivity for fixed telephony and international services. The duration of this exclusivity will be determined by decree, but cannot pass beyond June 30, 2004, which is the date by which all telecommunications services will be open to competition. This exclusivity, however, does not apply to localities where OPT started operations or services after March 22, 1998.

In order to provide telecommunications services that are open to competition, Mauritel must create a subsidiary specifically designated for such services. Mauritel and its subsidiary must have separate accounting and financial procedures and Mauritel cannot subsidize the activities of its subsidiary.

Mauritel will obtain a cellular license identical to the one granted in May 2000, and will be subject to the same obligations as the new cellular operator.

Because Mauritel will be granted a license without going through a competitive bidding process, it will have to comply with the clauses of its cahier des charges, which will define in particular:

• Obligations regarding universal access;
• Obligations for emergency and directory services;
• Obligations regarding interconnection;
• Obligation to publish an interconnection catalog;
• Obligations to supply leased lines;
• Obligation to establish a cost accounting system;
• Obligations with respect to the tariff regime;
• Obligations with respect to the rules for competition in the sector, especially the prohibition of dumping and any anti-competitive cross-subsidization.

Presentation of The telecommunications sector

1. Basic data

The number of lines and teledensity have increased from 8,300 and 0.36% in 1994, to 17,000 and 0.71% in 1999, at a compounded annual growth rate (CAGR) of 21% and 19.5% respectively.

Despite the rapid increase in the number of lines since 1996, the penetration in Mauritania remains low placing the country in the mid-range of the region in terms of penetration.

The CAGR of the number of lines has nearly doubled between the 1990-1996 period, and the 1995-1998 period, from 9.6% to 16.8%, which represents one of the highest growth rates in the region.

The average waiting time for a new line in Mauritania was 1.6 years in 1998. Although high, this waiting time was among the lowest in the region where it surpasses ten years in some countries.

Revenue per line (US$1,975) is relatively high in comparison with other operators in the region. Telecommunication revenues represent 2.9% of GDP, which is among the highest proportion within the region.

In summary, the telecommunications sector in Mauritania is characterized by:

• Low penetration;
• Strong growth in recent years;
• Relatively high revenue per access line;
• Potential for significant growth.

2. Mauritel

2.1. Introduction

Mauritel was established on January 1, 2000, in the same manner as Mauripost, from the separation of the postal and telecommunications activities of OPT. Mauritel is responsible for all telecommunications activities formerly handled by OPT, and has the same accounting, management and legal structure as the former OPT. Mauritel has a national company status.

Mauritel has experienced very rapid growth since 1996. Within a period of three years, the company substantially increased the capacity and quality of its network as well as the number of connections. The financial performance of the company has equally improved significantly.

2.2. Organization

The employees of OPT have been allocated between Mauritel and Mauripost. Mauritel currently has 667 employees, of which 120 are professional staff and 240 are technical staff. The organizational structure of Mauritel is summarized below.

As of December 31, 1999, the number of lines per employee was 25.5. This number is relatively low by international standards but places the company in the mid-range among other operators in the region.

2.3. Network description

Introduction

The components of Mauritel’s network are:

• An entirely numeric switching system, with:

• 13 OCB and EE 900 switches that can serve a capacity of 33,096 lines;
• An MT 20 national and international transit center with a capacity of 2800 circuits;

• A satellite transmission network that is 97% numeric, and operates with two satellites:

• Intelsat, serving direct traffic and transit traffic to Europe, the Americas, Africa and the rest of the world;
• Arabsat, serving the regional and domestic traffic;

• A local network including standard wire cables and wireless local loop (WLL) using DECT technology.

Switching

The switching system is 100% numeric. The national and international transit center, type MT20, is located in Nouakchott. The cities of Nouakchott and Nouadhibou each have an Alcatel OCB telephone exchange, a coastal station and a central telex, type Eltex.

11 Wilaya administrative centers are equipped with an EE900 telephone exchange. These 11 administrative units have recently had their capacity extended.

Between 1996 and 2000, installed capacity of the exchanges increased from 13,426 to 23,096 lines, at a CAGR of 18%. As of April 2000, the exchanges had an installed capacity of 18,000 lines.

Transmission

Mauritel’s network is centralized in Nouakchott where the Intelsat standard A and the Arabsat standard B earth stations are located. A second Arabsat earth station is located in Nouadhibou. The network is also composed of Arabsat IBS earth station satellites situated in the 11 Wilaya administrative centers.

The Nouakchott – Nouadhibou connection has been equipped with IDR/DCME since July 1999, while the other DOMSAT connections use speed compression systems with a speed of 16 Kbp/s per channel.

Currently, the transmission network is composed of 222 international circuits, 760 interurban circuits and two internet lines of 768 Kbts dynamic service (one 256 Kbts France Telecom and one 512 Kbts Gobal One backbone). The number of international and interurban circuits increased from 156 and 258 in 1996 to 356 and 760 in 2000, at a CAGR of 24% and 22% respectively. International capacity for internet has increased from 64 Kbps in 1997 to 768 Kbps in 2000.

2.4. Commercial aspects

Customer segmentation

The table below shows the breakdown of customers and the breakdown of lines among the different categories of consumers. At the end of 1999, Mauritel had 12, 472 customers and 17,103 lines.

Lines by Type of Customer, EOY 1999

• The majority of the lines are for private customers (72.1% of total lines). Residential lines represent 49.0% of total lines.
• The public sector clients (government officials and state companies) make up 15.1% of the total lines.
• Public phone booths constitute 5.2% of the total lines within which the large majority belong to private operators (5.0% of the total lines).

Tariffs

The billing period unit is 7 minutes for a local call. The charge for a local call is 16 UM every 7 minutes. No study has been undertaken to evaluate the average length of a local telephone call in Mauritania. However, using an average of 3 minutes per local phone call, which is the average phone call length for other countries in the region, the average tariff per minute is estimated around 5.33 UM.

Interurban tariffs are about 62.6 UM per minute on average throughout the country, with regional differences varying from between 54 UM per minute between Nouakchott and Rosso (two of the nearest cities) and 106 UM per minute between Nouakchott and Aleg (two of the furthest cities).

International tariffs vary depending on the destination of the call as shown in the table below.

Traffic to Europe and Africa correspond to approximately 80% of total international traffic.

It is expected that Mauritel’s tariffs will be rebalanced during the company’s exclusivity period.

Tariffs for local calls are comparatively low. On the other hand, interurban tariffs are somewhat high, particularly for the longer distances.

International tariffs are relatively high in Mauritania. It is significantly more expensive to make an international call from Mauritania than to call Mauritania from another country.

All tariffs in UM. Exchange rate as of 15/02/00

Regional break-down of customers

At the end of 1999, Mauritel had 17,103 lines, (which represents less than 7 lines per 1000 inhabitant), of which 11,961 are located in Nouakchott and 1,825 in Nouadhibou. These two cities account for 81% of total lines and total clients, with more than 70% in Nouakchott.

2.5. Financial aspects

Mauritel has experienced a rapid increase in revenues and operating profit since 1996.

Source: PGA, 1998 financial audit

1999: estimations

Mauritel’s revenues have substantially increased from 3,769 million UM in 1996 to 6,526 million UM in 1999, at a CAGR of 20.24%.

The collection ratio, excluding the State, is relatively high at around 90%. The State sets an annual budget for telecommunications usage which it pays in full on a regular basis. This helps improve the collection ratio for Mauritel.

Mauritania has one of the highest revenue per access line in the region. In 1999, it was nearly 384,000 UM per line (US$ 1,745 per line).

Earnings before interest taxes and depreciation (EBITDA) and operating profit have increased in parallel with revenues:

• EBITDA increased from 2,186 million UM in 1996 (58% of revenues) to approximately 3,672 million UM in 1999 (56.3% of revenues);
• Operating profit increased from 1,506 million UM in 1996 (40% of revenues) to approximately 2,839 million UM in 1999 (43.5% of revenues).

1999 EBITDA of approximately 56.3% of revenues is comparatively high and reflects the high level of tariffs and revenue per customer.

The increase in Mauritel’s revenues is due primarily to the substantial increase in international revenues as outgoing international traffic has nearly doubled over this period and the payment of settlement rates for international correspondence has increased by about 2.3 times. Fixed fees and internal Mauritel consumption has also strongly increased (80% and 70% respectively). Revenues from national traffic increased 81% over the same period.

OPT’s telecommunications revenues for 1999 (national, international and internal consumption) increased to nearly 6,110 million MRO and is broken down as follows:

• National sales 2,228,046,534
• International sales 3,747,996,541
• Internal consumption 134,112,039

Mauritel’s revenues are predominantly from international telephone traffic because of the relatively high prices charged for international calls.

Structure of OPT’s 1998 telecommunication revenues

Source : 1998 OPT financial statement

The ratio of long-term debt to equity is close to 1.45, which is relatively high with respect to other national operators.

It is expected that a portion of Mauritel’s debt will be transferred to the Government prior to privatization. In addition, the capital increase from the strategic partner as part of the privatization should substantially improve Mauritel’s financial condition.

January 1, 2000 Opening Balance Sheet

(UM Million)

Source : Mauritel

The substantial increase in revenues and accounts receivables has resulted in an increase in the company’s working capital requirements. Nevertheless, working capital requirements decreased significantly from 1999 relative to 1998. This is explained by a reduction in current assets, particularly in accounts payable as well as in the asset adjustment account.

The cash balance is relatively low. As a result of the combination of relatively high level of accounts receivable and limited access to credit from suppliers. Nevertheless, the cash flow balance has improved from 1996 to 1999.

The equity to fixed assets ratio has significantly improved indicating Mauritel’s improved financial situation since 1996. This ratio increased from 44.5% in 1997, to 57.8% in 1999 as a result of capital increases in 1998 and 1999.

Strategic Decisions

The Government has taken a number of strategic decisions related to the privatization of Mauritel in accordance with the policies set forth and with the aim of developing the infrastructure sector. These decisions include:

• A capital increase through the issuance of new shares to a strategic partner. The strategic partner will receive a minimum of 33.33% of Mauritel’s equity;
• Transfer of management control to the strategic partner;
• Sale of shares to Mauritel’s employees concurrently with the sale of shares to the strategic partner;
• A public offering of shares to the general public and local investors, after the strategic partnership.

However, a certain number of additional decisions will be taken during the month of June to finalize the privatization strategy for Mauritel. These decisions include:

• Implementation of Mauritel’s cellular operations: Mauritel will be competing with the private operator who has been granted a cellular license in May 2000. Mauritel will be able to obtain its license at the same cost, and is currently considering rolling out its cellular network as soon as possible. The Government needs to decide whether Mauritel should start rolling out its network before the entry of the strategic partner, which is expected to be in December 2000, or whether Mauritel should wait until after the entry of the strategic partner before rolling out its cellular network.
• Competition for the international market: The new telecommunications law promulgated on July 11, 1999, gives Mauritel exclusivity for fixed line telephony services (including international telephony) that cannot last beyond June 2004. The Government must decide whether to open the international telephone market to competition before this date, or whether to maintain the exclusivity for international telephony until June 30, 2004.
• Percentage of shares transferred to the strategic partner: The Government intends to transfer management control to the strategic partner. However, the Government will need to decide on the percentage of Mauritel’s shares to be sold to the strategic partner. The main options being considered are either the sale of a minority percentage (minimum of 33.33%) along with a management contract, or a sale of majority percentage.
• Mauritel’s debt: The amount of medium and lont-term det currently amounts to 3,048 UM million (US$ 13.9 million). The Government is considering removing part of Mauritel’s debt as an element in the privatization strategy.

The candidates who wish to express their views regarding the issues that are to be decided are requested to submit them in writing no later than June 5, 2000 to the following addresses:

Information to be Submitted by Potential Investors

Potential investors interested in the transaction are invited to submit their expressions of interest, along with the following information, no later than July 15, 2000 to the addresses noted in the previous page.

Potential investors who express their interest in this transaction will receive a letter describing the prequalification procedures and an Information Memorandum that will have supplementary information on the telecommunications sector, Mauritel and the privatization transaction.

Five copies of the expressions of interest and associated information should be submitted in French or in English, three of which should be sent to the Assistance Project to the Postal and Telecommunications Sectors Reform and two to IFC.

The information required is as follows:

General information:

• Name of the company
• Nationality
• Address of headquarters
• Main financial information
• Main activities
• Shareholding structure
• Name, title and address of contact person to receive additional information regarding the privatization of Mauritel
• All activities or shareholding in the telecommunications sector

Specific information required from telecommunications operators:

• Description of activities and main services
• Strategic partnerships in the telecommunications sector

Copy # ____________

DISCLAIMER

This Information Notice has been prepared by the Government of The Islamic Republic of Mauritania (the Government) with the assistance of the International Finance Corporation (IFC) as part of its mandate as advisor to the Government on the privatization of Mauritel, the national telecommunications operator.

The information presented in this notice has been prepared on the basis of documents and data received from the Government, Mauritel and other sources such as the World Bank.

IFC has served solely as financial advisor to the Government in connection with the proposed privatization of Mauritel and expresses no opinion as to the merits, value or appropriateness of any securities that may be offered for sale, or the financial condition or prospects of Mauritel. Prospective investors are expected to make their own examination of Mauritel, its business and financial statements, and reach their own conclusions as to the advisability of investing.

Neither the Government, nor IFC, nor Mauritel offer any guarantee, implicit or explicit, as to the accuracy or the completeness of this preliminary information, and they shall have no liability as to the use that might be made of it.

By accepting this document, the recipients acknowledge and agree to the foregoing, and agree to keep strictly confidential the information hereby released.

The Government reserves the right to modify the contents of this document at any time, without prior warning or justification.

The Government also reserves the right to stop temporarily or permanently any on-going negotiation, or to modify the procedures without prior warning or justification.

This information notice does not in any way constitute a call for tenders for the privatization of Mauritel. Such a call for tenders, accompanied by specific instructions, will be initiated later.

This information notice also does not constitute an offer for sale of any securities.