TELECOMMUNICATIONS I

closed

The project would include the following: (a) bank approval would be obtained before TELECOM incurs any long-term debt unless its maximum debt service in any future year is covered 1.5 times by the net revenues of the preceding fiscal year; (b) TELECOM would inform the Bank promptly upon the incurrence of short-term debt in excess of US$500,000 equivalent; (c) TELECOM would maintain adequate tariff levels to enable the maintenance of at least a 16% rate of return calculated on the peso equivalent of the US dollar value of net plant in service for the years 1977-80 and will maintain thereafter a rate of return of at least 11%; (d) TELECOM would complete the acquisition of about 26 local entities included under the project by December 31, 1980, and would consult with the Bank prior to finalizing the acquisition of the entities; (e) TELECOM would enter into agreements, with major arrangements satisfactory to the Bank, for the acquisition of majority interest in about six local telephone companies.