1
SUMMARY
The office of Posts and Telecommunications
2018-2023
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Warning
This summary is intended to facilitate the reading and use of the report of the territorial audit
office. Only the report engages the territorial audit office.
The answers, if expressed, of the administrations, organizations and local bodies concerned
are included after the report.
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TABLE OF CONTENTS
1
A DETERMINING LEGAL FRAMEWORK FOR THE ESTABLISHMENT'S
ACTIVITIES
.....................................................................................................................
4
1.1
A 'performing monopoly' model subject to increased competition
..................................
4
1.2
A strategy refocused on business performance
.................................................................
5
2
STRENGTHENING RISK MANAGEMENT
...............................................................
6
2.1
Necessary vigilance regarding non-compliance risks
.......................................................
6
2.2
An evolving risk management framework
........................................................................
7
2.3
Information technology risk management
........................................................................
7
3
A DETERIORATING FINANCIAL SITUATION
.......................................................
8
3.1
A need to structure financial management
........................................................................
8
3.2
A statutory reflection to be completed taking into account the establishment's
environment
......................................................................................................................
8
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The Office of Posts and Telecommunications (OPT) is responsible for essential services in the
territory of New Caledonia. Since 2006, it has held a monopoly over public postal and
telecommunications services and also implements financial services across the entire territory.
The territorial audit office sought to determine the conditions under which these services were
evolving and could continue to be provided by the establishment. The previous audit by the
territorial audit office was published in 2016. Therefore, the territorial audit office examined the
implementation of the recommendations made in its report and assessed the strategic
evolution of the establishment since that date, as well as its relations with its oversight body,
New Caledonia. Given the strategic importance of the establishment for the territory, the third
objective of the territorial audit office was to evaluate the establishment's management of the
risks it dealt with, whether regulatory compliance risks or information and technology risks.
Finally, the territorial audit office conducted an analysis of the financial situation of the
establishment between 2018 and 2023 to assess the sustainability prospects of the planned
investments, before considering the impact of the crisis that began in May 2024.
1
A
DETERMINING
LEGAL
FRAMEWORK
FOR
THE
ESTABLISHMENT'S ACTIVITIES
1.1
A 'performing monopoly' model subject to increased competition
Established as an industrial and commercial public entity by the decree that created it in 1957,
the Office of Posts and Telecommunications (OPT) has retained this status since its transfer
to New Caledonia, effective from January 1, 2003, in accordance with Article 1 of Congress
Deliberation No. 051/CP of October 23, 2000, relating to the organization and operation of the
Office of Posts and Telecommunications of New Caledonia.
Since 2006, the Postal and Telecommunications Code has granted it a monopoly over
activities forming public postal and telecommunications services. It is also the sole entity to
which the State has entrusted the obligation to distribute and manage saving accounts on the
territory and to fight financial exclusion.
Its monopoly is dominant, but some sectors of postal and telecommunications activities, such
as parcels weighing more than one kilogram or internet access provision, have been placed
outside public service by New Caledonia's deliberations or by jurisprudence following recent
disputes.
The so-called 'performing monopoly' economic model is specific to sparsely populated markets
too narrow for multiple operators, but of significant size, resulting in high costs for service
provision across the entire territory. It allows the operator to achieve sufficient profits to fund
the development of services for the entire population, including in sparsely populated areas.
The risk of cross-financing limits the monopolistic operator's activities to those outside the field
of competition, which is the case for OPT, whose monopoly in the telecommunications sector
enables it to fund offerings across the entire territory in this area and to finance postal or
financial services and associated public interest missions, even though they are deficit-making.
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Gross operating surplus by sector
Billion FCFP
2019
2020
2021
2022
Telecommunications services
6,27
5,26
5,13
5,23
Postal services
-1,85
-1,69
-1,56
-1,35
Financial services
-1,62
-1,70
-1,74
-2,09
Total
2,8
1,87
1,83
1,79
Source : OPT
However, in addition to the lack of intervention in the competitive field, the rule for industrial
and commercial public services implies that the fees paid by users of a public service must be
offset only by the services provided by the organization in charge of the public service. Contrary
to this rule, OPT transferred 10.4 billion CFP to its oversight body, New Caledonia, between
2016 and 2021. The territorial audit office recommends that the establishment cease making
such transfers from its reserves to New Caledonia.
Furthermore, as the territorial audit office had reminded in its report on New Caledonia's
exercise of its tax competence, OPT collects the telephone contribution and the tax on
telephone communications on behalf of New Caledonia. Therefore, the territorial audit office
reiterates its 2023 recommendation to establish a mandate agreement between OPT and New
Caledonia to cover these collection missions.
A country law project examined in 2023 to authorize satellite provision of fixed internet
connection could constitute a competitive offer, putting at risk the network managed by OPT.
Direct satellite provision of mobile phone connection should also be authorized, which would
then compete with OPT's terrestrial mobile network.
The territorial audit office recommends that the establishment finalize the assessment of the
impacts of satellite competition and implement the most suitable technical solutions, such as
deploying fiber and 5G technology networks, to maintain an attractive offer in a segment of
activity that supports the establishment's profitability.
1.2
A strategy refocused on business performance
The establishment initiated a strategic review in 2019 that culminated in 2021 with the adoption
of the strategic plan 'Building Tomorrow / OPT 2025'. The primary objective of this plan is to
improve performance across all its business lines. Unlike previous strategic plans, this
approach aligns with the mission definition of the establishment as outlined in Deliberation No.
051/CP of October 23, 2000. From this perspective, the business lines of the establishment
must progressively become genuine profit centers.
This business-focused reflection also identified a fourth emerging business line called
'Distribution', encompassing activities other than postal, financial, and telecommunications
services, conducted at the 53 points of sale in the OPT network
–
the 37 OPT agencies and
their 16 annexes
–
as well as at home through postmen. Through this business line, OPT aims
to facilitate access for the population to a wider range of services across the entire territory,
guided by a logic of general interest.
The strategic plan 'Building Tomorrow / OPT 2025' has been translated into a revised
organizational chart, and its objectives have been broken down into deliverables whose
implementation is monitored by a management control system. The oversight of the plan's
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execution relies on a dedicated committee ensuring effective supervision by the general
management.
The territorial audit office invites the board of directors to set financial objectives for each of
these profit centers, which are now the business lines, based on the financial projections
established within the framework of the strategic plan.
Furthermore, while the governance of the establishment is carried out by its board of directors
and its general management, it is not formally structured at the oversight level. New Caledonia
implicitly supports the establishment's strategy, and the congress determines its legal
framework for activities, as currently with satellite connectivity, but the management dialogue
is not formalized as envisaged in Article 2 of Deliberation No. 051/CP of October 23, 2000.
The territorial audit office recommends that OPT engage with New Caledonia to formally
validate its strategy and the financing modalities for public interest missions within a specific
contract setting financial objectives by business line.
2
STRENGTHENING RISK MANAGEMENT
2.1
Necessary vigilance regarding non-compliance risks
Compliance, refers to the correct application of legal rules, standards, and internal instructions.
Internal control aims to ensure a reasonable level of adherence to these rules and must
therefore prevent their non-application, thus limiting the risk of non-compliance. OPT is subject
to a very wide range of regulations and procedures whose management is complex. The
establishment must therefore continuously keep abreast of the applicable texts and the
resulting procedures.
The territorial audit office has identified four areas illustrating the necessary vigilance of the
establishment in terms of compliance.
In fiscal matters, the establishment did not comply with the rule requiring it to include the
provincial tax on telephone communications in its taxable income for corporate tax purposes
between 2011 and 2022. An adjustment was made for the years 2019 to 2022.
Financial regulation aimed at ensuring the fight against money laundering and terrorist
financing is another area of vigilance. According to the report on the compliance of financial
services in the fight against money laundering and terrorist financing established by the
General Inspection of Finance in 2020 and the sanction imposed on OPT in 2022 for non-
compliance in this area by the Prudential Control and Resolution Authority, the establishment
presented numerous failures.
In terms of telecommunications security, OPT is subject to the telecommunications code and
the defense code like any telecommunications operator. It may be designated by the State as
a vital operator. OPT must therefore ensure that its telecommunications services comply with
the security requirements and it must, if needed, implement the necessary corrective
measures, under the control of the National Agency for the Security of Information Systems.
This is a particularly sensitive area of compliance.
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The General Data Protection Regulation (GDPR) has been applicable in New Caledonia since
2019. It strengthens compliance requirements regarding the transparency of data processing
and respect for individuals' rights. The establishment must be able to demonstrate, in the event
of an inspection by the National Commission for Information Technology and Civil Liberties
(CNIL), that it complies with the obligations set out in the General Data Protection Regulation.
The territorial audit office recommends that, with regard to data hosted in Australia, it
implements the legal tools provided by the European Union when transferring personal data
to countries not recognized as adequate by the European Union.
2.2
An evolving risk management framework
The risk management actions
–
establishing a risk map, implementing internal control and
internal audit
–
started to be implemented at OPT, first within the financial department, in 2017.
Following the sanctions imposed by the Prudential Control and Resolution Agency for non-
compliance of financial services with regulations on anti-money laundering and counter-
terrorism financing, the financial risk management framework benefited from additional
resources and an audit committee was created. However, it never met.
This risk management framework was significantly modified upon the adoption of the new
organizational chart on October 4, 2023, to establish a dedicated function for all business lines
within the organization. An audit and risk management department was created as an expert
directorate assisting the general management in overseeing risk management. In February
2024, an internal audit charter, an internal control charter, and an audit program for the period
2024-2028 were adopted.
The territorial audit office commends this evolution and invites the establishment to continue
advancing the risk management function across the entire scope of the establishment by
finalizing the risk map and establishing an annual internal audit plan covering all departments.
The territorial audit office also recommends reinforcing the resources allocated to risk
management by centralizing them within the audit and risk management department and
restructuring and operating the audit committee in accordance with internal control standards
2.3
Information technology risk management
Information technology risks, also sometimes referred to as 'cyber risks', can affect business
and support information systems, without which production is not possible. Thus, IT risk tends
to become an operational risk. This is particularly true for OPT and its main line of business,
telecommunications.
The technical equipment and arrangements are heterogeneous, partially obsolete, and their
maintenance is becoming increasingly costly. The shortage of human resources in the field of
information technology is partly compensated by outsourced services whose volume is
increasing. This outsourcing is a risk factor in case of failure and weakens the control by the
establishment's services over the management of the information system.
Furthermore, the IT master plan is not aligned with OPT's strategy and the organizational chart
implemented. The IT function within the establishment remains fragmented across several
departments, and although the IT master plan lists a large number of projects, it does not
provide an overall view of the projects to be undertaken at the establishment level.
The project management capacity of the IT department is not sufficiently organized. The
difficult implementation of the telecommunications information system renovation project
named
Convergence
, which was completed nearly three years late and with double the initially
planned financial envelope, illustrates this difficulty. For the future, the ability to manage IT
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projects is a critical issue for successfully implementing OPT's digitalization strategy. The
territorial audit office recommends that the establishment strengthens its internal competencies
in IT project management.
The security of the information system has several shortcomings. Firstly, the governance
framework for information system security is weakened by its age (the information system
security policy dates back to 2008), the vacancy of the information systems manager position,
and the absence of a dedicated committee. Secondly, the resilience capabilities of the
information system are in place but incomplete and still insufficiently tested, necessitating the
establishment of a strategy and ensuring backup capacity for the entire information system. To
also strengthen IT resilience capabilities, the territorial audit office recommends updating the
documentation related to business continuity by integrating prioritization of service resumption
for various computerized services and conducting regular restoration tests. Lastly, operational
IT risk management processes such as physical protections, cyberattacks, or cloud data
storage are also implemented but remain partly unconfirmed. The territorial audit office
recommends systematizing an annual exhaustive review of accounts and access rights to the
information system and establishing a multi-year security audit program based on a technical
security audit for the telecommunications part and a physical security audit to have a prioritized
action plan to secure IT assets.
3
A DETERIORATING FINANCIAL SITUATION
3.1
A need to structure financial management
OPT remains governed by the accounting rules that applied when it was a public entity of the
State. This accounting framework has become irregular because it implements an accounting
instruction that has been abrogated since 2021. Unlike similar-sized organizations subject to
commercial law, the establishment does not benefit from certification of its accounts by an
auditor and does not produce the financial information documents of commercial companies.
In terms of financial management, the forecasted statement of revenues and expenditures
does not define management objectives for business lines. These must become profit centers
with performance objectives validated by the board of directors so that the levers of recovery
(actions on sales, purchases, personnel expenses) are directly activated by them and by
support departments, based on their multi-year result objectives. This assumes that these
departments are equipped with performance indicators and that their management is made
possible by implementing sub-annual analytical accounting.
3.2
A statutory reflection to be completed taking into account the establishment's
environment
The annual operating results of the establishment have deteriorated between 2018 and 2023,
with stagnant revenue (23.5 billion CFP), a decrease in added value (- 4 %) whose rate relative
to revenue has fallen from 79 % to 76 % due to the increase in outsourcing and external
services, a more significant decline in gross operating surplus (- 16 %) due to increased
personnel costs (+ 7 %), and a reduction in operating profit from 945 MF CFP to 27 MF CFP.
The annual net result after tax becomes negative, dropping from 280 MF CFP to a loss of
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625 MF CFP, largely due to the burden of provincial taxation on telephone communications,
which represents an annual charge of over 600 MF CFP.
Graph 1 Sales revenue (net of provincial taxes)
Source: territorial audit office / OPT
The establishment has transitioned from a situation where investments were funded by its own
resources to one where self-financing is no longer sufficient, despite significant investment
needs, forcing it to rely on borrowing since 2022. The level of available cash has deteriorated
by nearly 60 % between 2020 and 2023, falling from 162 days of expenses in 2020 to 63 days
of expenses at the end of 2023. The territorial audit office recommends that the establishment
accelerate invoicing and collection of non-contentious debts, and improve the effectiveness of
measures for recovering contentious debts.
Graph 2 Year end cash position
Source: territorial audit office / OPT
0
5 000
10 000
15 000
20 000
25 000
30 000
2018
2019
2020
2021
2022
2023
MF CFP
Telecommunications
Post
Finanacial services
Others
Total
0
50
100
150
200
-
10 000
20 000
30 000
40 000
50 000
60 000
2018
2019
2020
2021
2022
2023
In days of expenses
MF CFP
Third party cash
Non available cash
Available cash
Available cash in days of expenses
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OPT has begun adapting to this new environment by establishing, at the end of 2023, a multi-
year investment plan until 2026. However, this plan is limited by the level of self-financing. This
threatens OPT's ability to implement all necessary investments and, consequently, maintain
and develop the establishment's performance, unless it resorts more widely to borrowing,
despite the guarantees required, or to other levers, such as tax exemptions.
The establishment should spread out the financing for heavy investments over time by
resorting to borrowing. However, the status of a public entity does not favor relationships
between OPT and banks, which are not accustomed to this type of borrower.
Furthermore, integrating business lines into the construction and updating of the multi-year
investment plan remains to be implemented, on one hand by establishing analytical balances
per department, and on the other hand by setting up a dedicated committee for investment
between business and support departments and at the establishment level.
The territorial audit office therefore recommends that OPT extend the multi-year plan over five
years by listing needs, integrate business lines into the construction of the multi-year
investment plan, and resort to bank financing for long-term investments.
Given the various statutory points of attention currently characterizing the establishment, the
territorial audit office recommends that OPT continue studies on possible evolutions in line with
its economic model, strategy, and public service missions, and approach New Caledonia for a
decision-making process.
To improve the management of the establishment and address the identified shortcomings,
the territorial audit office makes 15 performance recommendations and three legal reminders
11/11
PRESS RELEASE
The territorial audit office sought to determine the conditions under
which the Office of Posts and Telecommunications provides the
essential services for the territory for which it is responsible. This
operator’s
“successful
monopoly”
business
model
is
being
challenged by satellite competition at a time when risk management
needs to be strengthened and financial pressures are increasing.
A strategy refocused on business performance
Since 2021, the institution has been implementing a strategic plan aimed at
strengthening its business divisions as profit centers. The institution's mission is to facilitate
the population's access to a wider range of services throughout the country in the public
interest. The territorial audit office invites the institution to set financial performance targets
for each department and to approach New Caledonia with a view to formally validate its
strategy and the methods of financing its missions realized in the general interest, in an
institutional contract.
Risk management is being strengthened
The risk management system was modified in 2023 to create an audit and risk
management department. In February 2024, an internal audit charter, an internal control
charter and a multi-year audit programme were adopted.
With regard to IT risk management, the territorial audit office noted that there were
shortcomings in the security of the information system, whether in terms of governance,
project management, resilience or physical protection and access rights.
The statutory reflection must be finalized, considering changes in the environment and
increased financial pressures
The establishment's monopoly in the telecommunications sector makes it possible to
finance the provision of telecommunications services throughout New Caledonia and to
finance postal and financial services and the related public interest missions, even though
these services are not breaking even. However, the establishment's annual results have
deteriorated between 2018 and 2023, with a stagnation in turnover (23.5 billion CFP) and a
decline in gross operating surplus due to the increase in personnel costs (+ 7 %). A draft law
examined in 2023 to authorize the provision of fixed internet connections by satellite could
constitute a competing offer to that of the network managed by OPT. In view of the various
points of attention of a statutory nature that characterize the establishment, the territorial
audit office recommends that OPT continue to study possible changes to its status in line with
its business model, strategy and public service missions, and to approach New Caledonia with
a view to taking a decision.
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