November 18, 2002
NTT Com Announces Interim Financial Results
|TOKYO, JAPAN NTT Communications Corporation (NTT Com) today announced its non-consolidated financial results for the first half of the current fiscal year ending March 31, 2003.
Operating revenue fell to 575.7 billion yen, down 9.7% or by 61.7 billion yen year on year, operating income rose to 74.8 billion yen, up 98.0% or by 37.0 billion yen, and recurring profit rose 72.9 billion yen, up 90.8% or by 34.7 billion yen.
The company posted a net loss of 12.2 billion yen, due largely to taking an extraordinary charge of 76.7 billion yen on losses in overseas investments.
Recurring profit rose as a result of cost reductions. Revenue continued to grow among IP-based services, but declined in voice, leased-circuit and data services. Results were influenced by the shrinking fixed-line telephone market, Japans stagnant economy and fierce competition to win customers for the Myline carrier-selection service.
Data and IP Services
Data and IP services revenue declined slightly to 312.1 billion yen, down just 2.7% or by 8.5 billion yen. The demand for IP-based services was steady, although leased-circuit service revenue decreased.
OCN ISP Services
Although the ISP market for new subscribers was sluggish, reflected in declining demand for PCs, the ADSL market expanded. The companys ADSL services steadily gained market share. The company expanded the range of access networks for connection with OCN services, enriched its IPv6 services as well as security and other value-added features, and strengthened its backbone network. As a result, subscribers of OCN-brand ISP services grew to approximately 3.29 million people.
Leased-Circuit and Data Services
The range and area of access networks were expanded for increased connection with the companys Arcstar-brand IP-VPN and e-VLAN transparent Ethernet, enabling the company to meet increasing needs for lower network costs and broadband access among corporate customers. In addition, these value-added services were newly adapted to the mobile and remote environments.
Due to Japans prolonged IT slump, however, corporations cut network costs and integrated operations on an accelerated pace by shutting down networks for leased-circuit and packet telecommunications services while transitioning to cost-effective, broadband IP-VPN.
The solutions market remained very weak due to continued sluggishness in IT-related capital expenditure as a result of a worsening global slump in the IT field. In a positive response, NTT Com developed value-added total solutions that integrate its powerful IP network, data center, security, monitoring and operations services.
Voice Services Revenue
Voice transmission service revenue fell to 263.5 billion yen, down 16.8% or by 53.1 billion yen, the result of a shrinking fixed-line market and increased discounting of service charges.
Ratio of Data Revenue to Voice Revenue
The ratio of revenue from data and IP services versus voice services (D/V ratio), one of the benchmarks of NTT Coms progress in becoming a Global IP Company, increased from last years 0.9 to 1.1.
The profitability of NTT Coms voice, data and leased-circuit services will continue to decline in the immediate future. The company expects to improve profit by strengthening revenue from transparent Ethernet services and other IP-based services, solutions and outsourcing, as well as continuing efforts to reduce costs.
MAJOR DEVELOPMENTS DURING HALF YEAR
During the interim period, NTT Com neared completion of its transformation into a Global IP Company. Company efforts to promote standardization and commercialization of IPv6, as well as telecom services in Asia, were honored with two prizes at the fourth annual World Communication Awards (WCA). NTT Com became the first carrier to be awarded the Best Carrier Asia-Pacific prize and the first Japanese carrier to be awarded the newly introduced Best Technology Foresight prize.
NTT Com obtained BS 7799 (ISO17799) and ISMS Compatibility Evaluation System certifications as part of enhancing its security management.
Other major activities carried out in the interim period include:
- Unveiled the OCN Style concept to offer secure, simple, and enjoyable new lifestyles using the Internet.
- Increased revenue by offering enriched broadband content for OCN Broadband Media.
- Increased revenue from corporate users by introducing high value-added services, adding more heavy-volume customers and strengthening support for sales activities.
- Increased NTT Com group synergy in ISP business by integrating NTTPC Communications InfoSphere service for individuals into the OCN service lineup.
IP Network and Data Services
- Increased the bandwidth available for Arcstar IP-VPN to provide a more advanced IP platform. In addition, services were made available in the mobile and remote environments and were strengthened with new features, such as inter-VPN connectivity.
- Reduced charges for the ATM Mega Link leased-circuit service in response to the growing needs for broadband communications.
- Enriched service lineup and strengthened sales for the e-VLAN service.
- Developed services to meet customers expanding needs for cost reduction and outsourcing.
- Formed alliances with a broad range of partners to offer reliable, secure, global-scale solution services that meet ISO quality-management and ISMS security-management standards.
- Offered IT services that helped Japans central and regional governments under the e-Japan strategy.
Data Center Services
- Bundled colocation and hosting services with IP network and security features.
- Increased revenue from new services, such as V-Portal for voice-activated information retrieval and Communications Choice for discounts on communication between user-designated mobile-phone and fixed-phone numbers.
- Strengthened the marketing of voice-communication by bundling it with mobile and IP services.
- Increased profitability by thoroughly cutting operating costs of telephone services.
NTT Coms Corporate Vision
NTT Com is evolving into a Global IP Company that offers innovative, high-quality IP-based services. A major goal for the current fiscal year is to complete the firms emergence as a truly Global IP Company by increasing revenue from global operations and raising the ratio of revenue from IP and data services versus voice services. Going forward, NTT Com will offer integrated, packaged services with security and quality features and provide unique value-added services to become a strong player in the global solutions field.
Changes in Market and Business Base
The telecom industry continues to suffer from a worsening global slump in the IT field, which has impacted ISPs, incumbent carriers, telecom manufacturers and vendors. Many players have been forced to leave the market or undergo substantial changes.
The commercialization of VoIP services is becoming full-fledged this year as more and more firms enter the market by, for example, forming partnerships with ISPs. As a result, industry revenues from legacy voice services using fixed networks are expected to decline at an accelerating rate.
Demand for broadband applications for businesses and individuals are both expected to rise, however, with the proliferation of broadband access services and the diversification of services, including ADSL and wireless LAN HOTSPOT services.
Future Growth Strategy
NTT Com views the prolonging IT slump and the reorganization of the telecom market as an opportunity to grow its customer base for Internet services, as well as to enhance the companys product lineup. This will be achieved by focusing strategically on the following five fields:
- Solution services
- IT management services (outsourcing)
- Global one-stop services
- Ubiquitous access
- Security services
Fierce competition over prices and customer acquisition will continue both in the domestic and international telecom markets. NTT Com will compete as a global carrier by offering solutions that meet diversified customer needs to more service areas, as well as reliable, secure and high-quality IP services as core products in the coming age of ubiquitous services.
The recently announced VoIP trial will help to establish a foundation to offer VoIP-based communication services, as well as enable smooth VoIP communications between the company and other ISPs. This will also serve as a foundation for services that combine VoIP-based voice and data.
Continuing from last year, NTT Com is streamlining operations through staff cuts and the reorganization of global operations, including Verio Inc. Going forward, the company will integrate services and operations under its Arcstar global data network and Verios Tier-1 global IP backbone. The firm will also consolidate other operations, strengthen alliances with domestic and global partners and enhance cost management.
About NTT Communications Corporation (NTT Com)
NTT Com, a Tokyo-based subsidiary of Nippon Telegraph and Telephone Corporation, provides long-distance and international services for voice, video and data communication reaching more than 200 countries. NTT Com also provides world-class IP services under the NTT/VERIO brand, as well as managed data, multimedia and additional services under the Arcstar brand. For details, please visit www.ntt.com