May 12, 2005
NTT Com Announces Financial Results
For Fiscal Year Ended March 31, 2005
|TOKYO, JAPAN NTT Communications Corporation (NTT Com) today announced its non-consolidated financial results for the fiscal year that ended March 31, 2005.
Revenue from phone, leased-circuit and other existing services continued to decline, but success with new services helped to generate operating revenues of 1,090.0 billion yen, down only 1.5% year on year. Despite continued efforts to drastically reduce costs, recurring profit declined 39.9% to 67.9 billion yen due to significant market changes. A special loss of 25 billion yen was booked for the revaluation of shares held in NTT USA, Inc. and other affiliates, but net income rose 1.8% to 24.6 billion yen as a result of 4 billion yen profit from the sale of shares in ACCA Networks Company.
The global market for information and communication technologies (ICT) continued to experience intensifying competition and ongoing consolidation among market players. Technological innovation led to new competition, such as rival carriers adding their own vertical services to customer premises via "dry copper" lines and introducing expanded IP phone services via optical fiber lines. Demand rose for integrated voice and IP services and increased information security prior to the full-scale introduction of Japan's new Personal Information Protection Law in April 2005. Economic globalization, including expanded multinational business in China, India and other parts of Asia, generated diversified demand for seamless global networks and other ICT-based products and services.
In line with other ICT companies, NTT Com took aggressive steps to raise its competitiveness and take advantage of potential new revenue sources and growth in the rapidly changing business environment. Guided by its vision of becoming a "Global IP Solution Company," NTT Com continued to develop and strengthen comprehensive services for network reliability, security, IT asset management and global access within four core business domains - solutions, network management, security and global services.
During the fiscal year, NTT Com developed new one-stop solutions and business models for diversified customer needs. To support such efforts, the company focused resources on growth areas, reorganized sales, delivery, customer services and product development, strengthened operations and reduced costs. It also broadened the scope of proactive business models aimed at helping customers achieve both 20% lower costs and 20% greater performance, and aggressively diversified its high-demand security services.
Operating revenue from voice and data transmission services (excluding IP services) declined due to intensifying competition and the market shift to low-cost IP services. Nevertheless, operating revenue from IP and solutions services showed solid increases as a result of continuing success of NTT Com's transformation into a global IP solution company. Specifically, NTT Com actively worked to develop the following in its four core business domains.
In global services, NTT Com became the first Asian carrier to be named "Best Global Carrier" at the World Communication Awards 2004 in recognition of its global IP-VPN services for multinational companies and the global reach of its services. In addition, NTT Com opened up an office in India to become the first Japanese telecommunications company to provide global IP-VPN services in this promising market. NTT Communications China was established to provide multinational companies with value-added solutions services. Verio Inc.'s financial condition continued to recover thanks to its strengthened partnership with NTT America, Inc.
In solutions services, the company offered outsourcing services for networking, hosting, applications, servers and security and other solutions to help business customers improve operational efficiency and reduce total cost of ownership. A new service called ".Phone Business V" became Japan's first service for live video communications between PCs and NTT DoCoMo's third-generation FOMA-brand mobile phones. For individuals, the company created broadband services for personal solutions, such as the CoDen Hikari service, which bundles voice, Internet and video services, the OCN Music Store music-downloading service and the OCN Theater video-on-demand service for subscribers who use optical fiber.
In network management services, the company launched the AGILIT hosting service, which combines automated operations, IT infrastructure management and security. It also packaged VPN services with maintenance and monitoring services for routers and desktop computers.
In security services, as demand grew in anticipation of the full-scale introduction of the Personal Information Protection Law in April 2005, NTT Com responded with new security inspection services, such as customer-security monitoring and evaluation services, and sales of smart cards for security applications at financial institutions. NTT Com also upgraded internal security at its own workplaces.
1. Voice Transmission Services
Operating revenue from voice transmission services (excluding IP services) fell 5.7% to 440.6 billion yen. Revenue declined because of shrinking demand for fixed-line phone services, and new competition from IP phone services as well as rival carriers adding their own vertical services to customer premises via "dry copper" lines. New revenue was generated through the introduction of services such as PL@TINUM LINE, which offers unprecedented low rates on calls placed locally, out of city (same prefecture), internationally or to mobile phones. Revenue was also augmented in international markets with stronger sales of prepaid cards and through increased market share.
2. IP Services
Operating revenue from IP services, underpinned by expanding demand, rose 24.4% to 278.3 billion yen. As of the end of March 2005, 4.64 million users were subscribing to NTT Com's "OCN" ISP, which was enhanced with higher-speed ADSL service and expanded access to optical fiber services during the year.
3. Data Communications Services
Operating revenue from data communications services (excluding IP services) dropped 20.3% to 212.7 billion yen. Revenues declined due to competition from cheaper IP-VPN and VPN services that leverage Internet cost advantages. For those customers who place maximum priority on the quality, reliability and security of leased circuits, however, NTT Com launched a simple, highly reliable leased-circuit service called Giga Stream.
4. Solutions Services
Operating revenue from solutions services rose 7.4% to 125.8 billion yen. NTT Com worked to increase revenue from comprehensive solutions for customer facilities and systems, such as data-centers, security and managed (monitoring and operation) services.
5. Other Services
Revenue from other value-added services, mainly for the leasing of facilities and resale of products, increased 4.2% to 32.5 billion yen.
The breakdown of revenues was changed from this reporting period in accordance with revisions to Japan's telecommunications business accounting regulations.
About NTT Com
NTT Communications is a subsidiary of Nippon Telegraph and Telephone (NTT) Corporation (NYSE: NTT) - one of the world's largest telecommunications companies. NTT Com provides high-quality, technologically advanced network management, security and solution services to consumers, corporations and governments on a global basis, with a special focus on the Asia-Pacific region. Its world-class backbone network, combined with the networks of partner companies around the world, offers access to more than 200 countries. NTT Com Group has over 30 companies in the Asia-Pacific region, Europe and the Americas. The company has garnered several awards for its leading edge technologies, outstanding performance and customer service, including "Best Global Carrier - 2004." For more information, please visit http://www.ntt.com