November 9, 2005
NTT Com Announces Interim Financial Results
For Fiscal Half Year Ended September 30, 2005
|TOKYO, JAPAN – NTT Communications (NTT Com) today announced non-consolidated financial results for the fiscal half-year ended September 30, 2005. Operating revenues advanced to 547.8 billion yen, up 4.3% or 22.4 billion yen year on year. Operating income fell 13.5 billion yen, or 28.3%, to 34.3 billion yen, and recurring profit totaled 38.0 billion yen, down 18.6% or 8.7 billion yen. Net income totaled 2.8 billion yen, down 89.8% or 24.8 billion yen as a result of revaluation of affiliated companies NTT USA, Inc., JSAT Inc., and NTT EUROPE LTD. being posted as special losses of 16.4 billion yen, 15.9 billion yen, and 5.3 billion yen, respectively, despite distributable income of 22.3 billion yen posted as special profit from the dissolution of NTT Investment Singapore Pte. Ltd.
Since fiscal 2003, NTT Com has been evolving into a “Global IP Solution Company” to provide turnkey solutions that meet needs for advanced communications. To further this vision, NTT Com is focusing on five core business domains: solution, network management, security, global, and new this year, ubiquitous services, which reflect NTT Com’s efforts to realize a ubiquitous society.
Changes in Market Environment and Business Base
The current market for information and communications technologies (ICT) is extremely challenging with the rapid rise in popularity of VoIP (Voice over Internet Protocol), low-price VPN (Virtual Private Network) and other new services. In addition, the prices of network services continue to fall due to the shift from conventional telephone and leased-circuit services. Subsequent confusion and uncertainty in the market has resulted in strategic partnerships across industries to survive.
At the same time, as ICT becomes indispensable for both business and private activities, there is a boost for the need for one-stop services such as IP-convergence (of data and voice communications) and fixed-mobile convergence (of fixed and mobile communications).
Capitalizing on these market changes, NTT Com is working with companies both within and outside the NTT Group to create a ubiquitous environment that offers customers maximum one-stop service utility.
OVERVIEW OF OPERATIONS
As a Global IP Solution Company, NTT Com is strategically concentrating resources on five growth-oriented domains to create a new earnings base.
1. Ubiquitous Services
NTT Com’s newly added ubiquitous services provide one-stop, value-added solutions that link fixed-line and mobile wireless networks. NTT Com has begun market trials of “Smart Biz Kit,” which converges fixed-line and mobile communications to allow NTT DoCoMo’s third-generation FOMA® mobile handsets to access companies’ internal systems and the Internet, and implements security measures and other functions. NTT Com also uses fixed-mobile convergence to offer a corporate IP-telephone service using FOMA®.
In addition, a new “Click to Connect” service combines a network telephone directory and inexpensive IP-telephony.
2. Security Services
NTT Com provides comprehensive services that comply with international standards for Information Security Management Systems (ISMS). These range from consultation to installation and operation of state-of-the-art security systems. For corporate and government customers who need to comply with the Protection of Personal Information Law, NTT Com has introduced “PC Security Solution,” which combines such features as restricted access using IC cards, thin client, encryption and quarantine solutions to supplement NTT Com’s other security services. It also enhanced collaboration between sales and service development to facilitate one-stop sales and technical support services.
To address concerns of individual customers, NTT Com updated pattern files for the “OCN Virus Check” service and strengthened other security services.
3. Solution Services
NTT Com’s highly practical services are creating new business models and lifestyles. Corporate and government customers can raise efficiency and reduce the total cost of ownership through services that combine platforms for security, mobile communications, and more, as well as managed services ranging from network construction to server operation and monitoring. For individual customers, NTT Com actively promotes one-stop services such as “OCN Hikari with FLET’S,” a combination of OCN and “B FLET’S,” while enhancing service content, such as images and music distributed through “OCN Theater” and “OCN MUSIC STORE.” The company launched a videophone service between its IP videophone “.Phone Personal” and DoCoMo’s FOMA® mobile handsets for even greater convenience.
4. Network Management Services
NTT Com provides management solutions for sophisticated networks and ICT resources via seamless, secure and highly simplified one-stop services. NTT Com’s enhanced “Integrated VPN,” the optimized network solution that combines its lineup of VPN services and also offered additional bundled services combining systems integration and networks. One-stop “management outsourcing” for servers, routers and networks also proved successful.
For small offices/home offices (SOHO) and small and medium-sized businesses, NTT Com launched “Web Camera Package,” which offers a video camera and network in one for convenient video monitoring. The company also began providing “Customer Connect,” which allows a customer service center to be established without significant capital investment.
5. Global Services
NTT Com creates a seamless, full lineup of services to support multinational organizations. In India, where the number of multinational enterprises is increasing, NTT Com has become the first Japanese carrier to establish a local subsidiary, NTT Communications India Private Limited, to integrate local networks as well as solutions. NTT Com is leveraging its strengths to provide Tier 1 status Internet backbone and corporate data network services and has commenced a next-generation integrated network service, “Global Super Link,” which offers wide-area Ethernet closed network services in open networks. The company also launched “Arcstar Global Security Operation Service,” an outsourcing service covering rental, set up, operation and maintenance of security equipment in 88 countries to provide effective, economical security. Furthermore, the company’s high level of customer satisfaction and highly flexible support through its dedicated support team have been widely acclaimed, making NTT Com the first Japanese and Asian carrier to receive the Best Customer Care Award for its corporate customer support. The award is one of the World Communication Awards for global carriers and vendors sponsored by Terrapinn, an international media company.
Revenues for voice transmission services have grown due to strengthened service offerings and aggressive sales promotions, despite a challenging business climate. While revenues for data communications, excluding IP, are declining with the shift toward lower cost IP services, IP-related revenues are increasing steadily.
Overall, operating revenues increased while recurring profit decreased year on year, reflecting continued fierce market competition.
1. Voice Transmission Services (Excluding IP)
The severe market environment for voice transmission (excluding IP) continues due to intensifying competition from the shrinking fixed-line telephone market and the popularity of IP telephony. However, NTT Com made efforts to keep or increase revenues for domestic telephone services by offering such services as PL@TINUM LINE as well as providing various packaged solutions that anticipate customers’ needs. The company is also vigorously stepping up sales activities to increase market share and revenues from international fixed-line calls.
Operating revenues for voice transmission services, excluding IP services, rose 7.5% year on year, or 16.5 billion yen, to 236.5 billion yen.
2. IP Services
Revenues increased steadily amid strong demand for IP services. As of October 22, 2005, OCN subscribers topped 5 million due to aggressive promotion of broadband, including “OCN Hikari with FLET’S,” a one-stop service with “B FLET’S,” and enhanced security and content applications.
Operating revenues for IP services amounted to 150.0 billion yen, up 11.9% or 15.9 billion yen year on year.
3. Data Communications Services (Excluding IP)
Revenues for data communications services (excluding IP) decreased due to the migration towards lower cost IP-VPN and other VPN services that utilize the Internet. However, the company worked on maintaining revenues by providing simple and highly reliable services for customers who require quality, reliability and security.
Operating revenues for data communications services (excluding IP) totaled 91.5 billion yen, down 17.8% or 19.8 billion yen year on year.
4. Solution Services
Revenues are growing steadily as NTT Com actively develops high value-added services providing total solutions for facilities, such as data centers, and security and managed-services for monitoring and operations.
Operating revenues for solution services grew 20.9% year on year, or 9.3 billion yen, to 53.8 billion yen.
5. Other Services
Other operating revenues, mainly from equipment leases and product sales, totaled 15.9 billion yen, up 3.8% or 0.5 billion yen year on year.
*FOMA® is a registered trademark of NTT DoCoMo.
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 34 companies in the Asia-Pacific region, Europe and the Americas. For more information, please visit www.ntt.com