November 10, 2006
NTT Com Announces Interim Financial Results
For Fiscal Half-Year Ended September 30, 2006
|TOKYO, JAPAN - NTT Communications (NTT Com) today announced its non-consolidated financial results for the fiscal half-year ended September 30, 2006. Half-year operating revenue fell 0.1% or 0.4 billion yen to 547.4 billion yen and operating income fell 7.3% or 2.5 billion yen to 31.8 billion yen. Recurring profit declined 5.2% or 1.9 billion yen to 36.1 billion yen in the face of intense competition. Special profit of 5.7 billion yen from the dissolution of NTT Investment Singapore Pte. Ltd. and special losses of 6.9 billion yen as the result of revaluation of its affiliate company, NTT America, Inc., brought net income to 17.9 billion yen, up 534.2 % or 15.1 billion yen over the previous year. All results are based on Japanese accounting principles.
With the further nationwide spread of broadband services effected mainly by the shift towards optical fiber access lines, Internet services such as search engine portal sites, video distribution, and electric commerce as well as diversified methods of messaging, including social networking services and blogs, are expanding. Consequently, these information and communication technologies (ICT) have a strong impact on individual lifestyles and corporate business models.
Global competition and markets are also reflecting a new landscape in the wake of developments such as restructuring of the telecommunications industry in the U.S., especially with regards to the Internet, and cross-border alliances among carriers in Europe.
OVERVIEW OF OPERATIONS
Adapting to such changes, NTT Com has devised a strategy of providing one-stop ICT solutions that create new ways to live and conduct business. Such efforts focus on five key business domains that offer long-term growth potential for the company: solution, network management, security, global and ubiquitous services.
1. Solution Services
In the domain of solution services, which leverage the strength of NTT Com networks for corporate solutions, NTT Com now offers greater convenience and reduction of corporate users’ managing costs with the IP Contact Center Solution – which enables one-stop management of corporate contact centers – and also with one-stop server and network management operation for managing clients’ networks, servers and client PCs. Similarly, NTT Com’s solution services for individuals provide greater security and convenience, such as the new DoTV portal for Internet browsing and shopping on network-capable television sets and other appliances.
2. Network Management Services
The network management services lineup of end-to-end, one-stop services for corporate users was expanded with the addition of Ethernet access lines (provided by Nippon Telegraph and Telephone East Corporation (NTT East) and Nippon Telegraph and Telephone West Corporation (NTT West) for corporate data transmission). Demand for the high valued-added hosting service "AGILIT" that combines ICT infrastructure with a high-performance security function was very strong.
3. Security Services
Security services were strengthened with new anti-spam measures for OCN Internet-access services, which automatically screen for spam and phishing mail. Also, in order to enhance the Secure Smart Storage service for extra-safe data management by corporate users, NTT Com upgraded its leak-prevention measures by making it possible for outdated files on internal networks to be deleted automatically after elapse of a specified period of time.
4. Global Services
Global services, which meet customers’ needs for seamless worldwide services, were upgraded with expanded availability of the next-generation international Ethernet service Global Super Link, and the introduction of international IP-VPN (MPLS) in Vietnam.
5. Ubiquitous Services
Ubiquitous services became even more convenient and more widely available, so that users are now able to use various existing NTT Com solutions from their mobile phones. These services include the Smart Biz Kit for remote access to internal systems and Hotspot public-access wireless LANs. In addition, NTT Com added a new roaming function to its Mobile Connect gateway service, which enables secure connection between mobile handsets and intranets, from access points in more than 160 countries.
Under the NTT Group’s "Promoting NTT Group's Medium-Term Management Strategy" announced in November 2005, Internet business services offered by the group, such as Internet access, IP telephone, video distribution and portals, were streamlined by placing them under NTT Com’s management in August 2006 with focus to providing more attractive services to customers. In addition, NTT Com was placed in charge of nationwide and global corporate customers in order to provide a single point of contact for corporate customers.
As part of this restructuring, several Internet business service units became subsidiaries of NTT Com, including NTT Resonant, which provides the "goo" portal site, and Plala Networks, which provides Internet access, IP telephony and video distribution services. In addition, the company formed the Net Business Division to manage the group’s Internet business services and related alliances. Approximately 1,200 account managers and system engineers were transferred from the corporate services units of NTT East and NTT West to NTT Com, and Enterprise Sales III unit was newly formed accordingly to accept the vast majority.
Revenues from voice transmission services increased on the strength of more diverse services and reinforced sales. IP service revenues were strong, but revenues from data communications services declined due to customer migration to lower-priced IP services. Overall, operating revenues and recurring profit both declined due to continuing fierce competition.
1. Voice Transmission Services (excluding IP)
Operating revenues from voice services excluding IP fell 1.7% or 3.9 billion yen to 232.5 billion yen. The business environment remained highly competitive due to the shrinking market for fixed-line telephones and the rising popularity of IP telephony. Efforts to sustain or increase revenues from domestic voice services included the introduction of new services, such as PL@TINUM LINE discounted calling and toll-free calling services. Efforts to increase market share for international voice services included more aggressive sales and making the World Discount plan available to PL@TINUM LINE users.
2. IP Services
Operating revenues from IP services rose 5.0 % or 7.5 billion yen to 157.5 billion yen. The demand for IP services was strong, with OCN Internet-access service subscriptions reaching 5.713 million by the end of September. Favorable sales were achieved through a strong marketing effort focused on OCN Hikari B-FLET’S, a one-stop optical-fiber service which bundles NTT East and NTT West’s access line, and enhancement of applications. Integrated VPN, a solution that provides scalable optimal networks for corporate users by combining four VPN services, also contributed to the rise in revenues in this category.
3. Data Communications Services (excluding IP)
Operating revenues from data communications services excluding IP declined 11.4% or 10.4 billion yen to 81.0 billion yen. The ongoing decline reflects user migration to lower-cost IP services. Efforts were made to maintain or increase revenues from highly reliable services targeted at corporate users who prioritize service quality.
4. Solution Services
Operating revenues from solution services rose 10.2% or 5.5 billion yen to 59.3 billion yen. Revenues continued to show steady growth as a result of the popularity of total solutions for corporate communications infrastructure, such as services for data and contact centers, network and server operations (monitoring and management), and video distribution.
5. Other Services
Other operating revenues, mainly from equipment leases and product sales, rose 5.9% or 0.9 billion yen to 16.9 billion yen.
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 more than 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 "World Communication Awards Best Customer Care - 2005." For more information, please visit http://www.ntt.com