May 14, 2002
NTT Communications Corporation

NTT Communications’ Business Strategy for the Future

Corporate Vision

NTT Communications is evolving as a “Global IP Company” to deliver high-quality IP services to customers worldwide. As of the end of the fiscal year ended March 31, 2002, the company had achieved a 1:1 ratio between revenues from data/IP and voice services, and had increased subscribers to “OCN” Internet services to more than 3 million. Overseas, the firm has strengthened Verio Inc., a U.S.-based subsidiary acquired in September 2000, and launched the NTT/VERIO brand. As a result of such efforts, NTT Com is confident it will realize a profit on a consolidated basis, including Verio, in the foreseeable future. NTT Com will complete its transition to a “Global IP Company” within fiscal 2002.

Major Business Domains and Growth Strategy

NTT Com has positioned its “e-theater” concept as the company’s fundamental strategy for becoming a “Global IP Company”. This concept envisions the formation of an “electronic stage” built upon a foundation of large, high-speed global IP networks, data centers and platforms incorporating authentication, security and payment functions, which form the company’s three main business domains. NTT Com is continuing to develop and incorporate core technologies for these three domains to provide value-added architecture, in order to enhance the company’s overall competitiveness.

Although the Internet has the advantages of being open and global, it has certain inherent limitations as a decentralized, best-effort network. To guarantee secure payments and mission-critical communications for all users — including individuals, corporations and governments — NTT Com offers total IP solutions on a global scale, which include the following core competences:

- Platforms for authentication, payments, billing and copyright management (“Safety Pass”)
- Managed services for security, surveillance and consulting
- Full outsourcing with total solution offerings
- Web services integrating applications and devices
- Global end-to-end services.

NTT Com is also developing new business models and advanced applications to make a ubiquitous network environment. To expand Internet access, for example, the company is developing its WLAN Hot Spot service and related solutions. The firm has begun rolling out its IPv6 next-generation IP technology on a commercial basis, pointing to the eventual networking of smart appliances, including on a secure mobile basis.

At the same time, to succeed in the battle for the ever-shrinking fixed-line telephone market, NTT Com is strengthening its financial stature by reforming its operational practices and cutting costs.

NTT Com views VoIP not just as an inexpensive method for voice services, but also as an opportunity to reach out to new customers and expand the company’s market base. NTT Com is developing and launching a variety of VoIP solutions, including IP-PBX outsourcing and IP-based call centers for corporations, as well as innovative VoIP-based communications by combining voice with data and video.

Global Business

To become a true “Global IP Company”, NTT Com must function as a major global IP player. This means offering highly reliable and stable solutions that integrate IP networks, managed hosting and platforms covering the U.S., Europe and Japan. Fiscal 2002 is the final year to achieve this goal.

In September 2000, NTT Com acquired Verio Inc., including its global Tier 1 network and expertise in hosting services. NTT Com and Verio have now established a global service operation infrastructure by constructing the NTT/VERIO Global IP Network. The network, with globally unified autonomous system numbers, spans the U.S., Europe and Japan, and has 24-hour global operation centers in all three regions.

NTT Com succeeded in thoroughly reforming Verio’s structure despite a very severe business environment. Changes included streamlining measures, such as the integration of POPs and offices on a large scale, and staff downsizing. In addition, resources were concentrated on business offering the greatest potential for long-term growth, which has already improved Verio’s profitability.

Although many telecommunications carriers have experienced serious downturns, the global demand continues to grow for globally unified value-added services backed by reliability and stability. NTT Com will capitalize on its expertise to strengthen marketing, as well as services, in order to offer customers increased value. This will include the development of highly secure and stable global IP package solutions, the provision of strategic total solutions, including consulting, and the upgrading of customer services by integrating customer-related network operations within the year.

NTT Com will continue to follow the basic strategy of building up its global business centered around Verio. NTT Com and Verio will promote business as one under the NTT/VERIO brand name.

This is how NTT Com aims to complete its transition to a “Global IP Company” within the year.

Future Outlook: “We speak IP!”

The telecommunications markets in Japan and worldwide will both continue to experience fierce competition over prices and customers. NTT Com intends to succeed by offering high-quality, secure, reliable, and competitively priced products and services, backed by thorough cost cuts as a result of ongoing group-wide reform of development and sales activities. Moreover, NTT Com aims to increase its profitability and strengthen its financial stature by consistently offering true value to its customers.

NTT Com expects to show a profit in consolidated earnings for the current fiscal year ending on March 31, 2003. In addition, the company’s international business is expected to achieve a positive EBITDA in fiscal 2003 and positive net income in fiscal 2005.