I. Changes in the Telecommunications Market
In the domestic market,

Direct participation by foreign-owned corporations in the Japanese market is on the increase, with Vodafone acquiring a controlling interest of Japan Telecom through TOB, and possible foreign purchases of some of the mobile network companies, for example.
A succession of companies are entering the market in new ways, prime examples being the vertically integrated business models adopted by Yahoo! BB and Usen Broad Networks in approaching the broadband market.
As this situation continues, fixed telephone providers are faced with structural stagnation marked by fierce price-lowering competition in a shrinking market, as they feel the impact of (a) the demand shift toward mobile and IP communications, plus (b) the introduction of MYLINE (carrier selection service) and the full-scale launching of VoIP services by Fusion Communications and others. (See Attachment 1, References 1 and 2)

The U.S. market is experiencing an IT recession, causing long-distance carriers like AT&T to face financial difficulties and new players like Covad, North Point, and Rhythms to fail one after the other. This situation has prompted a variety of discussions on the need for revising conventional competitive strategies, and there are even reports of moves to recombine AT&T and the RBOCs, as industry restructuring goes forward actively. (See Attachment 2)

After repeated offerings of government-held stocks, 54% of all shares are now held by ordinary shareholders. However, the price of NTT shares have experienced a continued downward spiral due to market concerns about the future outlook of the overall telecommunications market and uncertainty over further restrictions on NTT, in addition to the deflationary trends in the Japanese economy as a whole. (See Attachment 3 and 4)