News Release tstq070511b

1. Business Results

(1)

Analysis concerning business results

During the consolidated fiscal year ended March 31, 2007, the Japanese economy expanded at a steady pace. Corporate earnings have improved against a backdrop of strong demand in Japan and overseas, and as a result, capital investment has increased steadily. There are signs of expanding improvement in employment and a moderate increase in personal consumption.

Dramatic changes continue to take place in the telecommunications market environment in conjunction with the advance of ubiquitous broadband communications and reforms in business structures. In the broadband market, the number of ADSL subscribers is undergoing a net decrease as the expansion of optical access accelerates and the market continues to grow. In the mobile communications market, growth in the overall number of subscribers remains sluggish, but third-generation mobile communications services are expanding steadily, and with the introduction of mobile number portability, price competition remains fierce. The market for conventional fixed-line telephone services continues to shrink due to the shift to IP telephony services.

Under these business conditions, the NTT Group continued its efforts towards realization of the NTT Group's Medium-Term Management Strategy (released November 2004). Specific business activities include expansion and improvement of the service areas to promote greater use of B FLET'S optical access services and active marketing measures designed to meet customer requirements. As a result of these activities, the number of B FLET'S subscribers surpassed 6 million and pulled ahead of the number of FLET'S ADSL service subscribers. Also, efforts to bolster the overall strength of FOMA third-generation mobile communications services including rates, products, network quality, and after-sales services resulted in a steady shift from the mova second-generation mobile communications services, with FOMA subscribers surpassing 35.5 million and accounting for two-thirds of all mobile communications subscribers.

To ensure that NTT Group management resources are used effectively, NTT Group reviewed its group structures for upper layer services such as Internet connectivity and portal sites and services for corporate customers.

With regards to solution services for corporate customers, we are actively engaging in new businesses through alliances with partners outside the group and joint investments.

Regarding construction of the next-generation network, we have started field trials designed to determine customer preferences and confirm technologies so we can launch full-scale commercial services in accordance with the roadmap described in the document entitled "Promoting NTT Group's Medium-Term Management Strategy" (released November 2005). Businesses from a wide range of industries have participated in the trials, and we are currently working on developing video communications services such as high-quality video distribution, video conferencing, and video telephony and services that use intelligent consumer electronics devices.

As a result of these activities, despite a decrease in voice service related income because of the decline in the number of fixed-line telephone subscribers and other factors, NTT Group consolidated operating revenues were 10,760.6 billion yen for the fiscal year ended March 31, 2007 (an increase of 0.2% from the previous fiscal year) due to increases in IP-related revenues from B FLET'S and FOMA and system integration revenues. Consolidated operating expenses were 9,653.5 billion yen (an increase of 1.1% from the previous fiscal year) as a result of increased expenses associated with higher system integration revenues and increased mobile phone handset costs and other sales related expenses. Consolidated operating income was 1,107.0 billion yen (a decrease of 7.0% from the previous fiscal year), consolidated income before income taxes was 1,138.0 billion yen (a decrease of 12.9% from the previous fiscal year), and consolidated net income was 476.9 billion yen (a decrease of 4.4% from the previous fiscal year).

Business performance, etc. for NTT Corporation (holding company) and the main Group companies during the consolidated fiscal year ended March 31, 2007 is as follows.

Nippon Telegraph and Telephone Corporation

In its capacity as a holding company, NTT worked to efficiently develop the businesses of the NTT Group through the planning of overall strategies and redistribution of managerial resources in line with changes in the business environment.
To carry out NTT Group's Medium-Term Management Strategy, we have reviewed group structures for upper layer services and services for corporate customers and provided advice and intermediary services aimed at developing broadband services and promoting international business. In compensation for these services, the Company received 19.7 billion yen in group management and administration revenue (a decrease of 2.8% from the previous fiscal year). In addition, with its focus on developing secure, safe, and convenient broadband and ubiquitous communications services, NTT has conducted fundamental research and development and actively developed future-oriented basic technologies, and received 122.1 billion yen (a decrease of 3.8% from the previous fiscal year) in fundamental research and development revenues. NTT also received 198.6 billion yen in dividends (an increase of 17.5% from the previous fiscal year).
As a result of the above, NTT's unconsolidated operating revenues for the year under review were 359.9 billion yen (an increase of 6.1% from the previous fiscal year), unconsolidated recurring profit was 206.2 billion yen (an increase of 20.0% from the previous fiscal year), and unconsolidated net income was 189.3 billion yen (a decrease of 51.9% from the previous fiscal year).

Nippon Telegraph and Telephone East Corporation and Nippon Telegraph and Telephone West Corporation

NTT East and NTT West are taking measures to secure solid revenue structures by enhancing and expanding broadband services with a focus on B FLET'S and are continuing their efforts to raise business efficiency.
In the broadband service business, NTT East and NTT West expanded B FLET'S service areas, launched new services, and took measures to improve customer service to increase the number of B FLET'S customers. They also took measures to bolster security functions to counter computer viruses and unauthorized access. With respect to Hikari Denwa, a high-quality IP telephony service that makes use of optical access, NTT East and NTT West launched new services such as caller ID Display, discount flat-rate plans, and Hikari Denwa Office Type, a service for small and medium-size businesses that make up to eight phone lines and 32 phone numbers available. In the area of video distribution services, NTT East and NTT West have also formed tie-ups with broadcasters to promote and expand multi-channel broadcasting services using B FLET'S.
In response to a temporary connection problem when using Hikari Denwa, NTT East and NTT West moved up the construction of additional facilities and increased the pace of facility repairs to raise reliability.
To raise the quality of customer service and increase business efficiency, NTT East reinforced its operating structures including an expansion of its call center as a central location for receiving inquiries and requests concerning Hikari Denwa. NTT West reviewed its headquarters organization to provide specialized handling for broadband services, and reinforced its prefectural branch functions to promote business with strong local ties, and in conjunction with these developments consolidated its marketing, facility, and administrative subsidiaries.
Competition in broadband markets remains fierce, and despite these activities, during the year under review, NTT East's operating revenues were 2,061.3 billion yen (a decrease of 3.0% from the previous fiscal year), and those of NTT West were 1,951.5 billion yen (a decrease of 3.8% from the previous fiscal year). Net income was 84.3 billion yen for NTT East (an increase of 64.5% from the previous fiscal year) and 28.3 billion yen for NTT West (a decrease of 13.3% from the previous fiscal year).

NTT Communications Corporation

During the fiscal year under review, NTT Communications took measures to expand IP services in both domestic and global markets and to reinforce its global businesses. The company also reinforced structures for providing upper layer services and reviewed its customer service structures for corporate customers in accordance with the document entitled "Promoting NTT Group's Medium-Term Management Strategy."
For corporate customers, NTT Communications launched a data communications service using the wide-band Ethernet of NTT East and NTT West as access lines and expanded the service territory for the Global Super Link service, which creates wide-band international Ethernet networks. As the network needs of business customers diversify, NTT Communications offers solutions designed to enhance customer convenience and reduce management costs.
NTT Communications implemented various measures to improve and strengthen global business including the start of an international IP-VPN service (MPLS type) in Vietnam in cooperation with a local company, the first such project in that country by a Japanese communications carrier, and the start of an international data communication service in Russia.
For individual customers, NTT Communications worked to expand its OCN Internet access services and augmented its marketing of OCN Hikari with FLET'S and the Anshin Select Pack with enhanced security functions. As a result the number of OCN subscribers surpassed 6 million. NTT Communications also moved forward with the development of Music Ocean, an integrated intra-group music distribution service.
Concerning fixed-line telephone services, NTT Communications promoted sales of its Pl@tinum Line low-cost plan for domestic and international calls and calls to mobile phones and launched a new service called Pl@tinum Line & Sekaiwari that provides even greater discounts on international calls.
As a result of these developments, NTT Communications' operating revenues for the fiscal year under review were 1,145.4 billion yen (an increase of 1.6% from the previous fiscal year) and net income was 30.3 billion yen (a decrease of 3.5% from the previous fiscal year).

NTT DoCoMo, Inc.

With the start of mobile number portability, competition has become even more severe. In response, NTT DoCoMo has worked to enhance its overall capabilities by providing user-friendly billing services, enhancing and expanding its handset lineup and services, raising network quality, and improving after-sales services.
Concerning user-friendly billing services, NTT DoCoMo has taken measures to offer rate plans that suit customers by expanding its menu of discount services and flat-rate packet communications services.
With respect to enhancing and expanding its handset lineup and services, NTT DoCoMo continues to improve its handset lineup and has improved its music-related services including the launch of a service for downloading full-length songs from i-mode sites to handsets, and Music Channel, a full-length, high-quality music program distribution service that uses the HSDPA (High-Speed Downlink Packet Access) service.
Measures to raise network quality included expansion of the FOMA service area to make FOMA accessible nationwide, particularly in train stations through which large numbers of people travel, as well as active measures to gather customer comments and opinions and measures to eliminate areas with poor reception. In addition, NTT DoCoMo started providing HSDPA technology services in major cities around the country.
NTT DoCoMo worked to enhance after-sales services by offering DoCoMo Premier Club members the Mobile Phone Protection and Delivery Service, a Premier Club service that delivers new handsets to customers in case of loss or theft of their FOMA handsets.
NTT DoCoMo launched the DCMX credit service using the Osaifu Keitai service to create a new revenue source. The company also increased the lineup of handsets compatible with international roaming services and expanded the territories where international roaming services are available.
As a result of the above developments, NTT DoCoMo's consolidated operating revenues for the fiscal year under review were 4,788.1 billion yen (an increase of 0.5% from the previous fiscal year), and consolidated net income was 457.3 billion yen (a decrease of 25.1% from the previous fiscal year).

NTT DATA Corporation

During the fiscal year under review, NTT DATA set its sights on promoting new business jointly with business customers in the form of business alliances or joint investments and on becoming the number one business in terms of customer satisfaction by providing systems and services that increase customer value. With these objectives in mind, NTT DATA implemented policies designed to improve its basic organizational fitness and promote further growth.
With regard to improving basic organizational fitness, NTT DATA worked to strengthen its marketing capabilities and improve business processes by ensuring that marketing personnel steadily implement action plans developed based on the results of customer satisfaction surveys. At the same time, NTT DATA took steps to improve competitiveness in system integration and raise system development efficiency by improving and stabilizing processes, accumulating business know-how, and creating system environments that support these initiatives.
Concerning strategies for further growth, in the financial field, NTT DATA increased the number of banks participating in the NTT DATA Regional Bank Integrated Services Center, a shared-use format center for financial institutions. With a view toward the expansion of the corporate customer sector, NTT DATA formed capital alliances in the housing and travel industries to reinforce structures through the utilization of advanced industry-specific expertise and its own diverse management resources.
Through these endeavors, NTT DATA made efforts to develop efficient systems for engaging in vigorous marketing activities geared towards obtaining orders for new systems and launching new services and continued to provide stable services for existing systems.
As a result of these efforts, NTT DATA's consolidated operating revenues for the fiscal year under review were 1,044.9 billion yen (an increase of 15.2% from the previous fiscal year) and consolidated net income was 50.6 billion yen (an increase of 79.6% from the previous fiscal year).

The forecast for performance for the next term is as follows: consolidated operating revenues of 10,700.0 billion yen (a decrease of 0.6% from the previous term), consolidated operating income of 1,110.0 billion yen (an increase of 0.3% over the previous term), consolidated income before income taxes of 1,110.0 billion yen (a decrease of 2.5% from the previous term) and consolidated net income of 460.0 billion yen (a decrease of 3.5 % from the previous term).

(2)

Analysis of Financial Standing

"Cash flow from business activities" in the consolidated fiscal year ended March 31, 2007 was 2,361.3 billion yen, due to such factors as net income and depreciation and amortization costs. Compared to the previous term, cash flow decreased 881.6 billion yen (27.2%); this was due to various factors including an increase in the amount paid (net amount) in corporate taxes, etc. (in the previous term, the amount paid (net amount) in corporate taxes was 170.9 billion yen, due to such factors as impairment of AT&T Wireless Services, Inc., which was recognized as a tax-deductible loss) and an increase in trade accounts receivable resulting from collection of telephone fees etc. being delayed until the following month due to a bank holiday at the end of March.
With respect to "cash flow from investment activities", 2,150.0 billion yen in cash was used in acquiring fixed assets, etc. This was an increase of 73.7 billion yen (3.5%) in cash outlays over the previous term. This resulted from a decrease in outlays directed towards equity and other long-term investments on the one hand, and a decrease in redemption of short-term investments from the investment of funds on the other.

With respect to "cash flow from financing activities", 831.8 billion yen in cash was used for such purposes as repaying loans. This was a decrease of 308.1 billion yen (27.0%) from the previous term. This resulted from an increase in expenditures for acquiring shares from minority shareholders on the one hand, and a decrease in expenditures for acquiring NTT's own shares on the other.

As a result, the balance of cash and cash equivalents for the NTT Group during the consolidated fiscal year ended March 31, 2007, totaled 796.3 billion yen, a decrease of 614.6 billion yen (43.6%) compared with the consolidated fiscal year ended March 31, 2006.

(3)

Basic Policy concerning Profit Distribution; Dividends in the Current Term and Next Term

In addition to increasing corporate value over the medium- and long-term, NTT has identified the return of profits to shareholders as an important management goal. In paying dividends, NTT, while giving consideration to stability and sustainability, will base such payments upon a full range of factors, including business performance, dividend payout ratio and financial standing.
It is planned that dividends for the current annual period will be 8,000 yen per share, comprising a 4,000-yen end-of-term dividend and a 4,000-yen interim dividend. For the next annual period, dividends are planned to be 9,000 yen for the full year.
While maintaining a view towards capital efficiency, NTT will allocate retained earnings to investments directed towards capturing growth opportunities and to the strengthening of its financial structure.