For Immediate Release
May 22, 1998
NTT Announces Financial Results
for Fiscal Year Ended March 31, 1998
Nippon Telegraph and Telephone Corporation (NTT) announced today the non-consolidated financial results for its fiscal year that ended March 31, 1998. Operating revenues decreased 0.8% over the previous fiscal year to 6,322.3 billion yen, recurring profit dropped 2.6% to 356.6 billion yen, and net income declined 1.6% to 176.6 billion yen.On a consolidated basis, the group posted operating revenues of 9,450.0 billion yen, a 7.1 % increase from the previous fiscal year, recurring profit of 600.5 billion yen, a 35.1 % increase, and net income of 289.8 billion yen, a 93.5 % increase.
The Japanese economy remained stagnant due to sluggish personal consumption, which reflected an uncertain outlook for the economy, and slackened capital expenditures.
In the field of telecommunications, advances were made with ongoing deregulation, including measures that will allow investment in the Type I telecommunications businesses by foreign companies. NTT interconnected its local switches with local operators in December 1997, which has brought full-scale competition in the local call market. Such developments are leading to the introduction of more diversified services and price reduction, and increased demand for carriers to offer comprehensive service capabilities, including international telecommunications. Thus, the competitive environment for telecommunications carriers has become increasingly competitive.
The demand for telecommunications is dramatically shifting from the transmission of voice to the global distribution of digitized information including text and visual information, as seen in the explosive growth of the Internet. Meanwhile, new computer-based communications services, such as electronic commerce, are expected to cause dramatic changes in industrial structure and life styles. Competition in this emerging market is transcending traditional business frameworks and national borders.
Under these conditions, NTT worked to establish new sources of revenues by developing and providing new services that meet rapidly growing demand for computer-based communications and promote the wider use of multimedia. In addition, the Company made inroads into the international telecommunications market through subsidiaries and aggressively expanded its existing overseas carrier business. With the aim of reinforcing its competitive position, NTT also launched convenient, low-cost telephone services. Moreover, the Company completed the important task of digitizing its networks nationwide in December 1997 and prepared the network for the launch of new multimedia services and call charge discount services.
NTT responded to customers' needs for multimedia services by diversifying its Open Computer Network (OCN) service and expanding service areas. NTT launched the INS-Net 64 Light service, which eliminates the set-up fee (or the "Contribution to NTT Plant") by adding a small fixed amount to the basic monthly charge. NTT also introduced Phoenix mini, a low-cost ISDN TV telephone last September, and utilized these telephones for interpreting services during the Nagano Winter Olympic Games in February. The Phoenix Promotion Association was established to introduce and expand advanced multimedia services using optical fiber.
In the field of international telecommunications business, following the proclamation and partial enforcement in June 1997 of the Law Concerning Partial Revision of the Nippon Telegraph and Telephone Corporation Law in June 1997, it became possible for NTT to provide international telecommunications services through subsidiaries. In July 1997, as a step toward full-scale entry into this field following the Company's reorganization, NTT established a wholly owned subsidiary, NTT Worldwide Telecommunications Corporation (NTT-WT) as a special Type II international telecommunications company. This company, working in cooperation with overseas NTT subsidiaries and associates that had been engaged in making preparations, introduced global end-to-end services on September 1 mainly for multinational corporations. The initial service destinations were the United States, France, the United Kingdom, Hong Kong, the Philippines and Singapore. Furthermore, NTT Worldwide Network Corporation (NTT-WN), a Type I international telecommunications company set up as a wholly owned subsidiary in October 1997, proceeded to lay the groundwork for the provision of international leased-circuit and international telephone services. NTT-WN also signed an agreement with other members of a consortium for the construction and maintenance of the China-U.S. Undersea Fiber-Optic Cable Network, the world's largest-class submarine fiber-optic cable network linking Japan, the United States, China, Korea and Taiwan.
In overseas carrier business, NTT acquired shares and began participating in the management of Sri Lanka Telecom. NTT also invested in Teligent, a fixed wireless local-access carrier in the United States.
NTT Vietnam Corporation, a subsidiary of NTT, together with Vietnam Posts and Telecommunications Corporation (VNPT), received a license from the Vietnamese government for a telephone network construction project in northern Hanoi. NTT promoted the development of multimedia services beyond national boundaries through the formation of the Asian Multimedia Forum (AMF), which mainly comprises information communications companies in the Asia-Pacific region, and through the investment in Asia Internet Holding Co., Ltd. (AIH), a company involved in Internet international connections.
NTT strengthened its competitiveness by launching "Area Plus," which enables users to pay a fixed monthly fee to make calls to adjacent local calling areas, or up to 20km, at a cost of 10 yen for three minutes in the daytime and 10 yen for four minutes during early morning and late night hours. Also for a fixed monthly fee, the new "Time Plus" service enables users to make local calls within their own local calling area for 10 yen for five minutes in the daytime and 10 yen for seven minutes during early morning and late night hours, initially in metropolitan Tokyo and adjacent prefectures. The charge for long-distance phone calls covering more than 100 km was reduced to 90 yen for three minutes on weekdays, down from 110 yen, starting in February 1998. NTT also introduced "Number Display," a service that displays a caller's phone number on the receiver's telephone before the call is answered. NTT eliminated the charge for detailed statements on long-distance calls.
To improve operational efficiency, NTT completed the nationwide introduction of "116MCCS," an operator service system designed to respond efficiently to customers' inquires. The company also continued to spin off facility management and maintenance operations, consolidated branch offices and service centers, and gradually contracted out directory assistance operations. NTT Communicationware Corporation (NTT Comware), a wholly owned subsidiary, was established in April 1997 with the aim of developing systems and software for telecommunications business. NTT also transferred its software-related business to the subsidiary, to create a more responsive organization, in September 1997.
Uncertain prospects for eliminating accumulated losses at the nine subsidiaries that provide Personal Handy-phone System (PHS) services, including NTT Central Personal Communications Network Inc., resulted in an extraordinary loss of 64.6 billion yen, which consists of valuation loss on shares in related companies and provision for reorganization of related companies.
NTT will continue to actively pursue research and development (R&D) and investment aimed at establishment of advanced telecommunications networks for the 21st century, as well as provide high-quality telecommunications services to underpin socio-economic activity.
Recognizing the importance of both reinforcing the Company's business performance and financial performance and pursuing shareholders' interests over the long term, NTT intends to pay a fair dividend to shareholders, balanced with the need for internal reserves. Based on this policy, NTT will pay a year-end dividend of 2,500 yen per share, which, combined the interim dividend of 2,500 yen, brings the annual dividend to 5,000 yen, unchanged from the previous fiscal year.
Internal reserves will be used for future operations, including R&D and capital expenditure for telecommunications networks, and strengthening the corporation's financial performance.
NTT's non-consolidated operating revenues, recurring profit and net income for the fiscal year ending March 31, 1999 are forecast to be 6,365 billion yen, 274 billion yen and 144 billion yen, respectively. Also, NTT's consolidated operating revenues, recurring profit and net income for the same fiscal year are expected to be 9,702 billion yen, 657 billion yen, and 222 billion yen, respectively.
All financial information stated in this release has been prepared on the basis of Japanese accounting principles.
