1. Qualitative Information (1) Qualitative Information Relating to Consolidated Business Results <1> Consolidated results 1st Quarter, Consolidated Fiscal Year Ending March 31, 2011 (April 1, 2010 - June 30, 2010) During the three months ended June 30, 2010, NTT Group worked to expand broadband and ubiquitous services pursuant to its Medium-Term Management Strategy, adopted in May 2008, entitled "Road to Service Creation Business Group." Fixed Communications Fields NTT Group worked to expand the coverage area of the next-generation network ("NGN") commercial service, “FLET'S Hikari Next”. In addition, in Eastern Japan, in response to the increasing number of portable game consoles, smart phones and tablet computers, efforts were made to promote FLET’S wireless LAN usage by revising the fee schedules for FLET’S Spot, a public wireless LAN service, and launching a rental service for the mobile WiFi router(1) “Hikari Portable” to subscribers using FLET'S Hikari. In Western Japan, NTT Group launched two high speed FLET'S Hikari Next services (the “High-Speed Type,” with a maximum transmission speed of 200 Mbps, and the “Express Type,” with a maximum transmission speed of approximately 1 Gbps), and worked to expand its service line-up. As a result of these efforts, the number of FLET'S Hikari subscriptions reached 13.84 million. Mobile Communications Fields As part of its efforts to enhance customer satisfaction, NTT Group integrated the two-tiered packet fixed-rate services, Pake-hodai double and Biz-hodai double in pursuit of simpler and easier-to-understand rate schedules. Further, NTT Group launched the DOCOMO Smartphone Xperia™, and announced its FY2010 Summer Model handset lineup of 20 models, of which 14 models were released. As part of its efforts to create new revenue sources, NTT also launched DOCOMO one-time insurance(2) and i Bodymo(3). As a result of these efforts, mobile phone subscriptions reached 56.51 million. Solutions Fields NTT Group worked to provide high value-added solutions tailored to customer industries and business categories by expanding its service-lineup to include outsourcing, as well as structuring and providing systems to customers. With regards to cloud computing services(4), which will become the centerpiece of the solutions field going forward, NTT Group embarked on a full service roll-out of BizXaaS™, a service which ensures the construction and operation of optimal cloud computing that is designed in accordance with customer needs such as Private Cloud(5), Community Cloud(6) and Public Cloud(7). Upper-Layer Services NTT Group worked to strengthen services using broadband infrastructure, such as the NGN. In collaboration with ALC Press Inc. and 3Di Inc., NTT Group launched the Virtual English School, using English education know-how /content as well as 3D virtual space technology and web conferencing systems. This enables customers to take English conversation lessons from home through a virtual classroom on the Internet. Furthermore, through investments by NTT Investment Partners Fund, L.P., a venture fund, NTT Group sought to promote capital alliances with multiple business partners. Global Businesses With the goals of expanding its service lineup and securing know-how and personnel with expertise, NTT Group entered into capital alliances with overseas companies and established an overseas base (Cambodia) to strengthen marketing directed at Japanese companies operating abroad. NTT Group also expanded the service areas for the international VPN(8) service, Arcstar Global IP-VPN Service (Boston/U.S.A., Zurich/Switzerland and Penang/Malaysia), and worked to strengthen service delivery platforms. As a result of these efforts, NTT Group's consolidated operating revenues for the three months ended June 30, 2010 were ¥2,498.9 billion (a decrease of 0.2% from the same period of the previous fiscal year), consolidated operating expenses were ¥2,159.3 billion (a decrease of 0.8% from the same period of the previous fiscal year), consolidated operating income was ¥339.7 billion (a decrease of 4.3% from the same period of the previous fiscal year), consolidated net income before income taxes was ¥341.6 billion (an increase of 4.8% from the same period of the previous fiscal year), and net income attributable to NTT was ¥155.9 billion (an increase of 11.7% from the same period of the previous fiscal year). Note: These consolidated financial statements were prepared in accordance with accounting principles generally accepted in the U.S. (1)  Equipment which interconnects devices compatible with WiFi (wireless LAN standard specification) and other networks. (2) A mobile insurance service for travel, sports and a wide variety of other situations that enables customer to “easily” make “on the spot” applications on an “as-needed basis.” (3) A mobile health-support service that provides health tips and helps subscribers engage in fun and healthy activities in their daily lives. This service offers a pedometer function and a calorie check function. (4) Cloud computing is a computer technology whereby software and IT resources are delivered as a service through a network. It is unique for the fact that the services can be used on an on-demand basis without the need to purchase hardware, including a server, or software. The term “cloud” is used as a metaphor, based on the drawings used to depict networks such as the Internet in computer network diagrams. (5) A cloud computing infrastructure constructed for a single organization for use as an internal system. As these systems are specifically built for individual customers, they can be designed to flexibly meet the requirements of each customer. (6) A cloud computing infrastructure that can be provided for shared use across specific multiple organizations as a common data center. This offers a certain degree of flexibility in meeting user requirements, as well as offering cost reduction benefits. (7) A cloud computing infrastructure that provides a computing environment for shared use by the general public (companies and private customers). Since an existing cloud is shared by an unspecified number of customers, an IT environment can be easily deployed at a relatively low cost. (8) Virtual Private Network. A communication service that creates a virtual private network for exclusive use by specified parties that third parties cannot access. <2> Segment results Results by business segment are as follows. -  Regional telecommunications business segment 1st Quarter, Consolidated Fiscal Year Ending March 31, 2011 (April 1, 2010 - June 30, 2010) Consolidated operating revenues for the first quarter of the fiscal year ending March 31, 2011 were ¥957.1 billion (a decrease of 0.4% from the same period of the previous fiscal year). Despite an increase in IP-related revenues due to an increase in FLET’S Hikari subscriptions, fixed voice-related services revenue decreased mainly due to the decline in fixed-line telephone subscriptions. Consolidated operating expenses for the first quarter fell to ¥915.6 billion (a decrease of 3.1% from the same period of the previous fiscal year) due to a decrease in personnel expenses as a result of a decline in the number of employees and such factors as a decrease in operating expenses, including depreciation and amortization. As a result, consolidated operating income for the first quarter of the fiscal year ending March 31, 2011 was ¥41.5 billion (an increase of 158.3% from the same period of the previous fiscal year). Number of subscriptions Notes : (1) FLET’S Hikari includes B FLET’S and FLET’S Hikari Next provided by NTT East and B FLET’S, FLET’S Hikari Premium, FLET’S Hikari Mytown, and FLET’S Hikari Next provided by NTT West. (2) The figures for Hikari Denwa indicate number of channels (in thousands). -  Long-distance and international communications business segment 1st Quarter, Consolidated Fiscal Year Ending March 31, 2011 (April 1, 2010 - June 30, 2010) Consolidated operating revenues for the first quarter of the fiscal year ending March 31, 2011 were ¥302.7 billion (a decrease of 1.7% from the same period of the previous fiscal year). This decrease was caused by, among other factors, a decrease in revenues from corporate solutions businesses and a decline in fixed voice related revenues. Consolidated operating expenses for the first quarter decreased to ¥281.5 billion (a decrease of 0.6% from the same period of the previous fiscal year) due in large part to lower revenue-linked expenses. As a result, consolidated operating income for the first quarter of the fiscal year ending March 31, 2011 was ¥21.2 billion (a decrease of 14.9% from the same period of the previous fiscal year). -  Mobile communications segment 1st Quarter, Consolidated Fiscal Year Ending March 31, 2011 (April 1, 2010 - June 30, 2010) Consolidated operating revenues for the first quarter of the fiscal year ending March 31, 2011 increased to ¥1,089.2 billion (an increase of 0.4% from the same period of the previous fiscal year). Despite a decrease in mobile voice related revenues from, among other things, the penetration of Value Plan, increases in revenues from packet communications services and other sources increased consolidated operating revenues. Consolidated operating expenses for the first quarter increased to ¥850.2 billion (an increase of 1.9% from the same period of the previous fiscal year) as a result of several factors, including an increase of loyalty program expenses. As a result, consolidated operating income for the first quarter of the fiscal year ending March 31, 2011 was ¥239.1 billion (a decrease of 4.5% from the same period of the previous fiscal year). Number of subscriptions Notes : (1) The numbers for mobile phone service subscriptions, FOMA service subscriptions and mova service subscriptions include communications module service subscriptions. (2) Effective March 3, 2008, FOMA service subscriptions became mandatory for subscriptions to “2in1” services. Such FOMA service subscriptions to “2in1” services are included in the above numbers of mobile phone service subscriptions and FOMA service subscriptions. (3) The number of subscriptions for i-mode services represents the combined total of FOMA and mova service subscriptions. -  Data communications segment 1st Quarter, Consolidated Fiscal Year Ending March 31, 2011 (April 1, 2010 - June 30, 2010) Despite the increase in revenues from the expansion of consolidated subsidiaries, consolidated operating revenues for the first quarter of the fiscal year ending March 31, 2011 decreased to ¥264.4 billion (a decrease of 2.1% from the same period of the previous fiscal year). This decrease reflects the absence of the one-time gain from a large-scale business transaction in the three months ended June 30, 2009. Consolidated operating expenses for the first quarter rose to ¥250.3 billion (an increase of 0.6% from the same period of the previous fiscal year) particularly due to higher expenses caused by the expansion of consolidated subsidiaries. As a result, consolidated operating income for the first quarter of the fiscal year ending March 31, 2011 was ¥14.1 billion (a decrease of 33.6% from the same period of the previous fiscal year). -  Other segments 1st Quarter, Consolidated Fiscal Year Ending March 31, 2011 (April 1, 2010 - June 30, 2010) Despite an increase in revenues from the construction and power businesses and advanced technology development businesses, due to a decrease in revenues from other businesses within NTT Group, among other things, consolidated operating revenues for the first quarter of the fiscal year ending March 31, 2011 were ¥247.3 billion (a decrease of 5.3% from the same period of the previous fiscal year). Consolidated operating expenses decreased to ¥236.7 (a decrease of 5.3% from the same period of the previous fiscal year), due to lower loan loss expenses in the financing businesses. As a result, consolidated operating income for the first quarter of the fiscal year ending March 31, 2011 was ¥10.6 billion (a decrease of 4.8% from the same period of the previous fiscal year). Copyright (c) 2010 Nippon telegraph and telephone corporation