1. Qualitative Information (1) Qualitative Information Relating to Consolidated Business Results

1. Qualitative Information
(1) Qualitative Information Relating to Consolidated Business Results

<1> Consolidated results

Three-Month Period Ended September 30, 2010 (July 1, 2010 - September 30, 2010)

Six-Month Period Ended September 30, 2010 (April 1, 2010 - September 30, 2010)

During the three-month period ended September 30, 2010, NTT Group directed its efforts towards an expansion of broadband and ubiquitous services pursuant to its “Road to Service Creation Business Group” Medium-Term Management Strategy, adopted in May 2008.

Fixed-line communications field
NTT Group worked to expand the coverage area of “FLET’S Hikari Next” and continued to further strengthen and expand the distribution of FLET’S Hikari. NTT Group also worked to increase the convenience and appeal of FLET’S Hikari by providing a rental service for the mobile Wi-Fi router⁽¹⁾ “Hikari Portable,” which enables the use of various Wi-Fi-enabled equipment at home and outside the home, to subscribers using FLET’S Hikari, and by promoting television viewing utilizing FLET’S Hikari as an alternative to terrestrial digital broadcast migration. In addition, in providing support service for corporate customers, NTT Group directed its efforts towards enhancing on-site support and remote support for IT devices, as well as FLET’S Hikari, and expanding NTT Group’s customer support structure through tie-ups with multi-function device manufacturers. As a result of these efforts, the number of FLET’S Hikari subscriptions for NTT East and NTT West exceeded 8 million and 6 million, respectively, resulting in 14.24 million total subscriptions for the Group.

Mobile communications field
NTT Group released nine new handset models, including “Raku-Raku PHONE 7” equipped with “Raku-Raku Site Button” and “Deco-mail” pictograms. Furthermore, NTT Group launched “the sp-mode” service, which, among other things, enables users to use mail service on smartphones with the same “i-mode” mail address as conventional handsets, and worked to promote the sale of smartphones. Also, NTT Group released a mobile Wi-Fi router device, “BF-01B”, which allows users to use handheld gaming consoles, tablet devices and other Wi-Fi-enabled equipment on the FOMA network and extended the discount campaign period for its flat-rate data plans, aiming to increase customer convenience and expand subscribers’ data communication usage. As a result of these efforts, the number of mobile phone subscriptions reached 56.89 million.

Solutions field
NTT Group worked to provide high value-added solutions tailored to customer industries and business categories by expanding its cloud services, such as BizXaaS and BizCITY, as well as structuring and providing systems to customers. Further, with the goal of strengthening its efforts in the insurance and healthcare business fields, NTT Group implemented a reorganization of its structure, putting in place a framework for providing high value-added services in markets that are expected to grow in the future.

Upper-layer services
With regards to Hikari TV, an IPTV service distributed using FLET’S Hikari, NTT Group made efforts to expand its video content, such as its 3D contents, and launched “Hikari TV Shopping,” an interactive service having the advantage of the characteristics of the IP that enables viewers to select and order products from a TV screen using a remote control. In addition, NTT Group made efforts to expand the educational content of e-Learning, a service which enables users to study via a network, through collaborations with study abroad prep schools and the commencement of Virtual English School that combine the advantages of both the online and real world.

Global businesses
With the goals of expanding its service lineup and securing know-how and personnel with expertise, in addition to the expansion of overseas data centers, NTT Group worked to strengthen service platforms by entering into capital alliances with overseas companies and establishing overseas bases (Phnom Penh/Cambodia and Ayutthaya/Thailand) to strengthen marketing directed at Japanese companies operating abroad. Through alliances with overseas subsidiaries and local companies, NTT Group expanded areas of comic distribution for mobile phones (France, Malaysia and Vietnam) and actively carried out content distribution deployment.

As a result of these efforts, NTT Group’s consolidated operating revenues for the three-month period ended September 30, 2010 were ¥2,500.2 billion (an increase of 0.2% from the same period of the previous fiscal year), consolidated operating expenses were ¥2,112.9 billion (a decrease of 2.8% from the same period of the previous fiscal year), consolidated operating income was ¥387.3 billion (an increase of 20.7% from the same period of the previous fiscal year), consolidated net income before income taxes was ¥368.7 billion (an increase of 16.1% from the same period of the previous fiscal year), and net income attributable to NTT was ¥159.3 billion (an increase of 11.6% from the same period of the previous fiscal year).

For the six-month period ended September 30, 2010, NTT Group’s consolidated operating revenues were ¥4,999.1 billion (an increase of 0.0% from the same period of the previous fiscal year). Consolidated operating expenses were ¥4,272.1 billion (a decrease of 1.8% from the same period of the previous fiscal year). As a result, consolidated operating income was ¥727.0 billion (an increase of 12.4% from the same period of the previous fiscal year) while consolidated net income before income taxes was ¥710.3 billion (an increase of 10.4% from the same period of the previous fiscal year). Consolidated net income attributable to NTT was ¥315.2 billion (an increase of 11.7% from the same period of the previous fiscal year) for the six-month period ended September 30, 2010.

Note:	NTT Group’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States.
	(1)	Equipment that relays signals between devices compatible with Wi-Fi (a wireless LAN standard) and other networks.

<2>	Segment results

Results by business segment are as follows.

- Regional telecommunications business segment

Three-Month Period Ended September 30, 2010 (July 1, 2010 - September 30, 2010)

Six-Month Period Ended September 30, 2010 (April 1, 2010 - September 30, 2010)

NTT Group’s consolidated operating revenues for the three-month period ended September 30, 2010 were ¥979.1 billion (an increase of 0.2% from the same period of the previous fiscal year). The revenues rose particularly due to an increase in solution services revenues and IP-related revenues attributable to the increase in “FLET’S Hikari” subscriptions, partially offset by a decrease in fixed voice related revenues owing to a decline in fixed-line telephone subscriptions. Consolidated operating expenses were ¥934.9 billion (a decrease of 0.8% from the same period of the previous fiscal year) due to, among other factors, a decrease in personnel expenses resulting from a decline in the number of employees and a decrease in depreciation and amortization, despite an increase in operating expenses, including expenses coupled with an increase in solution services revenues. As a result, consolidated operating income in the three-month period ended September 30, 2010 was ¥44.3 billion (an increase of 27.8% from the same period of the previous fiscal year).

For the six-month period ended September 30, 2010, consolidated operating revenues were ¥1,936.2 billion (a decrease of 0.1% from the same period of the previous fiscal year) and consolidated operating expenses were ¥1,850.4 billion (a decrease of 1.9% from the same period of the previous fiscal year). As a result, consolidated operating income for the six-month period ended September 30, 2010 was ¥85.8 billion (an increase of 69.2% 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

Three-Month Period Ended September 30, 2010 (July 1, 2010 - September 30, 2010)

Six-Month Period Ended September 30, 2010 (April 1, 2010 - September 30, 2010)

Consolidated operating revenues for the three-month period ended September 30, 2010 were ¥309.9 billion (an increase of 0.5% from the same period of the previous fiscal year). This was mainly because of an increase in revenues from corporate solution businesses and from the increase in the number of consolidated subsidiaries, despite a decline in fixed voice related revenues and IP-related revenues. Consolidated operating expenses for the same period increased to ¥289.1 billion (an increase of 2.5% from the same period of the previous fiscal year) due in large part to an increase in personnel expenses and other operating expenses resulting from the increase in the number of consolidated subsidiaries. As a result, consolidated operating income for the three-month period ended September 30, 2010 was ¥20.8 billion (a decrease of 21.0% from the same period of the previous fiscal year).

For the six-month period ended September 30, 2010, consolidated operating revenues were ¥612.6 billion (a decrease of 0.6% from the same period of the previous fiscal year) and consolidated operating expenses were ¥570.6 billion (an increase of 0.9% from the same period of the previous fiscal year). As a result, consolidated operating income for the six-month period ended September 30, 2010 was ¥42.0 billion (a decrease of 18.1% from the same period of the previous fiscal year).

- Mobile communications business segment

Three-Month Period Ended September 30, 2010 (July 1, 2010 - September 30, 2010)

Six-Month Period Ended September 30, 2010 (April 1, 2010 - September 30, 2010)

Consolidated operating revenues for the three-month period ended September 30, 2010 decreased to ¥1,048.9 billion (a decrease of 1.1% from the same period of the previous fiscal year) mainly due to a decrease in mobile voice related revenues caused by increased market penetration of the “Value Plan,” and a decrease in handset sales revenues resulting from a fall in wholesale unit prices, despite an increase in packet communications revenues. On the other hand, consolidated operating expenses decreased to ¥759.4 billion (a decrease of 8.4% from the same period of the previous fiscal year) as a result of a decrease in revenue-driven expenses, network-related expenses and others. As a result, consolidated operating income for the three-month period ended September 30, 2010 was ¥289.5 billion (an increase of 24.8% from the same period of the previous fiscal year).

For the six-month period ended September 30, 2010, consolidated operating revenues were ¥2,138.2 billion (a decrease of 0.4% from the same period of the previous fiscal year) and consolidated operating expenses were ¥1,609.6 billion (a decrease of 3.2% from the previous fiscal year). As a result, consolidated operating income for the six-month period ended September 30, 2010 was ¥528.6 billion (an increase of 9.6% from the same period of the previous fiscal year).

Number of subscriptions

Notes	:	(1)	The numbers for Mobile phone services subscriptions, FOMA services subscriptions and mova services subscriptions include communications module service subscriptions.
		(2)	Effective March 3, 2008, FOMA services subscriptions became mandatory for subscriptions to “2in1” services. Such FOMA services subscriptions to “2in1” services are included in the above numbers of Mobile phone services subscriptions and FOMA services subscriptions.
		(3)	The number of subscriptions for i-mode services represents the combined total of FOMA and mova services subscriptions.

- Data communications business segment

Three-Month Period Ended September 30, 2010 (July1, 2010 - September 30, 2010)

Six-Month Period Ended September 30, 2010 (April 1, 2010 - September 30, 2010)

Consolidated operating revenues for the three-month period ended September 30, 2010 were ¥271.4 billion (an increase of 2.7% from the same period of the previous fiscal year) owing to the impact of a large-scale business transaction completed during the quarter and the increase in the number of consolidated subsidiaries. On the other hand, consolidated operating expenses for the three-month period ended September 30, 2010 were ¥259.0 billion (an increase of 4.2% from the same period of the previous fiscal year) due to an increase in expenses resulting from the expansion of consolidated subsidiaries and the effects of unprofitable transactions. As a result, consolidated operating income for the three-month period ended September 30, 2010 was ¥12.5 billion (a decrease of 20.2% from the same period of the previous fiscal year).

For the six-month period ended September 30, 2010, consolidated operating revenues were ¥535.8 billion (an increase of 0.3% from the same period of the previous fiscal year) and consolidated operating expenses were ¥509.2 billion (an increase of 2.4% from the same period of the previous fiscal year). As a result, consolidated operating income for the six-month period ended September 30, 2010 was ¥26.6 billion (a decrease of 27.9% from the same period of the previous fiscal year).

- Other segments

Three-Month Period Ended September 30, 2010 (July 1, 2010 - September 30, 2010)

Six-Month Period Ended September 30, 2010 (April 1, 2010 - September 30, 2010)

Despite a decrease in revenues from the system development business, consolidated operating revenues for the three-month period ended September 30, 2010 were ¥266.0 billion (an increase of 0.7% from the same period of the previous fiscal year) due to an increase in revenues from the real estate business and the construction and power business. Consolidated operating expenses were ¥250.5 billion (a decrease of 6.7% from the same period of the previous fiscal year) due to lower loan loss expenses in the finance business. As a result, consolidated operating income for the three-month period ended September 30, 2010 was ¥15.4 billion.

For the six-month period ended September 30, 2010, consolidated operating revenues were ¥513.3 billion (a decrease of 2.3% from the same period of the previous fiscal year) and consolidated operating expenses were ¥487.2 billion (a decrease of 6.0% from the same period of the previous fiscal year). As a result, consolidated operating income for the six-month period ended September 30, 2010 was ¥26.1 billion (an increase of 280.3% from the same period of the previous fiscal year).